Black Knight Reports Third Quarter 2020 Financial Results

November 9, 2020

JACKSONVILLE, Fla. – November 9, 2020 – Black Knight, Inc. (NYSE: BKI), a leading provider of software, data and analytics solutions to the mortgage and consumer loan, real estate and capital markets verticals, today announced unaudited financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Financial Highlights:

Revenues of $312.6 million, an increase of 4.5% compared to the prior year quarter.
Net earnings attributable to Black Knight of $127.8 million, an increase of 243% compared to the prior year quarter. Diluted EPS of $0.82, an increase of 228% compared to the prior year quarter. Net earnings margin of 36.7% compared to 12.5% in the prior year quarter. The effect of our investment in Dun & Bradstreet Holdings, Inc. (“DNB”) was an increase in Net earnings attributable to Black Knight of $86.6 million, or $0.55 per diluted share, primarily related to a non-cash gain recognized as a result of DNB’s initial public offering and concurrent private placement.
Adjusted Revenues of $312.6 million, an increase of 4.5% compared to the prior year quarter.
Adjusted Net Earnings of $81.1 million, an increase of 7% compared to the prior year quarter. Adjusted EPS of $0.52 per diluted share, an increase of 2% compared to the prior year quarter.
Adjusted EBITDA of $154.7 million, an increase of 3% year-over-year. Adjusted EBITDA Margin was 49.5% compared to 50.1% in the prior year quarter.
As of September 30, 2020, we had cash of $31.2 million, debt of $2,303.2 million and available capacity of $612.0 million on our revolving credit facility.

Third Quarter 2020 Segment Highlights:

Software Solutions Revenues of $259.5 million, an increase of 1% year-over-year.
Software Solutions EBITDA of $151.6 million, a decrease of 1% year-over-year. Software Solutions EBITDA margin of 58.4% compared to 59.5% in the prior year quarter.
Data and Analytics Revenues of $53.1 million, an increase of 27% year-over-year.
Data and Analytics EBITDA of $18.3 million, an increase of 74% year-over-year. Data and Analytics EBITDA margin of 34.5%, an increase of 940 basis points compared to the prior year quarter.

Commentary:

“Our third quarter results highlight the ongoing strength of our core business as we continue to execute on our strategic growth initiatives,” said Black Knight Chairman Bill Foley.

“We are pleased with our third quarter financial performance, which exceeded our expectations due to favorable origination market conditions,” added Black Knight Chief Executive Officer Anthony Jabbour. “We delivered Adjusted Revenues growth of 4.5% and Adjusted EBITDA growth of 3%, driven by solid execution across the enterprise. The acquisition of Optimal Blue and sharp focus on delivering innovative solutions to transform the industry gives us confidence that we can continue to create superior shareholder value over the long-term.”

Recent Highlights:

On September 15, 2020, we completed the acquisition of Optimal Blue.
On August 27, 2020, we completed the acquisition of DocVerify, Inc.
On August 26, 2020, we issued $1.0 billion aggregate principal amount of 3.625% senior unsecured notes due 2028 to partially fund the Optimal Blue acquisition.
DNB Investment: We own approximately 54.8 million shares of DNB common stock, which has a fair value of approximately $1.4 billion based on DNB’s closing share price as of September 30, 2020.
In early August we completed the conversion of Bank of America’s first mortgage and home equity loans to MSP.
We extended and expanded our origination software relationship with Truist. The conversion of BB&T’s new volume to Empower and LendingSpace is ongoing.
We signed Caliber Home Loans, Inc., a top 25 servicer, to MSP.

Business Outlook

Following the closing of the Optimal Blue acquisition, Black Knight’s updated full year 2020 outlook is as follows:

Revenues and Adjusted Revenues are expected to be in the range of $1,229 million to $1,235 million.
Adjusted EBITDA is expected to be in the range of $603 million to $608 million.
Adjusted EPS is expected to be in the range of $2.03 to $2.07.

The foregoing forward-looking statements reflect Black Knight’s expectations as of today’s date. Given the number of risk factors, uncertainties and assumptions discussed below, actual results may differ materially. Black Knight does not intend to update its forward-looking statements until its next quarterly results announcement, other than in publicly available statements.

Earnings Conference Call and Audio Webcast

Black Knight will host a conference call to discuss the third quarter 2020 financial results on November 9, 2020, at 8:30 a.m. ET. The conference call can be accessed live over the phone by dialing (877) 407-4018, or for international callers (201) 689-8471. A replay will be available from 11:30 a.m. ET on November 9, 2020, through November 16, 2020, by dialing (844) 512-2921, or for international callers (412) 317-6671. The replay passcode will be 13712102.

The call will also be webcast live from Black Knight’s investor relations website at https://investor.blackknightinc.com. Following completion of the call, a recorded replay of the webcast will be available on the website.

About Black Knight

Black Knight, Inc. (NYSE:BKI) is an award-winning software, data and analytics company that drives innovation in the mortgage lending and servicing and real estate industries, as well as the capital and secondary markets. Businesses leverage our robust, integrated solutions across the entire homeownership life cycle to help retain existing customers, gain new customers, mitigate risk and operate more effectively.

Our clients rely on our proven, comprehensive, scalable products and our unwavering commitment to delivering superior client support to achieve their strategic goals and better serve their customers. For more information on Black Knight, please visit www.blackknightinc.com.

Non-GAAP Financial Measures

This earnings release contains non-GAAP financial measures, including Adjusted Revenues, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Earnings and Adjusted EPS. These are important financial measures for us, but are not financial measures as defined by generally accepted accounting principles (“GAAP”). The presentation of this financial information is not intended to be considered in isolation of or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making, including determining a portion of executive compensation. We also present these non-GAAP financial measures because we believe investors, analysts and rating agencies consider them useful in measuring our ability to meet our debt service obligations. By disclosing these non-GAAP financial measures, we believe we offer investors a greater understanding of, and an enhanced level of transparency into, the means by which our management operates the company.

These non-GAAP financial measures are not measures presented in accordance with GAAP, and our use of these terms may vary from that of others in our industry. These non-GAAP financial measures should not be considered as an alternative to revenues, net earnings, net earnings per share, net earnings margin or any other measures derived in accordance with GAAP as measures of operating performance or liquidity. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the attached schedules.

Revenues, EBITDA and EBITDA margin for the Software Solutions and Data and Analytics segments are presented in conformity with Accounting Standards Codification Topic 280, Segment Reporting. These measures are reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For these reasons, these measures are excluded from the definition of non-GAAP financial measures under the Securities and Exchange Commission’s (“SEC”) Regulation G and Item 10(e) of Regulation S-K.

Adjusted Revenues – We define Adjusted Revenues as Revenues adjusted to include the revenues that were not recorded by Black Knight during the periods presented due to the deferred revenue purchase accounting adjustment recorded in accordance with GAAP. These adjustments are reflected in Corporate and Other.

Adjusted EBITDA – We define Adjusted EBITDA as Net earnings attributable to Black Knight, with adjustments to reflect the addition or elimination of certain statement of earnings items including, but not limited to:

Depreciation and amortization;
Impairment charges;
Interest expense, net;
Income tax expense;
Other expense (income), net;
Equity in (earnings) losses of unconsolidated affiliates, net of tax;
(Gains) losses on sale of investments in unconsolidated affiliate, net of tax;
Net earnings (losses) attributable to redeemable noncontrolling interests;
deferred revenue purchase accounting adjustment;
equity-based compensation, including certain related payroll taxes;
costs associated with debt and/or equity offerings;
acquisition-related costs, including costs pursuant to purchase agreements; and
costs associated with expense reduction initiatives.

These adjustments are reflected in Corporate and Other.

Adjusted EBITDA Margin – Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by Adjusted Revenues.

Adjusted Net Earnings – We define Adjusted Net Earnings as Net earnings attributable to Black Knight with adjustments to reflect the addition or elimination of certain statement of earnings items including, but not limited to:

equity in (earnings) losses of unconsolidated affiliates, net of tax;
(gains) losses on sale of investments in unconsolidated affiliate, net of tax;
the net incremental depreciation and amortization adjustments associated with the application of purchase accounting, primarily related to the Fidelity National Financial, Inc. acquisition of a predecessor of Black Knight in January 2014;
deferred revenue purchase accounting adjustment;
equity-based compensation, including certain related payroll taxes;
costs associated with debt and/or equity offerings;
acquisition-related costs, including costs pursuant to purchase agreements;
costs associated with expense reduction initiatives;
costs and settlement (gains) losses associated with significant legal matters;
adjustment for income tax expense primarily related to the tax effect of the non-GAAP adjustments; and
adjustment for redeemable noncontrolling interests primarily related to the effect of the non-GAAP adjustments.

Adjusted EPS – Adjusted EPS is calculated by dividing Adjusted Net Earnings by the diluted weighted average shares of common stock outstanding.

Forward-Looking Statements

This press release contains forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements regarding expectations, hopes, intentions or strategies regarding the future are forward-looking statements. Forward-looking statements are based on Black Knight management’s beliefs, as well as assumptions made by, and information currently available to, them. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. Black Knight undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

The risks and uncertainties that forward-looking statements are subject to include, but are not limited to:

changes in general economic, business, regulatory and political conditions, including those resulting from pandemics such as COVID-19, particularly as they affect foreclosures and the mortgage industry;
the outbreak of COVID-19 and measures to reduce its spread, including the effect of governmental or voluntary actions such as business shutdowns and stay-at-home orders;
security breaches against our information systems;
our ability to maintain and grow our relationships with our clients;
changes to the laws, rules and regulations that affect our and our clients’ businesses;
our ability to adapt our services to changes in technology or the marketplace or to achieve our growth strategies;
our ability to protect our proprietary software and information rights;
the effect of any potential defects, development delays, installation difficulties or system failures on our business and reputation;
risks associated with the availability of data;
the effects of our existing leverage on our ability to make acquisitions and invest in our business;
our ability to successfully integrate strategic acquisitions, including the acquisition of Optimal Blue;
risks associated with the achievement of the intended benefits related to the acquisition of Optimal Blue;
risks associated with our investment in DNB; and
other risks and uncertainties detailed in the “Statement Regarding Forward-Looking Information,” “Risk Factors” and other sections of our Annual Report on Form 10-K for the year ended December 31, 2019 and other filings with the SEC.