Black Knight Reports Second Quarter 2020 Financial Results

Black Knight, Inc. (NYSE: BKI), a leading provider of software, data and analytics solutions to the mortgage and consumer loan, real estate and capital markets verticals, today announced unaudited financial results for the second quarter and six months ended June 30, 2020.

Revenues for the second quarter of 2020 decreased 1% to $293.1 million compared to $294.9 million in the prior year quarter. Earnings before equity in losses of unconsolidated affiliates increased 44% to $65.1 million compared to $45.3 million in the prior year quarter, including a gain recognized related to the resolution of a legacy legal matter. Net earnings for the second quarter of 2020 increased 20% to $39.1 million compared to $32.6 million in the prior year quarter. Diluted EPS increased 18% to $0.26 compared to $0.22 in the prior year quarter. For the second quarter of 2020, the effect of our investment in Star Parent, L.P., the parent of Dun & Bradstreet Holdings, Inc. (the “D&B Investment”) was a reduction in Net earnings of $31.0 million, or $0.21 per diluted share, compared to a reduction of Net earnings of $12.7 million, or $0.09 per diluted share, in the prior year quarter, primarily due to the effect of their purchase accounting adjustments and other non-operating charges. Net earnings margin was 13.3% compared to 11.1% in the prior year quarter.

Adjusted Revenues for the second quarter of 2020 decreased 0.6% to $293.3 million compared to $295.1 million in the prior year quarter. Adjusted Net Earnings for the second quarter of 2020 increased 7% to $78.3 million compared to $73.1 million in the prior year quarter, reflecting lower interest expense and a lower tax rate. Adjusted EPS for the second quarter of 2020 increased 6% to $0.52 per diluted share compared to $0.49 per diluted share in the prior year quarter.

Adjusted EBITDA for the second quarter of 2020 decreased 0.4% to $147.3 million compared to $147.9 million in the prior year quarter. Adjusted EBITDA Margin was 50.2% compared to 50.1% in the prior year quarter.

Black Knight Chairman Bill Foley said, “Our second quarter results exceeded our expectations and demonstrate the strength of our business against known headwinds from the COVID-19 pandemic. In spite of these headwinds, we find ourselves uniquely positioned to deliver innovative solutions our markets need and demand.”

“We are pleased with the underlying performance of the business in these unprecedented times. These results illustrate the resilience of our business and our ability to manage effectively in any environment,” said Black Knight Chief Executive Officer Anthony Jabbour. “The fundamentals of our business remain strong, and we are excited by the positive momentum across the enterprise. We remain focused on providing exceptional service to our clients, winning market share and delivering innovative solutions to create sustainable, long-term shareholder value.”

Jabbour continued, “We are excited by the recently announced acquisition of Optimal Blue, which will add industry-leading product, pricing and eligibility capabilities to our already robust set of solutions and enhance our already comprehensive data and analytics capabilities. We believe they are an excellent strategic and cultural fit, and will enable Black Knight to deliver even greater value to our clients. We look forward to Optimal Blue and its employees joining the Black Knight family.”

Revenues for the six months ended June 30, 2020 increased 1% to $583.8 million compared to $578.0 million in the 2019 period. Earnings before equity in losses of unconsolidated affiliates increased 30% to $109.6 million compared to $84.6 million in the 2019 period. Net earnings for the six months ended June 30, 2020 increased 52% to $89.2 million compared to $58.6 million in the 2019 period. Diluted EPS increased 54% to $0.60 compared to $0.39 in the 2019 period. For the six months ended June 30, 2020, the effect of our D&B Investment was a reduction in Net earnings of $25.4 million, or $0.17 per diluted share, compared to a reduction of Net earnings of $26.0 million, or $0.18 per diluted share, in the 2019 period. Net earnings margin was 15.3% compared to 10.1% in the 2019 period.

Adjusted Revenues for the six months ended June 30, 2020 increased 1% to $584.1 million compared to $578.3 million in the 2019 period. Adjusted Net Earnings for the six months ended June 30, 2020 increased 6% to $147.7 million compared to $139.0 million in the 2019 period. Adjusted EPS for the six months ended June 30, 2020 increased 5% to $0.99 per diluted share compared to $0.94 per diluted share in the 2019 period.

Adjusted EBITDA for the six months ended June 30, 2020 increased 1% to $287.4 million compared to $285.0 million in the 2019 period. Adjusted EBITDA Margin was 49.2% compared to 49.3% in the 2019 period.

Definitions of non-GAAP financial measures and the reconciliations to the most directly comparable GAAP measures are provided in subsequent sections of the press release narrative and supplemental schedules. Black Knight has not provided a reconciliation of forward-looking Adjusted EPS and Adjusted EBITDA to the most directly comparable GAAP financial measures, due primarily to variability and difficulty in making accurate forecasts and projections of non-operating matters that may arise, as not all of the information necessary for a quantitative reconciliation is available to Black Knight without unreasonable effort. For the same reasons, Black Knight is unable to address the probable significance of the information.

Segment Information

Software Solutions

Revenues for the second quarter of 2020 decreased 4% to $245.1 million compared to $255.4 million in the prior year quarter. EBITDA decreased 5% to $146.2 million compared to $153.9 million, with an EBITDA margin of 59.6% compared to 60.3% in the prior year quarter.

Revenues for the six months ended June 30, 2020 decreased 2% to $489.8 million compared to $498.9 million in the 2019 period. EBITDA decreased 3% to $285.6 million compared to $294.6 million, with an EBITDA margin of 58.3% compared to 59.0% in the 2019 period.

Data and Analytics

Revenues for the second quarter of 2020 increased 21% to $48.2 million compared to $39.7 million in the prior year quarter. EBITDA increased 71% to $16.1 million compared to $9.4 million, with an EBITDA margin of 33.4%, an increase of 970 basis points compared to the prior year quarter.

Revenues for the six months ended June 30, 2020 increased 19% to $94.3 million compared to $79.4 million in the 2019 period. EBITDA increased 59% to $30.7 million compared to $19.3 million, with an EBITDA margin of 32.6%, an increase of 830 basis points compared to the 2019 period.

Balance Sheet

As of June 30, 2020, we had cash of $228.2 million and debt of $1,195.8 million. As of June 30, 2020, we had available capacity of $750.0 million on our revolving credit facility.

D&B Investment

On July 6, 2020, Dun & Bradstreet Holdings, Inc. (“DNB”) closed its previously announced initial public offering of 90.0 million shares of common stock, which included 11.7 million shares of common stock issued pursuant to the exercise by the underwriters of their option to purchase additional shares in full (the “DNB IPO”). The DNB IPO was priced at $22.00 per share, resulting in gross proceeds to DNB of $2.4 billion when combined with $400.0 million of aggregate proceeds from a concurrent private placement offering (the “DNB Private Placement”) and before deducting underwriting discounts and commissions and other offering expenses payable by DNB. Shares of DNB common stock began trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “DNB” on July 1, 2020.

On July 6, 2020, we invested $100.0 million in the DNB Private Placement. In connection with the closing of the DNB IPO and the DNB Private Placement, our limited partner interests in Star Parent were exchanged for shares of DNB common stock. Subsequent to the DNB IPO and the DNB Private Placement, we have invested an aggregate of $492.6 million and we own approximately 54.8 million shares of DNB common stock, which represents a fair value of approximately $1.4 billion based on the July 2020 average closing prices.

Optimal Blue

On July 27, 2020, Black Knight announced it had entered into a definitive equity purchase agreement with affiliates of private equity firm GTCR, LLC, to purchase Optimal Blue, LLC (“Optimal Blue”), a leading provider of secondary market solutions and actionable data services, for an enterprise value of $1.8 billion, subject to customary purchase price adjustments. In connection with the acquisition, Black Knight will combine its Compass Analytics business with Optimal Blue in a newly formed entity with minority co-investors Cannae Holdings, Inc. (“Cannae”) and Thomas H. Lee Partners, L.P. (“THL”). Black Knight will own approximately 60% of the new entity. The transaction is subject to regulatory approval and satisfaction of other customary closing conditions, and expected to close in the third quarter of 2020. The acquisition is being funded with cash on hand, debt financing and equity contributions from Cannae and THL.

Business Outlook

Note that guidance is provided for Black Knight on a standalone basis. Black Knight intends to provide an update on the overall financial profile and outlook for the combined company at or around the time of closing of the Optimal Blue acquisition. Black Knight’s updated full year 2020 outlook is as follows:

• Revenues and Adjusted Revenues are expected to be in the range of $1,170 million to $1,184 million.
• Adjusted EPS is expected to be in the range of $1.94 to $1.99.
• Adjusted EBITDA is expected to be in the range of $572 million to $583 million.

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