BLACK KNIGHT, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

The statements contained in this Quarterly Report on Form 10-Q that are not
purely historical are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), including
statements regarding expectations, hopes, intentions or strategies regarding the
future. Forward-looking statements are based on Black Knight, Inc. and its
subsidiaries ("Black Knight," the "Company," "we," "us" or "our") management's
beliefs, as well as assumptions made by, and information currently available to,
them. Because such statements are based on expectations as to future financial
and operating results and are not statements of fact, actual results may differ
materially from those projected. We undertake no obligation to update any
forward-looking statements, whether as a result of new information, future
events or otherwise. The risks and uncertainties that forward-looking statements
are subject to include, but are not limited to:

the occurrence of any event, change, or other circumstance that could give rise

? to a right in favor of Intercontinental Exchange, Inc. (“ICE”) or us to

terminate the definitive merger agreement governing the terms and conditions of

the proposed transaction;

? the outcome of any legal proceedings that may be instituted against us or ICE;

the possibility that the proposed transaction does not close when expected or

at all because required regulatory, stockholder, or other approvals and other

? conditions to closing are not received or satisfied on a timely basis or at all

(and the risk that such approvals may result in the imposition of conditions

that could adversely affect ICE or us or the expected benefits of the proposed

transaction);

? the diversity of management’s attention and time from ongoing business

operations and opportunities on merger-related matters;

? security breaches against our information systems or breaches involving our

third party vendors;

? our ability to maintain and grow our relationships with our clients;

? our ability to comply with or changes to the laws, rules and regulations that

affect our and our clients’ businesses;

? our ability to adapt our solutions to technological changes or evolving

industry standards or to achieve our growth strategies;

? our ability to protect our proprietary software and information rights;

? the effect of any potential defects, development delays, installation

difficulties or system failures on our business and reputation;

? changes in general economic, business, regulatory and political conditions;

? impacts to our business operations caused by the occurrence of a catastrophe or

global crisis;

? the effects of our existing leverage on our ability to make acquisitions and

invest in our business;

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

? risks associated with the availability of data;

? our ability to successfully consummate, integrate and achieve the intended

benefits or acquisitions;

? risks associated with our investment in DNB; and

other risks and uncertainties detailed in the “Statement Regarding

? Forward-Looking Information,” “Risk Factors” and other sections of our Annual

Report on Form 10-K for the year ended December 31, 2021 and other filings with

the Securities and Exchange Commission (“SEC”).



The following discussion should be read in conjunction with our Annual Report on
Form 10-K for the year ended December 31, 2021 filed with the SEC on February
25, 2022 and other filings with the SEC.

Overview


Black Knight is 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.

We believe businesses leverage our robust, integrated solutions across the entire homeownership lifecycle to help retain existing clients, gain new clients, mitigate risk and operate more efficiently. Our clients rely on our proven, comprehensive, scalable solutions and our unwavering commitment to delivering exceptional client support to achieve their strategic goals and better serve their customers.

We have a focused strategy of continuous innovation across our business supported by strategic acquisitions – and even more importantly, the integration of those innovations and acquisitions into our broader ecosystem. Our scale allows us to continually invest in


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our business, both to meet ever-changing industry requirements and to maintain
our position as a leading provider of platforms for the mortgage and real estate
markets.

Deep business and regulatory expertise and an unparalleled, holistic view of the
markets we serve allow us the privilege of being a trusted advisor to our
clients, who range from the nation's largest lenders and mortgage servicers to
institutional portfolio managers and government entities, to individual real
estate agents and mortgage brokers. Clients leverage our software ecosystem
across a range of real estate and housing finance verticals through multiple
digital channels, using our offerings to drive more business, reduce risk and
deliver a best-in-class customer experience, all while operating more
efficiently and cost-effectively.

The table below summarizes active first and second lien mortgage loans on our mortgage loan servicing software solution and the related market data, reflecting our leadership in the mortgage loan servicing software solutions market (in millions):


                             First lien                   Second lien                    Total first and second lien
                           as of June 30,               as of June 30,                         as of June 30,
                         2022          2021           2022           2021              2022                          2021
Active loans            33.1           32.3            3.1            3.3              36.2                           35.6
Market size             53.2 (1)       53.1 (1)       12.5 (2)       12.4 (2)          65.7                           65.5
Market share              62 %           61 %           25 %           26 %              55 %                           54 %

Note: Percentages above may not recalculate due to rounding.

Estimates according to the Black Knight Mortgage Monitor Report as of June (1) 30, 2022 and 2021 for US first lien mortgage loans. These estimates are

subject to change.

Estimates according to the July 2022 and 2021 Equifax National Consumer (2) Credit Trends Report as of June 30, 2022 and 2021 for US second lien

mortgage loans. These estimates are subject to change.



We have long-standing relationships with our clients - a majority of whom enter
into long-term contracts that include multiple, integrated products embedded
into mission-critical, client-side workflow and decision processes. This speaks
to the confidence our clients, which include some of the largest financial
institutions in the world, have in our solutions and our commitment to serve
them. The contractual nature of our revenues and stickiness of our client
relationships make our revenues both highly visible and recurring in nature. Our
scale and integrated ecosystem of solutions drive significant operating leverage
and cross-sell opportunities, enabling our clients to continually benefit from
new and greater operational efficiencies while simultaneously allowing us to
generate strong margins and cash flows.

Our Markets


The Black Knight ecosystem stretches across four core "pillar" verticals:
mortgage loan servicing, mortgage origination, capital markets and real estate;
with our data and analytics flowing throughout and between the interconnected
ecosystem of solutions. As we integrate our innovations and acquired
technologies, we are committed to continually improving the end consumer
experience, driving further efficiencies for our clients and helping them to win
new customers and retain existing customers.

Recent Developments

Optimal Blue Transaction

On February 15, 2022, we entered into a purchase agreement with Cannae and THL
and acquired all of their Class A units of Optimal Blue Holdco, LLC ("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 DNB common stock valued at $722.5
million and $433.5 million in cash, 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. As of February 15, 2022, we own 100% of the Class A units of Optimal
Blue Holdco. Refer to Note 1 - Basis of Presentation and Overview for additional
information.

Merger Agreement

On May 4, 2022, we entered into a definitive agreement to be acquired by ICE, 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%) (the "ICE
Transaction"). The ICE Transaction is expected to close in the first half of
2023, subject to the receipt of regulatory

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approvals, Black Knight shareholder approval and the satisfaction of customary
closing conditions. The ICE Transaction has been approved by the Boards of
Directors of Black Knight and ICE. Refer to Note 1 - Basis of Presentation and
Overview for additional information.

Business Trends and Conditions

Market Trends

Market trends that have spurred lenders and servicers to seek software, data and analytics solutions are as follows:


Integral role of technology in the U.S. mortgage loan industry. Over the past
few years, the homebuyer's processes have become more digital, and banks and
other lenders and servicers have become increasingly focused on automation and
workflow management to operate more efficiently and meet their regulatory
requirements as well as using technology to enhance the consumer experience
during the mortgage loan origination, closing and servicing processes. We
believe technology providers must be able to support the complexity and dynamic
nature of the market, display extensive industry knowledge and possess the
financial resources to make the necessary investments in technology and software
to support lenders and servicers. This includes an enhanced digital experience
along with the application of artificial intelligence, robotic process
automation and adaptive learning.

Heightened demand for enhanced transparency and analytic insight. As U.S.
mortgage loan market participants work to minimize the risk in lending,
servicing and capital markets, they rely on the integration of data and
analytics with solutions that enhance the decision-making process. These
industry participants rely on large comprehensive third-party databases coupled
with enhanced analytics to achieve these goals. Mortgage loan market
participants are eager for timely data and insights to help them plan and react
to the changing environment.

Regulatory changes and oversight. Most U.S. mortgage loan market participants
are subject to a high level of regulatory oversight and regulatory requirements
as federal and state governments have enacted various new laws, rules and
regulations. It is our experience that mortgage lenders and servicers have
become more focused on minimizing the risk of non-compliance with regulatory
requirements and are looking toward solutions that assist them in complying with
their regulatory requirements. We expect this trend to continue as additional
governmental programs and regulations have been enacted to address the economic
concerns resulting from the pandemic, and our clients have had to adapt their
systems and processes in record time to the shifting landscape. In addition, our
clients and our clients' regulators have elevated their focus on privacy and
data security in light of an increased level of cybersecurity incidents. We
expect the industry focus on privacy and data security to continue to increase.

Lenders increasingly focused on core operations. As a result of regulatory
scrutiny, a decline in refinance origination volumes due to a rising interest
rate environment and the higher cost of doing business, we believe lenders have
become more focused on their core operations and customers. We believe lenders
are increasingly shifting from in-house solutions to third-party solutions that
provide a more comprehensive and efficient solution. Lenders require these
providers to deliver best-in-class solutions and deep domain expertise and to
assist them in maintaining regulatory compliance.

Our Business Segments

Our business is organized into two segments: Software Solutions and Data and Analytics.


Software Solutions

Our Software Solutions segment offers software solutions that support loan
servicing, loan origination and settlement services. Our software solutions
revenues were 86% of our consolidated revenues for both the three and six months
ended June 30, 2022, and 85% for both the three and six months ended June 30,
2021.

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The following table summarizes our software solutions revenues (in millions):

                                    Three months ended       % of segment       Six months ended       % of segment
                                        June 30,               revenues            June 30,              revenues
                                     2022         2021      2022      2021      2022        2021      2022      2021
Servicing software solutions      $    221.7     $ 207.8       65 %     68 %  $   444.3    $ 410.5       66 %     68 %
Origination software solutions         117.7        97.6       35 %     32
%      225.8      190.7       34 %     32 %
Software Solutions                $    339.4     $ 305.4      100 %    100 %  $   670.1    $ 601.2      100 %    100 %


Our servicing software solutions primarily include our core servicing software
solution that automates loan servicing, including loan setup and ongoing
processing, customer service, accounting, reporting to the secondary mortgage
market and investors and web-based workflow information systems. Our servicing
software solutions primarily generate revenues based on the number of active
loans outstanding on our system, which has been very stable; however, we have
some exposure to foreclosure and bankruptcy loan volumes, which can fluctuate
based on economic cycles and other factors.

As a result of the effects of the broad-based response to the COVID-19 pandemic,
we have seen lower foreclosure-related transactional revenues due to the
mortgage loan foreclosure moratorium in the prior year period. We expect higher
foreclosure-related transactional revenues in 2022 compared to 2021 as a result
of the expiration of the federal foreclosure moratorium. According to
corresponding Black Knight Mortgage Monitor reports, foreclosure starts were
64,000 for the three months ended June 30, 2022 compared to 11,900 for the 2021
period.

Our origination software solutions primarily include our solutions that automate
and facilitate the origination of mortgage loans and provide an interconnected
network allowing the various parties and systems associated with lending
transactions to exchange data quickly and efficiently. Our exposure to
origination volumes is limited as our loan origination system revenues are based
on closed loan volumes subject to minimum base software fees that are
contractually obligated, and our secondary marketing technologies' revenues are
primarily subscription-based. Some of our origination software solutions are
exposed to variances in origination volumes, primarily related to refinance
volumes, due to the nature of the services provided. While we saw elevated
refinance origination volumes for a prolonged period of time, we have seen lower
origination volumes in 2022 due to record volumes in prior years and a rising
interest rate environment. According to the July 2022 Mortgage Bankers
Association Mortgage Finance Forecast, mortgage loan originations have declined
37% for the three months ended June 30, 2022 compared to the 2021 period. Our
origination software solutions that are more sensitive to origination volumes
were approximately 3% of our consolidated revenues for the three months ended
June 30, 2022, and revenues related to these origination software solutions
declined approximately 32% for the three months ended June 30, 2022 compared to
the 2021 period, representing a headwind of approximately $5.6 million.

Data and Analytics


Our Data and Analytics segment offers data and analytics solutions to the
mortgage, real estate and capital markets verticals. These solutions include
property ownership data, lien data, servicing data, automated valuation models,
collateral risk scores, behavioral models, a multiple listing service software
solution and other data solutions. Our data and analytics business is primarily
based on longer-term strategic data licenses, other data licenses and
subscription-based revenues. For both the three and six months ended June 30,
2022, our data and analytics revenues were 14% of our consolidated revenues. For
both the three and six months ended June 30, 2021, our data and analytics
revenues were 15% of our consolidated revenues. Our data and analytics solutions
that are more sensitive to fluctuations in home buying activity and origination
volumes primarily relate to services where we provide data necessary for title
insurance and other settlement service activities. Revenues from these solutions
were approximately 3% of our consolidated revenues for the three months ended
June 30, 2022 and declined approximately 23% for the three months ended June 30,
2022 compared to the 2021 period, representing a headwind of approximately
$3.1
million.

Results of Operations

Key Performance Metrics

Revenues, EBITDA and EBITDA margin for the Software Solutions and Data and Analytics segments are presented in conformity with Accounting Standards Codification Topic 280, Segment Reporting. These measures are reported to the chief operating decision maker for


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purposes of making decisions about allocating resources to the segments and
assessing their performance. For these reasons, these measures are excluded from
the definition of non-GAAP financial measures under the SEC's Regulation G and
Item 10(e) of Regulation S-K.

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