Black Knight posts strong Q4 but says organic growth will slow

In 2022, company expects higher profits after paying $1.156 billion for remaining shares of Optimal Blue

Florida-based mortgage tech and analytics behemoth Black Knight reported on Tuesday that despite strong sales in the fourth quarter, net earnings in 2021 were down from the prior year and organic growth should slow in 2022.

According to the company’s latest earnings report, net earnings in 2021 reached $207.9 million, down from $264.1 million in 2020. That’s down 21%, which executives largely attributed to bookkeeping associated with the 2020 investment of Dun & Bradstreet Holdings. Black Knight said that in 2020 it recorded a $62.1 million non-cash gain because of DNB’s public offering and private placement.

Business was good for the mortgage analytics and data company in the fourth quarter, largely on the strength of sales of Empower and MSP, Black Knight’s originations and servicing platforms. Profits in Q4 totaled $60.7 million, up 29% from the same period in 2020.

Revenue reached $386.2 million from October to December, an increase of 13% compared to the same quarter of 2020. The company’s margin went from 12.3% to 14.5% in the same period. In total, Black Knight’s revenues in 2021 came in at $1.48 billion, an increase of 19% compared to the previous year. 

Software solutions represented 84.7% of the revenues last year, with an operating margin of 46.6%, compared to 46.5% in the previous year. The remaining revenue came from data and analytics, a segment with an operating margin of 28.7% in 2021, compared to 25% in 2020.   

Anthony Jabbour, Black Knight’s chairman and CEO, said in a statement that the company enters 2022 “with significant momentum following a record sales year in 2021 and with laser focus to continue our strong execution of our strategic initiatives.”

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Black Knight’s full-year 2022 outlook forecasts revenues between $1.59 billion and $1.61 billion and adjusted Ebitda between $786 million and $803 million.

Organic revenue growth reached 10% in 2021 for Black Knight, but expectations for 2022 are muted. Less mortgage origination volume will chill demand for data and analytics products in 2022. Kirk Larsen, the company CFO, said organic growth will likely fall between 7% and 8%.

The 2022 forecast also considers the purchase of the outstanding interests of Optimal Blue from co-investors Cannae Holdings and investment entities affiliated with Thomas H. Lee Partners for $1.156 billion.

As a result of the transaction, Optimal Blue will become a wholly-owned subsidiary of Black Knight.

The transaction combines 36,376,360 shares of DNB at $722.5 million and $433.5 million in cash, funded by a revolving credit facility. Following the deal, Black Knight owns approximately 18.5 million shares of DBN with a fair value of $352.8 million. 

J.P. Morgan Securities LLC was the financial advisor, and Weil, Gotshal & Manges LLP was the legal advisor for the transaction. 

Black Knight announced in July 2020 it would buy 60% of Optimal Blue, a company founded in 2002 with an online marketplace that aims to connect originators, investors, and providers in the mortgage industry. 

When the deal was announced, Optimal Blue had nearly $2 trillion of transactions processed across its platform each year, facilitating several secondary market interactions such as pricing, locking, hedging, and trading mortgage loans. 

“The integration has gone very well, and there continue to be opportunities to go even further,” Jabbour said. He added that there are great cross-sell opportunities as Black Knight and Optimal Blue move forward as one company.  

In the fourth quarter earnings report, Black Knight also announced executive management transition: Jabbour will assume the role of executive chairman of the board; Joe Nackashi, the current president, will be the CEO; Larsen, the chief financial officer, will take the role of president.  

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