· They missed slightly on top line, beat on EPS and reiterated full year guidance. The street is at the high end of their guidance for the year. Revenues were up 7% and EPS was up 38%.
· Data analytics segment (~15% of revenue) revenues were up 2% an improvement from down 4% last quarter. YTD segment revenues are flat, though growth going forward in this segment is targeted at ~3-5%.
· Software Solutions segment (~85% of revenue) was up 7% driven by loan growth, higher average revenue per loan and cross-sales to existing clients.
o Within this segment servicing (~75% of revenue) grew 7%. This is steadier than their originations revenue. They continue to dominate first lien loans with 62% share and are growing share in second lien loans. They have high-teens share of second lien and expect to reach 30% once current commitments are implemented.
o Originations (~10% of total revs), which is made up of new loans and refi’s, grew 8%. Refinancing, down 28%, continues to be negatively impacted by rising rates.
o Margins expanded 230bps.
o Trends in this segment highlight a dynamic weighing on US housing statistics. The issue is a lock-in effect from lower mortgage rates. Homeowners have mortgage rates lower than prevailing rates making them less likely to sell as it would mean taking out a new mortgage at a higher rate. This is decreasing housing inventory and existing home sales. The average length of homeownership tenure has been rising from around 4 years in 2000 to over 8 years now.