Q1 2020 Earnings Call

[music].

Thank you for standing by this is the conference operator, welcome to the Black Knight first quarter 2020, <unk> earnings call.

As a reminder, all participants are in listen only mode and the conference is being recorded.

After the presentation, there will be an opportunity to ask questions.

To join the question Q you May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, an operator by pressing star and zero.

I would now like to turn the conference over to Steve eager to end the Vice President of Investor Relations at Black Knight. Please go ahead.

Thanks, Good morning, everyone and thank you for joining a black Knight first quarter 2020, <unk> earnings Conference call. Joining me today, our Chief Executive Officer, if needed War and Chief Financial Officer, Kirk Larsen. Our results released this morning in the press release and supplemental slide presentation.

Having posted to our website.

This conference call include statements related to the expected future results weren't company. Our therefore forward looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward looking statements are subject to are described in our earnings release form 10-K and other.

The filings.

Today's remarks will also include references to non-GAAP financial measures additional information, including reconciliation between non-GAAP financial information to the GAAP financial information.

Right in the press release and supplemental slide presentation.

This conference call will be available for replay via webcast to Black Knight Investor Relations website at Investor Black Knight <unk> Dot Com I'll now turn over the call to Anthony.

Thank you Steve Good morning, everyone and thank you for joining us for our first quarter earnings call.

In addition to the typical updates I provide on her calls about how we're executing on our growth strategies and the status of our recent innovations today I'm also going to discuss the impacts of cobot 19 on our business and on the industries, we serve and how black Knight is delivering solutions to help our clients respond to today's challenges.

Position them for success in the future.

It goes without saying that are most important priorities are the health and safety of our colleagues and helping the communities, where we work and live.

I'm proud to report that more than 99% of black Knight's workforce quickly and successfully transitioned to working from home, we're able to accomplish this because we have thorough business continuity plan and conduct an annual pandemic exercise as part of our comprehensive risk management culture.

I don't typically talk about risk management on these calls, but we have an incredibly strong program that enabled us to react quickly in this situation.

As a company that partners with many of the industry's best lenders and Servicers. We believe it's our duty to serve in a leadership role as we manage through this crisis and beyond.

As an example, rather than cancel our annual client conference. We made the decision to change it to a virtual conference.

Illustrate how productive our employees are in this new norm within a few weeks they were able to transition to a virtual event, which included 40 breakout sessions a product showcased a customer lounge.

During our opening session I spoke with Joe Safady Comptroller of the currency, where we discussed the impact of cobot 19 on the industry and potential next steps.

We understand the challenges our clients are facing and this conference gave us an opportunity to discuss how our solutions can help.

I had nearly 50% more lender and service or clients participate in this virtual conference and we typically have it or in person event.

And the feedback we received is our clients are interested in the solutions, we discussed because they see the value they can add to their operations.

From the start the Cobot 19 crisis, we have worked to provide leadership on behalf of our clients and to provide them with actionable intelligence. We have published in depth White papers Hell town Hall meetings with our clients and have frequent meetings with senior executives at our clients government agencies and indeed.

Street associations.

Beyond that we're leveraging our data and software assets with our analytics capabilities to deliver the right solutions at the right time.

We have an industry, leading servicing system and a mortgage loan contributory dataset, representing more than 60% of the market that is modeled to represent the entire market.

And we have robust analytics and seamless integration that ties them altogether.

In fact, we're the only company in the market with real time visibility into the majority of active mortgages in the United States and the only company that has a holistic view of the homeownership lifecycle.

As an example, the depth of our integrated data and technology allows us to length. The delinquency data in mic dash and enables clients to easily analyzed millions of records to observe the impact of delinquency and forbearance on a daily basis and identify trends by investor tight vintage.

Geography, and other cohorts.

Using our integrated data analytics and technology, our clients can see an quantify what the effects of the pandemic mean for their businesses and the industry.

Our clients use these robust solutions for modeling forecasting and reserve setting, which is critical especially in this current environment.

And our leadership role we've been actively sharing this data and innovating around these insights.

As you May have seen we recently began publishing forbearance data on the weekly basis.

We believe the end up data and insights we offer our essential for both mortgage market participants and government entities as we work together to address the economic ramifications of the crisis and no. Other company has the ability to deliver this insight.

Our integrated data in software can also help prevent losses.

As an example, our actionable intelligence platform can provide notifications as soon as the lean as filed so lenders and Servicers can quickly take action to avoid or mitigate potential loss.

Our clients are also looking for automated software solutions.

Just to make remote engagement possible and alternative ways of performing the core functions of their business.

Our solutions help our clients overcome these challenges, while increasing efficiency and mitigating risk.

Our investment and innovation and digital mortgage technology has made it possible for a majority of the mortgage application underwriting and closing processes to happen online and remotely.

As an example, that's part of our recent acquisition of collateral analytics, we gained a product called scout, which allows a homeowner to offload specific information and photos of their home to an appraiser.

The appraiser then use as their professional expertise to deliver a regulatory compliant appraisal without having to enter the home.

Interest in this product is growing especially with the FHLB phase recent decision to allow for flexibility and appraisals through May 17 2020.

For loan closing in addition to the 23 states that currently allow the use of some form of remote communication or online Odorization 20 States recently provided temporary permission for remote online ordering station to securely execute documents.

As a result interest in our expedite equalizing platform has increased significantly this solution makes it possible to close loans anytime anywhere without buyers sellers and closing agents being in the same room.

Moving onto servicing the recently passed cares act mandates that lenders must offer forbearance for all government backed mortgages when a customer indicates they have been impacted by cobot 19.

When this occurs the MSP system supports the setup and management of the forbearance plan.

On a plan reaches its expiration date it needs to be decision in accordance with investor requirements for loss mitigation.

We recently launched a new intuitive loss mitigation solution that is tightly integrated with MSP and servicing digital and enable servicers to communicate with their customers update the new loan terms and automate the management of the loss mitigation process.

We know the mortgage industry is working hard to respond as quickly as possible to customers request for forbearance plans.

And while we're all confident the economy will rebound history shows us that there will be a percentage of these borrowers that will fall into default.

When that occurs our industry, leading specialty servicing technology can assess clients and working through this process.

Next let me discuss our first quarter and expectations going forward.

Starting with our financial results, we exceeded our expectations due to higher origination volumes and continued improvement in our data and analytics sales execution.

In March we completed the acquisition of collateral analytics, a leading provider of real estate analytic products and tools to support appraisers appraisal management companies lenders investors and government agencies.

Solutions, we gained and this acquisition fill white space in our current offerings and augment our existing solutions.

Moving onto sales our first quarter was inline with our typical first quarter results.

I'm also pleased with the pipeline we have going forward.

As you would expect we're monitoring the sales pipeline for shifting client priorities and elongated sales cycles as a result of the pandemic.

But we believe the long term impacts of social distancing that we're seeing today will ultimately accelerate our clients decisions to move to our innovative platforms in the future.

From an implementation perspective, we continue to make progress on implementing our significant sold pipeline.

We did see a near term delay in certain cases as clients were adjusting to a work from home model and extremely elevated customer service calls.

After adjusting to this new normal we are moving forward at a usual pace with the revised timelines.

Next let me give some color around our expected results for the remainder of the year.

While our first quarter results exceeded our expectations cobot 19 effects have delayed the timing of certain revenues, which is reflected in our revised outlook for full year 2020.

Specifically, we have seen much lower foreclosure related volumes due to the foreclosure moratorium and we expect this to continue with the forbearance plans offered as part of the cares Act.

Additionally, we've seen some near term implementation delays as I just discussed.

As a reminder, both of these effects are associated with timing and not a loss of long term revenues.

In summary, the fundamentals of our business remains strong and we're focused on supporting our clients and the industry and these unprecedented times.

Thank you for your time today I will now turn the call over the Kirk.

Thank you Anthony and good morning, everyone today Im going to discuss our first quarter results at our updated outlook for the full year turning to slide three on a GAAP basis first quarter revenues were $291 million, an increase of 3% compared to the first quarter last year.

18 cents per diluted share.

The effect of our indirect investment in Dunn, and Bradstreet or D.N.B. was an increase the net earnings of $6 million or four cents per diluted share.

That earnings margin was 17.2% compared to 9.2%.

Turning to slide for now discuss our adjusted results for the first quarter.

First quarter adjusted revenues for $291 million, an acre of 3% compared to the first quarter last year.

<unk> was $140 million an increase of 2%.

Adjusted even dumb margin was 48.2% decrease of 20 basis points.

Adjust net earnings were $69 million, an increase of 5% and adjust D.P.S. was 47 cents an increase of 7%.

Turning out a slide five I'll discuss our software solutions segment result.

First quarter revenues with the software solution segment increased 0.5% to $245 million.

Or servicing software solutions revenues declined 3%, we continued to see similar girls drivers and passed quarters, such as new clients on the M.F.P. platform loan girls at existing clients and higher revenue per alone, but that growth was more than offset by previously discussed Klein deconversions and the effect of lower foreclosure related volumes due to the.

Foreclosure moratorium and second half of March.

In origination software solution revenues increased 17.5% driven by new clients higher refinance origination volumes and revenue from an acquired business.

First quarter, either decreased 1% to $139 million and even a margin was 57.0% decrease of 80 basis points.

Turning to five six first quarter revenues for the data and analytics segment increased 16% to $46 million, primarily driven by strong sales execution across nearly all business line higher refinance origination volumes and revenue from an acquired business.

Even increased 47% to $14.6 million, Steve It down margin was 31.7% increase of 680 basis points.

Adjusted Eve adopt for the corporate segment in the first quarter was zero point $4 million unfavorable compared to the prior your quarter.

Turning to slide seven a lock door capital structure.

The end of March we have cash and cash requirements of $66.5 million, which when combined with our borrowing capacity under a revolving line of credit $334 million represent total liquidity approximately $400 million.

Told that principle as of March 31st with $1.645 billion and our leverage ratio is 2.8 times on a gross basis and 2.7 times on that basis.

Running out of slide eight walk through our updated outlook for full year 2020, which has Anthony mentioned has been revised primarily to reflect the expected lower foreclosure related volumes as a result of the foreclosure moratorium and the forbearance relief as part of the cares Act, which we are modeling to be about 39 million dollar headwind in 2020.

For the year gap and adjusted revenues are expected to be range of $1.164 billion to $1.184 billion adjust even the expected to be the range of $568 million to $583 million.

Just the P.S. is expected to be in the range of $1.90 cents to $1.97 cents.

Additional modeling details underlying your outlook are as follows we expect interest expensive approximately $56 million depreciation and amortization expense at $137 million to $140 million, excluding the net incremental depreciation and amortization, resulting from purchase accounting and an adjusted effective tax rate approximately 20.

For 25%.

Although we do not provide quarterly guidance I want to provide you with some color as to how we expect progress through the year.

Regarding revenue, we expect adjusted revenue in a second quarter to be comparable to the first quarter with a full quarter of the headwind from lower foreclosure related revenues offset by sequential growth in origination software.

<unk> third quarter revenues to increase sequentially from the second quarter due to large scheduled implementation in servicing software.

And fourth quarter revenues are expected to be slightly higher than third quarter.

As it relates to foreclosure related revenues, we are not planning for them to recover over the course of the year do the forbearance relief that is available for up to 12 months under the cares Act.

And finally, we expect operating expenses to be relatively consistent in the first three quarters with a step up in the fourth quarter to do to seasonality and other investments.

Not during the color of the operator for Q. when I.

Yeah.

Thank you well now begin the question and answer session.

To join the question Q. you May press start then one and your telephone keypad, you will hear a tone acknowledging yarn question. If you are using a speaker phone. Please take up your hands that conform thing any keys.

Try your question. Please press start tend to.

<unk> as colors join the queue.

<unk> question comes from Bell Farmington Wells Fargo. Please go ahead.

Mm.

Morning, everyone.

The morning so.

So the the first question I had view is that.

You know the.

You're seeing major capacity problems at the bags trying to originate mortgages basically turning away business because they can handle the volumes.

Then you can talk a little bit about.

What.

I'd have an opportunity that presents for you in the near term and then also in the mid terms in terms with you, but your nation solutions.

Okay.

A good morning Bill.

Yeah, well, we've been talking but on these earnings calls you know for a number of years is really our focus on innovation on automation on enabling.

Yeah, all these capabilities because.

You know it they're required in every environment. It's just when you get into these types of.

Heightened environment. It really just highlights the need even more right and so we do feel very good about our capabilities in the space. We do feel very good about conversations that we continue to have with clients and prospects that aren't using our systems on ways that we can help them.

And <unk>. What we are are encouraged with his you know talked about it or or virtual client conference attendance was up significantly and we're having webinars on our sales cycles that are attended very heavily so at times like this.

Industry leaders you know are sought after and we are one and it's clear were in industry leader and so we're going to do everything that weekend to keep helping clients and prospects out there to to minimize any of the challenges they happen to maximize any opportunities in front of them, including won't origination hmm.

Hmm.

Yeah, the follow up on to ask about the the specialty servicing side you know that's part of the business that I remember, we had talked about on D.I.P.O. and at the time. It was actually m- viewed as a bit of a negative it's because it can be you kind of moves improving.

Oh that was a bit of the headwind maybe you could talk a little bit about those services loansphere for close your bankruptcy and the other products that are there and what kind of activity or seen there.

Sure [noise].

Well.

So number one you know we're pleased with the government did step in with the proposal moratorium and the forbearance plans offered through the cares Act.

You know going through this crisis the safest place for everyone is a in their homes and you know, we're not a human level happy that they're.

Able to do that.

What I'd say in terms of the the offerings that we have in the space there significant we had.

Oh tremendous market share in the space as we talked about.

And.

And it's an area that we've been investing until he was to think of loss mitigation.

You know we've been at record lows you know in recent history and we've been investing in this product for the last you know a few years until we're in a position right now with a very strong product very tightly integrated 10 S.P.

So it's not surprising that again in these challenging times, it's resonating with our clients and our sales are up significantly in loss mitigation and we're position well in terms of helping clients because like I said, if you walk through the process.

The moratorium gets lifted then you have you know forbearance and and again, we're providing a industry stats to the G.S. ease regulators et cetera, <unk>, we're really flexing our leadership in the space offering the type of inside said only we can offer but we need to see what the forbearance looks like it.

Early may so we're expecting a spike again people can't make their payments.

Unemployment numbers will come out again, and obviously <unk> you know, they're they're looking.

You know.

Poor obviously.

So as we look at all the the the the trends in the path of what's happening in the space. There's a lot of uncertainties, but we expect that it's hard to imagine we don't come out of this at elevated levels.

Of foreclosure at the end of the the timings can be dependent on when the moratorium comes up in the forbearance numbers look like what employment is you know how many get through loss mitigation a number of dependencies, but we've got the solutions to help at every step of it and in insights through A.I.P. to.

To track things like delinquencies and minimizing losses et cetera, So feel very very strong about the capabilities, we have and how we can help our clients and prospects.

Managed through this.

Thank you very much any insight.

Thank you Bill.

Right next question comes from John cancelled that Stevens, Inc. Please go ahead.

Hey, guys, congrats on a great quarter and a good job kind of navigating covert thus far.

<unk>.

Yeah I wanted to do some of the last question on I want to taking a little bit on the default in foreclosure business. You know obviously, an L.P.S. stage you guys were at one point doing over a billion dollars of revenue I know some of that a lot of that was transactional parts of that or software, but you know what solutions remained today and maybe what was the historical peak of.

Ramp from just those for meeting businesses.

Hey down it is Kirk.

I would say his backpack in the L.P.S. stays there were transaction services businesses that we're that we're part of the default process and those were what went over to the Servicelink business of F. enough. So what we have today are really the software the technology behind the process. So so the foreclosure in bankruptcy invoice management work flow applications.

As well as loss mitigation claims and some others, but the primary platforms are for closure in bankruptcy, an invoice management those revenues today. So acute won they were about the total specially servicing was about 11 per cent of total company revenue and about 4% of total company revenue was related to.

I'll say foreclosures generally and somebody some of the ancillary aspects of the process. So that is based off of a rather than kind of go back in time to do a different recession, that's kind of where the business stands today coming off of the year of Oh historical low is the lowest foreclosure start.

Since 2000 is just what I have in front of me and and you can imagine that if you go back to the time frame of 2009 or 10. It was it was a multiple of that again, a different time, a different recession, but it was much much larger and so what we're actively watching and those platforms that I just mentioned for pleasure bankruptcy in in.

Voice management, our our transactional businesses and so I still alluded to earlier for the last several years, we've been talking about that being a minor headwind not when we made an excuse for but one that was backshall, but one that to the extent that there are elevated foreclosures.

There would be incremental revenue is related to do that process and so we are certainly actively watching what's happening with the foreclosure moratorium, which was initially 60 days, we'll see if that is extended and then what happens in Forbearances. Anthony said, we literally watch the forbearance numbers on a daily basis, because we are the only ones with with access to that data.

On a daily basis I'm, so we're actively watching that and and looking certainly based upon the what the cares that provide for from a forebears perspective, which is up to six months and then up to another six months that takes us into next year for those you know windows transactional volumes would likely <unk>.

Likely commence and potentially a at elevated levels Ah, but it's something we're certainly watching we think that that the actions that have been taken where the right thing for the for the industry for the consumer and certainly as we go forward, what will monitor and and and report out to you all on on a frequent basis.

Okay. That's great color. Thanks Church, and then on the King can win and that was a really good when only origination side remind us again I don't know if you can talk to this but they're not currently a customer now M.S.P. is that right.

No they're not John.

Okay. That's all I've got thanks, guys.

<unk>.

Our next question.

<unk> Jeffrey <unk>. Please go ahead.

Hi, Good morning, John and appreciate you taking the question.

No I <unk>, we're only a couple of months into this disruption.

He's got a pretty good tech stack <unk> are there's some thoughts about.

Additional <unk> you could add you know that's collateral analytic showing looks interesting that's that appraisal space is one that it seems to be heating up competitive we would love to hear about that too, but I I.

Their technology do you think you could layer on top of eight or servicing digital and some of the the newer offerings that you think the current environment suggests might up the the level of urgency a bit.

Oh sure Andrew <unk>, it's a great question.

Yeah, what we're seeing <unk> question lot you know.

They're trends that happened in an industry like moved to digital is the trend right, but what's happening in the times of crisis, it's accelerating the adoption and so where we have a lot of great capabilities in place.

To some degree it's maybe integrating some of that data tying it together. So we've been tying for example, delinquency data from M.S.P. into our Mcdonnell solutions from the data and analytics perspective, really allowing us with Mcdonald's to have insights.

On forbearance on daily delinquencies tracking who you know, which consumers were current but now they're going 30 days late or 30 days like 60 days late or opposite they were 30 days late now their current again, but really tracking. It. So you can have you know great insight into your portfolio to drive capability.

Think only origination software side, we had movement and traction with her he closed solution that we've talked about on this call.

But again sales of that in first quarter have really jump significantly you know we've been having.

Webinars with you know thousand attendees and it's really it's different when we're selling different and leave them. We had before where it was one demo to one client at one time, having more of a women are to help solve industry problems and really you know moving capabilities quickly you know we talked about.

Mitigation and capabilities in that space and even in regards to foreclosure bankruptcy.

You know, we continue to sell new clients and answering solutions in the space such as bankruptcy ledger bankruptcy trustee payment processing.

As a leader you what we encourage in a sales psychos spend more time to a prospect get deeper and deeper because we're going to shine.

Brighter and brighter the more time, you spend to the cycle. It's in a lot of the ancillary capabilities and how it can all be integrated together such as on servicing digital having capabilities to request forbearance from servicing digital having it set up on M.S.P. in an automated way and getting.

Confirmation when call centres are being flooded with calls.

Bringing capability that we already had but more integrating it together to really drive an end user value proposition.

That is really differentiated we see lots of opportunities in the space and we're very focused on you know, helping our clients and helping our prospects out there with this capability.

Okay. Thanks, It's that's helpful. I mean, <unk> can I extrapolate from those comments on it for that.

It's just type of environment is.

Odd balance good for earlier like Black Knight and and.

Potentially pressure some of their your smaller competitors.

I always think that's the case.

In terms of you know of everyday but certainly in an environment like this.

You know again, what was obvious you know to me with these webinars, we're hosting in the the attendants had our conference.

You know being up even though it was a virtual conference in these times of stress. That's when people are looking for leaders and Black Knight is the leader we've got great capabilities were intensely focused on providing excellent you know client service and helping clients and being there answering the call.

Whenever it comes so I I really do think that it should benefit us and you know Ah Argh Argh pipeline gives us confidence at 2020 would be another strong sales here.

Andrew One thing I would add is do time to answer your question about three times like this.

The current flowing in the direction of leaders like last night I think the answer is as Nancy said, clearly, yes, and and you can do you can see it with who are the who is that who are various folks in a in the government agencies looking too who are the G.S. He's looking to who are the C.E.O.'s of our clients looking too.

They're looking to black Knight, because we have data because we have inside a at a scale, but no. One else has and I think that is be that is quite evident in in a time like this I think it's further evidence of Oh the position that we that we built here that that I think is differentiated from others.

Thanks for shit.

Thank you interview.

Yeah.

Hi next question <unk>, but I should think it's go ahead.

Thanks for taking the question and <unk>. My question was on the <unk> integration with soft and looks like it was pretty product based but just wanted to better understand what they're certain products in particular that was driving the string to end the data and analytics because.

There was I'm pretty lucky deal acceleration there. Thanks.

Yeah. It was <unk>. Thank you it actually was across the board within the business. So there there really were they really were two primary components of the grill that was it was the elevated origination volumes benefited the quarter and then it was sales execution of which we've been talking about.

Now for probably three quarters, which really has then you go back back 18 months or so we made investments in the in the sales in the sales team, we brought in leadership and and frankly as a team. They are executing at a very high level and they have frankly for now three or four quarters consecutively and and as I said largely across.

The board on on a sales execution basis, and so the focus their it continues to be a integrating a full from from an effort perspective with the with the broader sales team so cross selling to the base as well as as innovation like the rapid analytics platform for example, and frankly, finding new ways to use.

The data that we have is Anthony mentioned before the delinquency data within a within M.S.P. I can tell you that that is if you just look at the the attendance of of our monthly mortgage monitor call, which is with clients and prospects et cetera, and other folks in the industry and you look at how again this goes to Anders question as well.

How we're using data and how people are looking to lost for the data. Those monthly calls have increased in attendance by four times from where it was a month or two ago to where it is today and those things those things would lead to credibility they lead to a sales they lead to growth in that business and and frankly.

You can you will see black night, all over being reference as well as interviewed as as somebody who has insight and data that that no. One else has and so those things contribute to further further data sales and I think we'll see that going forward, but business is performing at a high level last I said across that really across.

The board I'll, we're excited to bring in the collateral analytics team to our data and analytics business a week that we think that that team brings tremendous capabilities and yeah. We think it's we expect other strong performance to continue.

Well actually if I could add onto that helps.

Just in terms of.

<unk> with Mcdonald's and other capabilities that were integrating it and I mentioned, the delinquency, but we're bringing pipeline hedging from compass hand Linux.

You know daily real estate listings and sales metrics from our Paragon encompass analytics platform. So.

We've been saying for a long time, you know, we're about innovation about integration and urgency and the integration, we just keep coming up with capabilities, we already have somewhere and if we can integrate it it can drive tremendous value and we're seeing a lot of momentum and excitement from our clients and prospects because of that exciting.

Oh, that's great, but it helps for us but he has full color maybe just a quick color on a question on the intimidation timeline Cook you mentioned, maybe artist <unk>, there, but when he talked about to see quenches, Kate and she talked about not scheduled subleasing implementation going live and helping actually.

Tend to back Koffler stocking towards <unk>, just wondering if you could provide any other colors like <unk> <unk> <unk> <unk> around 30, 40 push and going like 2020, <unk> <unk>, how should we think about implementation pipeline going like this yeah. Thanks.

Yeah, I would say things have largely gone we <unk>, we started monitoring yet as as really folk started working from home back in in March and trying to make sure that we were doing everything we could to keep the implementation on the original timeline admittedly whiskey changed to work from home at our clients we.

Did see some delays that that Anthony mentioned in his remarks to quantify that I'd say, it's about a point the revenue to the year. So so against that amount that we thought would come in during this year. There's about a point of head when that is that is delay and I would emphasize the word delay we expect them into the lives of time lines that that we.

We talked about now going forward and frankly things continue to progress and so you kind of Mary those two that that along with the foreclosure revenue affecting the moratorium and the forbearance you know, it's that that $39 million a of timing related to the foreclosure volumes and then about a point.

Timing related to the implementation.

That's very helpful actually took and then I saw the courtroom.

<unk>.

Our next to question <unk>. Please go ahead.

Hey, guys isn't it.

And today.

So I wanted to ask about obviously, we'd seen a a surgeon refinance volume applications did you quantify how much of a of a benefit that was <unk> software solutions.

It was about equal in both of them and it was roughly a little under a point related to each of us a little under those between one or two percentage points to the total company was the rifai benefits politically between origination and data and analytics.

Okay, Great and then just looking at the at the segment <unk> settle on a great corridor with with the top I'm number and it's more than came in pretty tremendously well come on over nearly 32% while servicing the <unk> side came in a little bit.

<unk> be a base 87 decide was there anything kind of unique in the first quarter that that kind of drove that divergence there.

What I would say isn't the data and analytics first of all I I would say how we're working very very please that we got over the 30 per cent mark with their margins <unk> not only is the team driving growth, but also they are very actively managing a expenses such that the revenue could come on at high incremental margin.

So doing really good job there in software solutions, it's really a mixed story and not anything unique to Q1 necessarily you know we had the revenue from the anomalous had ones. We talked about the last couple of quarters that comes off with very little very little incremental costs. So.

<unk> comes down at the very high margin and then we are offsetting Matt with with costs actions that we largely took last year that we that we talked about on prior call and then the revenue that's coming on is is in areas like origination that that has has some I had higher degrees of variable cost with it as it comes.

On compared to servicing as well as the acquisition of Compass analytics, which doesn't have margins that are at the level of the software solution segment. So it's really a mix shift I would say over time, we we continue to be competent in in driving margin expansion in both segments and so really the results in the first.

Quarter were absolutely in line with what we were expecting from margin right perspective, but we're we're we're we're certainly very pleased with with data and Alex.

Great. Thank you.

You're welcome.

Yeah.

Our next question <unk>, one with J.P. Morgan. Please go ahead.

Hey, great. Thanks, so much she'll be guys are say from well just done.

<unk> questions just from the long term impact accelerating decisions.

Moves you apply for them et cetera, like you suggested it but I'm just curious is that apply to downmarket answer as well and can we think about maybe some of the stubborn holdouts that are still in house that might finally budgeting and considered.

You know outsourcing just curious you know how how broad that that comment applies here to the client base.

I I think it is broadly based engine <unk> <unk>, we understand the market well, we understand the needs of reclines and have lots of capability to help.

And some point along the curve you know the lines intersect in it in in in in the timings right you know for the for them to make a move.

So you know we continue to feel we're respectful of you know the the the prospects that we speak to who aren't on our solutions and there are a lot of factors that go into decisions everyone makes terms of other initiatives they have going on or investments that they may have they're still in there a balance sheets.

I want to run down a bit et cetera, et cetera, but we continued you know took to walk away feeling like we can help and and I do think it goes down market as well, because that's where integration even place a bigger role in terms of bringing like what we're seeing driven more success going more down market as we brought more capability.

Integrated it enabled a.

It enabled us to go more down market than we had been historically so.

Long answered too short question, but yes, I do believe that.

Yeah. It makes sense just looking back it seems like always you know times of crisis or changes when you usually see things open up so just trying to.

Think about the back end of this that's helpful. Just on the the Guy That's me for her just on the Guy that you mentioned to 30, My 39 million Edwin from the Forbearance you you mentioned the reef size.

Little under a point each for help as well.

You had the acquisition I'm just trying to tie together the change in the guidance I think it was a $30 million change. So what what are the other factors that that contributed if you don't mind going through that again.

Not at all it's a great question that I I actually netted out very simply for the year and just say, we've got 39 million dollar headwind from for the timing of foreclosure volumes and then we expect somewhere short of a point just call it $9 million or so of of Rifai benefit so that it out it's $30 million. The other question.

Takes happen each and every year. So you know there and we were the implementation delays are are offset roughly by by collateral athletics and and really all the puts and takes you know other things that happened over the course of the year, but I would say, it's really those two things. It's it's a foreclosure volumes, partially offset by refile that I would consider to be.

What caused the guidance to to change.

Understood when last what if he got don't mind I know, it's like more of an gap question, but I saw the nice turn around.

The D.M.B., so well down there and to me with the four cents is there anything to consider for the for the rest of the year.

And that one and I realize this guy will not go.

Yeah, I I would I don't have the <unk> forecast in front of me, but but suffice to say the performance of Dunn and Bradstreet has improved materially over the past year that that we've we've invested in it if any of the team have done a tremendous job growing the business as well as expanding margins through significant cost reduction.

And you know as we look at it. So those are those are the things as the investor that that we are focused on there's other things that that happened like the under the the the the cares that there was some some tax things that are going on around deductibility of interest expense and some other things that are non operational in nature, but I would say and you can certainly fan upon this but but I'd say.

Were we continue to be very pleased with the performance of of the envy.

Yeah, absolutely you know, we second half of last year, we had a an eight and a half per cent growth and the third quarter that we normalize to around <unk>, four or 5% coupons or is that 6% and Q1 was a 3%. So you know if the growth was 17%.

You know margins in the high 30 so.

And Q1, so a lot of great work, that's been done by the team and similar to how Black Knight has been helping you know working hand in hand with the G.S. season <unk>. Other regulators, providing you know the real time data no one else can at D.N.B.. We're doing the same thing you know working with seem the small business administration White house.

National Economic Council or some other governments internationally in terms of trying to leverage you know our data that we have there.

You know for use in terms of how to you know bring aid to those businesses that need it.

Well done thanks.

Thanks to engine.

Yeah.

Our next question comes from Stephen Sheldon William Blair. Please go ahead.

Good morning. Thanks.

Most of my question from an ass, but just wanted to ask I guess, how you're thinking about risk your business related to the underlying health of your servicing client base.

Have you seen then they you know increasing pressure here and what could the potential ramifications meet a black Knight from that we had to look out over the next year. So.

Sure Steven you know for so we're in frequent contact as you can imagine with our clients on the Friday at top it's related to the current environment.

And if we look at the health of.

I'd, probably start by saying, Yeah, you don't think versus non bank and as a reminder, banks has a category have substantial liquidity and access to capital through the sad so not as risk the as the Nonbanks and.

More than two thirds of or mortgages are service by banks, So and if we look at the Nonbanks. We took a lot of good work is going on in the industry to solve their liquidity issues and again, that's where we've been working hand in hand, with G.S.A.T.'s and regulators to try and help facilitate this.

Do you see the G.S. ease of limited the servicing advances to four months.

And we've not seen any collection issues. So far so so I feel you know very good thing from a a risk perspective that it's well managed and and again in in cases, where there's an issue with one of our clients again with the market share that we have feel good about our window.

Rate should any portfolios transfer.

Great. Thank you.

Thank you Steven.

Our next question comes from Glenn Green Oppenheimer. Please go ahead.

Thanks, Good morning, just want to follow up on tinge of questions on C.N.B. I'm in the quarter, obviously sounded sounded fine but are there any sort of for <unk> either positive or negative.

You know that are relevant for D.N.B. and any implications for I.P.O. time into consideration.

Given what's happened.

Sure well you know certainly the you know the I.P.O. timing is a impacted by this and you know, we'll watch market conditions and see when it makes sense and.

And you know current you know plan is to.

To go back when the market has opened up but D.B. is a you know similar to block nine I think to you know bill Foley's credit in terms of identifying you know winning businesses are are ones that they are good defensive growth place as well and so.

You know, we're seeing if you looked at the N.B. in the last per session.

Where S.M.P. 500 companies had revenues declined 13% D.N.B. declined only 2%.

Primarily tied to business that's no longer there. So we feel very good about the health of the business on I'm a go forward basis.

Okay, and then Kirk just sort of the sort of the default services business or you know the 11% of revenue to <unk> just trying to understand you know given the the business mixed today, you know versus back on the L.P.S. days, you know the o. eight or 910 timeframe were sort of business.

Exploded <unk> are you as a sort of volume sensitive or it sounds like you're not nearly as volume sensitive today. As you were you know a decade or so ago, but just try to understand how how sensitive that business could move based on what we see going forward in terms of you know foreclosure activity whatnot.

Sure. So I would say, it's not the first of all it's not as big of a business as it was back then so that that stuff one I'd say the second piece would be our it likely is not as sensitive as bad as back then because there is there a greater percentage of dedicated professional services.

<unk> and contracts that are not volume sensitive and those types of things. So that's where you kind of get to that four per cent, that's really tied to foreclosure related volumes and those are that those are transaction related so to the extent that there is a a an increase in foreclosure volumes following the form.

Areas period, and the moratorium that would flow through we have 80% or so market share. So what happens in the market will happen to us and so you you certainly have the possibility when when when you get through the forbearance period, and you get through loss mitigation that we could see significantly elevated volumes for.

That 4% about that is on our our foreclosure bankruptcy, an invoice management platforms.

Okay, Great. That's helpful. Thanks, guys.

Thanks.

My next question <unk> S.H.G. Please go ahead.

[noise] good morning, everybody is well on your own.

You are holding questions well you talked about the forbearance workout functionality.

It's forbearance parties be standard <unk> or is there.

This is what's happened in the last two months incremental revenue piece already.

There there's basic functionality within M.S.P. four forbearance period, so that so that that was in which I think is an important point that you're making jack that the industry, leading platform has capabilities that I'm sure they're platforms out there that weren't ready for it that if it were a in house proprietary platform are very customs.

Not for May not have had the functionality that the M.S.P. had that we are prepared I I can tell you that the moment that any of these topics arose early in the process again folks were little we're looking to us and we were hosting town halls for clients and writing white papers, and and really where the where the thought leaders.

Around these topics and and yet the functionality is is in his in M.S.P., where the incremental opportunity is where where Anthony was talking about loss mitigation, where our pipeline has more than doubled in more than doubled in a matter of a couple of weeks, where a thousand people got onto a variety of webinars that we were hosting a servicing did.

Digital is is much more interesting I've already was very interesting, but it certainly has capabilities that are more valuable in a time like this or incrementally valuable all say and so there's that's where that's where the incremental that's where the incremental but man comes from as well as just coming back to the beginning where you want to be on a platform where you have the.

Leaders, where you have the capabilities that are that are native and and ready to go and we're ready to support you as any of these changes if there's if there's investor recording changes that come out of the G.S. East you want to be on M.S.P., because they're those are always significant and so those are the things that I think you know we'll call it or will drive incremental man in the future.

Well it's perfect.

Asking about and then.

Obviously, you guys are weighted towards banks banks don't have the issues and I'm talking on the service inside.

You don't do business with two of the large or small banks sort, which is already on the <unk> are you.

My my assumption, you're you're you're you're servicing rubbing it was a standard subscription it's either annualized okay quarterly your servicing she went on banks, whether that's not tied to the advanced in any way is it.

No no it's not we get most of the revenues based on a per loan basis paid monthly and then there's some activity based fees, which some of that activity actually the levels could or could rise in in times like this because there's more activity around alone if it's in forbearance for example.

So that but that's that's the most of the revenue related to relates to the core servicing possibly that must be.

Okay. Thanks for taking the questions.

Thank thank you.

Hi next question comes from Kevin <unk>. Please go ahead.

Hey, guys I had one more question on the covert related delinquencies weren't about to ask about the economics for black Knight on modifications versus foreclosures either and.

Multi servicing revenue or other areas for instance, a lot of the covert impacted loans are eventually modified or would you get roberta from that and if so how much of the lost a closer revenue could that offset.

[noise] there. It's it's a great question I mean that would come through the loss mitigation platform is where the <unk> would would take place and so it would be would be client contract dependent as to exactly how how that activity would work, but there certainly is that is incremental revenue that we wouldn't have had a couple of years ago and we didn't have lost.

Litigation platform, but it would be it would not be as significant as as what what a foreclosure would be the way the way the way that their price.

Okay.

I guess when last one.

Disclose how much revenue came from collateral analytics in the quarter or how much does it take them for the rest of the year.

It was I mean, it's about to the total company. It's about a point revenue in the first quarter. It was we only on it for part of them off so it was it a million dollars though.

Okay, great. Thanks, that's all I have.

Thank you.

It's concludes the question and answer session.

To turn the conference back over to Anthony for any clutching her mikes.

Thank you.

As always I'd like to think our clients for their strong partnership and my Black My colleagues for their exceptional efforts and dedication delivering innovative solutions and superior customer support, especially during this challenging period.

Thank you for joining us on the call today and for your interest in our Great Company, Please stay healthy and safe and enjoy the rest your day.

Mhm.

This concludes today's conference call you May disconnected line. Thank you for participating and have to play Sunday.

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