UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
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FORM 10-Q
QUARTERLY REPORT
Quarter Ended March 31, 2021
TABLE OF CONTENTS
i
Part I: FINANCIAL INFORMATION
Item 1.Condensed Consolidated Financial Statements (Unaudited)
BLACK KNIGHT, INC.
Condensed Consolidated Balance Sheets
(In millions)
(Unaudited)
March 31, 2021 | December 31, 2020 | |||||
ASSETS | ||||||
Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Trade receivables, net |
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Prepaid expenses and other current assets |
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Receivables from related parties |
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Total current assets |
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Property and equipment, net |
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Computer software, net |
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Other intangible assets, net |
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Goodwill |
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Investments in unconsolidated affiliates |
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Deferred contract costs, net |
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Other non-current assets |
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Total assets | $ | | $ | | ||
LIABILITIES AND EQUITY |
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Current liabilities: |
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Trade accounts payable and other accrued liabilities | $ | | $ | | ||
Accrued compensation and benefits |
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Current portion of debt |
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Deferred revenues |
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Total current liabilities |
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Deferred revenues |
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Deferred income taxes |
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Long-term debt, net of current portion |
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Other non-current liabilities |
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Total liabilities |
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Commitments and contingencies (Note 11) |
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Redeemable noncontrolling interests |
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Equity: |
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Common stock; $ |
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Preferred stock; $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
| ( |
| ( | ||
Treasury stock, at cost, |
| ( |
| ( | ||
Total shareholders’ equity |
| |
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Total liabilities, redeemable noncontrolling interests and shareholders’ equity | $ | | $ | |
See Notes to Condensed Consolidated Financial Statements (Unaudited).
1
BLACK KNIGHT, INC.
Condensed Consolidated Statements of Earnings and Comprehensive Earnings
(In millions, except per share data)
(Unaudited)
Three months ended March 31, | ||||||
| 2021 |
| 2020 | |||
Revenues | $ | | $ | | ||
Expenses: |
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Operating expenses |
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Depreciation and amortization |
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Transition and integration costs |
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Total expenses |
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Operating income |
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Other income and expense: |
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Interest expense, net |
| ( |
| ( | ||
Other expense, net |
| ( |
| ( | ||
Total other expense, net |
| ( |
| ( | ||
Earnings before income taxes and equity in earnings of unconsolidated affiliates |
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Income tax expense | |
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Earnings before equity in earnings of unconsolidated affiliates |
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Equity in earnings of unconsolidated affiliates, net of tax |
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Net earnings |
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Net losses attributable to redeemable noncontrolling interests |
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Net earnings attributable to Black Knight | $ | | $ | | ||
Other comprehensive (loss) earnings: |
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Unrealized holding gains (losses), net of tax(1) |
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| ( | ||
Reclassification adjustments for losses included in net earnings, net of tax(2) |
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Total unrealized gains (losses) on interest rate swaps, net of tax |
| |
| ( | ||
Foreign currency translation adjustment, net of tax (3) |
| ( |
| ( | ||
Unrealized losses on investments in unconsolidated affiliates(4) |
| ( |
| ( | ||
Other comprehensive earnings (loss) |
| |
| ( | ||
Comprehensive earnings |
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Net losses attributable to redeemable noncontrolling interests |
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Comprehensive earnings attributable to Black Knight | $ | | $ | | ||
Net earnings per share attributable to Black Knight common shareholders: |
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Basic | $ | | $ | | ||
Diluted | $ | | $ | | ||
Weighted average shares of common stock outstanding (see Note 5): |
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Basic |
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Diluted |
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(1) |
(2) |
(3) |
(4) |
See Notes to Condensed Consolidated Financial Statements (Unaudited).
2
BLACK KNIGHT, INC.
Condensed Consolidated Statements of Equity
(In millions)
(Unaudited)
Three months ended March 31, 2021 | |||||||||||||||||||||||||
Accumulated | |||||||||||||||||||||||||
Additional | other | Total | Redeemable | ||||||||||||||||||||||
Common stock | paid-in | Retained | comprehensive | Treasury stock | shareholders’ | noncontrolling | |||||||||||||||||||
| Shares |
| $ |
| capital |
| earnings |
| loss |
| Shares |
| $ |
| equity |
| interests | ||||||||
Balance, December 31, 2020 |
| | $ | — | $ | | $ | | $ | ( |
| | $ | ( | $ | | $ | | |||||||
Fair value adjustment to redeemable noncontrolling interests in Optimal Blue Holdco, LLC |
| — |
| — |
| ( |
| — |
| — |
| — |
| — |
| ( |
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Grant of restricted shares of common stock |
| — |
| — |
| ( |
| — |
| — |
| ( |
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| — |
| — | |||||||
Forfeitures of restricted shares of common stock |
| — |
| — |
| |
| — |
| — |
| — |
| ( |
| — |
| — | |||||||
Tax withholding payments for restricted share vesting |
| ( |
| — |
| ( |
| — |
| — |
| — |
| — |
| ( |
| — | |||||||
Vesting of restricted shares granted from treasury stock |
| — |
| — |
| |
| — |
| — |
| |
| ( |
| — |
| — | |||||||
Equity-based compensation expense |
| — |
| — |
| |
| — |
| — |
| — |
| — |
| |
| — | |||||||
Net earnings (losses) |
| — |
| — |
| — |
| |
| — |
| — |
| — |
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| ( | |||||||
Equity-based compensation expense of unconsolidated affiliates |
| — |
| — |
| — |
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| — |
| — |
| — |
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| — | |||||||
Purchases of treasury stock |
| — |
| — |
| — |
| — |
| — |
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| ( |
| ( |
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Foreign currency translation adjustment |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( |
| — | |||||||
Unrealized gains on interest rate swaps, net |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| |
| — | |||||||
Other comprehensive loss on investments in unconsolidated affiliates |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( |
| — | |||||||
Balance, March 31, 2021 |
| | $ | — | $ | | $ | | $ | ( |
| | $ | ( | $ | | $ | |
Three months ended March 31, 2020 | ||||||||||||||||||||||
Accumulated other | ||||||||||||||||||||||
Common stock | Additional | Retained | comprehensive | Treasury stock | Total shareholders’ | |||||||||||||||||
| Shares |
| $ |
| paid-in capital |
| earnings |
| loss |
| Shares |
| $ |
| equity | |||||||
Balance December 31, 2019 |
| | — | $ | | $ | | $ | ( |
| | $ | ( | $ | | |||||||
Effect of CECL adoption | — | — | — | ( | — | — | — | ( | ||||||||||||||
Adjusted balance at January 1, 2020 | | — | | | ( | | ( | | ||||||||||||||
Grant of restricted shares of common stock | — | — | ( | — | — | ( | | — | ||||||||||||||
Forfeitures of restricted shares of common stock |
| — |
| — |
| |
| — |
| — |
| — |
| ( |
| — | ||||||
Tax withholding payments for restricted share vesting |
| ( |
| — |
| ( |
| — |
| — |
| — |
| — |
| ( | ||||||
Vesting of restricted shares granted from treasury stock |
| — |
| — |
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| — |
| — |
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| ( |
| — | ||||||
Equity-based compensation expense |
| — |
| — |
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| — |
| — |
| — |
| — |
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Net earnings |
| — |
| — |
| — |
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| — |
| — |
| — |
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Equity-based compensation expense of unconsolidated affiliates |
| — |
| — |
| — |
| |
| — |
| — |
| — |
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Foreign currency translation adjustment | — | — | — | — | ( | — | — | ( | ||||||||||||||
Unrealized losses on interest rate swaps, net |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( | ||||||
Other comprehensive loss on investments in unconsolidated affiliates |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( | ||||||
Balance, March 31, 2021 |
| | $ | — | $ | | $ | | $ | ( |
| | $ | ( | $ | |
See Notes to Condensed Consolidated Financial Statements (Unaudited).
3
BLACK KNIGHT, INC.
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
| Three months ended March 31, | |||||
2021 | 2020 | |||||
Cash flows from operating activities: |
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Net earnings | $ | | $ | | ||
Adjustments to reconcile net earnings to net cash provided by operating activities: |
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Depreciation and amortization |
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Amortization of debt issuance costs and original issue discount |
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Loss on extinguishment of debt | | — | ||||
Deferred income taxes, net |
| ( | | |||
Equity in earnings of unconsolidated affiliates, net of tax |
| ( | ( | |||
Equity-based compensation |
| | | |||
Changes in assets and liabilities, net of acquired assets and liabilities: |
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Trade and other receivables, including receivables from related parties |
| | ( | |||
Prepaid expenses and other assets |
| ( | ( | |||
Deferred contract costs |
| ( | ( | |||
Deferred revenues |
| | ( | |||
Trade accounts payable and other liabilities |
| ( | ( | |||
Net cash provided by operating activities |
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Cash flows from investing activities: |
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Additions to property and equipment |
| ( | ( | |||
Additions to computer software |
| ( | ( | |||
Business acquisitions, net of cash acquired |
| ( | ( | |||
Asset acquisitions |
| ( | ( | |||
Net cash used in investing activities |
| ( | ( | |||
Cash flows from financing activities: |
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Revolver borrowings |
| | | |||
Revolver payments |
| ( | ( | |||
Term loan borrowings | | — | ||||
Term loan payments |
| | ( | |||
Purchases of treasury stock |
| ( | — | |||
Tax withholding payments for restricted share vesting |
| ( | ( | |||
Finance lease payments |
| ( | ( | |||
Debt issuance costs paid |
| ( | — | |||
Net cash (used in) provided by financing activities |
| ( | | |||
Net increase in cash and cash equivalents |
| | | |||
Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period | $ | | $ | | ||
Supplemental cash flow information: |
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Interest paid, net | $ | ( | $ | ( | ||
Income taxes paid, net | $ | ( | $ | ( |
See Notes to Condensed Consolidated Financial Statements (Unaudited).
4
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1)Basis of Presentation and Overview
The preparation of these Condensed Consolidated Financial Statements (Unaudited) in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements (Unaudited), as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission ("SEC") on February 26, 2021 and other filings with the SEC.
Description of Business
We are a leading provider of integrated software, data and analytics solutions to the mortgage and consumer loan, real estate and capital markets verticals. Our solutions facilitate and automate many of the mission-critical business processes across the homeownership lifecycle. We are committed to being a premier business partner that clients rely on to achieve their strategic goals, realize greater success and better serve their customers by delivering best-in-class software, services and insights with a relentless commitment to excellence, innovation, integrity and leadership.
Principles of Consolidation
The consolidated financial statements include the accounts of BKI, its wholly-owned subsidiaries and non-wholly owned subsidiaries in which we have a controlling financial interest either through voting rights or means other than voting rights. Intercompany transactions and balances have been eliminated in consolidation. Where our ownership interest in a consolidated subsidiary is less than 100%, the noncontrolling interests’ share of these non-wholly owned subsidiaries is reported in our consolidated balance sheets as a separate component of equity or within temporary equity. The noncontrolling interests’ share of the net earnings (loss) of these non-wholly owned subsidiaries is reported in our Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) as an adjustment to our net earnings to arrive at Net earnings attributable to Black Knight.
We consolidate variable interest entities (“VIEs”) if we are considered the primary beneficiary because we have (a) the power to direct matters that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.
Optimal Blue Holdco, LLC (“Optimal Blue Holdco”), a non-wholly owned subsidiary, is considered a VIE. We are the primary beneficiary of Optimal Blue Holdco through our controlling interest and our rights established in the Second Amended and Restated Limited Liability Company Agreement of Optimal Blue Holdco dated November 24, 2020 (the “OB Holdco LLC Agreement”). As such, we control Optimal Blue Holdco and its subsidiaries and consolidate its financial position and results of operations. As of March 31, 2021 and December 31, 2020, we own
Reporting Segments
We conduct our operations through
5
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
(2)Condensed Consolidated Financial Statement Details
Cash and Cash Equivalents
Cash and cash equivalents are unrestricted and include the following (in millions):
March 31, 2021 |
| December 31, 2020 | |||||
Cash | $ | | $ | | |||
Cash equivalents |
| |
| | |||
Cash and cash equivalents | $ | | $ | |
Trade Receivables, Net
A summary of Trade receivables, net of allowance for credit losses is as follows (in millions):
| |||||||
March 31, 2021 |
| December 31, 2020 | |||||
Trade receivables — billed | $ | | $ | | |||
Trade receivables — unbilled |
| |
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Trade receivables |
| |
| | |||
Allowance for credit losses |
| ( |
| ( | |||
Trade receivables, net | $ | | $ | |
In addition to the amounts above, we have unbilled receivables that we do not expect to collect within the next year included in Other non-current assets in our Condensed Consolidated Balance Sheets (Unaudited). Billings for these receivables are based on contractual terms.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in millions):
| March 31, 2021 |
| December 31, 2020 | ||||
Prepaid expenses | $ | | $ | | |||
Contract assets, net |
| |
| | |||
Other current assets |
| |
| | |||
Prepaid expenses and other current assets | $ | | $ | |
6
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
Other Non-Current Assets
Other non-current assets consist of the following (in millions):
March 31, 2021 |
| December 31, 2020 | ||||
Property records database | $ | | $ | | ||
Contract assets, net |
| |
| | ||
Right-of-use assets(1) |
| |
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Contract credits |
| |
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Deferred compensation plan related assets |
| |
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Prepaid expenses |
| |
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Other |
| |
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Other non-current assets | $ | | $ | |
(1) | Includes non-cash additions for right-of-use assets obtained in exchange for lease liabilities of $ |
Trade Accounts Payable and Other Accrued Liabilities
Trade accounts payable and other accrued liabilities consist of the following (in millions):
March 31, 2021 |
| December 31, 2020 | ||||
Income taxes payable | $ | | $ | | ||
Lease liabilities, current |
| |
| | ||
Trade accounts payable |
| |
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Other taxes payable and accrued |
| |
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Accrued client liabilities | | | ||||
Accrued interest |
| |
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Other |
| |
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Trade accounts payable and accrued liabilities | $ | | $ | |
Deferred Revenues
During the three months ended March 31, 2021 and 2020, revenues recognized related to the amount included in the Deferred revenues balance at the beginning of each year were $
Depreciation and Amortization
Depreciation and amortization includes the following (in millions):
| Three months ended March 31, | ||||||
| 2021 |
| 2020 | ||||
Computer software | $ | | $ | | |||
Other intangible assets |
| |
| | |||
Deferred contract costs |
| |
| | |||
Property and equipment |
| |
| | |||
Total | $ | | $ | |
7
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
(3)Business Acquisitions
Allocation of purchase price
The purchase price of acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the acquisition date. The fair value of the acquired Computer software and Other intangible assets were primarily determined using a third party valuation based on significant estimates and assumptions, including Level 3 inputs, which are judgmental in nature. These estimates and assumptions include the projected timing and amount of future cash flows and discount rates reflecting the risk inherent in the future cash flows.
NexSpring Acquisition
On March 16, 2021, we completed the acquisition of the technology assets and business of NexSpring Financial, LLC (“NexSpring”). This solution is expected to broaden our ability to serve mortgage brokers. NexSpring’s digital lending platform will be integrated with our Empower® loan origination system and reported within our Software Solutions segment.
Total consideration was $
Optimal Blue Acquisition
On September 15, 2020, we completed the acquisition of Optimal Blue, a leading provider of secondary market solutions and actionable data services, funded with cash on hand, debt financing and investments from co-investors Cannae and THL. Optimal Blue is reported within our Software Solutions segment because it enhances our robust set of software solutions and includes additional product, pricing and eligibility capabilities.
Total consideration, net of cash acquired was approximately $
Cash paid |
| $ | |
Less: cash acquired |
| ( | |
Total consideration, net | $ | |
8
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
The following table summarizes the total purchase price consideration and the preliminary fair value amounts recognized for the assets acquired and liabilities assumed (in millions):
Total consideration, net |
| $ | |
Trade receivables | $ | | |
Computer software |
| | |
Other intangible assets |
| | |
Goodwill |
| | |
Other current and non-current assets |
| | |
Total assets acquired |
| | |
Deferred income taxes |
| | |
Current and other non-current liabilities |
| | |
Total liabilities assumed |
| | |
Net assets acquired | $ | |
The fair value of Computer Software, Other intangible assets, Goodwill and certain assumed liabilities, including estimated liabilities for pre-acquisition tax exposure, is preliminary and subject to adjustments as we complete our valuation process. During the three months ended March 31, 2021, no measurement period adjustments were recorded.
(4)Investments in Unconsolidated Affiliates
DNB Investment
Dun & Bradstreet Holdings, Inc. (“DNB”) is a global leader in commercial data and analytics that provides various services helping companies improve their operational performance. On July 6, 2020, DNB, previously a wholly-owned subsidiary of Star Parent, L.P., a Delaware limited partnership (“Star Parent”), closed its initial public offering (the “DNB IPO”) and concurrent private placement (the “DNB Private Placement”). In connection with the DNB IPO and DNB Private Placement, our limited partner interests in Star Parent were exchanged for
We hold less than
On January 8, 2021, DNB completed its acquisition of Bisnode Business Information Group AB (the “Bisnode acquisition”). In connection with the Bisnode acquisition, DNB issued
As of March 31, 2021, we have invested an aggregate of $
9
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
Summarized consolidated financial information for DNB (Successor) and Star Parent (Predecessor) is presented below (in millions):
| March 31, 2021 |
| December 31, 2020 | |||
Current assets | $ | | $ | | ||
Non-current assets |
| |
| | ||
Total assets | $ | | $ | | ||
Current liabilities, including short-term debt | $ | | $ | | ||
Non-current liabilities |
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Total liabilities |
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Total equity |
| |
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Total liabilities and shareholders' equity | $ | | $ | |
|
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Three months ended March 31, | ||||||
2021 | 2020 | |||||
Revenues | $ | | $ | | ||
Loss before provision for income taxes and equity in net income of affiliates |
| ( |
| ( | ||
Net (loss) income |
| ( |
| | ||
Net (loss) income attributable to DNB (Successor)/Star Parent (Predecessor) |
| ( |
| |
Effective January 1, 2021, DNB eliminated the one-month reporting lag for certain of its subsidiaries outside North America and aligned the year-end for all of its subsidiaries to December 31. DNB applied this change in their accounting policy retrospectively. The effect of this change in accounting policy did not have a material impact to our results of operations or financial condition and was included in our current period accounting for our investment in DNB. The summarized consolidated financial information above was derived from DNB’s most recently available unaudited consolidated financial information and includes the effect of their change in accounting policy.
Equity in earnings (losses) of unconsolidated affiliates, net of tax consists of the following (in millions):
Three months ended March 31, | |||||
2021 |
| 2020 | |||
Equity in (losses) earnings of unconsolidated affiliates, net of tax | $ | ( | $ | | |
Non-cash gain related to DNB's issuance of common stock, net of tax |
| |
| — | |
Equity in earnings of unconsolidated affiliates, net of tax | $ | | $ | |
(5)Earnings Per Share
Diluted net earnings per share includes the effect of unvested restricted stock awards. For the three months ended March 31, 2021, the outstanding Optimal Blue Holdo profits interests units (“OB PIUs”) were excluded from the diluted earnings per share calculations because
10
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
the effect of their inclusion was antidilutive. The following table sets forth the computation of basic and diluted net earnings per share (in millions, except per share amounts):
| Three months ended March 31, | ||||||
2021 |
| 2020 | |||||
Basic: |
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Net earnings attributable to Black Knight | $ | | $ | | |||
Shares used for basic net earnings per share: |
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Weighted average shares of common stock outstanding |
| |
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Basic net earnings per share | $ | | $ | | |||
Diluted: |
|
|
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| |||
Net earnings attributable to Black Knight | $ | | $ | | |||
Shares used for diluted net earnings per share: |
|
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| |||
Weighted average shares of common stock outstanding |
| |
| | |||
Dilutive effect of unvested restricted shares of common stock |
| |
| | |||
Weighted average shares of common stock, diluted |
| |
| | |||
Diluted net earnings per share | $ | | $ | |
(6)Related Party Transactions
We believe the amounts earned from or charged by us under each of the following arrangements are fair and reasonable. The amounts we earned or that were charged under these arrangements were not negotiated at arm's length and may not represent the terms that we might have obtained from an unrelated third party.
DNB
DNB is considered to be a related party primarily due to the combination of our investment in DNB, our shared Chief Executive Officer and certain shared board members. Refer to Note 4 — Investments in Unconsolidated Affiliates for additional details.
As of March 31, 2021, we had a related party receivable of $
Trasimene
Trasimene Capital Management, LLC ("Trasimene") is considered a related party because the Chairman of our Board of Directors owns a controlling interest in Trasimene. During the three months ended March 31, 2021, we recognized $
(7)Goodwill
Goodwill consists of the following (in millions):
| Software |
| Data and |
| |||||
Solutions | Analytics | Total | |||||||
Balance, December 31, 2020 | $ | | $ | | $ | | |||
NexSpring acquisition (Note 3) |
| |
| |
| | |||
Balance, March 31, 2021 | $ | | $ | | $ | |
The increase in Goodwill related to our NexSpring acquisition is deductible for tax purposes.
11
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
(8)Long-Term Debt
Long-term debt consists of the following (in millions):
| March 31, 2021 |
| December 31, 2020 | |||
Term A Loan | $ | | $ | | ||
Revolving Credit Facility |
| |
| | ||
Senior Notes |
| |
| | ||
Other |
| |
| | ||
Total long-term debt principal |
| |
| | ||
Less: current portion of long-term debt |
| ( |
| ( | ||
Long-term debt before debt issuance costs and discount |
| |
| | ||
Less: debt issuance costs and discount |
| ( |
| ( | ||
Long-term debt, net of current portion | $ | | $ | |
As of March 31, 2021, principal maturities, including payments related to our finance leases, are as follows (in millions):
2021 |
| $ | |
2022 | | ||
2023 |
| | |
2024 |
| | |
2025 |
| | |
Thereafter |
| | |
Total | $ | |
Credit Agreement
On April 30, 2018, our indirect subsidiary, BKIS entered into an amended and restated credit and guaranty agreement (the “2018 Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent, the guarantors party thereto, the other agents party thereto and the lenders party thereto. The 2018 Credit Agreement provided for (i) a $
Debt Refinancing
On March 10, 2021, BKIS entered into a second amended and restated credit and guaranty agreement (the “2021 Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, the guarantors party thereto, the other agents party thereto and the lenders party thereto.
The 2021 Credit Agreement provides for (i) a $
The Facilities bear interest at rates based upon, at the option of BKIS, either (i) the base rate plus a margin of between
12
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
2018 Credit Agreement. The 2021 Credit Agreement also provides us with an option to choose an alternative rate of interest on or before the cessation of the London Interbank Offered Rate (“LIBOR”) at our election.
As of March 31, 2021, the interest rate for the Facilities was based on the Eurodollar rate plus a margin of
The Facilities are guaranteed by all of BKIS’s wholly-owned domestic restricted subsidiaries and BKFS, and are secured by associated collateral agreements that pledge a lien on the majority of BKIS’s assets and the assets of the guarantors, in each case, subject to customary exceptions.
The Term A Loan is subject to amortization of principal, payable in quarterly installments on the last day of each fiscal quarter equal to the percentage set forth below of the initial aggregate principal amount of the term loans for such fiscal quarter:
Payment Dates |
| Percentage |
|
Commencing on March 31, 2022 through and including December 31, 2023 |
| | % |
Commencing on March 31, 2024 through and including December 31, 2025 |
| | % |
The remaining principal balance of the Term A Loan and any outstanding loans under the Revolving Credit Facility are due upon maturity on March 10, 2026.
As a result of the refinancing, we recognized $
Senior Notes
On August 26, 2020, BKIS completed the issuance and sale of $
Other Debt
On April 1, 2018, we entered into a financing agreement for $
Finance Leases
On December 31, 2019, we entered into
13
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
Consolidated Balance Sheets (Unaudited). For the three months ended March 31, 2021 and 2020, non-cash investing and financing activity was $
Fair Value of Long-Term Debt
The fair values of our Facilities and Senior Notes are based upon established market prices for the securities using Level 2 inputs. The fair value of our Facilities approximates their carrying value at March 31, 2021. The fair value of our Senior Notes at March 31, 2021 was $
Interest Rate Swaps
We enter into interest rate swap agreements to hedge forecasted monthly interest rate payments on our floating rate debt. As of March 31, 2021, we had the following interest rate swap agreements (collectively, the "Swap Agreements") (in millions):
Effective dates |
| Notional amount |
| Fixed rates |
| |
March 31, 2017 through March 31, 2022 | $ | |
| | % | |
September 29, 2017 through September 30, 2021 | $ | |
| | % | |
April 30, 2018 through April 30, 2023 | $ | |
| | % | |
January 31, 2019 through January 31, 2023 | $ | |
| | % |
Under the terms of the Swap Agreements, we receive payments based on the 1-month LIBOR (approximately
We entered into the Swap Agreements to convert a portion of the interest rate exposure on our floating rate debt from variable to fixed. We designated these Swap Agreements as cash flow hedges. A portion of the amount included in Accumulated other comprehensive loss is reclassified into Interest expense, net as a yield adjustment as interest is either paid or received on the hedged debt. The fair value of our Swap Agreements is based upon Level 2 inputs. We have considered our own credit risk and the credit risk of the counterparties when determining the fair value of our Swap Agreements.
It is our policy to execute such instruments with creditworthy banks and not to enter into derivative financial instruments for speculative purposes. We believe our interest rate swap counterparties will be able to fulfill their obligations under our agreements, and we believe we will have debt outstanding through the various expiration dates of the swaps such that the occurrence of future cash flow hedges remains probable.
The estimated fair values of our Swap Agreements are as follows (in millions):
Balance sheet accounts |
| March 31, 2021 |
| December 31, 2020 | ||
Other current liabilities | $ | | $ | | ||
Other non-current liabilities | $ | | $ | |
A cumulative loss of $
Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | |||||||||||
|
| Amount of loss |
|
| Amount of loss | |||||||
Amount of gain | reclassified from | Amount of loss | reclassified from | |||||||||
recognized | Accumulated OCE | recognized | Accumulated OCE | |||||||||
in OCE | into Net earnings | in OCE | into Net earnings | |||||||||
Swap agreements | $ | | $ | | $ | ( | $ | |
14
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
Approximately $
(9)Fair Value Measurements
Fair Value of Financial Assets and Liabilities
Fair value represents the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of financial assets and liabilities are determined using the following fair value hierarchy:
● | Level 1 inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access. |
● | Level 2 inputs to the valuation methodology include: |
o | quoted prices for similar assets or liabilities in active markets; |
o | quoted prices for identical or similar assets or liabilities in inactive markets; |
o | inputs other than quoted prices that are observable for the asset or liability; and |
o | inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
● | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis (in millions):
| March 31, 2021 |
| December 31, 2020 | |||||||||||||||||||||
| Carrying |
| Fair value |
| Carrying |
| Fair value | |||||||||||||||||
amount | Level 1 | Level 2 | Level 3 | amount | Level 1 | Level 2 | Level 3 | |||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Cash and cash equivalents (Note 2) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Liabilities: |
|
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|
|
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|
|
| ||||||||
Interest rate swaps (Note 8) |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Contingent consideration (Note 3) |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Redeemable noncontrolling interests |
| |
| |
| |
| |
| |
| |
| |
| |
The fair value of contingent consideration was primarily determined using a third-party valuation based on significant estimates and assumptions, including Level 3 inputs. The estimates and assumptions include the projected timing and amount of future cash flows and discount rates reflecting the rate inherent in the future cash flows.
15
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
The following table presents a summary of the change in fair value of our Level 3 fair value measurements (in millions):
Beginning balance, December 31, 2020 |
| $ | |
Contingent consideration adjustments related to prior year acquisition | | ||
Contingent consideration increase related to current year acquisition |
| | |
Ending balance, March 31, 2021 | $ | |
As of March 31, 2021, the fair value of redeemable noncontrolling interests approximates its carrying amount due to the close proximity to the reporting date of the contributions received from Cannae and THL for their share of equity interests in Optimal Blue Holdco. Refer to Note 1 — Basis of Presentation and Overview and Note 3 — Business Acquisitions for additional information.
(10)Income Taxes
Our effective tax rate for the three months ended March 31, 2021 and 2020 was
(11)Commitments and Contingencies
Legal and Regulatory Matters
In the ordinary course of business, we are involved in various pending and threatened litigation and regulatory matters related to our operations, some of which include claims for punitive or exemplary damages. Our ordinary course litigation may include class action lawsuits, which make allegations related to various aspects of our business. From time to time, we also receive requests for information from various state and federal regulatory authorities, some of which take the form of civil investigative demands or subpoenas. Some of these regulatory inquiries may result in the assessment of fines for violations of regulations or settlements with such authorities requiring a variety of remedies. We believe that none of these actions depart from customary litigation or regulatory inquiries incidental to our business.
We review lawsuits and other legal and regulatory matters (collectively "legal proceedings") on an ongoing basis when making accrual and disclosure decisions. When assessing reasonably possible and probable outcomes, management bases its decision on its assessment of the ultimate outcome assuming all appeals have been exhausted. For legal proceedings where it has been determined that a loss is both probable and reasonably estimable, a liability based on known facts and which represents our best estimate has been recorded. Actual losses may materially differ from the amounts recorded and the ultimate outcome of our pending cases is generally not yet determinable. While some of these matters could be material to our operating results or cash flows for any particular period if an unfavorable outcome results, at present we do not believe the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on our financial condition.
PennyMac Litigation
On November 5, 2019, Black Knight Servicing Technologies, LLC (“BKST”), an indirect, wholly-owned subsidiary of Black Knight, filed a Complaint and Demand for Jury Trial (the “Black Knight Complaint”) against PennyMac Loan Services, LLC (“PennyMac”) in the Circuit Court for the Fourth Judicial Circuit in and for Duval County, Florida. The Black Knight Complaint includes causes of action for breach of contract and misappropriation of MSP® System trade secrets in order to develop an imitation mortgage processing system intended to replace the MSP® System. The Black Knight Complaint seeks damages for breach of contract and misappropriation of trade secrets, injunctive relief under the Florida Uniform Trade Secrets Act and declaratory judgment that BKST owns all intellectual property and software developed by or on behalf of PennyMac as a result of its wrongful use of and access to the MSP® System and related trade secret and confidential information. PennyMac filed a motion to compel arbitration of the action, and the court granted the motion on April 6, 2020. After the court denied BKST's motion for reconsideration of the court’s order compelling arbitration, BKST filed a notice of appeal with the Florida First District Court of Appeal on May 6, 2020. On January 6, 2021, the appellate court affirmed the trial court's ruling.
16
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
On October 21, 2020, PennyMac submitted a dispute regarding a Black Knight Origination Technologies, LLC LendingSpace® software audit request to the American Arbitration Association ("AAA") for arbitration. Black Knight moved to consolidate the LendingSpace® arbitration with the existing trade secret/antitrust arbitrations and, on December 21, 2020, the arbitrator granted Black Knight’s motion to consolidate the arbitrations. On December 8, 2020, Black Knight and PennyMac filed motions for summary judgment concerning the LendingSpace® audit, and responses to the competing motions for summary judgment were filed by both parties on January 7, 2021. On February 16, 2021, the arbitrator granted Black Knight’s motion for summary judgment and ordered that Black Knight may conduct an audit of PennyMac’s use of Black Knight’s LendingSpace® software.
Shortly after the filing of the Black Knight Complaint, on November 6, 2019, PennyMac filed an Antitrust Complaint (the “PennyMac Complaint”) against Black Knight in the United States District Court for the Central District of California. The PennyMac Complaint included causes of action for alleged monopolization and attempted monopolization under Section 2 of the Sherman Antitrust Act, violation of California’s Cartwright Act, violation of California’s Unfair Competition Law and common law unfair competition under California law. The PennyMac Complaint sought equitable remedies, damages and other monetary relief, including treble and punitive damages. Generally, PennyMac alleged that Black Knight relies on various anticompetitive, unfair, and discriminatory practices to maintain and to enhance its dominance in the mortgage servicing platform market and in an attempt to monopolize the platform software applications market. Black Knight moved to dismiss the PennyMac Complaint or have the action transferred to Florida based upon a forum selection clause in the agreement with BKST. On February 13, 2020, the judge granted Black Knight's motion to transfer the case to Florida and denied as moot the motion to dismiss. On April 17, 2020, PennyMac filed a notice of dismissal of this action without prejudice and indicated that they intended to bring the claims raised in the dismissed PennyMac Complaint as defenses, third party claims and/or counterclaims in arbitration. On April 23, 2020, the court entered an order dismissing the action without prejudice and directing that the clerk close the case. On April 28, 2020, PennyMac submitted this matter to the AAA for arbitration. On May 27, 2020, Black Knight filed its answering statement with the AAA. The arbitrator was confirmed by the AAA on July 21, 2020.
The arbitrator set Black Knight's trade secret case for a 10-day final hearing beginning on October 24, 2022, and set PennyMac's antitrust case for a 5-day final hearing beginning on November 14, 2022.
On June 26, 2020, Black Knight filed a complaint against PennyMac in the United States District Court for the Middle District of Florida seeking a declaratory judgment that PennyMac waived its right to arbitrate federal antitrust and related state law claims against Black Knight because PennyMac previously filed and litigated those claims in a court of law (the “BKI Declaratory Action”). On July 22, 2020, PennyMac moved to dismiss the complaint in the BKI Declaratory Action, which Black Knight opposed. In response to a request from the court in the BKI Declaratory Action, on August 20, 2020, BKI filed a memorandum of law in support of the federal court's subject matter jurisdiction. Black Knight filed its motion for summary judgment on September 28, 2020, and PennyMac filed its opposition to the motion on October 27, 2020. On March 1, 2021, the Court conducted a telephonic hearing on PennyMac’s motion to dismiss and BKI’s motion for summary judgment, at which the parties agreed that PennyMac’s motion to dismiss would be converted to a cross-motion for summary judgment. On March 22, 2021, the Court denied BKI’s motion for summary judgment and granted PennyMac’s motion as to the waiver issue, finding that PennyMac has not waived its right to arbitrate the claims raised in the Black Knight Complaint.
As these cases continue to evolve, it is not possible to reasonably estimate the probability that we will ultimately prevail on our lawsuit or be held liable for the violations alleged in the PennyMac Complaint, nor is it possible to reasonably estimate the ultimate gain or loss, if any, or range of gain or loss that could result from these cases.
Indemnifications and Warranties
We often agree to indemnify our clients against damages and costs resulting from claims of patent, copyright, trademark infringement or breaches of confidentiality associated with use of our software through software licensing agreements. Historically, we have not made any payments under such indemnifications, but continue to monitor the conditions that are subject to the indemnifications to identify whether a loss has occurred that is both probable and estimable that would require recognition. In addition, we warrant to clients that our software operates substantially in accordance with the software specifications. Historically, no costs have been incurred related to software warranties and none are expected in the future, and as such, no accruals for warranty costs have been made.
17
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
Indemnification Agreement
We are party to a cross-indemnity agreement dated December 22, 2014 with ServiceLink Holdings, LLC ("ServiceLink"). Pursuant to this agreement, ServiceLink indemnifies us from liabilities relating to, arising out of or resulting from the conduct of ServiceLink’s business or any action, suit or proceeding in which we or any of our subsidiaries are named by reason of being a successor to the business of Lender Processing Services, Inc. and the cause of such action, suit or proceeding relates to the business of ServiceLink. In return, we indemnify ServiceLink for liabilities relating to, arising out of, or resulting from the conduct of our business.
(12)Revenues
Disaggregation of Revenues
The following tables summarize revenues from contracts with clients (in millions):
| Three months ended March 31, 2021 | |||||||||||||||||
| Servicing |
| Origination |
| Software |
| Data and |
| Corporate |
| ||||||||
Software | Software | Solutions | Analytics | and Other | Total | |||||||||||||
Software and hosting solutions | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Professional services |
| |
| |
| |
| |
| |
| | ||||||
Data solutions |
| |
| |
| |
| |
| |
| | ||||||
Other |
| |
| |
| |
| |
| |
| | ||||||
Revenues | $ | | $ | | $ | | $ | | $ | | $ | |
| Three months ended March 31, 2020 | |||||||||||||||||
| Servicing |
| Origination |
| Software |
| Data and |
| Corporate |
| ||||||||
Software | Software | Solutions | Analytics | and Other | Total | |||||||||||||
Software and hosting solutions | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Professional services |
| |
| |
| |
| |
| ( | (1) |
| | |||||
Data solutions |
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| |
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| | ||||||
Other |
| |
| |
| |
| |
| |
| | ||||||
Revenues | $ | | $ | | $ | | $ | | $ | ( | $ | |
(1) | Revenues for Corporate and Other represent deferred revenue purchase accounting adjustments recorded in accordance with GAAP. |
Our Software Solutions segment offers leading software and hosting solutions that facilitate and automate many of the mission-critical business processes across the homeownership lifecycle. These solutions primarily consist of processing and workflow management software applications. Our servicing software solutions primarily include our core servicing software solution that automates loan servicing, including loan setup and ongoing processing, customer service, accounting, reporting to the secondary mortgage market and investors and web-based workflow information systems. Our origination software solutions primarily include our solutions that automate and facilitate the origination of mortgage loans, offer product, pricing and eligibility capabilities, and provide an interconnected network allowing the various parties and systems associated with lending transactions to exchange data quickly and efficiently. Professional services consists of pre-implementation and post-implementation support and services and are primarily billed on a time and materials basis. Professional services may also include dedicated teams provided as part of agreements with software and hosting solutions clients.
Our Data and Analytics segment offers data and analytics solutions to the mortgage, real estate and capital markets verticals. These solutions include property ownership data, lien data, servicing data, automated valuation models, collateral risk scores, behavioral models, a multiple listing service software solution and other data solutions.
18
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
Transaction Price Allocated to Future Performance Obligation
Our disclosure of transaction price allocated to future performance obligations excludes the following:
● | Volume-based fees in excess of contractual minimums and other usage-based fees to the extent they are part of a single performance obligation and meet certain variable allocation criteria; |
● | Performance obligations that are part of a contract with an original expected duration of one year or less; and |
● | Transactional fees based on a fixed fee per transaction when we have the right to invoice once we have completed the performance obligation. |
As of March 31, 2021, the aggregate amount of the transaction price that is allocated to our future performance obligations was approximately $
(13)Equity
Share Repurchase Program
On February 12, 2020, our Board of Directors approved a
A summary of share repurchases under our share repurchase program during the three months ended March 31, 2021 is as follows (in millions, except per share amounts):
Shares remaining under repurchase | ||||||
Total number of shares repurchased | Aggregate purchase price | Average price paid per share | authorization as of March 31, 2021 | |||
$ | $ |
Omnibus Incentive Plan
A summary of restricted shares granted in 2021 is as follows:
Number of shares | Grant date fair | Vesting period | |||||||
Date |
| granted |
| value per share |
| (in years) |
| Vesting criteria | |
March 10, 2021 | | $ | | Service and Performance |
(1) | This award is subject to an independent performance target for each of |
Restricted stock transactions in 2021 are as follows:
Weighted average | |||||
grant date | |||||
| Shares |
| fair value | ||
Balance, December 31, 2020 | |
| $ | | |
Granted |
| | $ | | |
Forfeited |
| ( | $ | | |
Vested |
| ( | $ | | |
Balance, March 31, 2021 |
| | $ | |
19
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
Equity-based compensation expense related to our restricted shares was $
As of March 31, 2021, total unrecognized compensation cost was $
Profits Interests Units
The OB PIUs vest over
Equity-based compensation expense related to the OB PIUs was $
(14)Segment Information
Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting ("ASC 280") establishes standards for reporting information about segments and requires that a public business enterprise reports financial and descriptive information about its segments. Segments are components of an enterprise for which separate financial information is available and are evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. Our chief executive officer is identified as the CODM as defined by ASC 280. To align with the internal management of our business operations based on service offerings, our business is organized into
Separate discrete financial information is available for these
Segment asset information is not included below because we do not use it to evaluate performance or allocate resources.
Three months ended March 31, 2021 | ||||||||||||
Software | Data and | Corporate and | ||||||||||
| Solutions |
| Analytics |
| Other |
| Total | |||||
Revenues | $ | |
| $ | | $ | | (1) | $ | | ||
Expenses: |
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Operating expenses |
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| | (2) |
| | |||
Transition and integration costs |
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| | (3) |
| | |||
EBITDA |
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| ( |
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| | |||
Depreciation and amortization |
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| | (4) |
| | |||
Operating income (loss) |
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| ( |
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| | |||
Interest expense, net |
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| ( |
20
BLACK KNIGHT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)
Other expense, net |
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| ( | |||
Earnings before income taxes and equity in earnings of unconsolidated affiliates |
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Income tax expense |
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Earnings before equity in earnings of unconsolidated affiliates |
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Equity in earnings of unconsolidated affiliates, net of tax |
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Net earnings |
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Net losses attributable to redeemable noncontrolling interests |
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Net earnings attributable to Black Knight |
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| $ | |
Three months ended March 31, 2020 | ||||||||||||
Software |
| Data and | Corporate and | |||||||||
| Solutions | Analytics | Other | Total | ||||||||
Revenues | $ | | $ | | $ | ( | (1) | $ | | |||
Expenses: |
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Operating expenses |
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| | (2) |
| | |||
Transition and integration costs |
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| | (3) |
| | |||
EBITDA |
| |
| |
| ( |
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| | |||
Depreciation and amortization |
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| | (4) |
| | |||
Operating income (loss) |
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| ( |
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| | |||
Interest expense, net |
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| ( | |||
Other expense, net |
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| ( | |||
Earnings before income taxes and equity in earnings of unconsolidated affiliates |
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Income tax expense |
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Earnings before equity in earnings of unconsolidated affiliates |
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Equity in earnings of unconsolidated affiliates, net of tax |
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Net earnings |
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| $ | |
(1) | Revenues for Corporate and Other represent deferred revenue purchase accounting adjustments recorded in accordance with GAAP. |
(2) | Operating expenses for Corporate and Other includes equity-based compensation, including certain related payroll taxes, of $ |
(3) | Transition and integration costs primarily consists of costs associated with acquisitions. |
(4) | Depreciation and amortization for Corporate and Other primarily represents net incremental depreciation and amortization adjustments associated with the application of purchase accounting recorded in accordance with GAAP. |
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including statements regarding expectations, hopes, intentions or strategies regarding the future. Forward-looking statements are based on Black Knight, Inc. and its subsidiaries ("Black Knight," the "Company," "we," "us" or "our") 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. We undertake 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 or breaches involving our third-party vendors; |
● | our ability to maintain and grow our relationships with our clients; |
● | our ability to comply with or changes to the laws, rules and regulations that affect our and our clients’ businesses; |
● | our ability to adapt our solutions to technological changes or evolving industry standards 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 consummate, integrate and achieve the intended benefits of acquisitions; |
● | risks associated with our investment in Dun & Bradstreet Holdings, Inc. ("DNB") and integrating and achieving the intended benefits of the acquisition of Optimal Blue, LLC (“Optimal Blue”); 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, 2020 and other filings with the Securities and Exchange Commission ("SEC"). |
The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 26, 2021 and other filings with the SEC.
Overview
We are 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 clients, gain new clients, 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.
We have market-leading vertical software solutions combined with comprehensive real estate data and extensive analytic capabilities. Our solutions are utilized by U.S. mortgage loan originators and servicers, as well as other financial institutions, investors and real estate professionals, to support mortgage lending and servicing operations, analyze portfolios and properties, operate more efficiently, meet regulatory compliance requirements and mitigate risk.
We believe the breadth and depth of our comprehensive end-to-end, integrated solutions and the insight we provide to our clients differentiate us from other software providers and position us particularly well for emerging opportunities. We have served the mortgage and real estate industries for over 55 years and utilize this experience to design and develop solutions that fit our clients’ ever-evolving needs. Our proprietary software solutions and data and analytics capabilities reduce manual processes, improve compliance and quality, mitigate risk and deliver significant cost savings to our clients. Our scale allows us to continually and cost-effectively invest in our business in order to meet industry requirements and maintain our position as an industry-standard platform for mortgage market participants.
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The table below summarizes active first and second lien mortgage loans on our mortgage loan servicing software solution and the related market data, reflecting our leadership in the mortgage loan servicing software solutions market (in millions):
First lien | Second lien | Total first and second lien |
| ||||||||||||||
as of March 31, | as of March 31, | as of March 31, | |||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
| 2020 | ||
Active loans |
| 32.3 |
|
| 30.8 |
|
| 3.4 |
|
| 2.6 |
|
| 35.7 |
| 33.4 | |
Market size |
| 53.2 |
| (1) | 53.0 |
| (1) | 12.3 |
| (2) | 13.4 |
| (2) | 65.5 |
| 66.4 | |
Market share |
| 61 | % |
| 58 | % |
| 28 | % |
| 19 | % |
| 55 | % | 50 | % |
Note: Percentages above may not recalculate due to rounding.
(1) | According to the Black Knight Mortgage Monitor Report as of March 31, 2021 and February 29, 2020 for U.S. first lien mortgage loans. |
(2) | According to the April 2021 and February 2020 Equifax National Consumer Credit Trends Report as of March 31, 2021 and December 31, 2019, respectively, for U.S. second lien mortgage loans. |
We offer our solutions to a wide range of clients across the mortgage and consumer loan, real estate and capital markets verticals. The quality and breadth of our solutions contribute to the long-standing nature of our relationships with our clients, the majority of whom enter into long-term contracts across multiple products that are embedded in their mission-critical workflow and decision processes, particularly in the Software Solutions segment. Given the contractual nature of our revenues and stickiness of our client relationships, our revenues are highly visible and recurring in nature. Due to our integrated suite of solutions and our scale, we are able to drive significant operating leverage, which we believe enables our clients to operate more efficiently while allowing us to generate strong margins and cash flows.
Our Markets
The U.S. mortgage loan market is large, and the loan lifecycle is complex and consists of several stages. The mortgage loan lifecycle includes origination, servicing and default. Mortgage loans are originated to finance home purchases or refinance existing mortgage loans. Once a mortgage loan is originated, it is serviced on a periodic basis by mortgage servicers, which may not be the lenders that originated the mortgage loan. Furthermore, if a mortgage loan goes into default, it triggers a set of multifaceted processes with an assortment of potential outcomes depending on a mix of variables.
Underlying the three major stages of the mortgage loan lifecycle are the software, data and analytics support behind each process, which have become integral to industry participants. As the industry has grown in complexity, participants have responded by outsourcing to large-scale specialty providers, automating manual processes and seeking end-to-end solutions that support the processes required to manage the entire mortgage loan lifecycle.
Business Trends and Conditions
COVID-19 Pandemic
On March 11, 2020, the World Health Organization ("WHO") declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries have issued policies intended to stop or slow the further spread of the disease.
COVID-19 and the U.S.’s response to the pandemic are significantly affecting the mortgage and real estate industries. On March 18, 2020, the U.S. Department of Housing and Urban Development ("HUD") and the Federal Housing Finance Agency ("FHFA") announced a 60-day moratorium on mortgage loan foreclosures and evictions. Likewise, the FHFA also announced mortgage loan forbearance programs for certain borrowers that allow mortgage loan payments to be suspended for up to 12 months.
The Coronavirus, Aid, Relief and Economic Security Act (the "CARES Act") was signed into law in an effort to provide economic assistance to workers, families and businesses and codified the actions of HUD and the FHFA.
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Subsequent to the CARES Act, the Federal Housing Administration ("FHA") extended the moratorium on mortgage loan foreclosures and evictions through at least June 30, 2021. In addition, many states have implemented additional guidance that extends their moratorium on mortgage loan foreclosures and evictions, and additional extensions of these moratoriums may be implemented in the future.
There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business or our operations.
Black Knight Response and the Effect on Our Business
We continue to execute on our business continuity plans to address the challenges related to the ongoing COVID-19 pandemic. Since March 2020, substantially all of our employees have been working from home. We are following the requirements and protocols published by the U.S. Centers for Disease Control, the WHO and country, state and local governments. Our most important priorities are the health and safety of our employees and helping the communities where we work and live. A phased return to office plan has been created, which outlines when and how we will slowly begin to lift the actions put in place as part of our business continuity plans. The plan includes a phased return to office, social distancing , travel restrictions and additional safety precautions and will be enacted at each location when the risk to re-open has been reduced to an acceptable level. We continue to monitor the effects of the pandemic on our global workforce and have contingency plans in place to mitigate business risks. We believe working from home has been successful and has not significantly affected our results of operations, financial condition, cash flows or control environment.
The extraordinary effects of the broad-based response to the COVID-19 pandemic have delayed the timing of certain revenues. Specifically, the current mortgage loan foreclosure moratorium and forbearance plans offered as part of the CARES Act are reducing the number of foreclosures being processed on our BankruptcySM/ForeclosureSM and InvoicingSM software solutions for which revenue is recognized as transactions occur. Many of our clients continue to work from home while experiencing refinance origination volume increases as well as an elevated number of customer service calls. Our teams are focused on supporting our clients in this shifting landscape and stand ready to deliver our solutions.
Our clients have experienced the significant changes in how their customers want to, or are able to, interact with them throughout the pandemic and have realized these changes will likely persist beyond the pandemic. In reaction to these changes, our clients are prioritizing automated technology solutions that enable them to remotely engage with their customers and provide streamlined ways of performing the core functions of their businesses, all while maintaining regulatory compliance in an environment that is rapidly changing. We believe our solutions are well-positioned to help our clients address these needs.
We partner with many of the industry’s best lenders and servicers and believe it is our duty to serve in a leadership role as we manage through this crisis and beyond. From the start of the COVID-19 crisis, we have worked to provide leadership on behalf of our clients and to provide them with actionable intelligence, including our monthly Mortgage Monitor report and our McDash Flash Forbearance Tracker. We have also published in-depth white papers, held town hall meetings with our clients and have had frequent meetings with senior executives at our clients, government agencies and industry associations. We believe the in-depth data and insights we offer are essential for both mortgage market participants and government entities as we work together to address the economic ramifications of the crisis.
Our investment and innovation in digital mortgage loan solutions have made it possible for a majority of the mortgage application, underwriting and closing processes to happen online and remotely. Our industry-leading servicing system and a mortgage loan contributory data set represents a majority of the U.S. market and is modeled to represent the entire U.S. market. Our robust analytics and seamless integration ties them all together and allows for real-time visibility into the majority of active mortgage loans and a holistic view of the homeownership lifecycle. The depth of our integrated software, data and analytics enables clients to see what the effects of the pandemic mean for their business and industry. Our clients use these robust solutions for modeling, forecasting and reserve setting, which is critical, especially in this current environment.
Market Trends
Market trends that have spurred lenders and servicers to seek software, data and analytics solutions are as follows:
Integral role of technology in the U.S. mortgage loan industry. Over the past few years, the homebuyers’ processes have become more digital, and banks and other lenders and servicers have become increasingly focused on automation and workflow management to operate
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more efficiently and meet their regulatory requirements as well as using technology to enhance the consumer experience during the mortgage loan origination, closing and servicing processes. Since the start of the COVID-19 pandemic, our clients have become increasingly aware that digital solutions are integral to their ability to stay connected with their customer base in times when face-to-face interactions are not possible. We believe technology providers must be able to support the complexity and dynamic nature of the market, display extensive industry knowledge and possess the financial resources to make the necessary investments in technology and software to support lenders and servicers. This includes an enhanced digital experience along with the application of artificial intelligence, robotic process automation and adaptive learning.
Heightened demand for enhanced transparency and analytic insight. As U.S. mortgage loan market participants work to minimize the risk in lending, servicing and capital markets, they rely on the integration of data and analytics with solutions that enhance the decision-making process. These industry participants rely on large comprehensive third-party databases coupled with enhanced analytics to achieve these goals. The pandemic is putting pressure on the U.S. economy, affecting millions of American jobs and creating a high-level of uncertainty in the volume of work that our clients are facing with possible delinquent mortgage loans. Mortgage loan market participants are eager for timely data and insights to help them plan and react to the changing environment.
Regulatory changes and oversight. Most U.S. mortgage loan market participants are subject to a high level of regulatory oversight and regulatory requirements as federal and state governments have enacted various new laws, rules and regulations. It is our experience that mortgage lenders and servicers have become more focused on minimizing the risk of non-compliance with regulatory requirements and are looking toward solutions that assist them in complying with their regulatory requirements. We expect this trend to continue as additional governmental programs and regulations have been recently enacted to address the economic concerns resulting from the pandemic, and our clients have had to adapt their systems and processes in record time to the shifting landscape. In addition, our clients and our clients’ regulators have elevated their focus on privacy and data security while many of our clients’ employees are working from home and in light of an increased level of cybersecurity incidents. We expect the industry focus on privacy and data security to continue to increase.
Our Business Segments
Our business is organized into two segments: Software Solutions and Data and Analytics.
Software Solutions
Our Software Solutions segment offers software and hosting solutions that primarily support loan servicing, loan origination, settlement services and secondary marketing activities. The following table summarizes our software solutions revenues (in millions):
Three months ended | % of segment | |||||||||
March 31, | revenues | |||||||||
2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Servicing software solutions | $ | 202.7 | $ | 195.7 |
| 69 | % | 80 | % | |
Origination software solutions |
| 93.1 |
| 49.0 |
| 31 | % | 20 | % | |
Software Solutions | $ | 295.8 | $ | 244.7 |
| 100 | % | 100 | % |
Our servicing software solutions primarily include our core servicing software solution that automates loan servicing, including loan setup and ongoing processing, customer service, accounting, reporting to the secondary mortgage market and investors and web-based workflow information systems. Our servicing software solutions primarily generate revenues based on the number of active loans outstanding on our system, which has been very stable; however, we have some exposure to foreclosure and bankruptcy loan volumes, which can fluctuate based on economic cycles and other factors.
As a result of the effects of the broad-based response to the COVID-19 pandemic, we have seen lower foreclosure-related transactional revenues due to the mortgage loan foreclosure moratorium and expect this trend to continue due to the mortgage loan forbearance plans offered as part of the CARES Act. As of April 27, 2021, Black Knight’s McDash Flash Forbearance Tracker estimated 2.3 million homeowners, or 4.4% of all U.S. mortgage loans, were in COVID-19 mortgage loan forbearance plans.
Our origination software solutions primarily include our solutions that automate and facilitate the origination of mortgage loans and provide an interconnected network allowing the various parties and systems associated with lending transactions to exchange data quickly and efficiently. Our exposure to origination volumes is limited as our loan origination system revenues are based on closed loan volumes
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subject to minimum base software fees that are contractually obligated, and our secondary marketing technologies’ revenues are primarily subscription-based. Some of our origination software solutions are exposed to variances in origination volumes, primarily related to refinance volumes due to the nature of the services provided. Given the continued low level of mortgage loan interest rates, we have seen elevated volumes related to refinance originations. However, we expect to see lower volumes related to refinance originations during the remainder of 2021 due to the record volumes in the prior year periods and rising interest rates. We have also seen improvement in purchase origination volumes due to pent-up demand and the current interest rate environment and expect this trend to continue. Our origination software solutions that are more sensitive to origination volumes, were approximately 5% and 6% of our consolidated revenues for the three months ended March 31, 2021 and 2020, respectively.
Data and Analytics
Our Data and Analytics segment offers data and analytics solutions to the mortgage, real estate and capital markets verticals. These solutions include property ownership data, lien data, servicing data, automated valuation models, collateral risk scores, behavioral models, a multiple listing service software solution and other data solutions. Our data and analytics business is predominantly based on longer-term strategic data licenses, other data licenses and subscription-based revenues. For the three months ended March 31, 2021 and 2020, our data and analytics revenues were 15% and 16% of our consolidated revenues, respectively. Our data and analytics solutions that are more sensitive to fluctuations in home buying activity and origination volumes were approximately 5% of our consolidated revenues for the three months ended March 31, 2021 and 2020 and relate to services where we provide data necessary for title insurance and other settlement service activities.
Results of Operations
Key Performance Metrics
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 SEC’s Regulation G and Item 10(e) of Regulation S-K.
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Consolidated Results of Operations
The following table presents certain financial data for the periods indicated (in millions, except per share data):
Three months ended March 31, |
| ||||||
2021 |
| 2020 |
|
| |||
Revenues | $ | 349.7 | $ | 290.7 | |||
Expenses: |
|
|
|
| |||
Operating expenses |
| 186.2 |
| 162.4 | |||
Depreciation and amortization |
| 87.8 |
| 57.7 | |||
Transition and integration costs |
| 7.9 |
| 2.4 | |||
Total expenses |
| 281.9 |
| 222.5 | |||
Operating income |
| 67.8 |
| 68.2 | |||
Operating margin |
| 19.4 | % |
| 23.5 | % | |
Interest expense, net |
| (20.3) |
| (14.7) | |||
Other expense, net |
| (3.2) |
| (0.8) | |||
Earnings before income taxes and equity in earnings of unconsolidated affiliates |
| 44.3 |
| 52.7 | |||
Income tax expense |
| 5.2 |
| 8.2 | |||
Earnings before equity in earnings of unconsolidated affiliates |
| 39.1 |
| 44.5 | |||
Equity in earnings of unconsolidated affiliates, net of tax |
| 6.4 |
| 5.6 | |||
Net earnings |
| 45.5 |
| 50.1 | |||
Net losses attributable to redeemable noncontrolling interests |
| 8.6 |
| — | |||
Net earnings attributable to Black Knight | $ | 54.1 | $ | 50.1 | |||
Net earnings per share attributable to Black Knight common shareholders: |
|
|
|
| |||
Diluted | $ | 0.35 | $ | 0.34 | |||
Weighted average shares of common stock outstanding: |
|
|
|
| |||
Diluted |
| 155.9 |
| 148.7 |
Segment Financial Results
Revenues
The following table sets forth revenues by segment for the periods presented (in millions):
Three months ended | ||||||||||||
March 31, | Variance | |||||||||||
| 2021 |
| 2020 |
| $ | % |
| |||||
Software Solutions | $ | 295.8 | $ | 244.7 | $ | 51.1 | 21 | % | ||||
Data and Analytics |
| 53.9 |
| 46.1 |
| 7.8 | 17 | % | ||||
Corporate and Other(1) |
| — |
| (0.1) |
| 0.1 | NM | |||||
Total | $ | 349.7 | $ | 290.7 | $ | 59.0 | 20 | % |
(1) | Revenues for Corporate and Other represent deferred revenue purchase accounting adjustments recorded in accordance with GAAP. |
Software Solutions
Revenues were $295.8 million in the three months ended March 31, 2021 compared to $244.7 million in the 2020 period, an increase of $51.1 million, or 21%. Our servicing software solutions revenues increased 4%, or $7.0 million, primarily driven by increased revenues from new and existing clients on MSP® and higher revenue per loan, partially offset by approximately $11 million of lower foreclosure-related revenues due to the foreclosure moratorium as part of the CARES Act. Our origination software solutions revenues increased 90%, or $44.1 million, primarily driven by revenues of $34.9 million related to the acquisition of Optimal Blue, increased revenues from new clients, higher consulting revenues and higher origination volumes.
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Data and Analytics
Revenues were $53.9 million in the three months ended March 31, 2021 compared to $46.1 million in the 2020 period, an increase of $7.8 million, or 17%. The increase was primarily driven by strong sales execution across nearly all business lines, revenues from an acquired business and higher origination volumes.
EBITDA and EBITDA margin
The following tables set forth EBITDA (in millions) and EBITDA margin by segment for the periods presented:
Three months ended |
| ||||||||||
March 31, | Variance |
| |||||||||
2021 |
| 2020 |
| $ | % | ||||||
Software Solutions | $ | 170.9 | $ | 139.4 | $ | 31.5 | 23 | % | |||
Data and Analytics |
| 19.7 |
| 14.6 |
| 5.1 | 35 | % |
Three months ended | |||||||
March 31, | Variance | ||||||
| 2021 |
| 2020 |
| Basis points |
| |
Software Solutions |
| 57.8 | % | 57.0 | % | 80 |
|
Data and Analytics |
| 36.5 | % | 31.7 | % | 480 |
|
Software Solutions
EBITDA was $170.9 million in the three months ended March 31, 2021 compared to $139.4 million in the 2020 period, an increase of $31.5 million, or 23%, with an EBITDA margin of 57.8%, an increase of 80 basis points from the 2020 period. The EBITDA margin increase was primarily driven by incremental margins on revenue growth.
Data and Analytics
EBITDA was $19.7 million in the three months ended March 31, 2021 compared to $14.6 million in the 2020 period, an increase of $5.1 million, or 35%, with an EBITDA margin of 36.5%, an increase of 480 basis points from the 2020 period. The EBITDA margin increase was primarily driven by incremental margins on revenue growth.
Consolidated Financial Results
Operating Expenses
The following table sets forth operating expenses by segment for the periods presented (in millions):
Three months ended |
| ||||||||||
March 31, | Variance |
| |||||||||
2021 |
| 2020 |
| $ | % |
| |||||
Software Solutions | $ | 124.9 | $ | 105.3 | $ | 19.6 | 19 | % | |||
Data and Analytics |
| 34.2 |
| 31.5 |
| 2.7 | 9 | % | |||
Corporate and Other(1) |
| 27.1 |
| 25.6 |
| 1.5 | 6 | % | |||
Total | $ | 186.2 | $ | 162.4 | $ | 23.8 | 15 | % |
(1) | Operating expenses for Corporate and Other include equity-based compensation, including certain related payroll taxes, of $10.5 million and $11.7 million for the three months ended March 31, 2021 and 2020, respectively. |
The increase in Operating expenses in the three months ended March 31, 2021 compared to the 2020 period was primarily driven by the effect of prior year acquisitions, higher incentive bonus expense and software subscription and maintenance costs, partially offset by lower medical costs and travel related costs.
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Depreciation and Amortization
The following table sets forth depreciation and amortization by segment for the periods presented (in millions):
Three months ended |
| ||||||||||
March 31, | Variance |
| |||||||||
2021 |
| 2020 |
| $ | % |
| |||||
Software Solutions | $ | 31.2 | $ | 30.3 | $ | 0.9 | 3 | % | |||
Data and Analytics |
| 3.8 |
| 4.0 |
| (0.2) | (5) | % | |||
Corporate and Other(1) |
| 52.8 |
| 23.4 |
| 29.4 | 126 | % | |||
Total | $ | 87.8 | $ | 57.7 | $ | 30.1 | 52 | % |
(1) | Depreciation and amortization for Corporate and Other primarily represents net incremental depreciation and amortization adjustments associated with the application of purchase accounting recorded in accordance with GAAP. |
The increase in Depreciation and amortization in the three months ended March 31, 2021 compared to the 2020 period is primarily related to the amortization of acquired intangible assets from the Optimal Blue acquisition.
Transition and Integration Costs
Transition and integration costs were $7.9 million in the three months ended March 31, 2021 compared to $2.4 million in the 2020 period. Transition and integration costs in both periods primarily consisted of costs associated with acquisitions, including costs pursuant to purchase agreements.
Interest Expense, Net
Interest expense, net was $20.3 million in the three months ended March 31, 2021 compared to $14.7 million in the 2020 period, an increase of $5.6 million, or 38%. The increase was primarily driven by our higher average outstanding debt balances primarily related to the Senior Notes.
Other Expense, Net
Other expense, net was $3.2 million in the three months ended March 31, 2021 compared to $0.8 million in the 2020 period. The 2021 amounts primarily related to the debt refinancing. The 2020 amounts primarily related to legal fees.
Income Tax Expense
Income tax expense was $5.2 million in the three months ended March 31, 2021 compared to $8.2 million in the 2020 period. Our effective tax rate was 11.7% in 2021 compared to 15.6% in 2020. For the three months ended March 31, 2021 and 2020, our effective tax rate includes the effect of tax benefits related to the vesting of restricted shares of the common stock. Refer to Note 10 — Income taxes in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated by reference into this Part I Item 2 for additional information.
Equity in Earnings of Unconsolidated Affiliates, Net of Tax
Equity in earnings (losses) of unconsolidated affiliates, net of tax consists of the following (in millions):
Three months ended March 31, | |||||
2021 |
| 2020 | |||
Equity in (losses) earnings of unconsolidated affiliates, net of tax | $ | (3.5) | $ | 5.6 | |
Non-cash gain related to DNB's issuance of common stock, net of tax |
| 9.9 |
| — | |
Equity in earnings of unconsolidated affiliates, net of tax | $ | 6.4 | $ | 5.6 |
Refer to Note 4 — Investments in Unconsolidated Affiliates in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated by reference into this Part I Item 2 for additional information.
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Liquidity and Capital Resources
Cash Requirements
Our primary sources of liquidity are our existing cash balances, cash flows from operations and borrowings on our revolving credit facility. On March 10, 2021, we entered into an amended and restated credit agreement that extended the maturity of the facilities until 2026 and delayed mandatory term loan payments until 2022. Refer to Note 8 — Long-Term Debt in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information. As of March 31, 2021, we had cash of $44.9 million, debt principal of $2,281.7 million and available capacity of $883.0 million on our revolving credit facility.
Our primary cash requirements include operating expenses, debt service payments (principal and interest), capital expenditures (including property, equipment and computer software expenditures) and tax-related payments and may include business acquisitions and share repurchases.
We believe that our cash flows from operations and available cash and cash equivalents are sufficient to meet our liquidity needs, including the repayment of our outstanding debt, for at least the next 12 months. We anticipate that to the extent we require additional liquidity, it will be funded through borrowings on our revolving credit facility, the incurrence of other indebtedness, equity issuance or a combination thereof. The loss of the largest lender on our revolving credit facility would reduce our borrowing capacity by $90.0 million. Additionally, our liquidity and our ability to meet our obligations and fund our capital requirements are also dependent on our future financial performance, which is subject to general economic, financial and other factors that are beyond our control. Accordingly, we cannot be assured that our business will generate sufficient cash flows from operations or that future borrowings will be available from additional indebtedness or otherwise to meet our liquidity needs. Although we have no specific current plans to do so, if we decide to pursue one or more significant acquisitions, we may incur additional debt or issue additional equity to finance such acquisitions.
The CARES Act allows us to defer payments of our share of social security taxes until December 31, 2021 and 2022. As of March 31, 2021, we have deferred $14.8 million of payments related to employer social security taxes.
DNB Investment
As of March 31, 2021, we own 54.8 million shares of DNB common stock. As of March 31, 2021, DNB’s closing share price was $23.81 and the fair value of our investment in DNB was $1,306.0 million before tax. Assuming a statutory tax rate of 25.3%, the estimated after tax value of our investment in DNB is $1,100.2 million. Refer to Note 4 — Investments in Unconsolidated Affiliates in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information
Cash Flows
The following table provides a summary of cash flows from operating, investing and financing activities for the periods presented (in millions):
Three months ended March 31, | ||||||||||
| 2021 |
| 2020 |
| Variance |
| ||||
Cash flows provided by operating activities | $ | 77.4 | $ | 60.5 | $ | 16.9 | ||||
Cash flows used in investing activities |
| (59.9) |
| (87.1) |
| 27.2 | ||||
Cash flows (used in) provided by financing activities |
| (7.3) |
| 77.7 |
| (85.0) | ||||
Net increase in cash and cash equivalents | $ | 10.2 | $ | 51.1 | $ | (40.9) |
Operating Activities
The $16.9 million increase in cash provided by operating activities in the three months ended March 31, 2021 compared to the 2020 period is primarily related to higher earnings adjusted for non-cash amortization and the timing and amount of payments for Trade accounts payable and other liabilities primarily related to the deferral of payments of our share of social security taxes, partially offset by higher interest payments related to Senior Notes.
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Investing Activities
The $27.2 million decrease in cash used in investing activities in the three months ended March 31, 2021 compared to the 2020 period is primarily related to the acquisition of Collateral Analytics in 2020, partially offset by the acquisition of NexSpring and higher capital expenditures in 2021.
Financing Activities
The $85.0 million decrease in cash provided by financing activities in the three months ended March 31, 2021 compared to the 2020 period is primarily related to share repurchases and lower net borrowings in 2021. See Note 8 — Long-Term Debt and Note 13 — Equity in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated by reference into this Part I Item 2.
Financing
For a description of our financing arrangements, see Note 8 — Long-Term Debt in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated by reference into this Part I Item 2.
Contractual Obligations
On March 10, 2021, BKIS entered into an amended and restated credit and guarantee agreement. Refer to Note 8 — Long-Term Debt in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated by reference into this Part I Item 2.
Our long-term contractual obligations generally include our debt and related interest payments, data processing and maintenance commitments and operating and finance lease payments for our offices, data centers, property and equipment. There were no significant changes to our contractual obligations from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020.
Share Repurchase Program
On February 12, 2020, our Board of Directors approved a three-year share repurchase program authorizing us to repurchase up to 10.0 million shares of our outstanding common stock through February 12, 2023, through open market purchases, negotiated transactions or other means, in accordance with applicable securities laws and other restrictions.
A summary of share repurchases under our share repurchase program during the three months ended March 31, 2021 is as follows (in millions, except per share amounts):
Shares remaining under repurchase | ||||||
Total number of shares repurchased | Aggregate purchase price | Average price paid per share | authorization as of March 31, 2021 | |||
0.6 | $46.7 | $ 75.19 | 9.4 |
Indemnifications and Warranties
We often agree to indemnify our clients against damages and costs resulting from claims of patent, copyright, trademark infringement or breaches of confidentiality associated with use of our software through software licensing agreements. Historically, we have not made any payments under such indemnifications, but continue to monitor the conditions that are subject to the indemnifications to identify whether a loss has occurred that is both probable and estimable that would require recognition. In addition, we warrant to clients that our software operates substantially in accordance with the software specifications. Historically, no costs have been incurred related to software warranties and none are expected in the future, and as such no accruals for warranty costs have been made.
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements other than interest rate swaps.
31
Critical Accounting Policies
There have been no material changes to our critical accounting policies and estimates described in our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
Market Risk
We regularly assess market risks and have established policies and business practices designed to protect against the adverse effects of these exposures. We are exposed to market risks primarily from changes in interest rates. We use interest rate swaps to manage interest rate risk. We do not use interest rate swaps for trading purposes, to generate income or to engage in speculative activity.
Interest Rate Risk
In addition to existing cash balances and cash provided by operating activities, we use fixed and variable rate debt to finance our operations.
Our Senior Notes represent our fixed-rate long-term debt. Refer to Note 8 — Long-Term Debt in Item 1 of Part I of this Quarterly Report on Form 10-Q. The carrying value of our Senior Notes was $988.5 million as of March 31, 2021. The fair value of our Senior Notes was approximately $982.5 million as of March 31, 2021. The potential reduction in fair value of the Senior Notes from a hypothetical 10 percent increase in market interest rates would not be material to the overall fair value of the debt.
We enter into interest rate swap agreements to hedge forecasted monthly interest rate payments on our variable rate debt. We are exposed to interest rate risk on our variable rate debt obligations and related interest rate swaps. As of March 31, 2021, we had $1,267.0 million in long-term debt principal outstanding from our Facilities, all of which is variable rate debt, as described in Note 8 — Long-Term Debt in Item 1 of Part I of this Quarterly Report on Form 10-Q.
As of March 31, 2021, the Facilities represent our long-term debt obligations exposed to interest rate risk. We performed a sensitivity analysis on the principal amount of debt as of March 31, 2021, as well as the effect of our interest rate swaps. Further, in this sensitivity analysis, the change in interest rates is assumed to be applicable for an entire year. An increase of 100 basis points in the applicable interest rate would cause an increase in interest expense of $11.4 million on an annual basis ($3.6 million including the effect of our current interest rate swaps). A decrease in the applicable interest rate to 0% would cause a decrease in interest expense of $1.4 million on an annual basis ($0.4 million including the effect of our current interest rate swaps) as the 1-week and 1-month LIBOR were approximately 0.08% and 0.11%, respectively, as of March 31, 2021.
As of March 31, 2021, we have the following interest rate swap agreements (collectively, the "Swap Agreements") (in millions):
Effective dates |
| Notional amount |
| Fixed rates |
| |
March 31, 2017 through March 31, 2022 | $ | 200.0 |
| 2.08 | % | |
September 29, 2017 through September 30, 2021 | $ | 200.0 |
| 1.69 | % | |
April 30, 2018 through April 30, 2023 | $ | 250.0 |
| 2.61 | % | |
January 31, 2019 through January 31, 2023 | $ | 300.0 |
| 2.65 | % |
Under the terms of the Swap Agreements, we receive payments based on the 1-month LIBOR rate (approximately 0.11% as of March 31, 2021).
The Swap Agreements were designated as cash flow hedging instruments. A portion of the amount included in Accumulated other comprehensive loss is reclassified into Interest expense, net as a yield adjustment as interest is either paid or received on the hedged debt. The inputs used to determine the estimated fair value of our interest rate swaps are Level 2 inputs. We have considered our own credit risk and the credit risk of the counterparties when determining the fair value of our Swap Agreements.
32
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of March 31, 2021, under the supervision and with the participation of our Chief Executive Officer ("CEO") and Executive Vice President and Chief Financial Officer ("CFO"), management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.
Based on that evaluation, our CEO and CFO concluded that as of March 31, 2021, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit with the SEC are recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2021 covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
33
Part II: OTHER INFORMATION
Item 1. Legal Proceedings
See discussion of legal proceedings in Note 11 — Commitments and Contingencies in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated by reference into this Item 1 of Part II.
Item 1A. Risk Factors
There have been no material changes in our risk factors since the filing of our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table summarizes share repurchases during the three months ended March 31, 2021:
Total number of shares | Maximum number of shares | |||||||
Total number of | Average price | purchased as part of publicly | that may yet to be | |||||
Period | shares purchased | paid per share | announced program(1) | purchased under the program(2) | ||||
January | - | $- | - | 10,000,000 | ||||
February | - | - | 10,000,000 | |||||
March | 621,000 | 75.19 | 621,000 | 9,379,000 | ||||
621,000 | $ 75.19 | 621,000 |
(1) | On February 12, 2020, our Board of Directors approved a three-year share repurchase program authorizing us to repurchase up to 10.0 million shares of our outstanding common stock through February 12, 2023, through open market purchases, negotiated transactions or other means, in accordance with applicable securities laws and other restrictions. |
(2) | As of the last day of the applicable month. |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
(a) | Exhibits |
Exhibit |
|
|
No. | Description | |
10.1* |
34
10.2 | ||
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | ||
32.2 | ||
101.INS | Inline XBRL Instance Document** | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
104 | Cover Page Interactive Data File formatted in Inline XBRL and contained in Exhibit 101 |
(1) | A management or compensatory plan or arrangement required to be filed as an exhibit to this report pursuant to Item 601(b)(10)(ii) of Regulation S-K. |
* | Certain schedules have been omitted pursuant to Item 601(a)(5) of Registration S-K. A copy of any omitted schedule will be furnished to the Securities and Exchange Commission upon request. |
** | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. |
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BLACK KNIGHT, INC. | ||
(registrant) | ||
Date: May 6, 2021 | By: | /s/ Kirk T. Larsen |
Kirk T. Larsen | ||
Executive Vice President and Chief Financial Officer | ||
(Principal Financial Officer) | ||
Date: May 6, 2021 | By: | /s/ Michele M. Meyers |
Michele M. Meyers | ||
Chief Accounting Officer and Treasurer | ||
(Principal Accounting Officer) |
36
Exhibit 10.2
Black Knight, Inc.
Amended and Restated
2015 Omnibus Incentive Plan
Notice of Restricted Stock Grant
You (the “Grantee”) have been granted the following award of restricted Shares of common stock (the “Restricted Stock”), par value $0.0001 per share (the “Shares”), by Black Knight, Inc. (the “Company”), pursuant to the Black Knight, Inc. Amended and Restated 2015 Omnibus Incentive Plan (the “Plan”) and the terms set forth in the attached Restricted Stock Award Agreement:
Name of Grantee: | Participant Name |
Number of Shares of Restricted Stock Granted: | Number of Awards Granted |
Effective Date of Grant: | Grant Date |
Vesting and Period of Restriction: | Subject to the terms of the Plan and the Restricted Stock Award Agreement attached hereto, the Period of Restriction shall lapse, and the Shares shall vest and become free of the forfeiture provisions contained in the Restricted Stock Award Agreement, with respect to one-third of the shares on each anniversary of the Effective Date of Grant, subject to satisfaction of the applicable Performance Restriction as set forth on Exhibit A of the Restricted Stock Award Agreement, attached hereto. |
By your electronic acceptance/signature below, you agree and acknowledge that the Restricted Stock is granted under and governed by the terms and conditions of the Plan and the attached Restricted Stock Award Agreement, which are incorporated herein by reference, and that you have been provided with a copy of the Plan and Restricted Stock Award Agreement. If you have not accepted or declined this Restricted Stock Grant, including the terms of this Notice and Restricted Stock Award Agreement, prior to the first anniversary of the Effective Date of Grant, you are hereby advised and acknowledge that you shall be deemed to have accepted the terms of this Notice and Restricted Stock Award Agreement on such first anniversary of the Effective Date of Grant.
Black Knight, Inc.
Amended and Restated 2015 Omnibus Incentive Plan
Restricted Stock Award Agreement
(Subject to Time-Based Restriction and Performance Restriction)
Section 1. | GRANT OF RESTRICTED STOCK |
Section 2. | FORFEITURE AND TRANSFER RESTRICTIONS |
(A x B) – C, where
A = the total number of Shares granted under this Agreement,
B = the number of completed months to the date of termination since the Effective Date of Grant divided by 36, and
C = the number of Shares granted under this Agreement which vested on or prior to the date of termination.
All Shares that are subject to a Period of Restriction on the date of termination of employment or service as a Director or Consultant and which will not be vested pursuant to Section 2(a)(ii) above, shall be forfeited to the Company, for no consideration.
Section 3. | STOCK CERTIFICATES |
As soon as practicable following the grant of Restricted Stock, the Shares of Restricted Stock shall be registered in the Grantee’s name in certificate or book-entry form. If a certificate is issued, it shall bear an appropriate legend referring to the restrictions and it shall be held by the Company, or its agent, on behalf of the Grantee until the Period of Restriction has lapsed. If the Shares are registered in book-entry form, the restrictions shall be placed on the book-entry registration. The Grantee may be required to execute and return to the Company a blank stock power for each Restricted Stock certificate (or instruction letter, with respect to Shares registered in book-entry form), which will permit transfer to the Company, without further action, of all or any portion of the Restricted Stock that is forfeited in accordance with this Agreement.
Except for the transfer and dividend restrictions, and subject to such other restrictions, if any, as determined by the Committee, the Grantee shall have all other rights of a holder of Shares, including the right to vote (or to execute proxies for voting) such Shares. Unless otherwise determined by the Committee, if all or part of a dividend in respect of the Restricted Stock is paid in Shares or any other security issued by the Company, such Shares or other securities shall be held by the Company subject to the same restrictions as the Restricted Stock in respect of which the dividend was paid.
Section 5. | DIVIDENDS |
Section 6. | MISCELLANEOUS PROVISIONS |
EXHIBIT A
Vesting and Restrictions
This grant is subject to both Performance Restrictions and Time-Based Restrictions, as described below. The period between the Effective Date of Grant and the applicable Vesting Date of a Share of Restricted Stock is the “Period of Restriction” for such Share of Restricted Stock.
Time-Based Restrictions
In order for the Restricted Stock to vest on any Vesting Date, in addition to satisfying the applicable Performance-Based Restrictions (described below), the Grantee must satisfy the continued service conditions set forth in Section 2 of the Agreement (the “Time-Based Restrictions”) as of the applicable Anniversary Date.
Performance Restrictions
In order for the Restricted Stock to vest on any Vesting Date, the Compensation Committee of the Board of Directors of the Company (the “Committee”) must determine that the Company has achieved the applicable Performance Restriction for the applicable Measurement Period, as more specifically set forth below. Adjusted EBITDA shall be defined as net earnings from continuing operations, with adjustments to reflect the addition or elimination of certain statement of earnings items including, but not limited to, (i) depreciation and amortization; (ii) impairment charges; (iii) interest expense, net; (iv) income tax expense; (v) other expense, net; (vi) equity in losses of unconsolidated affiliates, net of tax; (vii) deferred revenue purchase accounting adjustment; (viii) equity-based compensation, including certain related payroll taxes; (ix) costs associated with debt and/or equity offerings, including the spin-off of Black Knight from Fidelity National Financial, Inc.; (x) spin-off related transition costs; (xi) acquisition-related costs, including costs pursuant to purchase agreements; (xii) costs associated with expense reduction initiatives; and (xiii) costs associated with executive transition, together with any other adjustments that the Company may include in its presentation of Adjusted EBITDA to investors. Final calculations of our achievement of the Performance Restrictions are subject to adjustment for acquisitions, divestitures, major restructuring charges, and non-budgeted discontinued operations, as well as variances as a result of the market or legislative effect on origination and default volumes. The Committee will evaluate whether the Performance Restriction has been achieved following the completion of the Measurement Period; provided, however, that to the extent not already achieved, all Performance Restrictions shall be deemed to be achieved upon the consummation of a Change in Control.
Anniversary Date | % of Restricted Stock | Performance Restriction | Measurement Period | Vesting Date |
---|---|---|---|---|
First (1st) anniversary of the Effective Date of Grant. | 33.34% | Adjusted EBITDA equal to or greater than $609.9 million | January 1, 2021 through December 31, 2021 | The later of the first (1st) Anniversary Date or the date the Compensation Committee determines the applicable Performance Restriction has been achieved.* |
Second (2nd) anniversary of the Effective Date of Grant. | 33.33% | Adjusted EBITDA equal to or greater than 2021 fiscal year Adjusted EBITDA | January 1, 2022 through December 31, 2022 | The later of the second (2nd) Anniversary Date or the date the Compensation Committee determines the applicable Performance Restriction has been achieved.* |
Anniversary Date | % of Restricted Stock | Performance Restriction | Measurement Period | Vesting Date |
---|---|---|---|---|
Third (3rd) anniversary of the Effective Date of Grant | 33.33% | Adjusted EBITDA equal to or greater than 2022 fiscal year Adjusted EBITDA | January 1, 2023 through December 31, 2023 | The later of the third (3rd) Anniversary Date or the date the Compensation Committee determines the applicable Performance Restriction has been achieved.* |
* | The date the Committee determines the applicable Performance Restriction has been achieved shall be the date the Committee approves the achievement of the applicable Performance Restriction based upon a report from the Company’s Chief Financial Officer based upon the Company’s audited financial statements for the Measurement Period. |
Vesting
If the applicable Performance Restriction and Time-Based Restriction has been achieved as of a Vesting Date, the percentage of the Restricted Stock indicated on the row for such Vesting Date in the table above shall vest. If the Performance Restriction is not achieved during the applicable Measurement Period, the percentage of the Restricted Stock indicated on the row for such Vesting Date in the table above shall not vest and, for no consideration, will be automatically forfeited to the Company.
Exhibit 31.1
CERTIFICATIONS
I, Anthony M. Jabbour, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Black Knight, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: May 6, 2021
By: | /s/ Anthony M. Jabbour | |
| Anthony M. Jabbour | |
| Chief Executive Officer | |
Exhibit 31.2
CERTIFICATIONS
I, Kirk T. Larsen, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Black Knight, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: May 6, 2021
By: | /s/ Kirk T. Larsen | |
| Kirk T. Larsen | |
| Executive Vice President and Chief Financial | |
| Officer | |
Exhibit 32.1
CERTIFICATION OF PERIODIC FINANCIAL REPORTS PURSUANT TO 18 U.S.C. §1350
The undersigned hereby certifies that he is the duly appointed and acting Chief Executive Officer of Black Knight, Inc., a Delaware corporation (the “Company”), and hereby further certifies as follows.
1. | The periodic report containing financial statements to which this certificate is an exhibit fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934. |
2. | The information contained in the periodic report to which this certificate is an exhibit fairly presents, in all material respects, the financial condition and results of operations of the Company. |
In witness whereof, the undersigned has executed and delivered this certificate as of the date set forth opposite his signature below.
Date: May 6, 2021
By: | /s/ Anthony M. Jabbour | |
| Anthony M. Jabbour | |
| Chief Executive Officer | |
CERTIFICATION OF PERIODIC FINANCIAL REPORTS PURSUANT TO 18 U.S.C. §1350
The undersigned hereby certifies that he is the duly appointed and acting Executive Vice President and Chief Financial Officer of Black Knight, Inc., a Delaware corporation (the “Company”), and hereby further certifies as follows.
1. | The periodic report containing financial statements to which this certificate is an exhibit fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934. |
2. | The information contained in the periodic report to which this certificate is an exhibit fairly presents, in all material respects, the financial condition and results of operations of the Company. |
In witness whereof, the undersigned has executed and delivered this certificate as of the date set forth opposite his signature below.
Date: May 6, 2021
By: | /s/ Kirk T. Larsen | |
| Kirk T. Larsen | |
| Executive Vice President and Chief Financial Officer | |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 550,000,000 | 550,000,000 |
Common stock, shares issued (in shares) | 160,040,598 | 160,085,413 |
Common stock, shares outstanding (in shares) | 156,639,060 | 157,014,712 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized (in shares) | 25,000,000 | 25,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in share) | 0 | 0 |
Treasury stock (in shares) | 3,401,538 | 3,070,701 |
Consolidated Statements of Operations and Comprehensive Earnings Consolidated Statements of Operations and Comprehensive Earnings (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Income Statement [Abstract] | ||
Derivatives qualifying as hedges, tax expense (benefit) | $ 0.2 | $ 7.3 |
Reclassification adjustment from AOCI on derivatives, tax expense (benefit) | 1.3 | 0.4 |
Foreign currency translation adjustment, tax | (0.1) | (0.1) |
Unrealized losses on investments in unconsolidated affiliates, tax | $ (1.0) | $ (0.1) |
Consolidated and Combined Statements of Equity - USD ($) shares in Millions, $ in Millions |
Common stock
Cumulative Effect, Period of Adoption, Adjusted Balance
|
Common stock |
Additional paid-in capital
Cumulative Effect, Period of Adoption, Adjusted Balance
|
Additional paid-in capital |
Retained earnings
Cumulative Effect, Period of Adoption, Adjustment
|
Retained earnings
Cumulative Effect, Period of Adoption, Adjusted Balance
|
Retained earnings |
Accumulated other comprehensive loss
Cumulative Effect, Period of Adoption, Adjusted Balance
|
Accumulated other comprehensive loss |
Treasury stock
Cumulative Effect, Period of Adoption, Adjusted Balance
|
Treasury stock |
Redeemable noncontrolling interests |
Cumulative Effect, Period of Adoption, Adjustment |
Cumulative Effect, Period of Adoption, Adjusted Balance |
Total |
|||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Beginning balance at Dec. 31, 2019 | $ 1,586.8 | $ 1,586.8 | $ (1.1) | $ 489.5 | $ 490.6 | $ (20.2) | $ (20.2) | $ (158.7) | $ (158.7) | $ (1.1) | $ 1,897.4 | $ 1,898.5 | ||||||||
Beginning balance (shares) at Dec. 31, 2019 | 153.1 | 153.1 | 3.4 | 3.4 | ||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||||
Grant of restricted shares of common stock | (24.5) | $ 24.5 | ||||||||||||||||||
Grant of restricted shares of common stock (in shares) | (0.5) | |||||||||||||||||||
Forfeitures of restricted shares of common stock | 0.2 | $ (0.2) | ||||||||||||||||||
Tax withholding payments for restricted share vesting (shares) | (0.1) | |||||||||||||||||||
Tax withholding payments for restricted share vesting | (18.2) | (18.2) | ||||||||||||||||||
Vesting of restricted shares granted from treasury stock | 7.7 | $ (7.7) | ||||||||||||||||||
Vesting of restricted shares granted from treasury stock (in shares) | 0.1 | |||||||||||||||||||
Equity based compensation expense | 10.7 | 10.7 | ||||||||||||||||||
Net earnings (losses) | 50.1 | 50.1 | ||||||||||||||||||
Equity-based compensation expense of unconsolidated affiliates | 0.4 | 0.4 | ||||||||||||||||||
Foreign currency translation adjustment | (0.2) | (0.2) | [1] | |||||||||||||||||
Derivative, Gain (Loss) on Derivative, Net | (20.4) | (20.4) | ||||||||||||||||||
Other comprehensive loss on investments in unconsolidated affiliates | (0.2) | (0.2) | [2] | |||||||||||||||||
Ending balance at Mar. 31, 2020 | 1,562.7 | 540.0 | (41.0) | $ (142.1) | 1,919.6 | |||||||||||||||
Ending balance (shares) at Mar. 31, 2020 | 153.0 | 3.0 | ||||||||||||||||||
Beginning balance at Dec. 31, 2019 | $ 1,586.8 | 1,586.8 | $ (1.1) | $ 489.5 | 490.6 | $ (20.2) | (20.2) | $ (158.7) | $ (158.7) | $ (1.1) | $ 1,897.4 | 1,898.5 | ||||||||
Beginning balance (shares) at Dec. 31, 2019 | 153.1 | 153.1 | 3.4 | 3.4 | ||||||||||||||||
Ending balance at Dec. 31, 2020 | 2,053.7 | 757.4 | (38.8) | $ (144.6) | $ 578.0 | 2,627.7 | ||||||||||||||
Ending balance (shares) at Dec. 31, 2020 | 160.1 | 3.1 | ||||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||||
Fair value adjustment to redeemable noncontrolling interests | (8.6) | 8.6 | (8.6) | |||||||||||||||||
Grant of restricted shares of common stock | (25.3) | $ 25.3 | ||||||||||||||||||
Grant of restricted shares of common stock (in shares) | (0.5) | |||||||||||||||||||
Forfeitures of restricted shares of common stock | 0.1 | $ (0.1) | ||||||||||||||||||
Tax withholding payments for restricted share vesting (shares) | (0.1) | |||||||||||||||||||
Tax withholding payments for restricted share vesting | (22.7) | $ (22.7) | ||||||||||||||||||
Vesting of restricted shares granted from treasury stock | 10.4 | $ (10.4) | ||||||||||||||||||
Vesting of restricted shares granted from treasury stock (in shares) | 0.2 | |||||||||||||||||||
Purchases of treasury stock (share) | 0.6 | 0.6 | ||||||||||||||||||
Purchases of treasury stock | $ (46.7) | $ (46.7) | ||||||||||||||||||
Equity based compensation expense | 9.4 | 9.4 | ||||||||||||||||||
Net earnings (losses) | 54.1 | (8.6) | 54.1 | |||||||||||||||||
Equity-based compensation expense of unconsolidated affiliates | 0.5 | 0.5 | ||||||||||||||||||
Foreign currency translation adjustment | (0.3) | (0.3) | [1] | |||||||||||||||||
Derivative, Gain (Loss) on Derivative, Net | 4.4 | 4.4 | ||||||||||||||||||
Other comprehensive loss on investments in unconsolidated affiliates | (3.1) | (3.1) | [2] | |||||||||||||||||
Ending balance at Mar. 31, 2021 | $ 2,017.0 | $ 812.0 | $ (37.8) | $ (176.5) | $ 578.0 | $ 2,614.7 | ||||||||||||||
Ending balance (shares) at Mar. 31, 2021 | 160.0 | 3.4 | ||||||||||||||||||
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Consolidated and Combined Statements of Cash Flows - USD ($) $ in Millions |
3 Months Ended | |
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Mar. 31, 2021 |
Mar. 31, 2020 |
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Cash flows from operating activities: | ||
Net earnings | $ 45.5 | $ 50.1 |
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||
Depreciation and amortization | 87.8 | 57.7 |
Amortization of debt issuance costs and original issue discount | 1.0 | 0.7 |
Loss on extinguishment of debt, net | 2.5 | |
Deferred income taxes, net | (1.8) | 1.1 |
Equity in earnings on unconsolidated affiliates, net of tax | (6.4) | (5.6) |
Equity-based compensation | 9.4 | 10.7 |
Changes in assets and liabilities, net of acquired assets and liabilities: | ||
Trade and other receivables, including receivables from related parties | 0.4 | (1.4) |
Prepaid expenses and other assets | (32.5) | (5.3) |
Deferred contract costs | (11.0) | (12.8) |
Deferred revenues | 6.4 | (0.4) |
Trade accounts payable and other liabilities | (23.9) | (34.3) |
Net cash provided by operating activities | 77.4 | 60.5 |
Cash flows from investing activities: | ||
Additions to property and equipment | (5.2) | (3.5) |
Additions to computer software | (24.7) | (18.2) |
Business acquisitions, net of cash acquired | (20.0) | (50.4) |
Asset acquisition | (10.0) | (15.0) |
Net cash used in investing activities | (59.9) | (87.1) |
Cash flows from financing activities: | ||
Revolver borrowings | 167.8 | 246.6 |
Revolver payments | (98.5) | (140.6) |
Term loan borrowings | 1.6 | |
Term loan payments | 0.0 | (7.8) |
Purchases of treasury stock | (46.7) | |
Tax withholding payments for restricted share vesting | (22.7) | (18.2) |
Finance lease payments | (1.2) | (2.3) |
Debt issuance costs paid | (7.6) | |
Net cash (used in) provided by financing activities | (7.3) | 77.7 |
Net increase in cash and cash equivalents | 10.2 | 51.1 |
Cash and cash equivalents, beginning of period | 34.7 | 15.4 |
Cash and cash equivalents, end of period | $ 44.9 | $ 66.5 |
Consolidated and Combined Statements of Cash Flows Consolidated and Combined Statements of Cash Flows (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | |
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Mar. 31, 2021 |
Mar. 31, 2020 |
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Supplemental cash flow information: | ||
Interest paid, net | $ (29.1) | $ (13.9) |
Income taxes paid, net | $ (0.9) | $ (0.4) |
Basis of Presentation and Overview |
3 Months Ended |
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Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | (1)Basis of Presentation and Overview The accompanying Condensed Consolidated Financial Statements (Unaudited) of Black Knight, Inc. (“BKI”) and its subsidiaries ("Black Knight," the "Company," "we," "us" or "our") were prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), and all adjustments considered necessary for a fair presentation have been included. All significant intercompany accounts and transactions have been eliminated. The preparation of these Condensed Consolidated Financial Statements (Unaudited) in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements (Unaudited), as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission ("SEC") on February 26, 2021 and other filings with the SEC. Description of Business We are a leading provider of integrated software, data and analytics solutions to the mortgage and consumer loan, real estate and capital markets verticals. Our solutions facilitate and automate many of the mission-critical business processes across the homeownership lifecycle. We are committed to being a premier business partner that clients rely on to achieve their strategic goals, realize greater success and better serve their customers by delivering best-in-class software, services and insights with a relentless commitment to excellence, innovation, integrity and leadership. Principles of Consolidation The consolidated financial statements include the accounts of BKI, its wholly-owned subsidiaries and non-wholly owned subsidiaries in which we have a controlling financial interest either through voting rights or means other than voting rights. Intercompany transactions and balances have been eliminated in consolidation. Where our ownership interest in a consolidated subsidiary is less than 100%, the noncontrolling interests’ share of these non-wholly owned subsidiaries is reported in our consolidated balance sheets as a separate component of equity or within temporary equity. The noncontrolling interests’ share of the net earnings (loss) of these non-wholly owned subsidiaries is reported in our Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) as an adjustment to our net earnings to arrive at Net earnings attributable to Black Knight. We consolidate variable interest entities (“VIEs”) if we are considered the primary beneficiary because we have (a) the power to direct matters that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Optimal Blue Holdco, LLC (“Optimal Blue Holdco”), a non-wholly owned subsidiary, is considered a VIE. We are the primary beneficiary of Optimal Blue Holdco through our controlling interest and our rights established in the Second Amended and Restated Limited Liability Company Agreement of Optimal Blue Holdco dated November 24, 2020 (the “OB Holdco LLC Agreement”). As such, we control Optimal Blue Holdco and its subsidiaries and consolidate its financial position and results of operations. As of March 31, 2021 and December 31, 2020, we own 60% of Optimal Blue Holdco. Redeemable noncontrolling interests represent the collective 40% equity interest in Optimal Blue Holdco owned by Cannae Holdings, LLC ("Cannae") and affiliates of Thomas H. Lee Partners, L.P. ("THL"). As these redeemable noncontrolling interests provide for redemption features not solely within our control, they are presented outside of shareholders' equity. Reporting Segments We conduct our operations through two reporting segments: (1) Software Solutions and (2) Data and Analytics. See further discussion in Note 14 — Segment Information.
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Condensed Consolidated Financial Statement Details |
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Condensed Consolidated Financial Statement Details | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Consolidated Financial Statement Details | (2)Condensed Consolidated Financial Statement Details Cash and Cash Equivalents Cash and cash equivalents are unrestricted and include the following (in millions):
Trade Receivables, Net A summary of Trade receivables, net of allowance for credit losses is as follows (in millions):
In addition to the amounts above, we have unbilled receivables that we do not expect to collect within the next year included in Other non-current assets in our Condensed Consolidated Balance Sheets (Unaudited). Billings for these receivables are based on contractual terms. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following (in millions):
Other Non-Current Assets Other non-current assets consist of the following (in millions):
Trade Accounts Payable and Other Accrued Liabilities Trade accounts payable and other accrued liabilities consist of the following (in millions):
Deferred Revenues During the three months ended March 31, 2021 and 2020, revenues recognized related to the amount included in the Deferred revenues balance at the beginning of each year were $17.7 million and $15.6 million, respectively. Depreciation and Amortization Depreciation and amortization includes the following (in millions):
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Business Acquisitions |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisitions | (3)Business Acquisitions Allocation of purchase price The purchase price of acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the acquisition date. The fair value of the acquired Computer software and Other intangible assets were primarily determined using a third party valuation based on significant estimates and assumptions, including Level 3 inputs, which are judgmental in nature. These estimates and assumptions include the projected timing and amount of future cash flows and discount rates reflecting the risk inherent in the future cash flows. NexSpring Acquisition On March 16, 2021, we completed the acquisition of the technology assets and business of NexSpring Financial, LLC (“NexSpring”). This solution is expected to broaden our ability to serve mortgage brokers. NexSpring’s digital lending platform will be integrated with our Empower® loan origination system and reported within our Software Solutions segment. Total consideration was $24.4 million, including $20.0 million paid at closing and $4.4 million of estimated contingent consideration to be paid in cash based on NexSpring revenues recognized over the three-year period subsequent to the acquisition. We recorded a preliminary allocation of the $20.0 million purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values, consisting primarily of $4.6 million of computer software assets and $0.5 million of other intangible assets. The weighted-average amortization periods for these acquired assets are 5 years for computer software and 3 years for other intangible assets, respectively. We recorded $18.1 million in goodwill for the residual amount by which the purchase price exceeded the preliminary fair value of the net assets acquired. These estimates are preliminary and subject to adjustments as we complete our valuation process with respect to Computer software, Other intangible assets and contingent consideration. Refer to Note 9 — Fair Value Measurements for additional information. Optimal Blue Acquisition On September 15, 2020, we completed the acquisition of Optimal Blue, a leading provider of secondary market solutions and actionable data services, funded with cash on hand, debt financing and investments from co-investors Cannae and THL. Optimal Blue is reported within our Software Solutions segment because it enhances our robust set of software solutions and includes additional product, pricing and eligibility capabilities. Total consideration, net of cash acquired was approximately $1.8 billion for 100% of the equity interests in Optimal Blue and certain affiliates. The total consideration was as follows (in millions):
The following table summarizes the total purchase price consideration and the preliminary fair value amounts recognized for the assets acquired and liabilities assumed (in millions):
The fair value of Computer Software, Other intangible assets, Goodwill and certain assumed liabilities, including estimated liabilities for pre-acquisition tax exposure, is preliminary and subject to adjustments as we complete our valuation process. During the three months ended March 31, 2021, no measurement period adjustments were recorded. |
Investments in Unconsolidated Affiliates |
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Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Unconsolidated Affiliates | (4)Investments in Unconsolidated Affiliates DNB Investment Dun & Bradstreet Holdings, Inc. (“DNB”) is a global leader in commercial data and analytics that provides various services helping companies improve their operational performance. On July 6, 2020, DNB, previously a wholly-owned subsidiary of Star Parent, L.P., a Delaware limited partnership (“Star Parent”), closed its initial public offering (the “DNB IPO”) and concurrent private placement (the “DNB Private Placement”). In connection with the DNB IPO and DNB Private Placement, our limited partner interests in Star Parent were exchanged for 54.8 million shares of DNB common stock, which represented ownership of 13.0% of DNB. We hold less than 20% of the outstanding common equity of DNB, but we continue to account for our investment under the equity method because we continue to have significant influence over DNB primarily through a combination of our investment, an agreement with certain other DNB investors pursuant to which we agreed to collectively vote together on matters related to the election of DNB directors for a period of three years following the initial public offering of DNB and our shared Chief Executive Officer. On January 8, 2021, DNB completed its acquisition of Bisnode Business Information Group AB (the “Bisnode acquisition”). In connection with the Bisnode acquisition, DNB issued 6.2 million shares of common stock, which resulted in a decrease in our ownership interest in DNB to 12.8%. As of March 31, 2021, we have invested an aggregate of $492.6 million in DNB. As of March 31, 2021, DNB’s closing share price was $23.81 and the fair value of our investment in DNB was $1,306.0 million before tax. Summarized consolidated financial information for DNB (Successor) and Star Parent (Predecessor) is presented below (in millions):
Effective January 1, 2021, DNB eliminated the one-month reporting lag for certain of its subsidiaries outside North America and aligned the year-end for all of its subsidiaries to December 31. DNB applied this change in their accounting policy retrospectively. The effect of this change in accounting policy did not have a material impact to our results of operations or financial condition and was included in our current period accounting for our investment in DNB. The summarized consolidated financial information above was derived from DNB’s most recently available unaudited consolidated financial information and includes the effect of their change in accounting policy. Equity in earnings (losses) of unconsolidated affiliates, net of tax consists of the following (in millions):
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Earnings Per Share |
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Earnings Per Share | (5)Earnings Per Share Diluted net earnings per share includes the effect of unvested restricted stock awards. For the three months ended March 31, 2021, the outstanding Optimal Blue Holdo profits interests units (“OB PIUs”) were excluded from the diluted earnings per share calculations because the effect of their inclusion was antidilutive. The following table sets forth the computation of basic and diluted net earnings per share (in millions, except per share amounts):
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Related Party Transactions |
3 Months Ended |
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Mar. 31, 2021 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | (6)Related Party Transactions We believe the amounts earned from or charged by us under each of the following arrangements are fair and reasonable. The amounts we earned or that were charged under these arrangements were not negotiated at arm's length and may not represent the terms that we might have obtained from an unrelated third party. DNB DNB is considered to be a related party primarily due to the combination of our investment in DNB, our shared Chief Executive Officer and certain shared board members. Refer to Note 4 — Investments in Unconsolidated Affiliates for additional details. As of March 31, 2021, we had a related party receivable of $0.1 million from DNB. Trasimene Trasimene Capital Management, LLC ("Trasimene") is considered a related party because the Chairman of our Board of Directors owns a controlling interest in Trasimene. During the three months ended March 31, 2021, we recognized $0.3 million in fees with Trasimene related to our acquisition of NexSpring, which are included in Transition and integration costs in our Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited). As of March 31, 2021, we had a related party payable of $0.1 million included in Trade accounts payable and other accrued liabilities in our Condensed Consolidated Balance Sheets (Unaudited). |
Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | (7)Goodwill Goodwill consists of the following (in millions):
The increase in Goodwill related to our NexSpring acquisition is deductible for tax purposes. |
Long-Term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | (8)Long-Term Debt Long-term debt consists of the following (in millions):
As of March 31, 2021, principal maturities, including payments related to our finance leases, are as follows (in millions):
Credit Agreement On April 30, 2018, our indirect subsidiary, BKIS entered into an amended and restated credit and guaranty agreement (the “2018 Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent, the guarantors party thereto, the other agents party thereto and the lenders party thereto. The 2018 Credit Agreement provided for (i) a $1,250.0 million term loan A facility and (ii) a $750.0 million revolving credit facility. Debt Refinancing On March 10, 2021, BKIS entered into a second amended and restated credit and guaranty agreement (the “2021 Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, the guarantors party thereto, the other agents party thereto and the lenders party thereto. The 2021 Credit Agreement provides for (i) a $1,150.0 million term loan A facility (the “Term A Loan”) and (ii) a $1,000.0 million revolving credit facility (the “Revolving Credit Facility” and, together with the Term A Loan, collectively, the “Facilities”), the proceeds of which were used to repay in full the indebtedness outstanding under the 2018 Credit Agreement and to pay related fees and expenses. The Facilities bear interest at rates based upon, at the option of BKIS, either (i) the base rate plus a margin of between 25 and 50 basis points depending on the total net leverage ratio of Black Knight Financial Services, LLC (“BKFS”), a Delaware limited liability company and the direct parent company of BKIS, and its restricted subsidiaries on a consolidated basis (the “Consolidated Leverage Ratio”) and (ii) the Eurodollar rate plus a margin of between 125 and 150 basis points depending on the Consolidated Leverage Ratio. Until the delivery of the initial financial statements under the 2021 Credit Agreement, the Term A Loan and the Revolving Credit Facility bear interest, at the option of BKIS, at either (i) the base rate plus a margin of 50 basis points or (ii) the Eurodollar rate plus a margin of 150 basis points. In addition, BKIS will pay an unused commitment fee of between 15 and 20 basis points on the undrawn commitments under the Revolving Credit Facility, also depending on the Consolidated Leverage Ratio. The above unused commitment fee and margins are consistent with the 2018 Credit Agreement. The 2021 Credit Agreement also provides us with an option to choose an alternative rate of interest on or before the cessation of the London Interbank Offered Rate (“LIBOR”) at our election. As of March 31, 2021, the interest rate for the Facilities was based on the Eurodollar rate plus a margin of 150 basis points and was approximately 1.6%. As of March 31, 2021, we had $883.0 million capacity on the Revolving Credit Facility, and the unused commitment fee was 20 basis points. The Facilities are guaranteed by all of BKIS’s wholly-owned domestic restricted subsidiaries and BKFS, and are secured by associated collateral agreements that pledge a lien on the majority of BKIS’s assets and the assets of the guarantors, in each case, subject to customary exceptions. The Term A Loan is subject to amortization of principal, payable in quarterly installments on the last day of each fiscal quarter equal to the percentage set forth below of the initial aggregate principal amount of the term loans for such fiscal quarter:
The remaining principal balance of the Term A Loan and any outstanding loans under the Revolving Credit Facility are due upon maturity on March 10, 2026. As a result of the refinancing, we recognized $2.5 million of expense during the three months ended March 31, 2021 in Other expense, net on the Condensed Consolidated Statement of Earnings and Comprehensive Earnings (Unaudited). Senior Notes On August 26, 2020, BKIS completed the issuance and sale of $1.0 billion aggregate principal amount of 3.625% senior unsecured notes due 2028 (the "Senior Notes"). The Senior Notes have a coupon rate of 3.625% and mature on September 1, 2028. Interest is paid semi-annually in arrears on September 1 and March 1 of each year, and commenced on March 1, 2021. The obligations under the Senior Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by the same guarantors that guarantee our credit agreement (collectively, the “Guarantors”). The Senior Notes are effectively subordinated to any obligations that are secured, including obligations under our credit agreement, to the extent of the value of the assets securing those obligations. The Senior Notes are structurally subordinated to all liabilities of BKIS’ subsidiaries that do not guarantee the Senior Notes. Other Debt On April 1, 2018, we entered into a financing agreement for $32.9 million, with a stated interest rate of 0% and an imputed interest rate of 3.4%, primarily related to certain data processing and maintenance services. On December 31, 2019, we entered into an amendment to the financing agreement for an additional $16.3 million, with a stated interest rate of 0% and an imputed interest rate of 3.3%. Under the terms of the amendment, quarterly payments are due beginning January 2, 2020 through January 2, 2023. As of March 31, 2021 and December 31, 2020, $7.0 million and $9.5 million, respectively, are included in the Current portion of debt and $4.1 million and $6.4 million, respectively, are included in Long-term debt, net of current portion in our Condensed Consolidated Balance Sheets (Unaudited). Finance Leases On December 31, 2019, we entered into one-year finance lease agreements, with a stated interest rate of 0%, an imputed interest rate of 3.3% and bargain purchase options for certain computer equipment. On March 31, 2021, we entered into one-year finance lease agreements, with a stated interest rate of 0%, an imputed interest rate of 1.6% and bargain purchase options for certain computer equipment. The leased equipment has a useful life of five years and is depreciated on a straight-line basis. The finance lease liabilities of $3.3 million and $1.2 million as of March 31, 2021 and December 31, 2020, respectively, are included in the Current portion of debt on our Condensed Consolidated Balance Sheets (Unaudited). For the three months ended March 31, 2021 and 2020, non-cash investing and financing activity was $3.3 million and $12.0 million, respectively, related to the unpaid portion of our finance lease agreements. Fair Value of Long-Term Debt The fair values of our Facilities and Senior Notes are based upon established market prices for the securities using Level 2 inputs. The fair value of our Facilities approximates their carrying value at March 31, 2021. The fair value of our Senior Notes at March 31, 2021 was $982.5 million compared to its carrying value of $988.5 million, net of original issue discount and debt issuance costs. Interest Rate Swaps We enter into interest rate swap agreements to hedge forecasted monthly interest rate payments on our floating rate debt. As of March 31, 2021, we had the following interest rate swap agreements (collectively, the "Swap Agreements") (in millions):
Under the terms of the Swap Agreements, we receive payments based on the 1-month LIBOR (approximately 0.11% as of March 31, 2021). We entered into the Swap Agreements to convert a portion of the interest rate exposure on our floating rate debt from variable to fixed. We designated these Swap Agreements as cash flow hedges. A portion of the amount included in Accumulated other comprehensive loss is reclassified into Interest expense, net as a yield adjustment as interest is either paid or received on the hedged debt. The fair value of our Swap Agreements is based upon Level 2 inputs. We have considered our own credit risk and the credit risk of the counterparties when determining the fair value of our Swap Agreements. It is our policy to execute such instruments with creditworthy banks and not to enter into derivative financial instruments for speculative purposes. We believe our interest rate swap counterparties will be able to fulfill their obligations under our agreements, and we believe we will have debt outstanding through the various expiration dates of the swaps such that the occurrence of future cash flow hedges remains probable. The estimated fair values of our Swap Agreements are as follows (in millions):
A cumulative loss of $31.8 million ($23.7 million net of tax) and cumulative loss of $37.6 million ($28.1 million net of tax) is reflected in Accumulated other comprehensive loss as of March 31, 2021 and December 31, 2020, respectively. Below is a summary of the effect of derivative instruments on amounts recognized in Other comprehensive (loss) earnings ("OCE") on the Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) (in millions):
Approximately $19.4 million ($14.5 million net of tax) of the balance in Accumulated other comprehensive loss as of March 31, 2021 is expected to be reclassified into Interest expense, net over the next 12 months. |
Fair Value Measurements |
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Fair Value Measurements | (9)Fair Value Measurements Fair Value of Financial Assets and Liabilities Fair value represents the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of financial assets and liabilities are determined using the following fair value hierarchy:
Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis (in millions):
The fair value of contingent consideration was primarily determined using a third-party valuation based on significant estimates and assumptions, including Level 3 inputs. The estimates and assumptions include the projected timing and amount of future cash flows and discount rates reflecting the rate inherent in the future cash flows. The following table presents a summary of the change in fair value of our Level 3 fair value measurements (in millions):
As of March 31, 2021, the fair value of redeemable noncontrolling interests approximates its carrying amount due to the close proximity to the reporting date of the contributions received from Cannae and THL for their share of equity interests in Optimal Blue Holdco. Refer to Note 1 — Basis of Presentation and Overview and Note 3 — Business Acquisitions for additional information. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |
Income Taxes | (10)Income Taxes Our effective tax rate for the three months ended March 31, 2021 and 2020 was 11.7% and 15.6%, respectively. Our effective tax rate for the three months ended March 31, 2021 and 2020 differs from our statutory rate primarily due to the effect of excess tax benefits related to the vesting of restricted shares of our common stock.
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Commitments and Contingencies |
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Commitments and Contingencies | (11)Commitments and Contingencies Legal and Regulatory Matters In the ordinary course of business, we are involved in various pending and threatened litigation and regulatory matters related to our operations, some of which include claims for punitive or exemplary damages. Our ordinary course litigation may include class action lawsuits, which make allegations related to various aspects of our business. From time to time, we also receive requests for information from various state and federal regulatory authorities, some of which take the form of civil investigative demands or subpoenas. Some of these regulatory inquiries may result in the assessment of fines for violations of regulations or settlements with such authorities requiring a variety of remedies. We believe that none of these actions depart from customary litigation or regulatory inquiries incidental to our business. We review lawsuits and other legal and regulatory matters (collectively "legal proceedings") on an ongoing basis when making accrual and disclosure decisions. When assessing reasonably possible and probable outcomes, management bases its decision on its assessment of the ultimate outcome assuming all appeals have been exhausted. For legal proceedings where it has been determined that a loss is both probable and reasonably estimable, a liability based on known facts and which represents our best estimate has been recorded. Actual losses may materially differ from the amounts recorded and the ultimate outcome of our pending cases is generally not yet determinable. While some of these matters could be material to our operating results or cash flows for any particular period if an unfavorable outcome results, at present we do not believe the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on our financial condition. PennyMac Litigation On November 5, 2019, Black Knight Servicing Technologies, LLC (“BKST”), an indirect, wholly-owned subsidiary of Black Knight, filed a Complaint and Demand for Jury Trial (the “Black Knight Complaint”) against PennyMac Loan Services, LLC (“PennyMac”) in the Circuit Court for the Fourth Judicial Circuit in and for Duval County, Florida. The Black Knight Complaint includes causes of action for breach of contract and misappropriation of MSP® System trade secrets in order to develop an imitation mortgage processing system intended to replace the MSP® System. The Black Knight Complaint seeks damages for breach of contract and misappropriation of trade secrets, injunctive relief under the Florida Uniform Trade Secrets Act and declaratory judgment that BKST owns all intellectual property and software developed by or on behalf of PennyMac as a result of its wrongful use of and access to the MSP® System and related trade secret and confidential information. PennyMac filed a motion to compel arbitration of the action, and the court granted the motion on April 6, 2020. After the court denied BKST's motion for reconsideration of the court’s order compelling arbitration, BKST filed a notice of appeal with the Florida First District Court of Appeal on May 6, 2020. On January 6, 2021, the appellate court affirmed the trial court's ruling. On October 21, 2020, PennyMac submitted a dispute regarding a Black Knight Origination Technologies, LLC LendingSpace® software audit request to the American Arbitration Association ("AAA") for arbitration. Black Knight moved to consolidate the LendingSpace® arbitration with the existing trade secret/antitrust arbitrations and, on December 21, 2020, the arbitrator granted Black Knight’s motion to consolidate the arbitrations. On December 8, 2020, Black Knight and PennyMac filed motions for summary judgment concerning the LendingSpace® audit, and responses to the competing motions for summary judgment were filed by both parties on January 7, 2021. On February 16, 2021, the arbitrator granted Black Knight’s motion for summary judgment and ordered that Black Knight may conduct an audit of PennyMac’s use of Black Knight’s LendingSpace® software. Shortly after the filing of the Black Knight Complaint, on November 6, 2019, PennyMac filed an Antitrust Complaint (the “PennyMac Complaint”) against Black Knight in the United States District Court for the Central District of California. The PennyMac Complaint included causes of action for alleged monopolization and attempted monopolization under Section 2 of the Sherman Antitrust Act, violation of California’s Cartwright Act, violation of California’s Unfair Competition Law and common law unfair competition under California law. The PennyMac Complaint sought equitable remedies, damages and other monetary relief, including treble and punitive damages. Generally, PennyMac alleged that Black Knight relies on various anticompetitive, unfair, and discriminatory practices to maintain and to enhance its dominance in the mortgage servicing platform market and in an attempt to monopolize the platform software applications market. Black Knight moved to dismiss the PennyMac Complaint or have the action transferred to Florida based upon a forum selection clause in the agreement with BKST. On February 13, 2020, the judge granted Black Knight's motion to transfer the case to Florida and denied as moot the motion to dismiss. On April 17, 2020, PennyMac filed a notice of dismissal of this action without prejudice and indicated that they intended to bring the claims raised in the dismissed PennyMac Complaint as defenses, third party claims and/or counterclaims in arbitration. On April 23, 2020, the court entered an order dismissing the action without prejudice and directing that the clerk close the case. On April 28, 2020, PennyMac submitted this matter to the AAA for arbitration. On May 27, 2020, Black Knight filed its answering statement with the AAA. The arbitrator was confirmed by the AAA on July 21, 2020. The arbitrator set Black Knight's trade secret case for a 10-day final hearing beginning on October 24, 2022, and set PennyMac's antitrust case for a 5-day final hearing beginning on November 14, 2022. On June 26, 2020, Black Knight filed a complaint against PennyMac in the United States District Court for the Middle District of Florida seeking a declaratory judgment that PennyMac waived its right to arbitrate federal antitrust and related state law claims against Black Knight because PennyMac previously filed and litigated those claims in a court of law (the “BKI Declaratory Action”). On July 22, 2020, PennyMac moved to dismiss the complaint in the BKI Declaratory Action, which Black Knight opposed. In response to a request from the court in the BKI Declaratory Action, on August 20, 2020, BKI filed a memorandum of law in support of the federal court's subject matter jurisdiction. Black Knight filed its motion for summary judgment on September 28, 2020, and PennyMac filed its opposition to the motion on October 27, 2020. On March 1, 2021, the Court conducted a telephonic hearing on PennyMac’s motion to dismiss and BKI’s motion for summary judgment, at which the parties agreed that PennyMac’s motion to dismiss would be converted to a cross-motion for summary judgment. On March 22, 2021, the Court denied BKI’s motion for summary judgment and granted PennyMac’s motion as to the waiver issue, finding that PennyMac has not waived its right to arbitrate the claims raised in the Black Knight Complaint. As these cases continue to evolve, it is not possible to reasonably estimate the probability that we will ultimately prevail on our lawsuit or be held liable for the violations alleged in the PennyMac Complaint, nor is it possible to reasonably estimate the ultimate gain or loss, if any, or range of gain or loss that could result from these cases. Indemnifications and Warranties We often agree to indemnify our clients against damages and costs resulting from claims of patent, copyright, trademark infringement or breaches of confidentiality associated with use of our software through software licensing agreements. Historically, we have not made any payments under such indemnifications, but continue to monitor the conditions that are subject to the indemnifications to identify whether a loss has occurred that is both probable and estimable that would require recognition. In addition, we warrant to clients that our software operates substantially in accordance with the software specifications. Historically, no costs have been incurred related to software warranties and none are expected in the future, and as such, no accruals for warranty costs have been made. Indemnification Agreement We are party to a cross-indemnity agreement dated December 22, 2014 with ServiceLink Holdings, LLC ("ServiceLink"). Pursuant to this agreement, ServiceLink indemnifies us from liabilities relating to, arising out of or resulting from the conduct of ServiceLink’s business or any action, suit or proceeding in which we or any of our subsidiaries are named by reason of being a successor to the business of Lender Processing Services, Inc. and the cause of such action, suit or proceeding relates to the business of ServiceLink. In return, we indemnify ServiceLink for liabilities relating to, arising out of, or resulting from the conduct of our business. |
Revenues |
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Revenues | (12)Revenues Disaggregation of Revenues The following tables summarize revenues from contracts with clients (in millions):
Our Software Solutions segment offers leading software and hosting solutions that facilitate and automate many of the mission-critical business processes across the homeownership lifecycle. These solutions primarily consist of processing and workflow management software applications. Our servicing software solutions primarily include our core servicing software solution that automates loan servicing, including loan setup and ongoing processing, customer service, accounting, reporting to the secondary mortgage market and investors and web-based workflow information systems. Our origination software solutions primarily include our solutions that automate and facilitate the origination of mortgage loans, offer product, pricing and eligibility capabilities, and provide an interconnected network allowing the various parties and systems associated with lending transactions to exchange data quickly and efficiently. Professional services consists of pre-implementation and post-implementation support and services and are primarily billed on a time and materials basis. Professional services may also include dedicated teams provided as part of agreements with software and hosting solutions clients. Our Data and Analytics segment offers data and analytics solutions to the mortgage, real estate and capital markets verticals. These solutions include property ownership data, lien data, servicing data, automated valuation models, collateral risk scores, behavioral models, a multiple listing service software solution and other data solutions. Transaction Price Allocated to Future Performance Obligation Our disclosure of transaction price allocated to future performance obligations excludes the following:
As of March 31, 2021, the aggregate amount of the transaction price that is allocated to our future performance obligations was approximately $2.5 billion and is expected to be recognized as follows: 19% by December 31, , 42% by December 31, , 76% by December 31, and the rest thereafter. |
Equity |
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Equity | (13)Equity Share Repurchase Program On February 12, 2020, our Board of Directors approved a three-year share repurchase program authorizing us to repurchase up to 10.0 million shares of our outstanding common stock through February 12, 2023, through open market purchases, negotiated transactions or other means, in accordance with applicable securities laws and other restrictions. A summary of share repurchases under our share repurchase program during the three months ended March 31, 2021 is as follows (in millions, except per share amounts):
Omnibus Incentive Plan A summary of restricted shares granted in 2021 is as follows:
Restricted stock transactions in 2021 are as follows:
Equity-based compensation expense related to our restricted shares was $7.2 million and $10.7 million for the three months ended March 31, 2021 and 2020, respectively. Equity-based compensation includes accelerated recognition of $0.2 million for the three months ended March 31, 2020. These expenses are included in Operating expenses in the Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited). As of March 31, 2021, total unrecognized compensation cost was $68.5 million and is expected to be recognized over a weighted average period of approximately 2.4 years. Profits Interests Units The OB PIUs vest over three years, with cliff vesting after the third year. Holders of the OB PIUs have an option to put their profit interests to us if no public offering has been consummated as of the date that is 60 days prior to the fourth and each subsequent anniversary of the acquisition date of Optimal Blue. The units may be settled in cash or Black Knight common stock or a combination of both at our election and will be settled at the current fair value at the time we receive notice of the put election. As the OB PIUs provide for redemption features not solely within our control, we classify the redemption value outside of permanent equity in redeemable noncontrolling interests. The redemption value is equal to the difference in the per unit fair value of the underlying member units and the hurdle amount, based upon the proportionate required service period rendered to date. Equity-based compensation expense related to the OB PIUs was $2.2 million for the three months ended March 31, 2021. As of March 31, 2021, the total unrecognized compensation cost related to non-vested OB PIUs is $23.8 million, which is expected to be recognized over a weighted average period of approximately 2.7 years. |
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | (14)Segment Information Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting ("ASC 280") establishes standards for reporting information about segments and requires that a public business enterprise reports financial and descriptive information about its segments. Segments are components of an enterprise for which separate financial information is available and are evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. Our chief executive officer is identified as the CODM as defined by ASC 280. To align with the internal management of our business operations based on service offerings, our business is organized into two segments. Refer to Note 12 — Revenues for a description of our Software Solutions and Data and Analytics segments. Separate discrete financial information is available for these two segments, and the operating results of each segment are regularly evaluated by the CODM in order to assess performance and allocate resources. We use EBITDA as the primary profitability measure for making decisions regarding ongoing operations. EBITDA is earnings before Interest expense, net, Income tax expense and Depreciation and amortization. It also excludes Equity in earnings (losses) of unconsolidated affiliates. We do not allocate Interest expense, net, Other expense, net, Income tax expense, equity-based compensation and certain other items, such as purchase accounting adjustments and acquisition-related costs to the segments, since these items are not considered in evaluating the segments’ overall operating performance. Segment asset information is not included below because we do not use it to evaluate performance or allocate resources. Summarized financial information concerning our segments is shown in the tables below (in millions):
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Basis of Presentation and Overview (Policies) |
3 Months Ended |
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Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying Condensed Consolidated Financial Statements (Unaudited) of Black Knight, Inc. (“BKI”) and its subsidiaries ("Black Knight," the "Company," "we," "us" or "our") were prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), and all adjustments considered necessary for a fair presentation have been included. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of BKI, its wholly-owned subsidiaries and non-wholly owned subsidiaries in which we have a controlling financial interest either through voting rights or means other than voting rights. Intercompany transactions and balances have been eliminated in consolidation. Where our ownership interest in a consolidated subsidiary is less than 100%, the noncontrolling interests’ share of these non-wholly owned subsidiaries is reported in our consolidated balance sheets as a separate component of equity or within temporary equity. The noncontrolling interests’ share of the net earnings (loss) of these non-wholly owned subsidiaries is reported in our Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) as an adjustment to our net earnings to arrive at Net earnings attributable to Black Knight. We consolidate variable interest entities (“VIEs”) if we are considered the primary beneficiary because we have (a) the power to direct matters that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Optimal Blue Holdco, LLC (“Optimal Blue Holdco”), a non-wholly owned subsidiary, is considered a VIE. We are the primary beneficiary of Optimal Blue Holdco through our controlling interest and our rights established in the Second Amended and Restated Limited Liability Company Agreement of Optimal Blue Holdco dated November 24, 2020 (the “OB Holdco LLC Agreement”). As such, we control Optimal Blue Holdco and its subsidiaries and consolidate its financial position and results of operations. As of March 31, 2021 and December 31, 2020, we own 60% of Optimal Blue Holdco. Redeemable noncontrolling interests represent the collective 40% equity interest in Optimal Blue Holdco owned by Cannae Holdings, LLC ("Cannae") and affiliates of Thomas H. Lee Partners, L.P. ("THL"). As these redeemable noncontrolling interests provide for redemption features not solely within our control, they are presented outside of shareholders' equity. |
Reporting Segments | Reporting Segments We conduct our operations through two reporting segments: (1) Software Solutions and (2) Data and Analytics. See further discussion in Note 14 — Segment Information. |
Condensed Consolidated Financial Statement Details (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash and Cash Equivalents | Cash and cash equivalents are unrestricted and include the following (in millions):
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Schedule of Trade Receivables, Net | A summary of Trade receivables, net of allowance for credit losses is as follows (in millions):
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Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets consist of the following (in millions):
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Other Non-Current Assets | Other non-current assets consist of the following (in millions):
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Trade Accounts Payable and Other Accrued Liabilities | Trade accounts payable and other accrued liabilities consist of the following (in millions):
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Schedule of Depreciation and Amortization | Depreciation and amortization includes the following (in millions):
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Business Acquisitions (Tables) - Optimal Blue Holdco, LLC |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions, by Acquisition | Total consideration, net of cash acquired was approximately $1.8 billion for 100% of the equity interests in Optimal Blue and certain affiliates. The total consideration was as follows (in millions):
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the total purchase price consideration and the preliminary fair value amounts recognized for the assets acquired and liabilities assumed (in millions):
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Investments in Unconsolidated Affiliates (Tables) |
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Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unconsolidated VIEs | Summarized consolidated financial information for DNB (Successor) and Star Parent (Predecessor) is presented below (in millions):
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Equity in earnings (losses) of unconsolidated affiliates | Equity in earnings (losses) of unconsolidated affiliates, net of tax consists of the following (in millions):
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Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Basic and Diluted Earnings Per Share | the effect of their inclusion was antidilutive. The following table sets forth the computation of basic and diluted net earnings per share (in millions, except per share amounts):
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Goodwill (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | Goodwill consists of the following (in millions):
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Long-Term Debt (Tables) |
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Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt | Long-term debt consists of the following (in millions):
The Term A Loan is subject to amortization of principal, payable in quarterly installments on the last day of each fiscal quarter equal to the percentage set forth below of the initial aggregate principal amount of the term loans for such fiscal quarter:
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Schedule of Maturities of Long-term Debt | As of March 31, 2021, principal maturities, including payments related to our finance leases, are as follows (in millions):
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Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | We enter into interest rate swap agreements to hedge forecasted monthly interest rate payments on our floating rate debt. As of March 31, 2021, we had the following interest rate swap agreements (collectively, the "Swap Agreements") (in millions):
The estimated fair values of our Swap Agreements are as follows (in millions):
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Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss) |
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis (in millions):
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Change in Fair Value of Contingent Consideration | The following table presents a summary of the change in fair value of our Level 3 fair value measurements (in millions):
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Revenues (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The following tables summarize revenues from contracts with clients (in millions):
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Equity (Tables) |
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class of Treasury Stock | A summary of share repurchases under our share repurchase program during the three months ended March 31, 2021 is as follows (in millions, except per share amounts):
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Schedule of Restricted Stock Activity | A summary of restricted shares granted in 2021 is as follows:
Restricted stock transactions in 2021 are as follows:
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Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Summarized Segment Financial Information | Summarized financial information concerning our segments is shown in the tables below (in millions):
|
Basis of Presentation and Overview (Details) |
3 Months Ended |
---|---|
Mar. 31, 2021
segment
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of segments | 2 |
Basis of Presentation and Overview - Redeemable Noncontrolling Interests (Details) - Optimal Blue Holdco, LLC |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Noncontrolling Interest [Line Items] | ||
Noncontrolling ownership interest in consolidated subsidiary (as a percent) | 60.00% | 60.00% |
Cannae Holdings, LLC and Thomas H. Lee Partners, LP | ||
Noncontrolling Interest [Line Items] | ||
Noncontrolling ownership interest in consolidated subsidiary (as a percent) | 40.00% |
Condensed Consolidated Financial Statement Details - Cash and Cash Equivalents (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Accounting Policies [Abstract] | ||
Cash | $ 25.4 | $ 27.1 |
Cash equivalents | 19.5 | 7.6 |
Cash and cash equivalents | $ 44.9 | $ 34.7 |
Condensed Consolidated Financial Statement Details - Trade Receivables, Net (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Trade receivables | $ 184.7 | $ 184.3 |
Allowance for credit losses | (2.2) | (2.1) |
Trade receivables, net | 182.5 | 182.2 |
Trade receivables - billed | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Trade receivables | 134.4 | 136.4 |
Trade receivables - unbilled | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Trade receivables | $ 50.3 | $ 47.9 |
Condensed Consolidated Financial Statement Details - Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Accounting Policies [Abstract] | ||
Prepaid expenses | $ 48.5 | $ 39.7 |
Contract assets, net | 22.8 | 20.9 |
Other assets current | 12.2 | 9.8 |
Prepaid expenses and other current assets | $ 83.5 | $ 70.4 |
Condensed Consolidated Financial Statement Details - Other Non-Current Assets (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2020 |
Mar. 31, 2021 |
Dec. 31, 2020 |
|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||
Property records database | $ 60.5 | $ 60.5 | |
Contract assets, net | 61.2 | 56.5 | |
Right-of-use assets | 37.7 | 41.1 | |
Contract Credits | 23.8 | 5.0 | |
Deferred compensation plan related assets | 23.2 | 19.5 | |
Prepaid expenses | 3.8 | 4.9 | |
Other | 5.3 | 5.8 | |
Other non-current assets | $ 215.5 | $ 193.3 | |
Right-of-use assets obtained in exchange for lease liabilities | $ 2.6 |
Condensed Consolidated Financial Statement Details - Accounts Payable and Other Accrued Liabilities (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Accounting Policies [Abstract] | ||
Income taxes payable | $ 18.7 | $ 13.6 |
Lease liabilities, current | 11.4 | 13.5 |
Trade accounts payable | 9.0 | 8.9 |
Other taxes payable and accrued | 7.1 | 10.7 |
Accrued client liabilities | 3.6 | 6.4 |
Accrued interest | 3.1 | 12.8 |
Other | 34.0 | 22.2 |
Trade accounts payable and accrued liabilities | $ 86.9 | $ 88.1 |
Condensed Consolidated Financial Statement Details - Deferred Revenue (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Accounting Policies [Abstract] | ||
Deferred revenue, amount recognized | $ 17.7 | $ 15.6 |
Condensed Consolidated Financial Statement Details - Depreciation and Amortization (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Schedule of Depreciation and Amortization Expense [Line Items] | ||
Depreciation and amortization | $ 87.8 | $ 57.7 |
Deferred contract costs | 8.2 | 8.9 |
Computer software | ||
Schedule of Depreciation and Amortization Expense [Line Items] | ||
Depreciation and amortization | 30.6 | 25.8 |
Other intangible assets | ||
Schedule of Depreciation and Amortization Expense [Line Items] | ||
Depreciation and amortization | 38.8 | 13.0 |
Property and equipment | ||
Schedule of Depreciation and Amortization Expense [Line Items] | ||
Depreciation and amortization | $ 10.2 | $ 10.0 |
Business Acquisitions - Additional Information (Details) - USD ($) $ in Millions |
Mar. 16, 2021 |
Sep. 15, 2020 |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|---|---|
Business Acquisition [Line Items] | ||||
Goodwill | $ 3,631.5 | $ 3,613.4 | ||
Optimal Blue Holdco, LLC | ||||
Business Acquisition [Line Items] | ||||
Noncontrolling ownership interest in consolidated subsidiary (as a percent) | 60.00% | 60.00% | ||
Optimal Blue Holdco, LLC | ||||
Business Acquisition [Line Items] | ||||
Total purchase price consideration | $ 1,799.0 | |||
Cash paid | 1,828.3 | |||
Goodwill | 1,206.0 | |||
Computer software | 79.7 | |||
Other intangible assets | $ 610.8 | |||
Equity interest acquired (percent) | 100.00% | |||
NexSpring Financial, LLC | ||||
Business Acquisition [Line Items] | ||||
Total purchase price consideration | $ 24.4 | |||
Cash paid | 20.0 | |||
Goodwill | 18.1 | |||
Computer software | 4.6 | |||
Contingent consideration | 4.4 | |||
NexSpring Financial, LLC | Non-compete agreements | ||||
Business Acquisition [Line Items] | ||||
Other intangible assets | $ 0.5 | |||
NexSpring Financial, LLC | Computer software | ||||
Business Acquisition [Line Items] | ||||
Weighted average amortiation period | 5 years | |||
NexSpring Financial, LLC | Other intangible assets | ||||
Business Acquisition [Line Items] | ||||
Weighted average amortiation period | 3 years |
Business Acquisitions - Summary of Consideration and Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Millions |
Sep. 15, 2020 |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Goodwill | $ 3,631.5 | $ 3,613.4 | |
Optimal Blue Holdco, LLC | |||
Business Acquisition [Line Items] | |||
Cash paid | $ 1,828.3 | ||
Less: cash acquired | (29.3) | ||
Total consideration, net | 1,799.0 | ||
Trade receivables | 11.3 | ||
Computer software | 79.7 | ||
Other intangible assets | 610.8 | ||
Goodwill | 1,206.0 | ||
Other current and non-current assets | 13.3 | ||
Total assets acquired | 1,921.1 | ||
Deferred income taxes | 101.4 | ||
Current and other non-current liabilities | 20.7 | ||
Total liabilities assumed | 122.1 | ||
Net assets acquired | $ 1,799.0 |
Investments in Unconsolidated Affiliates - Narrative (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Jan. 08, 2021 |
Jul. 06, 2020 |
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Schedule of Equity Method Investments [Line Items] | ||||
Investment amount | $ 492.6 | |||
Equity in earnings of unconsolidated affiliates, net of tax | $ 6.4 | $ 5.6 | ||
D&B Investment | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Issuance of common stock (in shares) | 54.8 | |||
Ownership interest (percent) | 13.00% | 20.00% | ||
Share price (in USD per share) | $ 23.81 | |||
Fair value of investment | $ 1,306.0 | |||
Equity in earnings of unconsolidated affiliates, net of tax | 6.4 | $ 5.6 | ||
Noncash gain as a result of the DNB IPO | $ 9.9 | |||
D&B Investment | Bisnode Business Information Group AB | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Issuance of common stock (in shares) | 6.2 | |||
Ownership interest (percent) | 12.80% |
Investments in Unconsolidated Affiliates - Unconsolidated VIE (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Variable Interest Entity [Line Items] | ||
Assets | $ 6,130.9 | $ 6,090.5 |
Variable Interest Entity, Not Primary Beneficiary [Member] | ||
Variable Interest Entity [Line Items] | ||
Assets | 9,924.9 | 9,220.3 |
Maximum exposure | $ 9,251.7 | $ 8,345.9 |
Investments in Unconsolidated Affiliates - Summarized Financial Information (Details) - USD ($) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Variable Interest Entity [Line Items] | ||||
Current assets | $ 311.0 | $ 287.3 | ||
Total assets | 6,130.9 | 6,090.5 | ||
Current liabilities, including short-term debt | 223.0 | 291.3 | ||
Total liabilities | 2,938.2 | 2,884.8 | ||
Preferred stock; $0.0001 par value; 25,000,000 shares authorized; issued and outstanding, none as of March 31, 2021 | 0.0 | 0.0 | ||
Total shareholders' equity | 2,614.7 | $ 1,919.6 | 2,627.7 | $ 1,898.5 |
Total liabilities, redeemable noncontrolling interests and shareholders' equity | 6,130.9 | 6,090.5 | ||
Revenues | 349.7 | 290.7 | ||
Loss before provision for income taxes and equity in net income of affiliates | 44.3 | 52.7 | ||
Net loss | 45.5 | 50.1 | ||
Net earnings attributable to Black Knight | 54.1 | 50.1 | ||
Variable Interest Entity, Not Primary Beneficiary [Member] | ||||
Variable Interest Entity [Line Items] | ||||
Current assets | 673.2 | 874.4 | ||
Total assets | 9,924.9 | 9,220.3 | ||
Current liabilities, including short-term debt | 996.3 | 828.1 | ||
Non-current liabilities | 5,250.4 | 4,808.3 | ||
Total liabilities | 6,246.7 | 5,636.4 | ||
Total shareholders' equity | 3,678.2 | 3,583.9 | ||
Total liabilities, redeemable noncontrolling interests and shareholders' equity | 9,924.9 | $ 9,220.3 | ||
Revenues | 504.5 | 395.7 | ||
Loss before provision for income taxes and equity in net income of affiliates | (33.7) | (0.6) | ||
Net loss | (23.3) | 74.3 | ||
Net earnings attributable to Black Knight | $ (25.0) | $ 41.9 |
Investments in Unconsolidated Affiliates - Earnings of Unconsolidated Entities (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Schedule of Equity Method Investments [Line Items] | ||
Equity in earnings of unconsolidated affiliates, net of tax | $ 6.4 | $ 5.6 |
D&B Investment | ||
Schedule of Equity Method Investments [Line Items] | ||
Equity in earnings of unconsolidated affiliates, net of tax | 6.4 | 5.6 |
Noncash gain as a result of the DNB IPO | 9.9 | |
D&B Investment | Prior to change in accounting policy | ||
Schedule of Equity Method Investments [Line Items] | ||
Equity in earnings of unconsolidated affiliates, net of tax | $ (3.5) | $ 5.6 |
Earnings Per Share - Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Basic: | ||
Net earnings attributable to Black Knight | $ 54.1 | $ 50.1 |
Shares used for basic net earnings per share: | ||
Weighted average shares of common stock outstanding | 155.6 | 148.0 |
Basic net earnings per share (in dollars per share) | $ 0.35 | $ 0.34 |
Shares used for diluted net earnings per share: | ||
Weighted average shares of common stock outstanding | 155.6 | 148.0 |
Dilutive effect of unvested restricted shares of common stock | 0.3 | 0.7 |
Weighted average shares of common stock, diluted | 155.9 | 148.7 |
Diluted net earnings per share (in dollars per share) | $ 0.35 | $ 0.34 |
Related Party Transactions - DNB (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
D&B Investment | ||
Related Party Transaction [Line Items] | ||
Related party receivables | $ 0.1 | $ 0.1 |
Related Party Transactions - Trasimene (Details) - Trasimene Capital Management, LLC $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2021
USD ($)
| |
Related Party Transaction [Line Items] | |
Acquisition-related transaction costs | $ 0.3 |
Related party payable | $ 0.1 |
Goodwill - Schedule of Goodwill (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2021
USD ($)
| |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 3,613.4 |
Goodwill, ending balance | 3,631.5 |
NexSpring Financial, LLC | |
Goodwill [Roll Forward] | |
Acquisitions | 18.1 |
Operating Segments | Software Solutions | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 3,415.8 |
Goodwill, ending balance | 3,433.9 |
Operating Segments | Data and Analytics | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 197.6 |
Goodwill, ending balance | 197.6 |
Operating Segments | NexSpring Financial, LLC | Software Solutions | |
Goodwill [Roll Forward] | |
Acquisitions | 18.1 |
Operating Segments | NexSpring Financial, LLC | Data and Analytics | |
Goodwill [Roll Forward] | |
Acquisitions | $ 0.0 |
Long-Term Debt - Long-term Debt Components (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Debt Instrument [Line Items] | ||
Total long-term debt principal | $ 2,281.7 | $ 2,213.7 |
Less: current portion of long-term debt | (17.4) | (73.0) |
Long-term debt before debt issuance costs and discount | 2,264.3 | 2,140.7 |
Less: debt issuance costs and discount | (22.8) | (18.8) |
Long-term debt, net of current portion | 2,241.5 | 2,121.9 |
Other | ||
Debt Instrument [Line Items] | ||
Total long-term debt principal | 14.7 | 17.6 |
Term Loan | Term A Loan | ||
Debt Instrument [Line Items] | ||
Total long-term debt principal | 1,150.0 | 1,148.4 |
Line of Credit | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Total long-term debt principal | 117.0 | 47.7 |
Senior Notes | ||
Debt Instrument [Line Items] | ||
Total long-term debt principal | $ 1,000.0 | $ 1,000.0 |
Long-Term Debt - Principal Maturities of Debt (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Maturities of Long-term Debt [Abstract] | ||
2021 | $ 7.3 | |
2022 | 31.9 | |
2023 | 33.0 | |
2024 | 57.5 | |
2025 | 57.5 | |
Thereafter | 2,094.5 | |
Total long-term debt principal | $ 2,281.7 | $ 2,213.7 |
Long-Term Debt - Credit Agreement Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Apr. 01, 2018 |
Mar. 31, 2021 |
Dec. 31, 2019 |
Mar. 10, 2021 |
Dec. 31, 2020 |
Apr. 30, 2018 |
|
Debt Instrument [Line Items] | ||||||
Other debt borrowings | $ 32.9 | |||||
Debt Refinancing Costs | $ 2.5 | |||||
Imputed rate | 3.40% | |||||
Other Debt, Current | 7.0 | $ 9.5 | ||||
Other Debt, Noncurrent | 4.1 | $ 6.4 | ||||
Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Amount unused on the Revolving Credit Facility | $ 883.0 | |||||
Amended and Restated Credit Agreement | Term A Loan | ||||||
Debt Instrument [Line Items] | ||||||
Maximum borrowing capacity | $ 1,150.0 | $ 1,250.0 | ||||
Amended and Restated Credit Agreement | Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Maximum borrowing capacity | $ 1,000.0 | $ 750.0 | ||||
Term Loan and Revolving Credit Facility [Member] | Eurodollar | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as a percent) | 1.50% | |||||
Term Loan and Revolving Credit Facility [Member] | Amended and Restated Credit Agreement | Base Rate | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as a percent) | 0.50% | |||||
Term Loan and Revolving Credit Facility [Member] | Amended and Restated Credit Agreement | Eurodollar | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as a percent) | 1.50% | |||||
Term Loan and Revolving Credit Facility [Member] | Amended and Restated Credit Agreement | Minimum | ||||||
Debt Instrument [Line Items] | ||||||
Unused capacity, commitment fee (as a percent) | 0.15% | |||||
Term Loan and Revolving Credit Facility [Member] | Amended and Restated Credit Agreement | Minimum | Base Rate | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as a percent) | 0.25% | |||||
Term Loan and Revolving Credit Facility [Member] | Amended and Restated Credit Agreement | Minimum | Eurodollar | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as a percent) | 1.25% | |||||
Term Loan and Revolving Credit Facility [Member] | Amended and Restated Credit Agreement | Maximum | ||||||
Debt Instrument [Line Items] | ||||||
Unused capacity, commitment fee (as a percent) | 0.20% | |||||
Term Loan and Revolving Credit Facility [Member] | Amended and Restated Credit Agreement | Maximum | Base Rate | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as a percent) | 0.50% | |||||
Term Loan and Revolving Credit Facility [Member] | Amended and Restated Credit Agreement | Maximum | Eurodollar | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as a percent) | 1.50% | |||||
Term Loan | Term A Loan | ||||||
Debt Instrument [Line Items] | ||||||
Term loans, interest rate at period end (as a percent) | 1.60% | |||||
Line of Credit | Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Unused capacity, commitment fee (as a percent) | 20.00% | |||||
Other | ||||||
Debt Instrument [Line Items] | ||||||
Other debt borrowings | $ 16.3 | |||||
Imputed rate | 1.60% | 3.30% |
Long-Term Debt - Payment Dates and Percentages (Details) - Term Loan - Term A Loan |
3 Months Ended |
---|---|
Mar. 31, 2021 | |
Debt Instrument, Redemption, Period One | |
Debt Instrument [Line Items] | |
Quarterly installments of principal payments, percent of initial aggregate principal amount | 0.625% |
Debt Instrument, Redemption, Period Two | |
Debt Instrument [Line Items] | |
Quarterly installments of principal payments, percent of initial aggregate principal amount | 1.25% |
Long-Term Debt - Senior Notes (Details) - USD ($) $ in Billions |
Aug. 26, 2020 |
Apr. 01, 2018 |
---|---|---|
Debt Instrument [Line Items] | ||
Stated interest rate | 0.00% | |
Senior Notes | ||
Debt Instrument [Line Items] | ||
Principal amount of debt | $ 1.0 | |
Stated interest rate | 3.625% |
Long-Term Debt - Other Debt and FV (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Apr. 01, 2018 |
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Aug. 26, 2020 |
|
Debt Instrument [Line Items] | ||||||
Other debt borrowings | $ 32.9 | |||||
Stated interest rate | 0.00% | |||||
Imputed rate | 3.40% | |||||
Property, Plant and Equipment, Useful Life | 5 years | |||||
Other Debt, Current | $ 7.0 | $ 9.5 | ||||
Other Debt, Noncurrent | $ 4.1 | $ 6.4 | ||||
Remaining lease term | 1 year | 1 year | ||||
Finance lease, stated rate | 0.00% | |||||
Finance lease, imputed interest rate | 3.30% | |||||
Finance lease liability | $ 1.2 | |||||
Non-cash financing and investing activity related to unpaid portion of finance lease agreements | $ 3.3 | $ 12.0 | ||||
Current Portion Of Long Term Debt | ||||||
Debt Instrument [Line Items] | ||||||
Finance lease liability | $ 3.3 | |||||
Other | ||||||
Debt Instrument [Line Items] | ||||||
Other debt borrowings | $ 16.3 | |||||
Stated interest rate | 0.00% | 0.00% | ||||
Imputed rate | 1.60% | 3.30% | ||||
Senior Notes | ||||||
Debt Instrument [Line Items] | ||||||
Stated interest rate | 3.625% | |||||
Long-term Debt, Fair Value | $ 982.5 | |||||
Long-term debt | $ 988.5 |
Long-Term Debt - Interest Rate Swaps Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
Jan. 31, 2019 |
Apr. 30, 2018 |
Sep. 29, 2017 |
Mar. 31, 2017 |
|||
Derivative [Line Items] | |||||||||
Derivative, Gain (Loss) on Derivative, Net | $ 4.4 | $ (20.4) | |||||||
Unrealized holding losses, net of tax(1) | [1] | 0.5 | $ (21.6) | ||||||
Interest Rate Cash Flow Hedge Gain (Loss) to be Reclassified During Next 12 Month, Gross | 19.4 | ||||||||
Interest Rate Cash Flow Hedge Gain (Loss) to be Reclassified During Next 12 Months, Net | 14.5 | ||||||||
Interest Rate Swap | |||||||||
Derivative [Line Items] | |||||||||
Derivative, Fixed Interest Rate | 2.65% | 2.61% | 1.69% | ||||||
Derivative, Gain (Loss) on Derivative, Net | 31.8 | $ 37.6 | |||||||
Unrealized holding losses, net of tax(1) | $ 23.7 | $ 28.1 | |||||||
London Interbank Offered Rate (LIBOR) [Member] | Interest Rate Swap | |||||||||
Derivative [Line Items] | |||||||||
Derivative, Notional Amount Per Derivative Instrument | $ 300.0 | $ 250.0 | $ 200.0 | $ 200.0 | |||||
Derivative, Fixed Interest Rate | 2.08% | ||||||||
Derivative, Basis Spread on Variable Rate | 0.11% | ||||||||
|
Long-Term Debt - Swap Agreements in the Consolidated Balance Sheets (Details) - Interest Rate Swap - Designated as Hedging Instrument - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Other current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | $ 5.5 | $ 2.4 |
Other non-current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | $ 26.3 | $ 35.2 |
Long-Term Debt - Effect of Derivative Instruments on Amounts Recognized in Other Comprehensive Earnings (Details) - Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent [Member] - Interest Rate Swap - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative Instruments, Loss Recognized in Other Comprehensive Income (Loss), Effective Portion | $ 0.5 | $ (21.6) |
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net | $ 3.9 | $ 1.2 |
Fair Value Measurements - Summary of Fair Value Measurements (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Assets: | ||
Cash and cash equivalents | $ 44.9 | $ 34.7 |
Liabilities: | ||
Interest rate swaps | 31.8 | 37.6 |
Contingent consideration | 7.7 | 3.1 |
Redeemable noncontrolling interests | 578.0 | 578.0 |
Level 1 | ||
Assets: | ||
Cash and cash equivalents | 44.9 | 34.7 |
Liabilities: | ||
Interest rate swaps | 0.0 | 0.0 |
Contingent consideration | 0.0 | 0.0 |
Redeemable noncontrolling interests | 0.0 | 0.0 |
Level 2 | ||
Assets: | ||
Cash and cash equivalents | 0.0 | 0.0 |
Liabilities: | ||
Interest rate swaps | 31.8 | 37.6 |
Contingent consideration | 0.0 | 0.0 |
Redeemable noncontrolling interests | 0.0 | 0.0 |
Level 3 | ||
Assets: | ||
Cash and cash equivalents | 0.0 | 0.0 |
Liabilities: | ||
Interest rate swaps | 0.0 | 0.0 |
Contingent consideration | 7.7 | 3.1 |
Redeemable noncontrolling interests | $ 578.0 | $ 578.0 |
Fair Value Measurements - Summary of Change In Fair Value Of Contingent Consideration (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Dec. 31, 2020 |
|
Contingent Consideration Liability [Roll Forward] | ||
Beginning balance, December 31, 2020 | $ 3.1 | |
Ending balance, March 31, 2021 | 7.7 | |
Level 3 | ||
Contingent Consideration Liability [Roll Forward] | ||
Beginning balance, December 31, 2020 | 3.1 | |
Ending balance, March 31, 2021 | 7.7 | |
Liabilities, Fair Value Disclosure [Abstract] | ||
Fair value of liabilities | 585.7 | $ 581.1 |
Optimal Blue Holdco, LLC | Level 3 | ||
Liabilities, Fair Value Disclosure [Abstract] | ||
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability | 0.2 | |
NexSpring Financial, LLC | Level 3 | ||
Liabilities, Fair Value Disclosure [Abstract] | ||
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability | $ 4.4 |
Income Taxes - Narrative (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Income Tax Disclosure [Abstract] | ||
Effective tax rate | 11.70% | 15.60% |
Revenues - Disaggregation of Revenue (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Disaggregation of Revenue [Line Items] | ||
Revenues | $ 349.7 | $ 290.7 |
Software and hosting solutions | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 270.6 | 221.7 |
Professional services | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 30.6 | 28.4 |
Data solutions | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 45.6 | 36.8 |
Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 2.9 | 3.8 |
Operating Segments | Software Solutions | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 295.8 | 244.7 |
Operating Segments | Software Solutions | Software and hosting solutions | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 261.9 | 213.3 |
Operating Segments | Software Solutions | Professional services | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 30.4 | 28.2 |
Operating Segments | Software Solutions | Data solutions | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 1.2 | 0.0 |
Operating Segments | Software Solutions | Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 2.3 | 3.2 |
Operating Segments | Data and Analytics | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 53.9 | 46.1 |
Operating Segments | Data and Analytics | Software and hosting solutions | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 8.7 | 8.4 |
Operating Segments | Data and Analytics | Professional services | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 0.2 | 0.3 |
Operating Segments | Data and Analytics | Data solutions | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 44.4 | 36.8 |
Operating Segments | Data and Analytics | Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 0.6 | 0.6 |
Corporate and Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 0.0 | (0.1) |
Corporate and Other | Software and hosting solutions | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 0.0 | 0.0 |
Corporate and Other | Professional services | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 0.0 | (0.1) |
Corporate and Other | Data solutions | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 0.0 | 0.0 |
Corporate and Other | Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 0.0 | 0.0 |
Reportable Legal Entities | Servicing Software | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 202.7 | 195.7 |
Reportable Legal Entities | Servicing Software | Software and hosting solutions | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 184.1 | 177.0 |
Reportable Legal Entities | Servicing Software | Professional services | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 18.6 | 18.7 |
Reportable Legal Entities | Servicing Software | Data solutions | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 0.0 | 0.0 |
Reportable Legal Entities | Servicing Software | Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 0.0 | 0.0 |
Reportable Legal Entities | Origination Software | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 93.1 | 49.0 |
Reportable Legal Entities | Origination Software | Software and hosting solutions | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 77.8 | 36.3 |
Reportable Legal Entities | Origination Software | Professional services | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 11.8 | 9.5 |
Reportable Legal Entities | Origination Software | Data solutions | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 1.2 | 0.0 |
Reportable Legal Entities | Origination Software | Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | $ 2.3 | $ 3.2 |
Revenues - Narrative (Details) $ in Billions |
Mar. 31, 2021
USD ($)
|
---|---|
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 2.5 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, percent | 19.00% |
Remaining performance obligation, period | 9 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, percent | 42.00% |
Remaining performance obligation, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, percent | 76.00% |
Remaining performance obligation, period | 2 years |
Equity - Share Repurchase Program (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Feb. 12, 2020 |
Mar. 31, 2021 |
|
Equity [Abstract] | ||
Period in force | 3 years | |
Authorized amount (shares) | $ 10.0 | |
Number of shares repurchased (in shares) | 0.6 | |
Aggregate purchase price | $ 46.7 | |
Average cost per share (usd per share) | $ 75.19 | |
Remaining authorized shares for repurchase (shares) | 9.4 |
Equity - Equity-Based Compensation Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 10, 2021 |
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Allocated share-based compensation expense | $ 7.2 | $ 10.7 | |
Accelerated share-based compensation | $ 0.2 | ||
Compensation cost not yet recognized | $ 68.5 | ||
Compensation cost not yet recognized, period for recognition | 2 years 4 months 24 days | ||
Restricted Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Shares granted in period (in shares) | 518,219 | 518,219 | |
Vesting period (in years) | 3 years | ||
Grants in period, weighted average grant date fair value (in dollars per share) | $ 76.00 | $ 76.00 | |
Profit Interests Units | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Allocated share-based compensation expense | $ 2.2 | ||
Compensation cost not yet recognized | $ 23.8 | ||
Compensation cost not yet recognized, period for recognition | 2 years 8 months 12 days | ||
Vesting period (in years) | 3 years |
Equity - Restricted Stock Grant (Details) - Restricted Stock |
3 Months Ended | |
---|---|---|
Mar. 10, 2021
period
$ / shares
shares
|
Mar. 31, 2021
$ / shares
shares
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted (in shares) | shares | 518,219 | 518,219 |
Grants in period, weighted average grant date fair value (in dollars per share) | $ / shares | $ 76.00 | $ 76.00 |
Vesting period (in years) | 3 years | |
Number of measurement periods | period | 3 | |
Measurement period | 12 months |
Equity - Restricted Stock Transactions (Details) - Restricted Stock - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 10, 2021 |
Mar. 31, 2021 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||
Outstanding shares, Balance Beginning (in shares) | 1,549,098 | |
Granted (in shares) | 518,219 | 518,219 |
Forfeited (in shares) | (2,386) | |
Vested (in shares) | (817,204) | |
Outstanding shares, Balance Ending (in shares) | 1,247,727 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | ||
Beginning balance (in dollars per share) | $ 57.86 | |
Grants in period, weighted average grant date fair value (in dollars per share) | $ 76.00 | 76.00 |
Forfeitures, weighted average grant date fair value (in dollars per share) | 62.89 | |
Vested in period, weighted average grant date fair value (in dollars per share) | 52.76 | |
Ending balance (in dollars per share) | $ 68.72 |
Segment Information - Additional Disclosures (Details) |
3 Months Ended |
---|---|
Mar. 31, 2021
segment
| |
Segment Reporting [Abstract] | |
Number of segments | 2 |
Segment Information - Summarized Financial Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Segment Reporting Information [Line Items] | ||
Revenues | $ 349.7 | $ 290.7 |
Operating expenses | 186.2 | 162.4 |
Transition and integration costs | 7.9 | 2.4 |
EBITDA | 155.6 | 125.9 |
Depreciation and amortization | 87.8 | 57.7 |
Operating income | 67.8 | 68.2 |
Interest expense, net | (20.3) | (14.7) |
Other expense, net | (3.2) | (0.8) |
Earnings before income taxes and equity in earnings of unconsolidated affiliates | 44.3 | 52.7 |
Income tax expense | 5.2 | 8.2 |
Earnings before equity in earnings of unconsolidated affiliates | 39.1 | 44.5 |
Equity in earnings of unconsolidated affiliates, net of tax | 6.4 | 5.6 |
Net earnings | 45.5 | 50.1 |
Net losses attributable to redeemable noncontrolling interests | 8.6 | 0.0 |
Net earnings attributable to Black Knight | 54.1 | 50.1 |
Allocated share-based compensation expense | 7.2 | 10.7 |
Operating Segments | Software Solutions | ||
Segment Reporting Information [Line Items] | ||
Revenues | 295.8 | 244.7 |
Operating expenses | 124.9 | 105.3 |
Transition and integration costs | 0.0 | 0.0 |
EBITDA | 170.9 | 139.4 |
Depreciation and amortization | 31.2 | 30.3 |
Operating income | 139.7 | 109.1 |
Operating Segments | Data and Analytics | ||
Segment Reporting Information [Line Items] | ||
Revenues | 53.9 | 46.1 |
Operating expenses | 34.2 | 31.5 |
Transition and integration costs | 0.0 | 0.0 |
EBITDA | 19.7 | 14.6 |
Depreciation and amortization | 3.8 | 4.0 |
Operating income | 15.9 | 10.6 |
Corporate and Other | ||
Segment Reporting Information [Line Items] | ||
Revenues | 0.0 | (0.1) |
Operating expenses | 27.1 | 25.6 |
Transition and integration costs | 7.9 | 2.4 |
EBITDA | (35.0) | (28.1) |
Depreciation and amortization | 52.8 | 23.4 |
Operating income | (87.8) | (51.5) |
Allocated share-based compensation expense | $ 10.5 | $ 11.7 |
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