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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-37394

Black Knight, Inc.

______________________________________________________________________________________________________________________________________________________

(Exact name of registrant as specified in its charter)

Delaware

 

81-5265638

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification Number)

601 Riverside Avenue, Jacksonville, Florida

 

32204

(Address of principal executive offices)

 

(Zip Code)

(904) 854-5100

___________________________________________________________________

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.0001 par value

BKI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

There were 156,770,562 shares outstanding of the Registrant’s common stock as of May 1, 2023.

Table of Contents

FORM 10-Q

QUARTERLY REPORT

Quarter Ended March 31, 2023

TABLE OF CONTENTS

 

Page

Part I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

A. Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2023 and December 31, 2022

1

B. Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) for the three months ended March 31, 2023 and 2022

2

C. Condensed Consolidated Statements of Equity (Unaudited) for the three months ended March 31, 2023 and 2022

3

D. Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2023 and 2022

4

E. Notes to Condensed Consolidated Financial Statements (Unaudited)

5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3. Quantitative and Qualitative Disclosure About Market Risk

28

Item 4. Controls and Procedures

29

Part II: OTHER INFORMATION

31

Item 1. Legal Proceedings

31

Item 1A. Risk Factors

31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

34

Item 3. Defaults Upon Senior Securities

34

Item 4. Mine Safety Disclosures

34

Item 5. Other Information

34

Item 6. Exhibits

35

i

Table of Contents

Part I: FINANCIAL INFORMATION

Item 1.Condensed Consolidated Financial Statements (Unaudited)

BLACK KNIGHT, INC.

Condensed Consolidated Balance Sheets

(In millions, except share data)

(Unaudited)

March 31, 2023

December 31, 2022

ASSETS

Current assets:

 

  

 

  

Cash and cash equivalents

$

14.8

$

12.2

Trade receivables, net

 

187.2

 

193.5

Prepaid expenses and other current assets

 

137.6

 

132.1

Receivables from related parties

 

0.1

 

0.1

Current assets held for sale

 

5.8

Total current assets

 

339.7

 

343.7

Property and equipment, net

 

136.1

 

143.0

Software, net

 

434.4

 

443.7

Other intangible assets, net

 

439.3

 

470.1

Goodwill

 

3,747.8

 

3,747.8

Investments in unconsolidated affiliates

 

168.9

 

171.0

Deferred contract costs, net

 

191.0

 

192.6

Other non-current assets

 

266.0

 

246.2

Non-current assets held for sale

73.5

Total assets

$

5,723.2

$

5,831.6

LIABILITIES AND EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Trade accounts payable and other accrued liabilities

$

60.0

$

66.5

Income taxes payable

66.5

28.4

Accrued compensation and benefits

 

66.7

 

82.8

Current portion of debt

 

36.6

 

33.6

Deferred revenues

 

56.5

 

59.9

Total current liabilities

 

286.3

 

271.2

Deferred revenues

 

36.1

 

42.4

Deferred income taxes

 

207.9

 

227.5

Long-term debt, net of current portion

 

2,382.3

 

2,621.7

Other non-current liabilities

 

45.6

 

47.9

Total liabilities

 

2,958.2

 

3,210.7

Commitments and contingencies (Note 9)

 

  

 

  

Redeemable noncontrolling interests

 

41.8

 

47.6

Equity:

 

  

 

  

Common stock; $0.0001 par value; 550,000,000 shares authorized; 160,040,598 shares issued and 156,780,491 shares outstanding as of March 31, 2023, and 160,040,598 shares issued and 155,930,399 shares outstanding as of December 31, 2022

 

 

Preferred stock; $0.0001 par value; 25,000,000 shares authorized; issued and outstanding, none as of March 31, 2023 and December 31, 2022

 

 

Additional paid-in capital

 

1,358.1

 

1,398.2

Retained earnings

 

1,559.3

 

1,417.1

Accumulated other comprehensive loss

 

(7.8)

 

(6.3)

Treasury stock, at cost, 3,260,107 shares as of March 31, 2023 and 4,110,199 shares as of December 31, 2022

 

(186.4)

 

(235.7)

Total shareholders’ equity

 

2,723.2

 

2,573.3

Total liabilities, redeemable noncontrolling interests and shareholders’ equity

$

5,723.2

$

5,831.6

See Notes to Condensed Consolidated Financial Statements (Unaudited).

1

Table of Contents

BLACK KNIGHT, INC.

Condensed Consolidated Statements of Earnings and Comprehensive Earnings

(In millions, except per share data)

(Unaudited)

Three months ended March 31, 

    

2023

    

2022

Revenues

$

382.2

$

387.2

Expenses:

 

  

 

  

Operating expenses

 

213.1

 

207.9

Depreciation and amortization

 

82.6

 

91.5

Transition and integration costs

 

5.5

 

7.6

Total expenses

 

301.2

 

307.0

Operating income

 

81.0

 

80.2

Other income and expense:

 

  

 

  

Interest expense, net

 

(30.1)

 

(21.1)

Other income (expense), net

 

138.0

 

(1.2)

Total other income (expense), net

 

107.9

 

(22.3)

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

 

188.9

 

57.9

Income tax expense (benefit)

45.9

 

(1.1)

Earnings before equity in (losses) earnings of unconsolidated affiliates

 

143.0

 

59.0

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

 

(1.2)

 

303.1

Net earnings

 

141.8

 

362.1

Net losses attributable to redeemable noncontrolling interests

 

 

2.5

Net earnings attributable to Black Knight

$

141.8

$

364.6

Other comprehensive (losses) earnings:

 

  

 

  

Unrealized holding (losses) gains, net of tax(1)

(0.1)

4.3

Reclassification adjustments for (gains) losses included in net earnings, net of tax(2)

(1.2)

3.2

Total unrealized (losses) gains on interest rate swaps, net of tax

 

(1.3)

 

7.5

Foreign currency translation adjustment, net of tax(3)

(0.2)

Unrealized (losses) gains on investments in unconsolidated affiliates, net of tax(4)

(0.2)

3.2

Other comprehensive (losses) earnings

 

(1.5)

 

10.5

Comprehensive earnings

 

140.3

 

372.6

Net losses attributable to redeemable noncontrolling interests

 

 

2.5

Comprehensive earnings attributable to Black Knight

$

140.3

$

375.1

Net earnings per share attributable to Black Knight common shareholders:

 

  

 

  

Basic

$

0.92

$

2.36

Diluted

$

0.91

$

2.35

Weighted average shares of common stock outstanding (see Note 4):

 

  

 

  

Basic

 

154.7

 

154.2

Diluted

 

155.5

 

155.4

(1)Net of income tax benefit of less than $0.1 million and income tax expense of $1.4 million for the three months ended March 31, 2023 and 2022, respectively.
(2)Amounts reclassified to net earnings relate to losses (gains) on interest rate swaps and are included in Interest expense, net above. Amounts are net of income tax expense of $0.4 million and income tax benefit of $1.1 million for the three months ended March 31, 2023 and 2022, respectively.
(3)Net of income tax benefit of less than $0.1 million for the three months ended March 31, 2022.
(4)Net of income tax benefit of $0.1 million and income tax expense of $1.1 million for the three months ended March 31, 2023 and 2022, respectively.

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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BLACK KNIGHT, INC.

Condensed Consolidated Statements of Equity

(In millions)

(Unaudited)

Three months ended March 31, 2023

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, 2022

 

160.0

$

$

1,398.2

$

1,417.1

$

(6.3)

 

4.1

$

(235.7)

$

2,573.3

$

47.6

Fair value adjustment to redeemable noncontrolling interests in Optimal Blue Holdco, LLC

 

 

 

5.8

 

 

 

 

 

5.8

 

(5.8)

Grant of restricted shares of common stock

 

 

 

(58.0)

 

 

 

(1.0)

 

58.0

 

 

Forfeitures of restricted shares of common stock

 

 

 

1.4

 

 

 

 

(1.4)

 

 

Tax withholding payments for restricted share vesting

 

 

 

(7.9)

 

 

 

 

 

(7.9)

 

Vesting of restricted shares granted from treasury stock

 

 

 

7.3

 

 

 

0.1

 

(7.3)

 

 

Equity-based compensation expense

 

 

 

11.3

 

 

 

 

 

11.3

 

Net earnings

 

 

 

 

141.8

 

 

 

 

141.8

 

Equity-based compensation expense of unconsolidated affiliates

 

 

 

 

0.4

 

 

 

 

0.4

 

Unrealized losses on interest rate swaps, net

 

 

 

 

 

(1.3)

 

 

 

(1.3)

 

Other comprehensive loss on investments in unconsolidated affiliates

 

 

 

 

 

(0.2)

 

 

 

(0.2)

 

Balance, March 31, 2023

 

160.0

$

$

1,358.1

$

1,559.3

$

(7.8)

 

3.2

$

(186.4)

$

2,723.2

$

41.8

Three months ended March 31, 2022

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, 2021

 

160.0

$

$

1,410.9

$

968.2

$

(17.5)

 

4.7

$

(271.2)

$

2,090.4

$

1,188.8

Fair value adjustment to redeemable noncontrolling interests in Optimal Blue Holdco, LLC

(9.9)

(9.9)

9.9

Acquisition of remaining redeemable noncontrolling interests in Optimal Blue Holdco, LLC

(1,156.0)

Grant of restricted shares of common stock

 

 

 

(46.6)

 

 

 

(0.8)

 

46.6

 

 

Forfeitures of restricted shares of common stock

 

 

 

1.0

 

 

 

 

(1.0)

 

 

Tax withholding payments for restricted share vesting

 

 

 

(10.7)

 

 

 

 

 

(10.7)

 

Vesting of restricted shares granted from treasury stock

 

 

 

8.6

 

 

 

0.2

 

(8.6)

 

 

Equity-based compensation expense

 

 

 

10.7

 

 

 

 

 

10.7

 

Net earnings (losses)

 

 

 

 

364.6

 

 

 

 

364.6

 

(2.5)

Equity-based compensation expense of unconsolidated affiliates

 

 

 

 

(5.4)

 

 

 

 

(5.4)

 

Foreign currency translation adjustment

 

 

 

 

 

(0.2)

 

 

 

(0.2)

 

Unrealized gains on interest rate swaps, net

 

 

 

 

 

7.5

 

 

 

7.5

 

Other comprehensive gains on investments in unconsolidated affiliates

 

 

 

 

 

3.2

 

 

 

3.2

 

Other

 

 

 

0.8

 

 

 

 

 

0.8

 

Balance, March 31, 2022

 

160.0

$

$

1,364.8

$

1,327.4

$

(7.0)

 

4.1

$

(234.2)

$

2,451.0

$

40.2

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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BLACK KNIGHT, INC.

Condensed Consolidated Statements of Cash Flows

(In millions)

(Unaudited)

    

Three months ended March 31, 

2023

2022

Cash flows from operating activities:

 

  

Net earnings

$

141.8

$

362.1

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

 

  

  

Depreciation and amortization

 

82.6

91.5

Amortization of debt issuance costs and original issue discount

 

1.0

0.9

Gain related to the TitlePoint transaction

(145.4)

Deferred income taxes, net

 

(19.0)

(135.8)

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

 

1.2

(303.1)

Equity-based compensation

 

11.3

10.7

Changes in assets and liabilities:

 

Trade receivables, including receivables from related parties

 

6.3

(2.5)

Prepaid expenses and other assets

 

(25.1)

(11.9)

Deferred contract costs

 

(8.9)

(12.3)

Deferred revenues

 

(9.7)

(3.8)

Trade accounts payable and other liabilities

 

8.4

89.3

Net cash provided by operating activities

 

44.5

85.1

Cash flows from investing activities:

 

  

  

Additions to property and equipment

 

(2.5)

(6.6)

Additions to software

 

(22.5)

(20.8)

Proceeds from the TitlePoint transaction

 

224.2

Net cash provided by (used in) investing activities

 

199.2

(27.4)

Cash flows from financing activities:

 

  

  

Revolver borrowings

 

87.5

460.1

Revolver payments

 

(313.5)

(115.1)

Term loan payments

 

(7.2)

(7.2)

Payments made for redeemable noncontrolling interests

 

(433.5)

Tax withholding payments for restricted share vesting

 

(7.9)

(10.7)

Finance lease payments

 

(0.8)

Net cash used in financing activities

 

(241.1)

(107.2)

Net increase (decrease) in cash and cash equivalents

 

2.6

(49.5)

Cash and cash equivalents, beginning of period

 

12.2

77.1

Cash and cash equivalents, end of period

$

14.8

$

27.6

Supplemental cash flow information:

 

  

  

Interest paid, net

$

(38.8)

$

(29.3)

Income taxes paid, net

$

(23.2)

$

(0.3)

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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BLACK KNIGHT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(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 and Form 10-K/A for the year ended December 31, 2022 filed with the Securities and Exchange Commission ("SEC") on February 28, 2023 and March 24, 2023, respectively, and other filings with the SEC.

Description of Business

We are a premier provider of integrated, innovative, mission-critical, high-performance software solutions, data and analytics to the U.S. mortgage and real estate markets. Our mission is to transform the markets we serve by delivering innovative solutions that are integrated across the homeownership lifecycle and that result in realized efficiencies, reduced risk and new opportunities for our clients to help them achieve greater levels of success.

Principles of Consolidation

The Condensed Consolidated Financial Statements (Unaudited) include the accounts of BKI and its subsidiaries. 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 Condensed Consolidated Balance Sheets (Unaudited) 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.

Redeemable Noncontrolling Interests

Prior to February 15, 2022, we owned 60% of Optimal Blue Holdco, LLC (“Optimal Blue Holdco”). Redeemable noncontrolling interests primarily represented 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 provided for redemption features not solely within our control, they were presented outside of shareholders' equity.

On February 15, 2022, we entered into a purchase agreement with Cannae and THL and acquired all of their issued and outstanding Class A units of Optimal Blue Holdco through Optimal Blue I, LLC (“Optimal Blue I”), a Delaware limited liability company and our wholly-owned subsidiary, in exchange for aggregate consideration of 36.4 million shares of Dun & Bradstreet Holdings, Inc. (“DNB”) common stock valued at $722.5 million and $433.5 million in cash. The cash portion of the consideration is included as a financing cash outflow on the Condensed Consolidated Statements of Cash Flows (Unaudited) and was funded with borrowings under our revolving credit facility. The aggregate consideration of $1.156 billion and number of shares of DNB common stock paid to Cannae and THL was based on the 20-day volume-weighted average trading price of DNB for the period ended on February 14, 2022. Since February 15, 2022, we own 100% of the Class A units of Optimal Blue Holdco.

As of March 31, 2023 and December 31, 2022, redeemable noncontrolling interests were $41.8 million and $47.6 million, respectively, related to the Optimal Blue Holdco profits interests units (“OB PIUs”).  Refer to Note 11 – Equity for additional information.

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BLACK KNIGHT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

Reporting Segments

We conduct our operations through two reporting segments: (1) Software Solutions and (2) Data and Analytics. Refer to Note 12 — Segment Information for additional information.

Merger Agreement

On May 4, 2022, we entered into a definitive agreement to be acquired by Intercontinental Exchange, Inc. (“ICE”) (the “Original Merger Agreement”) a leading global provider of data, technology, and market infrastructure, in a transaction valued at approximately $13.1 billion, or $85 per share, with consideration in the form of a mix of cash (80%) and stock (20%). On March 7, 2023, we entered into Amendment No. 1 to the Original Merger Agreement (the “Amendment” and the Original Merger Agreement, as amended by the Amendment, the “Merger Agreement”), which provides for, among other things, a reduction in the merger consideration, valuing Black Knight at $75.00 per share, or a market value of $11.7 billion, with consideration in the form of a mix of approximately $68.00 per share in cash and stock with an exchange ratio of 0.0682 based on ICE’s 10-day volume weighted average price as of March 3, 2023 of $102.62 (the “ICE Transaction”). As under the Original Merger Agreement, Black Knight shareholders can elect to receive either cash or stock, subject to proration, with the value of the cash election and the stock election equalized based on an average of ICE’s 10-day volume weighted average prices for the period ended three trading days prior to closing. The ICE Transaction is expected to close in the third or fourth quarter of 2023, subject to regulatory clearance and the satisfaction of customary closing conditions. The ICE Transaction has been approved by the Boards of Directors of Black Knight and ICE and the shareholders of Black Knight.

Completion of the ICE Transaction is subject to the expiration or earlier termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). On March 9, 2023, the United States Federal Trade Commission (the “FTC”) filed an administrative complaint challenging the ICE Transaction under the HSR Act and authorized the filing of a complaint in federal district court to pursue a preliminary injunction to prevent the consummation of the ICE Transaction pending an administrative trial, and ICE announced that ICE strongly disagrees with, and intends to vigorously oppose the FTC’s decision to challenge the ICE Transaction. On April 10, 2023, the FTC filed a parallel complaint in federal court seeking injunctive relief. The FTC seeks to block ICE and BKI from completing the ICE Transaction during the pendency of the administrative proceeding on the merits. On April 21, 2023, the United States District Court for the Northern District of California entered a temporary restraining order that prevents ICE and BKI from consummating the ICE Transaction until 11:59 p.m. on the second business day after the Court rules on the FTC’s motion for a preliminary injunction, or a date set by the Court, whichever is later. On April 25, 2023, BKI filed its response to the FTC’s complaint generally denying the allegations and asserting several defenses. BKI also asserted a counterclaim against the FTC seeking declaratory and injunctive relief alleging violations of BKI’s constitutional rights. There can be no assurance as to the outcome of litigation with the FTC or that this condition to the completion of the ICE Transaction will be satisfied on a timely basis or at all.

Divestiture Agreement

In connection with entering into the Amendment, on March 7, 2023, we entered into an Equity Purchase Agreement (the “Divestiture Agreement”) with Constellation Web Solutions Inc., a subsidiary of Constellation Software Inc. (“Constellation”), and ICE in order to seek to address certain antitrust concerns raised by the FTC regarding the ICE Transaction.

In accordance with the Divestiture Agreement, after the closing of the ICE Transaction, Constellation will purchase our Empower® loan origination system (LOS) business, including its ExchangeSM, LendingSpace and AIVA solutions, (the “Divestiture Transaction”). The Divestiture Transaction is subject to customary closing conditions, including but not limited to the prior completion of the ICE Transaction.

TitlePoint Transaction

On November 18, 2022, we entered into a definitive agreement to sell our TitlePoint line of business (“TitlePoint”) within our Data and Analytics reporting segment to an affiliate of Fidelity National Financial, Inc. (“FNF”) for $225 million in cash, subject to a customary working capital adjustment. In connection with the contribution of Property Insight, LLC, which included TitlePoint, by affiliates of FNF to an affiliate of Black Knight in 2014, FNF had the right to repurchase TitlePoint in the event of a change in control of Black Knight. In connection with the proposed ICE Transaction, FNF notified us of its desire to repurchase TitlePoint. The TitlePoint transaction closed on

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BLACK KNIGHT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

January 1, 2023 and we recognized a gain before tax of $145.4 million in Other income (expense), net in our Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited).

(2)Condensed Consolidated Financial Statement Details

Cash and Cash Equivalents

Cash and cash equivalents are unrestricted and consist of the following (in millions):

    

March 31, 2023

    

December 31, 2022

Cash

$

14.7

$

4.3

Cash equivalents

 

0.1

 

7.9

Cash and cash equivalents

$

14.8

$

12.2

Trade Receivables, Net

A summary of Trade receivables, net of allowance for credit losses consist of the following (in millions):

    

March 31, 2023

    

December 31, 2022

Trade receivables — billed

$

142.9

$

150.4

Trade receivables — unbilled

 

50.0

 

48.0

Trade receivables

 

192.9

 

198.4

Allowance for credit losses

 

(5.7)

 

(4.9)

Trade receivables, net

$

187.2

$

193.5

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in millions):

    

    

March 31, 2023

    

December 31, 2022

Prepaid expenses

$

84.9

$

83.0

Contract assets, net

 

31.0

 

24.8

Income tax receivables

10.4

12.5

Other current assets

 

11.3

 

11.8

Prepaid expenses and other current assets

$

137.6

$

132.1

Other Non-Current Assets

Other non-current assets consist of the following (in millions):

March 31, 2023

    

December 31, 2022

Contract assets, net

$

129.7

$

107.9

Property records database

60.5

60.5

Right-of-use assets

 

22.8

 

24.8

Deferred compensation plan related assets

 

24.9

 

23.4

Contract credits

 

22.7

 

23.2

Prepaid expenses

 

3.7

 

4.4

Other

 

1.7

 

2.0

Other non-current assets

$

266.0

$

246.2

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BLACK KNIGHT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

Trade Accounts Payable and Other Accrued Liabilities

Trade accounts payable and other accrued liabilities consist of the following (in millions):

    

March 31, 2023

    

December 31, 2022

Trade accounts payable

$

7.7

$

11.0

Lease liabilities, current

8.3

8.7

Other taxes payable and accrued

 

6.6

 

6.1

Accrued interest

 

3.3

 

12.6

Accrued client liabilities

2.6

2.6

Other

 

31.5

 

25.5

Trade accounts payable and accrued liabilities

$

60.0

$

66.5

Deferred Revenues

Revenues recognized related to the amount included in the Deferred revenues balance at the beginning of each year were $22.0 million and $20.9 million during the three months ended March 31, 2023 and 2022, respectively.

Depreciation and Amortization

Depreciation and amortization consist of the following (in millions):

    

Three months ended March 31, 

    

2023

    

2022

Other intangible assets

$

30.8

$

36.8

Software

31.8

35.5

Property and equipment

 

9.5

 

9.9

Deferred contract costs

 

10.5

 

9.3

Total

$

82.6

$

91.5

In January 2023, we completed an assessment of the useful lives of certain software solutions. Due to investments in the software and changes in technology, we increased the estimated useful lives of certain origination and specialty servicing software solutions from 5 years to 7 years. This change in accounting estimate was effective January 1, 2023 and was applied prospectively. Based on the carrying amount of these software solutions as of December 31, 2022, the effect of this change in estimate for the three months ended March 31, 2023 was a decrease in software amortization of $5.0 million, which resulted in an increase in operating income of $5.0 million and net earnings attributable to Black Knight of $3.7 million, or $0.02 per basic and diluted share, based on our statutory income tax rate.

Other Non-Current Liabilities

Other non-current liabilities consist of the following (in millions):

    

March 31, 2023

    

December 31, 2022

Lease liabilities, non-current

$

14.4

$

17.4

Deferred compensation plan

20.7

21.4

Other

10.5

9.1

Other non-current liabilities

$

45.6

$

47.9

A

(3)Investments in Unconsolidated Affiliates

DNB is a leading global provider of business decisioning data and analytics. On February 15, 2022, we exchanged 36.4 million shares of DNB common stock in connection with our acquisition of the remaining Class A units in Optimal Blue Holdco from Cannae and THL.

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BLACK KNIGHT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

The number of shares of DNB common stock was valued at $722.5 million based on the 20-day volume-weighted average trading price of DNB for the period ended on February 14, 2022. We recognized a gain of $305.4 million, net of tax of $102.6 million, related to this transaction. As of March 31, 2023, we owned 18.5 million shares of DNB common stock for an ownership interest of approximately 4% of DNB’s outstanding common stock.

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 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 investment. The agreement with other DNB investors expires June 30, 2023.

During the three months ended March 31, 2023, we received a quarterly cash dividend of $0.9 million related to our ownership in DNB common stock. The cash dividend reduced the carrying value of our DNB investment in our Condensed Consolidated Balance Sheets (Unaudited). On April 26, 2023, DNB declared a cash dividend of $0.05 per share payable on June 15, 2023 to DNB’s shareholders of record as of June 1, 2023.

As of March 31, 2023, DNB’s closing share price was $11.74, and the fair value of our investment in DNB was $216.9 million before tax. Based on a statutory tax rate of 25.5%, the estimated after-tax value of our investment in DNB was $203.9 million.

Equity in (losses) earnings of unconsolidated affiliates, net of tax consists of the following (in millions):

Three months ended March 31, 

2023

    

2022

Equity in losses of unconsolidated affiliates, net of tax

$

(1.2)

$

(2.3)

Gain related to DNB investment, net of tax

305.4

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

$

(1.2)

$

303.1

(4)Earnings Per Share

Diluted net earnings per share includes the effect of unvested restricted stock awards, restricted stock unit awards (“RSUs”) and OB PIUs. 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, 

2023

    

2022

Basic:

  

 

  

Net earnings attributable to Black Knight

$

141.8

$

364.6

Shares used for basic net earnings per share:

 

  

 

  

Weighted average shares of common stock outstanding

 

154.7

 

154.2

Basic net earnings per share

$

0.92

$

2.36

Diluted:

 

  

 

  

Net earnings attributable to Black Knight

$

141.8

$

364.6

Shares used for diluted net earnings per share:

 

  

 

  

Weighted average shares of common stock outstanding

 

154.7

 

154.2

Dilutive effect of unvested restricted shares of common stock and OB PIUs

 

0.8

 

1.2

Weighted average shares of common stock, diluted

 

155.5

 

155.4

Diluted net earnings per share

$

0.91

$

2.35

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BLACK KNIGHT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

(5)Related Party Transactions

Our service arrangements with related parties are priced within the range of prices we offer to third parties. We believe the amounts earned from or charged by us under each of the following arrangements are fair and reasonable. However, 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 and our Executive Chairman, who is also the Chief Executive Officer of DNB. Refer to Note 3 — Investments in Unconsolidated Affiliates for additional information.

In 2021, we entered into a five-year agreement with DNB to provide them with certain products and data over the term of the agreement, as well as professional services, for an aggregate fee of approximately $34 million over the term of the agreement. During the same period, we also entered into an agreement with DNB for access to certain of their data assets for an aggregate fee of approximately $24 million over the term of the agreement. In addition, we jointly market certain solutions and data.

We have a services agreement with DNB that is cancellable upon mutual agreement. Pursuant to the agreement, we provide DNB certain support services in exchange for fees in an amount of our cost plus a 10% markup.

The following is a summary of amounts related to agreements with DNB included in our Condensed Consolidated Balance Sheets (Unaudited) (in millions):

March 31, 2023

    

December 31, 2022

Receivables from related parties

$

0.1

$

0.1

Prepaid expenses and other current assets

 

1.2

 

2.3

Deferred revenues (current)

4.5

6.2

The following is a summary of amounts related to agreements with DNB included in our Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) (in millions):

Three months ended March 31, 

    

2023

    

2022

Revenues

$

1.7

$

1.0

Operating expenses

 

1.2

 

1.1

During the three months ended March 31, 2023, we received a quarterly cash dividend of $0.9 million from DNB. Refer to Note 3 – Investments in Unconsolidated Affiliates for additional information.

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BLACK KNIGHT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

(6)Long-Term Debt

Long-term debt consists of the following (in millions):

    

March 31, 2023

    

December 31, 2022

Term A Loan

$

1,114.0

$

1,121.2

Revolving Credit Facility

 

319.0

 

545.0

Senior Notes

 

1,000.0

 

1,000.0

Other

 

0.8

 

5.0

Total long-term debt principal

 

2,433.8

 

2,671.2

Less: current portion of long-term debt

 

(36.6)

 

(33.6)

Long-term debt before debt issuance costs and discount

 

2,397.2

 

2,637.6

Less: debt issuance costs and discount

 

(14.9)

 

(15.9)

Long-term debt, net of current portion

$

2,382.3

$

2,621.7

As of March 31, 2023, principal maturities are as follows (in millions):

2023

    

$

22.3

2024

57.5

2025

 

57.5

2026

 

1,296.5

2027

 

Thereafter

 

1,000.0

Total

$

2,433.8

Credit Agreement

In 2021, our indirect subsidiary Black Knight Infoserv, LLC (“BKIS”) entered into a second amended and restated credit and guaranty agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, the guarantors party thereto and the other agents and lenders party thereto. The 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”).

As of March 31, 2023, the interest rate for the Facilities was based on the Eurodollar rate plus a margin of 150 basis points and was approximately 6.3%. As of March 31, 2023, we had $681.0 million unused capacity on the Revolving Credit Facility, and the unused commitment fee was 20 basis points.

The Facilities are guaranteed by BKIS’s wholly-owned domestic restricted subsidiaries, as defined by the Credit Agreement, and Black Knight Financial Services, LLC, 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 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.

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. The obligations under the Senior Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by the same guarantors that guarantee the Credit Agreement (collectively, the “Guarantors”). The Senior Notes are effectively subordinated to any obligations that are secured, including obligations under the Credit

11

Table of Contents

BLACK KNIGHT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

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.

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 as of March 31, 2023. The fair value of our Senior Notes as of March 31, 2023 was $909.4 million compared to its carrying value of $991.5 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, 2023, we had the following interest rate swap agreements (collectively, the "Swap Agreements") (in millions):

Effective dates

    

Notional amount

    

Fixed rates

April 30, 2018 through April 30, 2023

$

250.0

 

2.61

%

Under the terms of the Swap Agreements, we receive payments based on the 1-month LIBOR (approximately 4.84% as of March 31, 2023).

During the three months ended March 31, 2023, the following interest rate swap agreement expired (in millions):

Effective dates

    

Notional amount

    

Fixed rate