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Black Knight Reports Fourth Quarter and Full Year 2021 Financial Results

·16 min read

JACKSONVILLE, Fla., Feb. 15, 2022 /PRNewswire/ -- 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 fourth quarter and year ended December 31, 2021, as compared to the prior year period.

Black Knight, Inc. Logo (PRNewsfoto/Black Knight, Inc.)
Black Knight, Inc. Logo (PRNewsfoto/Black Knight, Inc.)

Fourth Quarter 2021 Highlights:

  • Revenues of $386.2 million, an increase of 13%; Organic revenue growth of 11%

  • Operating income of $82.9 million, an increase of 32%; Operating margin of 21.5% compared to 18.3%

  • Earnings before equity in (losses) earnings of unconsolidated affiliates, net of tax of $56.3 million, an increase of 37%

  • Net earnings attributable to Black Knight of $60.7 million compared to $47.1 million; Diluted EPS of $0.39 compared to $0.30; Net earnings margin of 14.5% compared to 12.3%

  • Adjusted EBITDA of $187.9 million, an increase of 12%; Adjusted EBITDA margin was 48.7% compared to 49.0%

  • Adjusted operating income of $150.0 million, an increase of 11%; Adjusted operating margin of 38.8% compared to 39.3%

  • Adjusted net earnings of $102.3 million, an increase of 9%; Adjusted EPS of $0.66, an increase of 10%

  • As of December 31, 2021, we had cash and cash equivalents of $77.1 million, debt of $2,395.1 million and available capacity of $744.0 million on our revolving credit facility

Fourth Quarter 2021 Segment Highlights:

Software Solutions

  • Revenues of $329.2 million, an increase of 13%; Organic revenue growth of 11%

  • EBITDA of $185.5 million, an increase of 11%; EBITDA margin of 56.3% compared to 57.5%

  • Operating income of $151.3 million, an increase of 10%; Operating margin of 46.0% compared to 47.3%

Data and Analytics

  • Revenues of $57.0 million, an increase of 11%; Organic revenue growth of 8%

  • EBITDA of $18.8 million, an increase of 19%; EBITDA margin of 33.0% compared to 30.8%

  • Operating income of $14.7 million, an increase of 21%; Operating margin of 25.8% compared to 23.6%

Full Year 2021 Highlights:

  • Revenues of $1,475.2 million, an increase of 19%; Organic revenue growth of 10%

  • Operating income of $303.0 million, an increase of 14%; Operating margin of 20.5% compared to 21.5%

  • Earnings before equity in (losses) earnings of unconsolidated affiliates, net of tax of $177.3 million compared to $178.7 million

  • Net earnings attributable to Black Knight of $207.9 million compared to $264.1 million; Diluted EPS of $1.33 compared to $1.73; Net earnings margin of 12.2% compared to 19.8%; The effect of our investment in Dun & Bradstreet Holdings, Inc. ("DNB") was an increase in Net earnings attributable to Black Knight of $2.6 million, or $0.02 per diluted share, compared to $62.1 million, or $0.41 per diluted share, primarily related to a non-cash gain recognized as a result of DNB's initial public offering and concurrent private placement in the prior year

  • Adjusted EBITDA of $724.2 million, an increase of 19%; Adjusted EBITDA margin was 49.1% compared to 49.2%

  • Adjusted operating income of $578.2 million, an increase of 22%; Adjusted operating margin of 39.2% compared to 38.3%

  • Adjusted net earnings of $371.5 million, an increase of 15%; Adjusted EPS of $2.38, an increase of 13%

Full Year 2021 Segment Highlights:

Software Solutions

  • Revenues of $1,250.0 million, an increase of 20%; Organic revenue growth of 10%

  • EBITDA of $713.7 million, an increase of 18%; EBITDA margin of 57.1% compared to 58.1%

  • Operating income of $582.6 million, an increase of 20%; Operating margin of 46.6% compared to 46.5%

Data and Analytics

  • Revenues of $225.2 million, an increase of 13%; Organic revenue growth of 10%

  • EBITDA of $80.2 million, an increase of 24%; EBITDA margin of 35.6% compared to 32.6%

  • Operating income of $64.7 million, an increase of 30%; Operating margin of 28.7% compared to 25.0%

Commentary:

Black Knight Chairman and Chief Executive Officer Anthony Jabbour said, "We are proud to have delivered an outstanding fourth quarter that closed out an outstanding year. During the fourth quarter, we achieved Organic revenue growth of 11%, Adjusted EBITDA growth of 12% and Adjusted EPS growth of 10%. I would like to thank our employees for their significant contributions to our success and our clients for their partnership and confidence that they place with us to help them solve their biggest challenges." Jabbour continued, "We enter 2022 with significant momentum following a record sales year in 2021 and with laser focus to continue our strong execution of our strategic initiatives."

Business Outlook

The following 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.

Black Knight's full year 2022 outlook reflects the purchase of the outstanding interests of Optimal Blue Holdco, LLC from co-investors Cannae Holdings, Inc. and certain investment entities affiliated with Thomas H. Lee Partners, L.P. Black Knight's full year 2022 outlook is as follows (in millions, except per share data):


















2021


2022


Growth



Actual


Low


High


Low


High

Revenues

$

1,475


$

1,593


$

1,612


8 %



9 %


Organic revenue growth










7 %



8 %


Adjusted EBITDA

$

724


$

786


$

803


9 %



11 %


Adjusted EPS

$

2.38


$

2.63


$

2.72


11 %



14 %


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 EBITDA and Adjusted EPS, including certain components of the forward-looking reconciliation, 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.

Earnings Conference Call and Audio Webcast

Black Knight will host a conference call to discuss the fourth quarter and full year 2021 financial results on February 15, 2022, at 8:30 a.m. ET. The conference call can be accessed live over the phone by dialing (877) 407–4018, or for international callers (201) 689–8471. A replay will be available from 11:30 a.m. ET on February 15, 2022, through February 22, 2022, by dialing (844) 512–2921 or for international callers (412) 317–6671. The replay passcode will be 13726378.

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

About Black Knight

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

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

Non-GAAP Financial Measures

This earnings release contains non-GAAP financial measures, including Adjusted revenues, Organic revenue growth, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted operating income, Adjusted operating margin, Adjusted net earnings and Adjusted EPS. These are important financial measures for us but are not financial measures as defined by generally accepted accounting principles ("GAAP"). The presentation of this financial information is not intended to be considered in isolation of or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

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

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

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

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

Organic revenue growth - We define Organic revenue growth as Adjusted revenues, as defined above, for the current period compared to an adjusted revenue base for the prior period, which is adjusted to add pre-acquisition revenues of acquired businesses for the portion of the prior year matching the portion of the current year that we owned the acquired businesses.

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

  • Depreciation and amortization;

  • Impairment charges;

  • Interest expense, net;

  • Income tax expense;

  • Other expense (income), net;

  • Equity in losses (earnings) of unconsolidated affiliates, net of tax;

  • (Gains) losses on sale of investments in unconsolidated affiliate, net of tax;

  • Net earnings (losses) attributable to redeemable noncontrolling interests;

  • deferred revenue purchase accounting adjustment;

  • equity-based compensation, including certain related payroll taxes;

  • costs associated with debt and/or equity offerings;

  • acquisition-related costs, including costs pursuant to purchase agreements; and

  • costs associated with expense reduction initiatives.

These adjustments are reflected in Corporate and Other.

Adjusted EBITDA margin - Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by Adjusted revenues.

Adjusted operating income - We define Adjusted operating income as Operating income, with adjustments to reflect the addition or elimination of certain statement of earnings items including, but not limited to:

  • deferred revenue purchase accounting adjustment;

  • equity-based compensation, including certain related payroll taxes;

  • costs associated with debt and/or equity offerings;

  • acquisition-related costs, including costs pursuant to purchase agreements;

  • costs associated with expense reduction initiatives; and

  • the net incremental depreciation and amortization adjustments associated with the application of purchase accounting.

These adjustments are reflected in Corporate and Other.

Adjusted operating margin - Adjusted operating margin is calculated by dividing Adjusted operating income by Adjusted revenues.

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

  • equity in losses (earnings) of unconsolidated affiliates, net of tax;

  • (gains) losses on sale of investments in unconsolidated affiliate, net of tax;

  • the net incremental depreciation and amortization adjustments associated with the application of purchase accounting;

  • deferred revenue purchase accounting adjustment;

  • equity-based compensation, including certain related payroll taxes;

  • costs associated with debt and/or equity offerings;

  • acquisition-related costs, including costs pursuant to purchase agreements;

  • costs associated with expense reduction initiatives;

  • costs and settlement (gains) losses associated with significant legal matters;

  • adjustment for income tax expense primarily related to the tax effect of the non-GAAP adjustments; and

  • adjustment for redeemable noncontrolling interests primarily related to the effect of the non-GAAP adjustments.

Adjusted EPS - Adjusted EPS is calculated by dividing Adjusted net earnings by the diluted weighted average shares of common stock outstanding.

Forward-Looking Statements

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

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

  • changes in general economic, business, regulatory and political conditions, including those resulting from pandemics such as COVID–19, particularly as they affect foreclosures and the mortgage industry;

  • the outbreak of COVID–19 and measures to reduce its spread, including the effect of governmental or voluntary actions such as business shutdowns and stay-at-home orders;

  • security breaches against our information systems 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;

  • risks associated with the recruitment and retention of our skilled workforce;

  • our ability to successfully consummate, integrate and achieve the intended benefits of acquisitions, including our ability to successfully achieve the intended benefits of our acquisition of Optimal Blue, LLC ("Optimal Blue");

  • risks associated with our investment in DNB; and

  • other risks and uncertainties detailed in the "Statement Regarding Forward-Looking Information", "Risk Factors" and other sections of our Annual Report on Form 10–K for the year ended December 31, 2020 and other filings with the SEC.

BLACK KNIGHT, INC.

Consolidated Balance Sheets

(In millions)

(Unaudited)










December 31,



2021


2020

ASSETS







Current assets:







Cash and cash equivalents


$

77.1


$

34.7

Trade receivables, net



191.8



182.2

Prepaid expenses and other current assets



83.0



70.4

Receivables from related parties



0.2



Total current assets



352.1



287.3

Property and equipment, net



154.5



163.1

Computer software, net



497.0



498.3

Other intangible assets, net



613.2



692.3

Goodwill



3,817.3



3,613.4

Investments in unconsolidated affiliates



490.5



470.5

Deferred contract costs, net



196.0



172.3

Other non-current assets



230.3



193.3

Total assets


$

6,350.9


$

6,090.5

LIABILITIES AND EQUITY







Current liabilities:







Trade accounts payable and other accrued liabilities


$

76.3


$

88.1

Accrued compensation and benefits



91.4



79.3

Current portion of debt



32.5



73.0

Deferred revenues



64.6



50.9

Total current liabilities



264.8



291.3

Deferred revenues



81.5



92.7

Deferred income taxes



284.1



284.0

Long-term debt, net of current portion



2,362.6



2,121.9

Other non-current liabilities



78.7



94.9

Total liabilities



3,071.7



2,884.8








Redeemable noncontrolling interests



1,188.8



578.0








Equity:







Additional paid-in capital



1,410.9



2,053.7

Retained earnings



968.2



757.4

Accumulated other comprehensive loss



(17.5)



(38.8)

Treasury stock, at cost



(271.2)



(144.6)

Total shareholders' equity



2,090.4



2,627.7

Total liabilities, redeemable noncontrolling interests and shareholders' equity


$

6,350.9


$

6,090.5

BLACK KNIGHT, INC.

Consolidated Statements of Earnings

(In millions, except per share data)

(Unaudited)
















Three months ended December 31,


Year ended December 31,



2021


2020


2021


2020

Revenues


$

386.2


$

342.1


$

1,475.2


$

1,238.5

Expenses:













Operating expenses



207.7



184.5



793.9



669.6

Depreciation and amortization



93.2



90.4



365.0



270.7

Transition and integration costs



2.4



4.6



13.3



31.4

Total expenses



303.3



279.5



1,172.2



971.7

Operating income



82.9



62.6



303.0



266.8

Other income and expense:













Interest expense, net



(20.8)



(20.5)



(83.6)



(62.9)

Other (expense) income, net



(1.1)



(0.7)



(6.4)



16.4

Total other expense, net



(21.9)



(21.2)



(90.0)



(46.5)

Earnings before income taxes and equity in (losses) earnings of
unconsolidated affiliates



61.0



41.4



213.0



220.3

Income tax expense



4.7



0.3



35.7



41.6

Earnings before equity in (losses) earnings of unconsolidated
affiliates



56.3



41.1



177.3



178.7

Equity in (losses) earnings of unconsolidated affiliates, net of
tax



(0.4)



0.9



2.6



67.1

Net earnings



55.9



42.0



179.9



245.8

Net losses attributable to redeemable noncontrolling interests



4.8



5.1



28.0



18.3

Net earnings attributable to Black Knight


$

60.7


$

47.1


$

207.9


$

264.1














Net earnings per share attributable to Black Knight
shareholders:













Basic


$

0.39


$

0.30


$

1.34


$

1.74

Diluted


$

0.39


$

0.30


$

1.33


$

1.73

Weighted average shares of common stock outstanding:













Basic



154.1



155.4



155.1



152.0

Diluted



155.6



156.5



155.8



152.9

BLACK KNIGHT, INC.

Consolidated Statements of Cash Flows

(In millions)

(Unaudited)










Year ended December 31,



2021


2020

Cash flows from operating activities:







Net earnings


$

179.9


$

245.8

Adjustments to reconcile net earnings to net cash provided by operating activities:







...