Delaware (State or Other Jurisdiction of Incorporation or Organization) | 81-5265638 (IRS Employer Identification Number) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition |
Item 9.01. | Financial Statements and Exhibits |
Exhibit | Description | ||||
99.1 | Press release announcing Black Knight's third quarter 2017 financial results | ||||
99.2 | Black Knight third quarter 2017 earnings results presentation |
Black Knight, Inc. | |||||
Date: | November 1, 2017 | By: | /s/ Kirk T. Larsen | ||
Name: | Kirk T. Larsen | ||||
Title: | Executive Vice President and Chief Financial Officer |
Information for Investors: | Information for Media: | |
Bryan Hipsher | Michelle Kersch | |
Black Knight | Black Knight | |
904.854.3219 | 904.854.5043 | |
bryan.hipsher@bkfs.com | michelle.kersch@bkfs.com |
• | Revenues of $263.8 million and Adjusted Revenues of $264.8 million |
• | Net Earnings Attributable to Black Knight of $14.7 million, or $0.21 per diluted share, and Adjusted Net Earnings of $54.3 million, or $0.36 per diluted share |
• | Adjusted EBITDA of $128.2 million and Adjusted EBITDA Margin of 48.4% |
• | Revenues and Adjusted Revenues growth are expected to be approximately 2.5% (5.5% adjusting to reflect the Property Insight realignment as if it had taken place on January 1, 2016), reflecting timing delays in certain client implementations |
• | Adjusted Net Earnings Per Share is expected to be in the range of $1.36 to $1.38 |
• | Adjusted EBITDA growth is expected to be approximately 10% |
• | Depreciation and amortization; |
• | Interest expense; |
• | Income tax expense; |
• | Other expense, net; |
• | Loss (gain) from discontinued operations, net of tax; |
• | deferred revenue purchase accounting adjustment recorded in accordance with GAAP; |
• | equity-based compensation, including related payroll taxes; |
• | costs associated with debt and/or equity offerings, including the Distribution; |
• | spin-off related transition costs; and |
• | acquisition-related costs. |
• | the net incremental depreciation and amortization adjustments associated with the application of purchase accounting; |
• | deferred revenue purchase accounting adjustment; |
• | equity-based compensation, including related payroll taxes; |
• | costs associated with debt and/or equity offerings, including the Distribution; |
• | spin-off related transition costs; |
• | acquisition-related costs; |
• | significant legal and regulatory matters; and |
• | adjustment for income tax expense at our full year estimated effective tax rate of approximately 37% for the three and nine months ended September 30, 2017 and 2016, assuming the conversion of all the shares of Class B common stock into shares of Class A common stock prior to the Distribution and assuming the effect of the non-GAAP adjustments. |
• | security breaches against our information systems; |
• | our ability to maintain and grow our relationships with our customers; |
• | changes to the laws, rules and regulations that affect our and our customers’ businesses; |
• | our ability to adapt our services to changes in technology or the marketplace; |
• | the effect of any potential defects, development delays, installation difficulties or system failures on our business and reputation; |
• | changes in general economic, business, regulatory and political conditions, particularly as they affect the mortgage industry; |
• | risks associated with the availability of data; |
• | the effects of our substantial leverage on our ability to make acquisitions and invest in our business; |
• | our ability to successfully integrate strategic acquisitions; |
• | risks associated with our spin-off from FNF, including limitations on our strategic and operating flexibility as a result of the tax-free nature of the spin-off; 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 and other filings with the SEC. |
September 30, 2017 | December 31, 2016 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 146.2 | $ | 133.9 | |||
Trade receivables, net | 169.2 | 155.8 | |||||
Prepaid expenses and other current assets | 42.5 | 45.4 | |||||
Receivables from related parties | 18.5 | 4.1 | |||||
Total current assets | 376.4 | 339.2 | |||||
Property and equipment, net | 165.0 | 173.0 | |||||
Computer software, net | 422.1 | 450.0 | |||||
Other intangible assets, net | 248.5 | 299.5 | |||||
Goodwill | 2,306.8 | 2,303.8 | |||||
Other non-current assets | 231.2 | 196.5 | |||||
Total assets | $ | 3,750.0 | $ | 3,762.0 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Trade accounts payable and other accrued liabilities | $ | 52.1 | $ | 55.2 | |||
Accrued compensation and benefits | 39.2 | 61.1 | |||||
Current portion of long-term debt | 55.1 | 63.4 | |||||
Deferred revenues | 54.2 | 47.4 | |||||
Total current liabilities | 200.6 | 227.1 | |||||
Deferred revenues | 98.1 | 77.3 | |||||
Deferred income taxes, net | 301.8 | 7.9 | |||||
Long-term debt, net of current portion | 1,486.9 | 1,506.8 | |||||
Other non-current liabilities | 12.5 | 3.5 | |||||
Total liabilities | 2,099.9 | 1,822.6 | |||||
Equity: | |||||||
Additional paid-in capital | 1,594.9 | 810.8 | |||||
Retained earnings | 54.2 | 65.7 | |||||
Accumulated other comprehensive earnings (loss) | 1.0 | (0.8 | ) | ||||
Total shareholders' equity | 1,650.1 | 875.7 | |||||
Noncontrolling interests | — | 1,063.7 | |||||
Total equity | 1,650.1 | 1,939.4 | |||||
Total liabilities and equity | $ | 3,750.0 | $ | 3,762.0 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues | $ | 263.8 | $ | 267.1 | $ | 784.1 | $ | 764.5 | |||||||
Expenses: | |||||||||||||||
Operating expenses | 140.7 | 152.2 | 428.2 | 433.4 | |||||||||||
Depreciation and amortization | 51.3 | 56.8 | 154.2 | 154.2 | |||||||||||
Transition and integration costs | 4.0 | 1.1 | 8.5 | 2.2 | |||||||||||
Total expenses | 196.0 | 210.1 | 590.9 | 589.8 | |||||||||||
Operating income | 67.8 | 57.0 | 193.2 | 174.7 | |||||||||||
Other income and expense: | |||||||||||||||
Interest expense | (14.1 | ) | (16.9 | ) | (44.8 | ) | (50.6 | ) | |||||||
Other expense, net | (0.6 | ) | (1.4 | ) | (17.1 | ) | (6.2 | ) | |||||||
Total other expense, net | (14.7 | ) | (18.3 | ) | (61.9 | ) | (56.8 | ) | |||||||
Earnings before income taxes | 53.1 | 38.7 | 131.3 | 117.9 | |||||||||||
Income tax expense | 9.2 | 6.3 | 24.3 | 19.2 | |||||||||||
Net earnings | 43.9 | 32.4 | 107.0 | 98.7 | |||||||||||
Less: Net earnings attributable to noncontrolling interests | 29.2 | 21.2 | 71.9 | 64.7 | |||||||||||
Net earnings attributable to Black Knight | $ | 14.7 | $ | 11.2 | $ | 35.1 | $ | 34.0 | |||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Earnings per share: | |||||||||||||||
Net earnings per share attributable to Black Knight common shareholders: | |||||||||||||||
Basic | $ | 0.22 | $ | 0.17 | $ | 0.52 | $ | 0.52 | |||||||
Diluted(1) | $ | 0.21 | $ | 0.16 | $ | 0.51 | $ | 0.50 | |||||||
Weighted average shares of common stock outstanding: | |||||||||||||||
Basic | 67.9 | 65.9 | 67.7 | 65.9 | |||||||||||
Diluted(1) | 68.5 | 67.9 | 152.7 | 67.8 |
(1) | For the periods presented, potentially dilutive securities include unvested restricted stock awards and the shares of Class B common stock prior to the Distribution. The shares of Class B common stock did not share in the earnings or losses of Black Knight and were, therefore, not participating securities. Accordingly, basic and diluted net earnings per share of Class B common stock have not been presented. The numerator in the diluted net earnings per share calculation is adjusted to reflect our income tax expense at an expected effective tax rate assuming the conversion of the shares of Class B common stock into shares of Class A common stock on a one-for-one basis, prior to the Distribution, for the nine months ended September 30, 2017. The expected effective tax rate for the nine months ended September 30, 2017 was 41.1%, including certain discrete items recorded during the period. The denominator includes approximately 84.4 million shares of Class B common stock outstanding for the nine months ended September 30, 2017. However, the approximately 83.7 million shares of Class B common stock for the three months ended September 30, 2017 and 84.8 million shares of Class B common stock for the three and nine months ended September 30, 2016 have been excluded in computing diluted net earnings per share because including them on an "if-converted" basis would have an anti-dilutive effect. The denominator also includes the dilutive effect of approximately 0.6 million shares of unvested restricted shares of common stock for the three and nine months ended September 30, 2017 and approximately 2.0 million and 1.9 million shares for the three and nine months ended September 30, 2016, respectively. |
Nine months ended September 30, 2017 | |||||||||
Earnings before income taxes | $ | 131.3 | |||||||
Income tax expense excluding the effect of noncontrolling interests | 54.0 | ||||||||
Net earnings | $ | 77.3 | |||||||
Diluted shares | 152.7 | ||||||||
Diluted net earnings per share | $ | 0.51 |
Nine months ended September 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 107.0 | $ | 98.7 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 154.2 | 154.2 | |||||
Amortization of debt issuance costs, bond premium and original issue discount | 2.5 | 2.0 | |||||
Loss on extinguishment of debt, net | 12.6 | — | |||||
Deferred income taxes, net | 4.8 | 3.7 | |||||
Equity-based compensation | 14.2 | 9.5 | |||||
Changes in assets and liabilities: | |||||||
Trade and other receivables, including receivables from related parties | (19.9 | ) | (23.1 | ) | |||
Prepaid expenses and other assets | 3.1 | (7.0 | ) | ||||
Deferred contract costs | (35.6 | ) | (41.1 | ) | |||
Deferred revenues | 27.6 | 15.8 | |||||
Trade accounts payable and other accrued liabilities | (30.7 | ) | (2.2 | ) | |||
Net cash provided by operating activities | 239.8 | 210.5 | |||||
Cash flows from investing activities: | |||||||
Additions to property and equipment | (5.3 | ) | (24.0 | ) | |||
Additions to computer software | (37.1 | ) | (31.9 | ) | |||
Business acquisitions, net of cash acquired | — | (150.2 | ) | ||||
Other investing activities | (4.0 | ) | — | ||||
Net cash used in investing activities | (46.4 | ) | (206.1 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings | 400.0 | 55.0 | |||||
Senior Notes redemption | (390.0 | ) | — | ||||
Senior Notes redemption fee | (18.8 | ) | — | ||||
Debt service payments | (25.9 | ) | (138.0 | ) | |||
Distributions to members | (75.3 | ) | (48.5 | ) | |||
Purchases of treasury stock | (46.6 | ) | — | ||||
Capital lease payments | (11.6 | ) | — | ||||
Tax withholding payments for restricted share vesting | (4.3 | ) | — | ||||
Debt issuance costs | (8.6 | ) | — | ||||
Net cash used in financing activities | (181.1 | ) | (131.5 | ) | |||
Net increase (decrease) in cash and cash equivalents | 12.3 | (127.1 | ) | ||||
Cash and cash equivalents, beginning of period | 133.9 | 186.0 | |||||
Cash and cash equivalents, end of period | $ | 146.2 | $ | 58.9 | |||
Supplemental cash flow information: | |||||||
Interest paid | $ | (45.2 | ) | $ | (39.6 | ) | |
Income taxes paid, net | $ | (13.6 | ) | $ | (16.0 | ) |
Three months ended September 30, 2017 | ||||||||||||||||
Software Solutions | Data and Analytics | Corporate and Other | Total | |||||||||||||
Revenues | $ | 224.5 | $ | 40.3 | $ | (1.0 | ) | (1) | $ | 263.8 | ||||||
Expenses: | ||||||||||||||||
Operating expenses | 93.0 | 32.7 | 15.0 | 140.7 | ||||||||||||
Transition and integration costs | — | — | 4.0 | 4.0 | ||||||||||||
EBITDA | 131.5 | 7.6 | (20.0 | ) | 119.1 | |||||||||||
Depreciation and amortization | 24.3 | 3.7 | 23.3 | (2) | 51.3 | |||||||||||
Operating income (loss) | 107.2 | 3.9 | (43.3 | ) | 67.8 | |||||||||||
Interest expense | (14.1 | ) | ||||||||||||||
Other expense, net | (0.6 | ) | ||||||||||||||
Earnings before income taxes | 53.1 | |||||||||||||||
Income tax expense | 9.2 | |||||||||||||||
Net earnings | $ | 43.9 |
Three months ended September 30, 2016 | ||||||||||||||||
Software Solutions | Data and Analytics | Corporate and Other | Total | |||||||||||||
Revenues | $ | 221.0 | $ | 47.6 | $ | (1.5 | ) | (1) | $ | 267.1 | ||||||
Expenses: | ||||||||||||||||
Operating expenses | 95.9 | 39.2 | 17.1 | 152.2 | ||||||||||||
Transition and integration costs | — | — | 1.1 | 1.1 | ||||||||||||
EBITDA | 125.1 | 8.4 | (19.7 | ) | 113.8 | |||||||||||
Depreciation and amortization | 29.0 | 2.1 | 25.7 | (2) | 56.8 | |||||||||||
Operating income (loss) | 96.1 | 6.3 | (45.4 | ) | 57.0 | |||||||||||
Interest expense | (16.9 | ) | ||||||||||||||
Other expense, net | (1.4 | ) | ||||||||||||||
Earnings before income taxes | 38.7 | |||||||||||||||
Income tax expense | 6.3 | |||||||||||||||
Net earnings | $ | 32.4 |
Nine months ended September 30, 2017 | ||||||||||||||||
Software Solutions | Data and Analytics | Corporate and Other | Total | |||||||||||||
Revenues | $ | 665.6 | $ | 122.1 | $ | (3.6 | ) | (1) | $ | 784.1 | ||||||
Expenses: | ||||||||||||||||
Operating expenses | 277.7 | 99.2 | 51.3 | 428.2 | ||||||||||||
Transition and integration costs | — | — | 8.5 | 8.5 | ||||||||||||
EBITDA | 387.9 | 22.9 | (63.4 | ) | 347.4 | |||||||||||
Depreciation and amortization | 74.9 | 11.0 | 68.3 | (2) | 154.2 | |||||||||||
Operating income (loss) | 313.0 | 11.9 | (131.7 | ) | 193.2 | |||||||||||
Interest expense | (44.8 | ) | ||||||||||||||
Other expense, net | (17.1 | ) | ||||||||||||||
Earnings before income taxes | 131.3 | |||||||||||||||
Income tax expense | 24.3 | |||||||||||||||
Net earnings | $ | 107.0 |
Nine months ended September 30, 2016 | ||||||||||||||||
Software Solutions | Data and Analytics | Corporate and Other | Total | |||||||||||||
Revenues | $ | 636.6 | $ | 133.7 | $ | (5.8 | ) | (1) | $ | 764.5 | ||||||
Expenses: | ||||||||||||||||
Operating expenses | 273.2 | 111.7 | 48.5 | 433.4 | ||||||||||||
Transition and integration costs | — | — | 2.2 | 2.2 | ||||||||||||
EBITDA | 363.4 | 22.0 | (56.5 | ) | 328.9 | |||||||||||
Depreciation and amortization | 80.2 | 6.5 | 67.5 | (2) | 154.2 | |||||||||||
Operating income (loss) | 283.2 | 15.5 | (124.0 | ) | 174.7 | |||||||||||
Interest expense | (50.6 | ) | ||||||||||||||
Other expense, net | (6.2 | ) | ||||||||||||||
Earnings before income taxes | 117.9 | |||||||||||||||
Income tax expense | 19.2 | |||||||||||||||
Net earnings | $ | 98.7 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
Consolidated: | 2017 | 2016 | 2017 | 2016 | |||||||||||
Revenues | $ | 263.8 | $ | 267.1 | $ | 784.1 | $ | 764.5 | |||||||
Deferred revenue purchase accounting adjustment | 1.0 | 1.5 | 3.6 | 5.8 | |||||||||||
Adjusted Revenues | 264.8 | 268.6 | 787.7 | 770.3 | |||||||||||
Effect of Property Insight realignment | — | (8.3 | ) | — | (23.3 | ) | |||||||||
Adjusted Revenues Excluding the Effect of the Property Insight Realignment | $ | 264.8 | $ | 260.3 | $ | 787.7 | $ | 747.0 | |||||||
Adjusted Revenues Growth Excluding the Effect of the Property Insight Realignment | 2 | % | 5 | % |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
Data and Analytics: | 2017 | 2016 | 2017 | 2016 | |||||||||||
Adjusted Revenues | $ | 40.3 | $ | 47.6 | $ | 122.1 | $ | 133.7 | |||||||
Effect of Property Insight realignment | — | (8.3 | ) | — | (23.3 | ) | |||||||||
Adjusted Revenues Excluding the Effect of the Property Insight Realignment | $ | 40.3 | $ | 39.3 | $ | 122.1 | $ | 110.4 | |||||||
Adjusted Revenues Growth Excluding the Effect of the Property Insight Realignment | 3 | % | 11 | % |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net earnings | $ | 43.9 | $ | 32.4 | $ | 107.0 | $ | 98.7 | |||||||
Depreciation and amortization | 51.3 | 56.8 | 154.2 | 154.2 | |||||||||||
Interest expense | 14.1 | 16.9 | 44.8 | 50.6 | |||||||||||
Income tax expense | 9.2 | 6.3 | 24.3 | 19.2 | |||||||||||
Other expense, net | 0.6 | 1.4 | 17.1 | 6.2 | |||||||||||
EBITDA | 119.1 | 113.8 | 347.4 | 328.9 | |||||||||||
Deferred revenue purchase accounting adjustment | 1.0 | 1.5 | 3.6 | 5.8 | |||||||||||
Equity-based compensation | 4.1 | 3.4 | 14.4 | 9.5 | |||||||||||
Debt and/or equity offering expenses | 2.4 | 0.5 | 5.8 | 0.6 | |||||||||||
Spin-off related transition costs | 1.6 | — | 2.7 | — | |||||||||||
Acquisition-related costs | — | 0.6 | — | 1.6 | |||||||||||
Adjusted EBITDA | $ | 128.2 | $ | 119.8 | $ | 373.9 | $ | 346.4 | |||||||
Adjusted EBITDA Margin | 48.4 | % | 44.6 | % | 47.5 | % | 45.0 | % |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net earnings | $ | 43.9 | $ | 32.4 | $ | 107.0 | $ | 98.7 | |||||||
Depreciation and amortization purchase accounting adjustment | 23.3 | 24.9 | 68.2 | 65.0 | |||||||||||
Deferred revenue purchase accounting adjustment | 1.0 | 1.5 | 3.6 | 5.8 | |||||||||||
Equity-based compensation | 4.1 | 3.4 | 14.4 | 9.5 | |||||||||||
Debt and/or equity offering expenses | 2.4 | 0.5 | 18.5 | 0.6 | |||||||||||
Spin-off related transition costs | 1.6 | — | 2.7 | — | |||||||||||
Acquisition-related costs | — | 0.6 | — | 1.6 | |||||||||||
Legal and regulatory matters | 0.5 | 1.3 | 4.0 | 6.2 | |||||||||||
Income tax expense adjustment | (22.5 | ) | (20.0 | ) | (65.4 | ) | (57.2 | ) | |||||||
Adjusted Net Earnings | $ | 54.3 | $ | 44.6 | $ | 153.0 | $ | 130.2 | |||||||
Adjusted Net Earnings Per Share | $ | 0.36 | $ | 0.29 | $ | 1.00 | $ | 0.85 | |||||||
Weighted Average Adjusted Shares Outstanding | 152.2 | 152.7 | 152.7 | 152.7 |
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