Black Knight Inc (BKI) 2020 Q3 法說會逐字稿

Greetings, and welcome to the Black Knight Third Quarter 2020 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Steve Eagerton, Investor Relations with Black Knight. Thank you. You may begin.

Thanks. Good morning, everyone, and thank you for joining us for the Black Knight Third Quarter 2020 Earnings Conference Call. Joining me today are Chief Executive Officer, Anthony Jabbour; and Chief Financial Officer, Kirk Larsen. Our results were released this morning, and the press release and supplemental slide presentation have been posted to our website.

This conference call will include statements related to the expected future results of our company and are, 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 SEC 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, is provided in the press release and supplemental slide presentation.

This conference call will be available for replay via webcast through Black Knight's Investor Relations website at investor.blackknightinc.com.

I'll now turn over the call to Anthony.

Thank you, Steve. Good morning, everyone, and thank you for joining us for our third quarter earnings call. This was a strong quarter for Black Knight, during which we continue to execute against our strategic growth initiatives, including adding new clients to our core platforms, cross-selling, delivering innovative solutions and making strategic acquisitions.

Our sales have been particularly strong so far this year despite the challenges from this unprecedented environment. This illustrates that forward-thinking lenders and servicers are seeing the value of our innovations, the integration of one Black Knight and our sense of urgency in all that we do, and they want to reap the benefits that our valuable solutions offer.

First, let me provide an update on each of our businesses, beginning with our servicing software business. In the third quarter, we signed 3 new clients to MSP, including Caliber, a top 25 nonbank servicer, which I mentioned on the last call, and 2 mid-tier servicers. Year-to-date, we've signed 5 new MSP clients representing over 750,000 loans. We also renewed our MSP contract with Dovenmuehle Mortgage, a top 10 servicer.

In our origination software business, we've continued the momentum selling Expedite, AIVA, fee services and Exchange, which are solutions that can be used with any loan origination system. At the end of last year, we reorganized the team that sells these solutions, and the results have been remarkable as we've seen sales contract value more than double.

We also had continued success selling Empower to mid- and top-tier lenders. In fact, we signed 2 new lenders to our Empower platform in the third quarter, in addition to signing the Truist long-term renewal that includes adding the BB&T production onto Black Knight systems, which we've previously discussed.

Next, I'd like to talk about our Data and Analytics business. Last year, we launched the Rapid Analytics Platform or RAP. We signed twice as many clients to RAP in the third quarter than we have since launching the product last year, which speaks to the value our clients see in the solution to help them make informed business decisions and develop effective and informed strategies. In addition to being a powerful platform, RAP drives more bundled data sales and is a differentiator when it comes to customer renewals.

At the onset of the pandemic, we launched the McDash Flash data set to give clients deeper daily insights into the impact of the coronavirus on servicing performance. In the third quarter alone, we executed 8 deals that included both McDash Flash data and RAP. The company that will be leveraging these unique solutions include 4 of the top investment banks and a Federal Reserve bank.

I frequently share with our clients, our colleagues and with you our intense focus on innovation, integration and urgency. It is this commitment that has enabled us to launch our next-generation customer service solution, which helps MSP clients better support their customers by displaying all the information they need to respond to a caller's questions in a single location so they can respond quickly, efficiently and accurately. We've signed 4 clients to this solution since launching it last month.

We also continue to add capabilities to our digital origination suite. Our digital point-of-sale solution, which is now generally available, simplifies the loan application process by leveraging AI throughout the process and enables consumers to complete the loan application under schedule and from any device. Complementing this solution, we have also delivered a digital solution for loan officers, which gives them a single mobile responsive platform with all the tools they need to serve their customers anytime, anywhere.

Next, I'm going to talk about some enhancements we've made to our Expedite Close solution, which uses advanced intelligence to select the best, most permissible way to digitally close a loan for each jurisdiction. In the third quarter, we acquired DocVerify and integrated this leading software into Expedite Close to support e-notarization and remote online notarization.

Another innovation in the digital mortgage life-cycle journey is our new guided close solution that guides borrowers on the document-by-document basis through the closing package. Together, these solutions are transforming closings into a more efficient and contactless process. As the trend towards a fully digital mortgage process accelerates, particularly in the socially distance environment, these solutions further enhance our clients' ability to serve their customers where they are.

All the solutions I just mentioned are integrated and further our digital footprint. We are the only provider in the industry that offers comprehensive platforms across the loan life cycle as well as digital solutions that could be leveraged at any point in the process to help our clients be more efficient and better serve their customers, which leads to increased customer satisfaction and retention.

Finally, we continue gaining traction with our innovative servicing digital and loss-mitigation solutions. In fact, we now have 43% of the loans on MSP signed for servicing digital and 34% for loss mitigation.

Next, I'd like to give an update on our acquisition of Optimal Blue, which closed in September. By combining the Optimal Blue and Compass Analytics teams and offerings, we now have the leading product, pricing and eligibility engine as well as the premier hedging capability in the industry. The combined team has a great deal of experience in both mortgage and technology that will help drive continued innovations for our company.

We've already started to identify ways we can aggregate our strong data assets to deliver even more valuable analytics and insights to our clients. The power of this combined set of solutions is resonating with clients of both companies. I look forward to providing you with additional updates on this acquisition on future calls.

In closing, it's clear that the core fundamentals of our business remain strong, and we continue to execute on our strategy to drive revenue growth by adding new clients, expanding relationships with existing clients, delivering innovative solutions and pursuing strategic acquisitions. I'm excited about the momentum we have built and how we'll continue to transform the industry.

Thank you for your time today. Now I'd like to turn the call over to Kirk for a financial update.

Thank you, Anthony, and good morning, everyone. Today, I'm going to discuss our third quarter results and our updated outlook for the year.

To summarize, the underlying performance in the third quarter was very strong. The results came in as we expected, with the exception of origination volumes that came in higher. It was another quarter that demonstrated the resilience, visibility and predictability of our business. With that said, I'll take you through the details and our outlook.

Turning to Slide 3, which shows our GAAP results. On a GAAP basis, third quarter revenues were $313 million, an increase of 4.5% compared to the prior year quarter. Net earnings attributable to Black Knight were $128 million, an increase of 243%. Diluted earnings per share was $0.82, an increase of 228%. The effect of our investment in Dun & Bradstreet was an increase in net earnings attributable to Black Knight of $87 million or $0.55 per diluted share, primarily related to an $88 million noncash gain as a result of their initial public offering and concurrent private placement. Net earnings margin was 36.7% compared to 12.5%.

Turning to Slide 4, I'll now discuss our adjusted results for the third quarter. Third quarter adjusted revenues were $313 million, an increase of 4.5% compared to the prior year quarter. Adjusted EBITDA was $155 million, an increase of 3%. Adjusted EBITDA margin was 49.5% compared to 50.1%. Adjusted net earnings were $81 million, an increase of 7%. And adjusted earnings per share was $0.52, an increase of 2%.

Turning now to Slide 5, I'll discuss our Software Solutions segment results. Third quarter revenues for the Software Solutions segment increased 1% to $260 million. Our servicing software solutions revenue declined 4% as a result of the previously discussed headwinds, including the effect of the foreclosure moratorium. The year-over-year performance improved from the second quarter as a result of the Bank of America conversion and the anniversary of certain of the previously discussed anomalous headwinds from 2019. We continue to be pleased with the underlying performance in our servicing software business and the outlook for growth as we look forward.

In origination software solutions, revenues increased 20%, driven by new clients, high origination volumes and revenue from acquisitions. Optimal Blue contributed $5.5 million of revenue in the third quarter. Third quarter EBITDA decreased 1% to $152 million, and EBITDA margin was 58.4% compared to 59.5% due to unfavorable revenue mix.

Turning to Slide 6. Third quarter revenues for the Data and Analytics segment increased 27% to $53 million, primarily driven by strong sales execution, higher origination volumes and revenue from an acquired business. EBITDA increased 74% to $18 million. EBITDA margin was 34.5%, an increase of 940 basis points from the prior year quarter. Adjusted EBITDA for the corporate segment was $1 million unfavorable compared to the prior year quarter, driven by higher incentive-based compensation.

Turning now to Slide 7, I'll walk through our debt structure. At the end of September, we had cash and cash equivalents of $31 million. Total debt principal was $2.323 billion. We had revolver capacity available of $612 million, and our leverage ratio was 3.6x.

Before I walk through our updated outlook for 2020, I'll go through the details of our investment in Dun & Bradstreet shares. Turning now to Slide 8, we own 54.8 million shares. The market value of this investment was $1.407 billion based on the $25.66 closing price of DNB on September 30. Our invested capital was $493 million. That puts our unrealized pretax gain at $915 million, our unrealized after-tax gain at $683 million and the after-tax value of our DNB investment at $1.176 billion. It goes without saying that we have been very pleased with the performance of the DNB team and our investment.

Turning to Slide 9, I'll discuss our updated outlook for 2020, which we are raising to reflect the Optimal Blue acquisition, the outperformance in the third quarter and expectations for the fourth quarter. Revenues and adjusted revenues for the full year are expected to be in the range of $1.229 billion to $1.235 billion. Adjusted EBITDA is expected in the range of $603 million to $608 million, and adjusted earnings per share is expected to be in the range of $2.03 to $2.07.

Additional modeling details underlying our outlook are as follows: we expect full year interest expense of approximately $64 million; full year depreciation and amortization expense of $136 million, excluding the net incremental depreciation and amortization resulting from purchase accounting; an adjusted effective tax rate of approximately 19% in the fourth quarter and 22% for the full year, including certain discrete tax benefits; and fourth quarter weighted average shares outstanding of 156.5 million and full year weighted average shares outstanding of approximately 153 million.

Thanks again for your time this morning. I'll now turn it over to the operator for Q&A.

(Operator Instructions) Our first question is from John Campbell with Stephens Inc.

Congrats on the quarter. Really good success with innovation efforts and then closing on Optimal Blue. That's great work. Congrats.

Thank you, John.

Thanks, John.

Thanks so much.

First question, how many loans, if you can just update us, how many loans on MSP now? And what's the expected kind of loan count once you get through the implementations?

Loans today are $32.7 million; on first, 3.4; on seconds, which is 36 total. So market share is 61% on first, 26% on seconds; and then pro forma to be a little over 62 on first and about 29 on seconds.

Okay. That's helpful. And then on Optimal Blue, I think you guys originally kind of framed that up as 100 -- I think $120 million growing 30-ish, 35%, something like that. It looks like you guys might be a little ahead of schedule now. So if you could just maybe provide us an update on kind of Optimal Blue outlook and if you could maybe give us a little bit more color on the contractual versus transactional mix at this point?

Yes. It's still in that area, John. It came in, frankly, as we expected for the 2 weeks we had in the third quarter, and the forecast for the fourth quarter was in line with that expectation, so right in that $120 million area.

From a transactional versus subscription, it's about 80% subscription, a little bit less. But it's a very -- it's a business that is very similar to most of what Black Knight is with that very high subscription content, a little bit of benefit from volumes, but not nearly as sensitive as some other origination software providers in this space. So very high recurring, which, as we talked about last quarter, is something that we really like about the business is that predictability and consistency in the revenue base and then, of course, the high incremental margins.

Okay. And then on the modeling, I know they have a little bit of Data and Analytics revenue, but is it safe to assume that the vast majority of that falls into origination for you guys?

It all does. So Optimal Blue fully reports into our origination software business. We actually, with the combination of Compass, created a secondary marketing technologies division. That's the combination of Compass and Optimal Blue.

Our next question is with Andrew Jeffrey with Truist Securities.

Optimal Blue seems to be a terrific fit and, obviously, very strong future growth drivers. Anthony, can you talk a little bit about maybe a product road map and exactly what -- how we might think about the integration of Optimal Blue solutions and perhaps new solutions that grow out of the consolidated entity? Is that a '21 event? What's the kind of time frame and the road map there?

Sure. Well, the first integration, Andrew, is integrating Empower with Optimal Blue, and that's targeted for Q1, off and running in terms of the project, the selling, sharing leads back and forth, et cetera, on a more broad basis. But on that integration, it's looking Q1.

And in terms of really new possibilities coming from it, as Kirk said, we created a new division, our secondary marketing technology division, where we put our Compass Analytics business together with Optimal Blue where I think we have a lot of great collaboration and specialization in that space. And we'll constantly find new ways to innovate and ideas to come up with. The one that probably has the most team right now that we're pursuing is a trading platform.

Looking at what Optima Blue had previously, but adding seasoned loans to it from MSP and the analytics and the data that we have on those loans is probably the soonest one. And I imagine we'll launch at some point next year and do what we always do, work with our clients, beta test, learn, pivot and then come on a GA basis.

Okay. That's helpful. And then I just -- I wonder if you could just comment on the macro environment to the extent that rates stay low and the purchase market is robust. As we start to see perhaps some increased foreclosure activity, is this kind of the best of all possible worlds looking to next year for Black Knight?

Well, like I said, the thing that we pride ourselves on is not being affected as much by other impacts in the environment. But certainly, as you've seen, unnatural things can occur, such as the foreclosure moratorium, which did occur. And as we see things improving, saw the Pfizer announcement this morning and, hopefully, unrelated to our call, it's good for all of humanity in terms of we work our way out of this pandemic. But certainly, rates are low. They're looking to stay low. I think President-elect has talked about tax credits to spur on more purchase for low income.

So we anticipate that continuing. We -- the foreclosure moratorium does next year, we'll see. I mean -- but we're certainly in a good spot. There's headwinds and tailwinds, I think, that we can go through across all these things. So we're starting to think about them. Would there be an increase in regulations, for example, as a potential headwind to the industry? It's something that's been classically a tailwind for a company such as ourselves where strong industry leaders or clients turn to, to stay within guidelines. So we'll work through that, but we certainly feel good about where we're positioned. We feel good about next year.

Our next question is with Ashish Sabadra with Deutsche Bank.

So first one, on the origination suite, you've built out a great product there with combination of the digital suite plus the Optimal Blue. I know it's still very early days, but I was just wondering how are your client conversations? How is the pipeline building up for the origination suite? Obviously, you've had a really great success over the last few quarters, but how do you think about the momentum going forward?

Sure, Ashish. We feel great about the momentum going forward. I certainly feel that the -- we're leaders on the digital channels and prior to the pandemic, and that's just exaggerated the trends and accelerated them. And so the innovation that we're bringing to market really is resonating with our clients, and we're seeing them in conversations that we're having with them and our prospects. So short answer is we feel very good about how we're positioned there.

That's great. And then just quickly on Data and Analytics. Kirk, if you can give us what the organic growth there was, excluding mortgage and the acquisition. And then a follow-up there, obviously, pretty strong momentum there as well, 8 new deals. Can you just talk about how do you think about -- again, are you gaining market share in that business? And what's driving that strong momentum? You called out the RAP platform as well as McDash. But just wondering, are there other products which are in the pipeline as well? Any color on those fronts?

Sure. So to answer the first question, the quantitative aspect. If you back out Collateral Analytics and the effective volumes, it was about 6% growth. So very consistent, and we actually -- we continue to be very pleased with that performance as well as the margin performance in our Data and Analytics business. So very consistent with the last several quarters, so very good performance there.

From a what's driving it? It's actually pretty broad-based. We are continuing to focus on cross-selling to the existing client base and leveraging those relationships. We're leveraging the sales and the receptivity of the Rapid Analytics Platform, which not only is a way -- it's not only a platform sale, but it's a way to deliver more data. And so it's actually a way to deepen those partnerships as well. But it's really across the board, and it's been remarkably consistent over the last 4 or 5 quarters what that performance has been. And we think that that's a reasonable expectation as we go forward as well.

And congrats on such solid results.

Thanks.

Thanks, Ashish.

Our next question is with Tien-Tsin Huang with JPMorgan.

Really, everything was very strong. Everything is ahead of our expectations, it looks like, except for the servicing margins came in a little bit light. You overcame it with revenues overall, I know, but just trying to think about that line there, specifically. I know Bank of America boarded. You've got mix, et cetera. Any one-timers to call out there or considerations for that line ahead?

Tien-Tsin, you're saying Software Solutions margins?

Yes.

Yes. It's a good question. Really, it does -- there's no one-timers on -- from an expense perspective. In the third quarter, we didn't have the benefit of lower medical costs like we had last quarter. That was something that happened that didn't recur. We got back to more of a normal level from a year-over-year basis.

It comes down to revenue mix, really simply put. So some of those anomalous headwinds were transactional with very little related variable costs. We had that termination fee in origination last year. Those come at 100% margin. And then it's replaced with margins that require support, even on a relatively limited basis with the new clients and then, of course, some of the acquired businesses. So it really is a revenue mix story more than anything. There's really nothing else to note.

Got you. And then just on the change in the guidance here, is it predominantly Optimal Blue coming in with the acquisitions? Or is there some underlying performance benefit there? Is there any way to maybe break that up for us a bit?

Sure, sure. So we exceeded our own expectations in Q3 because of volumes. And so if you take the Q3 beat, excluding Optimal Blue, that would be kind of the first layer. The next layer would be Optimal Blue. And it's -- I think you can back into what those numbers are. And then there's an incremental amount above that if you look at it where the new guidance range is. And that's, frankly, in an environment like this, when we came into our -- we gave our guidance for the second half of the year, we didn't think there is any reason to be anything other than potentially a bit conservative.

And so with 6 months left in this environment, there's even with -- as predictable as our business is, we felt it prudent to be a little conservative. Now we have 3 months left, there's only -- there's -- it's half the time remaining. And so I think we tuned up the guidance, narrowed the range, raised it. And now we get back to sort of thinking of things at the midpoint going forward. So -- but it really is that. It was, first, volume; second, Optimal Blue; and then third, it was just a bit of conservatism in the prior guidance.

Yes. Always happy to see the raise.

Thanks, Tien-Tsin.

Our next question is from Ryan Tomasello with KBW.

Congrats on a strong quarter.

Thanks, Ryan.

Just following up on your comments to an earlier question. It seems like one of the lower-hanging fruit opportunities at Optimal Blue is the cross-sell to the existing Empower clients once that integration is completed. So can you talk about what that sales cycle will look like? I know, Anthony, you mentioned it's ongoing, the level of adoption you might expect there from Empower clients. And what the opportunity could be in terms of revenues from those clients?

I'd say in terms of in how I see the sales process progressing is we're in constant communication with our clients about all the innovations that we've got coming out. The majority of Empower clients had, basically, had built in a PPE engine inside of Empower. And obviously, Optimal Blue is a lot more powerful. So we're excited to bring that new capability to those clients. And as we sell new Empower deals, we will sell them with Optimal Blue just bundled in and automatic and already integrated.

So what we want to do is we want to change just how we go to market in terms of selling a loan origination system. Of course, it has a PPE engine integrated into it. It's not a separate decision. More and more capability that we're bringing to market, we want to bring it integrated into a sales cycle and do more and more in a more integrated way, making it easier for our clients. So that's really what our focus is from a revenue perspective.

Yes, we usually look into pricing for particular deals. But it's -- as Anthony said, we'll end up bundling it into each of the deals. And for existing deals, we'll add it on a per-loan basis and then, of course, get the benefit of having minimums in the contracts as well. But it's -- I think it's something that certainly will be a nice add to the revenue per loan that we'll get from our Empower clients. And certainly, it will be something that will help contribute to that 20% growth that we've talked about over the next several years for Optimal Blue.

Great. And then 2020 is clearly shaping up to be a very strong year in terms of new sales and implementations. So I guess without explicitly asking for anything about 2021, could you maybe walk us through the moving pieces as we think about the organic growth power in the business next year that is already really in the bag per se from recent sales, layering in Optimal Blue being naturally accretive to growth as well as some other factors like the ongoing impact of forbearance and foreclosure moratoriums into next year? And specifically, for recent client wins and implementations across software and D&A, is it possible to quantify the cumulative impact of those from a run rate revenue perspective?

Sure. I'll take that one, Ryan. It's a great question. Certainly, it is that time of year where we're working on budgets and thinking about, in very detailed terms, all the things that you're asking about. It's a bit premature for us to go through those details. But what I will do is walk you through things in 3 buckets. There's a tailwind that will drive the growth next year, the known headwinds as we sit here today and then some things that are kind of a coin flip, I'll say, meaning we don't exactly know which direction it's going to go next year at this point because things can change.

But it's -- the single biggest driver of growth, as it always is, is going to be the revenue related to new clients on our platform, so MSP, Empower, foreclosure and bankruptcy, the private primary platforms. And I would say we certainly have a nice backlog going into next year. I won't characterize it where it is relative specifically to where we are this year, but we'll get -- we will have a full year of Bank of America versus 5 months this year and then certainly have other clients that have gone live or are signed and will go live next year. So that will be the primary driver of growth next year. And we'll go through the details of what our expectations are for that when we give full guidance on our next call.

The other thing benefiting next year is going to be a return to more typical attrition. So we will have gotten, let's say, almost entirely through the anomalous headwinds we talked about from last year as some of those have abated. Another one will abate later this year and then just a little bit of carryover to next year. So we'll get back into that 2-ish percent kind of attrition level that we had experienced in the past. And then as you said, the accretion from the Optimal Blue growing at the rate that it's growing. So just not thinking of it just as we'll have a full year of it, but it is accretive to our overall organic growth rate.

From a headwind perspective, in origination volumes, there's a large refinance eligible population, but we and most others are calling for next year's refi to be lower than this year. Where that ultimately lands, we all will have to wait and see because it can be -- it can move around a bit. But as you think about that number, as Anthony said before, we're just not that sensitive to origination volumes. So this year, with the significant pickup and record-level originations, it's a couple of points of growth. And so as you think to next year, if there is a headwind, it's 1 to 2 points maybe. Somewhere -- we will go through those details and tell you our assumptions on the next call. But it's, in the grand scheme of things, it's just not a big number.

And then one kind of a smaller detail, but I'll tell you this just because it's something we know is, as you know, when we implement our clients on our platforms, MSP and Empower, for example, they -- we -- many times, we get paid for the implementation, and we recognize that over the life of the contract. We had a relatively large client that renewed and this year got to the end of the first contract and renewed and extended, and so that deferred revenue amortization has now been fully recognized. And so that's probably 0.5 point or so of headwind next year. So not the biggest number, but I'll point it out because you asked.

And then the last thing, as you think about the piece of the third bucket, where I say it's something that we don't know at this point, is the foreclosure volumes. I would say, as we sit here today, we expect them to come back in the second half of next year, but the exact timing and quantum is something that we're going to have to monitor. And it's another thing that I would expect that we would be very explicit with what our assumptions are when we give you guidance for next year, so we can all measure against the same set of assumptions. So that's kind of the revenue side.

One quick thing I'll just -- I'll mention on the expense side is we, like everybody else this year, benefited a bit from, on the expense side, related to travel and entertainment and sales and marketing costs because we're all working from home as well as we, and I know many others, also experienced lower medical costs. And those are things that, as we look to next year, will return maybe not back to norm because things won't fully be normal next year, but certainly, there'll be some element of those coming back. And we'll talk about that, too, when we give guidance next year.

But those are -- as I think about the building blocks for next year, that's how we're thinking about it. And I think it will be important next year giving some of the variables there that we go through those details with you, but that will be something we'll go through on the next call.

(Operator Instructions) Our next question is with Jake Williams from Wells Fargo.

I wanted to touch on the strong margin expansion in D&A. How much of that was driven by favorable operating leverage with the originations tailwind versus any structural cost reductions or anything more ongoing?

That was more about volumes. That was more about -- and I wouldn't say just origination volumes, though, because it was growing 6% on a natural basis. And so it really is the operating leverage in the business. There were no [recourse] cost actions there that really benefited. But it really is a business that we've been very focused on positioning it for efficiency.

And so in most cases, we've made the investment once and we can deliver it many times, which is the way we like our business to run. There are certain aspects within volumes that do bring with them some cost of goods sold. But in other cases, it's a matter of selling it, and there isn't a whole lot of variable costs. So we're, as I said before, very pleased with the performance in that business and maintaining for now with the third quarter in a row of margins over 30%, and that's going to be a focus to continue going forward.

Our next question is with Stephen Sheldon with William Blair.

Just one quick one here. I just want to ask on the servicing side -- and thanks for giving the market share update. I think you said 29% on second lien, and I know you had KeyBank recently. So just wanted to ask how conversations on the second-lien side, in particular, are going and the potential for market share to continue moving higher as we look out over the next few years.

Well, we continue to have lots of great conversations around it. The value proposition that we came out with continues to -- actually continues to resonate more because now as we come up with servicing digital, that also works with the second-lien solutions as well. So it's a more holistic solution even than when we previously launched it. So we feel very good about our continued momentum that we're having in the space and look forward to continue to provide you updates on new wins as they come.

Our next question is from Mihir Bhatia with Bank of America.

I wanted to ask about the Data and Analytics business. You saw some nice growth there this quarter, but really it has a lot of pieces in it. So one question I did have is, are there -- can you provide maybe a little bit more color on certain things that might be resonating a lot currently? And is there anything in there -- like is there any risk that this is resonate -- like those pieces are resonating because of elevated forbearance and people maybe need a little bit more data and analytics, and some of that could start dropping off next year or the year after that? Or is it more the case of generally, once you get in there and you start providing some of these data, it tends to be pretty sticky and the customers don't give up that data that easily?

Sure. There's probably a few things I'd attribute the success we're having in D&A growth, obviously, in addition to great leadership and doing all the right things. The first is RAP and the introduction of our RAP platform, it really gives an opportunity for our clients to view their data with our data to -- in a sandbox, so to speak, and really look for new insights from it. And so it's powerful in that way and has led to a lot of data sales for us. So that would be one.

The second would be our McDash Flash. So early on when the pandemic broke out, we're very quickly working with all sorts of agencies and organizations in sharing our data as to what we're seeing really on the front lines, and that's contributed to interest and, I'd say, relationships that have been grown beyond the initial forbearance relationship into other types of data and analytics we can provide to these organizations.

And the third, I'd say, is really just our integration to our core platforms. So again, we really -- we talked about servicing and originations and data and analytics. But from a client perspective, we just want them to see one integrated Black Knight. And so as we integrate our offerings more and more into these core platforms and we sell them and include them in the packaging, that's really continuing to help us grow that business as well. So these are the 3 areas I'd probably call out.

Got it. And then just one last question for me. Now that Optimal Blue is kind of acquired, I guess, is closed, can you just talk about what your capital allocation strategy looks like from here? In terms of your appetite for M&A, is it more likely near term to be smaller tuck-in type acquisitions? Or is it you're still, I think, open to wider and just generally on your capital allocation? That will be all.

Sure. Yes, at the macro level, our priorities have remained unchanged from a capital allocation perspective. First, we're going to continue to invest in internal investment in innovation. We're very pleased with what we're seeing there and obviously going to stay the course. But as you said, with the acquisition of Optimal Blue, we've increased our consolidated leverage to the mid-3s. And so I'd say, near term, we have a focus on delevering, which will happen quickly based on the growth in EBITDA as well as our significant cash generation. But that delevering won't reduce our abilities to have potential tuck-in acquisitions or, obviously, our continued focus on internal investments.

Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back over to Anthony Jabbour, CEO, for closing remarks.

Thank you. In closing, I'm confident in our ability to grow market share and continue delivering significant value to our clients through our powerful and integrated solutions by acting with urgency to support their success. These efforts will continue to drive long-term growth and create value for our shareholders.

Finally, I'd like to thank my colleagues for their extraordinary work and commitment to our clients and to our clients for their trust and partnership. Last, I'd like to thank our shareholders for their ongoing support. Please stay safe, and have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.