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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 June 30, 2022

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 156,025,027 shares outstanding of the Registrant’s common stock as of August 3, 2022.

FORM 10-Q

QUARTERLY REPORT

Quarter Ended June 30, 2022

TABLE OF CONTENTS

 

Page

Part I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

A. Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2022 and December 31, 2021

1

B. Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) for the three and six months ended June 30, 2022 and 2021

2

C. Condensed Consolidated Statements of Equity (Unaudited) for the three and six months ended June 30, 2022 and 2021

3

D. Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2022 and 2021

5

E. Notes to Condensed Consolidated Financial Statements (Unaudited)

6

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

23

Item 3. Quantitative and Qualitative Disclosure About Market Risk

32

Item 4. Controls and Procedures

33

Part II: OTHER INFORMATION

34

Item 1. Legal Proceedings

34

Item 1A. Risk Factors

34

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

37

Item 3. Defaults Upon Senior Securities

38

Item 4. Mine Safety Disclosures

38

Item 5. Other Information

38

Item 6. Exhibits

39

i

Part I: FINANCIAL INFORMATION

Item 1.Condensed Consolidated Financial Statements (Unaudited)

BLACK KNIGHT, INC.

Condensed Consolidated Balance Sheets

(In millions)

(Unaudited)

June 30, 2022

December 31, 2021

ASSETS

Current assets:

 

  

 

  

Cash and cash equivalents

$

38.0

$

77.1

Trade receivables, net

 

203.2

 

191.8

Prepaid expenses and other current assets

 

97.7

 

83.0

Receivables from related parties

 

6.1

 

0.2

Total current assets

 

345.0

 

352.1

Property and equipment, net

 

146.6

 

154.5

Software, net

 

469.6

 

497.0

Other intangible assets, net

 

539.6

 

613.2

Goodwill

 

3,817.1

 

3,817.3

Investments in unconsolidated affiliates

 

171.4

 

490.5

Deferred contract costs, net

 

198.0

 

196.0

Other non-current assets

 

241.2

 

230.3

Total assets

$

5,928.5

$

6,350.9

LIABILITIES AND EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Trade accounts payable and other accrued liabilities

$

59.8

$

64.5

Income taxes payable

46.8

11.8

Accrued compensation and benefits

 

75.4

 

91.4

Current portion of debt

 

33.6

 

32.5

Deferred revenues

 

68.8

 

64.6

Total current liabilities

 

284.4

 

264.8

Deferred revenues

 

62.0

 

81.5

Deferred income taxes

 

241.3

 

284.1

Long-term debt, net of current portion

 

2,736.7

 

2,362.6

Other non-current liabilities

 

56.6

 

78.7

Total liabilities

 

3,381.0

 

3,071.7

Commitments and contingencies (Note 10)

 

  

 

  

Redeemable noncontrolling interests

 

47.4

 

1,188.8

Equity:

 

  

 

  

Common stock; $0.0001 par value; 550,000,000 shares authorized; 160,040,598 shares issued and 156,031,830 shares outstanding as of June 30, 2022, and 160,040,598 shares issued and 155,357,705 shares outstanding as of December 31, 2021

 

 

Preferred stock; $0.0001 par value; 25,000,000 shares authorized; issued and outstanding, none as of June 30, 2022 and December 31, 2021

 

 

Additional paid-in capital

 

1,367.8

 

1,410.9

Retained earnings

 

1,368.2

 

968.2

Accumulated other comprehensive loss

 

(5.5)

 

(17.5)

Treasury stock, at cost, 4,008,768 shares as of June 30, 2022 and 4,682,893 shares as of December 31, 2021

 

(230.4)

 

(271.2)

Total shareholders’ equity

 

2,500.1

 

2,090.4

Total liabilities, redeemable noncontrolling interests and shareholders’ equity

$

5,928.5

$

6,350.9

See Notes to Condensed Consolidated Financial Statements (Unaudited).

1

BLACK KNIGHT, INC.

Condensed Consolidated Statements of Earnings and Comprehensive Earnings

(In millions, except per share data)

(Unaudited)

Three months ended June 30, 

Six months ended June 30, 

    

2022

    

2021

    

2022

    

2021

Revenues

$

394.5

$

361.3

$

781.7

$

711.0

Expenses:

 

  

  

 

  

 

  

Operating expenses

 

216.8

197.0

 

424.7

 

383.2

Depreciation and amortization

 

92.5

90.4

 

184.0

 

178.2

Transition and integration costs

 

8.2

4.3

 

15.8

 

12.2

Total expenses

 

317.5

 

291.7

 

624.5

 

573.6

Operating income

 

77.0

 

69.6

 

157.2

 

137.4

Other income and expense:

 

  

 

  

 

  

 

  

Interest expense, net

 

(22.6)

(20.9)

 

(43.7)

 

(41.2)

Other expense, net

 

(2.4)

(1.0)

 

(3.6)

 

(4.2)

Total other expense, net

 

(25.0)

 

(21.9)

 

(47.3)

 

(45.4)

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

 

52.0

 

47.7

 

109.9

 

92.0

Income tax expense

 

11.6

10.5

10.5

 

15.7

Earnings before equity in (losses) earnings of unconsolidated affiliates

 

40.4

 

37.2

 

99.4

 

76.3

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

 

(0.1)

(5.0)

 

303.0

 

1.4

Net earnings

 

40.3

 

32.2

 

402.4

 

77.7

Net losses attributable to redeemable noncontrolling interests

 

7.5

 

2.5

 

16.1

Net earnings attributable to Black Knight

$

40.3

$

39.7

$

404.9

$

93.8

Other comprehensive earnings (loss):

 

  

 

  

 

  

 

  

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

 

2.3

(0.2)

6.6

0.3

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

 

2.0

4.0

5.2

7.9

Total unrealized gains on interest rate swaps, net of tax

 

4.3

 

3.8

 

11.8

 

8.2

Foreign currency translation adjustment, net of tax (3)

 

(0.4)

(0.1)

(0.6)

(0.4)

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

 

(2.4)

1.5

0.8

(1.6)

Other comprehensive earnings

 

1.5

 

5.2

 

12.0

 

6.2

Comprehensive earnings

 

41.8

 

37.4

 

414.4

 

83.9

Net losses attributable to redeemable noncontrolling interests

 

7.5

 

2.5

 

16.1

Comprehensive earnings attributable to Black Knight

$

41.8

$

44.9

$

416.9

$

100.0

Net earnings per share attributable to Black Knight common shareholders:

 

  

 

  

 

  

 

  

Basic

$

0.26

$

0.26

$

2.62

$

0.60

Diluted

$

0.26

$

0.25

$

2.60

$

0.60

Weighted average shares of common stock outstanding (see Note 5):

 

 

  

 

  

Basic

 

154.5

 

155.4

 

154.4

 

155.5

Diluted

 

155.6

 

155.7

 

155.5

 

155.8

(1)Net of income tax expense of $0.9 million and income tax benefit of $0.1 million for the three months ended June 30, 2022 and 2021, respectively, and income tax expense of $2.3 million and $0.1 million for the six months ended June 30, 2022 and 2021, respectively.
(2)Amounts reclassified to net earnings relate to losses on interest rate swaps and are included in Interest expense, net above. Amounts are net of income tax benefit of $0.7 million and $1.4 million for the three months ended June 30, 2022 and 2021, respectively, and $1.8 million and $2.7 million for the six months ended June 30, 2022 and 2021, respectively.
(3)Net of income tax benefit of $0.2 million for the three and six months ended June 30, 2022 and less than $0.1 million for the three and six months ended June 30, 2021.
(4)Net of income tax benefit of $0.8 million and income tax expense of $0.5 million for the three months ended June 30, 2022 and 2021, respectively, and income tax expense of $0.3 million and income tax benefit $0.5 million for the six months ended June 30, 2022 and 2021, respectively.

See Notes to Condensed Consolidated Financial Statements (Unaudited).

2

BLACK KNIGHT, INC.

Condensed Consolidated Statements of Equity

(In millions)

(Unaudited)

Three months ended June 30, 2022

Accumulated

Additional

other

Total

Redeemable

Common stock

paid-in

Retained

comprehensive

Treasury stock

shareholders’

noncontrolling

    

Shares

    

$

    

capital

    

earnings

    

loss

    

Shares

    

$

    

equity

    

interests

Balance, March 31, 2022

 

160.0

$

$

1,364.8

$

1,327.4

$

(7.0)

 

4.1

$

(234.2)

$

2,451.0

$

40.2

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

 

 

 

(7.2)

 

 

 

 

 

(7.2)

 

7.2

Grant of restricted shares of common stock

 

 

 

(4.2)

 

 

 

(0.1)

 

4.2

 

 

Forfeitures of restricted shares of common stock

 

 

 

0.2

 

 

 

 

(0.2)

 

 

Tax withholding payments for restricted share vesting

 

 

 

(0.3)

 

 

 

 

 

(0.3)

 

Vesting of restricted shares granted from treasury stock

 

 

 

0.2

 

 

 

 

(0.2)

 

 

Equity-based compensation expense

 

 

 

12.9

 

 

 

 

 

12.9

 

Net earnings

 

 

 

 

40.3

 

 

 

 

40.3

 

Equity-based compensation expense of unconsolidated affiliates

 

 

 

 

0.5

 

 

 

 

0.5

 

Foreign currency translation adjustment

 

 

 

 

 

(0.4)

 

 

 

(0.4)

 

Unrealized gains on interest rate swaps, net

 

 

 

 

 

4.3

 

 

 

4.3

 

Other comprehensive loss on investments in unconsolidated affiliates

 

 

 

 

 

(2.4)

 

 

 

(2.4)

 

Other

1.4

1.4

Balance, June 30, 2022

 

160.0

$

$

1,367.8

$

1,368.2

$

(5.5)

 

4.0

$

(230.4)

$

2,500.1

$

47.4

Three months ended June 30, 2021

Accumulated

Additional

other

Total

Redeemable

Common stock

paid-in

Retained

comprehensive

Treasury stock

shareholders’

noncontrolling

    

Shares

    

$

    

capital

    

earnings

    

loss

    

Shares

    

$

    

equity

    

interests

Balance, March 31, 2021

 

160.0

$

$

2,017.0

$

812.0

$

(37.8)

 

3.4

$

(176.5)

$

2,614.7

$

578.0

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

(7.5)

(7.5)

7.5

Grant of restricted shares of common stock

 

 

 

(1.3)

 

 

 

 

1.3

 

 

Forfeitures of restricted shares of common stock

 

 

 

0.4

 

 

 

 

(0.4)

 

 

Tax withholding payments for restricted share vesting

 

 

 

(1.7)

 

 

 

 

 

(1.7)

 

Vesting of restricted shares granted from treasury stock

 

 

 

1.0

 

 

 

 

(1.0)

 

 

Equity-based compensation expense

 

 

 

13.1

 

 

 

 

 

13.1

 

Net earnings (losses)

 

 

 

 

39.7

 

 

 

 

39.7

 

(7.5)

Equity-based compensation expense of unconsolidated affiliates

 

 

 

 

0.7

 

 

 

 

0.7

 

Foreign currency translation adjustment

 

 

 

 

 

(0.1)

 

 

 

(0.1)

 

Unrealized gains on interest rate swaps, net

 

 

 

 

 

3.8

 

 

 

3.8

 

Other comprehensive gains on investments in unconsolidated affiliates

 

 

 

 

 

1.5

 

 

 

1.5

 

Balance, June 30, 2021

 

160.0

$

$

2,021.0

$

852.4

$

(32.6)

 

3.4

$

(176.6)

$

2,664.2

$

578.0

See Notes to Condensed Consolidated Financial Statements (Unaudited).

3

BLACK KNIGHT, INC.

Condensed Consolidated Statements of Equity

(In millions)

(Unaudited)

Six months ended June 30, 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

 

 

 

(17.1)

 

 

 

 

 

(17.1)

 

17.1

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

(1,156.0)

Grant of restricted shares of common stock

 

 

 

(50.8)

 

 

 

(0.9)

 

50.8

 

 

Forfeitures of restricted shares of common stock

 

 

 

1.2

 

 

 

 

(1.2)

 

 

Tax withholding payments for restricted share vesting

 

 

 

(11.0)

 

 

 

 

 

(11.0)

 

Vesting of restricted shares granted from treasury stock

 

 

 

8.8

 

 

 

0.2

 

(8.8)

 

 

Equity-based compensation expense

 

 

 

23.6

 

 

 

 

 

23.6

 

Net earnings (losses)

 

 

 

 

404.9

 

 

 

 

404.9

 

(2.5)

Equity-based compensation expense of unconsolidated affiliates

 

 

 

 

(4.9)

 

 

 

 

(4.9)

 

Foreign currency translation adjustment

 

 

 

 

 

(0.6)

 

 

 

(0.6)

 

Unrealized gains on interest rate swaps, net

 

 

 

 

 

11.8

 

 

 

11.8

 

Other comprehensive gains on investments in unconsolidated affiliates

 

 

 

 

 

0.8

 

 

 

0.8

 

Other

2.2

2.2

Balance, June 30, 2022

 

160.0

$

$

1,367.8

$

1,368.2

$

(5.5)

 

4.0

$

(230.4)

$

2,500.1

$

47.4

Six months ended June 30, 2021

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, 2020

 

160.1

$

$

2,053.7

$

757.4

$

(38.8)

 

3.1

$

(144.6)

$

2,627.7

$

578.0

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

(16.1)

(16.1)

16.1

Grant of restricted shares of common stock

 

 

 

(26.6)

 

 

 

(0.5)

 

26.6

 

 

Forfeitures of restricted shares of common stock

 

 

 

0.5

 

 

 

 

(0.5)

 

 

Tax withholding payments for restricted share vesting

 

(0.1)

 

 

(24.4)

 

 

 

 

 

(24.4)

 

Vesting of restricted shares granted from treasury stock

 

 

 

11.4

 

 

 

0.2

 

(11.4)

 

 

Equity-based compensation expense

 

 

 

22.5