Black Knight Inc (BKI) 2019 Q1 法說會逐字稿

Greetings. Welcome to Black Knight First Quarter 2019 Earnings Call. (Operator Instructions) Please note, this conference is being recorded. I will now turn the conference over to [Ed Ewing], Investor Relations. Thank you. You may begin.

Thanks. Good morning, everyone, and thank you for joining us for the Black Knight First Quarter 2019 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 are -- that forward-looking statements are subject to are described in our earnings releases, 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 the call over to Anthony.

Thank you, Ed, and good morning. Thank you for joining us on our first quarter 2019 earnings call. We're off to a solid start for the year. Our first quarter results reflect a consistent execution of our strategy to drive organic growth through expanding relationships with existing clients, adding new clients and delivering innovative solutions.

We just returned from our annual client conference where we had the opportunity to meet with 1,200 attendees to discuss their operations, business challenges and what we're doing to support their continued growth. We heard from our clients that they're in a difficult environment, and we were able to share our progress on developing products that will help them address what continue to be their greatest challenges: growing revenue, increasing efficiency and maintaining regulatory compliance. We provided demos and updates on our latest innovative solutions like the Actionable Intelligence Platform, which now has more than 100 actionable analytics that help our clients address the challenges I just mentioned.

We gave updates on AIVA, our artificial intelligence virtual assistance tool, that automates repetitive tasks to help our clients improve turn times, reduce expense and invest more in growing their businesses.

We also provided updates on Servicing Digital, which allows our clients' customers to use their mobile device to quickly make loan payments, review payment and refinance options and get notifications and other information about their home and neighborhood. Servicing Digital is now live at 3 clients, including Citizens Financial Group, which began using it last month.

We also introduced several new digital solutions at the conference. One new solution that we introduced was our point-of-sale offering that allows lenders to enable their customers to apply for a loan from any mobile device or computer. While there are other point-of-sale solutions on the market, there are 3 key differentiators to Black Knight's point of sale. First, it completely and wholly integrates with Empower so the information that is entered is automatically fed to the Empower system, creating a seamless and quick application process.

Second, data stays in sync to the Empower database throughout the process so there are no other databases to keep in sync. And finally, we've integrated AIVA, which adds efficiency and increases accuracy in the data review process and can alert a lender's prospective borrowers in real time if there are issues with documents that were submitted.

We also introduced loan officer digital and customer service digital. These digital solutions allow the loan officer or customer service representative to see what their customers are seeing so they can answer questions and make sure their customers have the best possible experience. Both of these digital tools increase efficiency, customer satisfaction and customer retention. And loan officer digital can help lenders close loans faster.

I was also excited to introduce our enhanced correspondent functionality in Empower. When delivered later this year, lenders will be able to use Empower to support their retail, wholesale, assumptions, home equity, consumer direct and correspondent lending business all on a single platform.

At the conference, I heard one common theme from our clients: they're extremely pleased with the urgency with which we've delivered our innovative solutions over the past year, and they want us to do even more. We believe that the growing interest in these innovative solutions will help grow market share because they ultimately help lenders and servicers grow revenue and produce the overall cost to originate and service loans. In fact, we believe some of this growth in market share will be from smaller companies that may not have considered Black Knight in the past, but now see how our products can help lower their total cost of ownership.

On the new client front, Pentagon Federal Credit Union, the nation's second-largest federal credit union, signed a contract to use MSP as well as many of our other offerings, including our default solutions, Servicing Digital app and our Actionable Intelligence Platform.

Additionally, Members Mortgage Services, which supports the lending needs of credit unions, real estate professionals and individual home buyers in the Midwest, have signed a long-term contract to also use MSP and the Actionable Intelligence Platform as well as many other origination and data products.

We continue to make progress selling Empower to mid-market lenders in a competitive market. While we signed 4 clients since the launch of Empower Now! in 2017, based on the momentum we have built and our significant pipeline, we expect to sign 2 to 3x that many clients this year alone.

We continue to make progress with implementations across the business. On the servicing side of the business, we currently have 8 MSP implementations and 5 Servicing Digital implementations in process, including U.S. Bank.

On the LOS side, we are currently implementing 8 Empower clients. One of our commitments was to expedite the LOS implementation process so lenders could begin realizing the value of Empower even faster. With Empower Now! and our enhanced delivery process, we're able to complete many implementations in 6 months or less.

On the integration front, we recently signed a strategic agreement with LERETA to deliver enhanced tax reporting services for MSP clients. LERETA's a leading national provider of real estate tax and flood services. As part of this agreement, we are tightly integrating our MSP system with LERETA's data, which would allow MSP clients to add new loans to the system faster and eliminate the need to create manual tax reports. As a result, servicers will benefit from improved reporting accuracy and faster processing times to pay taxes, which mitigates risk by reducing taxed penalties and improves customer service.

In closing, we continue to deliver on our commitments and to focus on signing new clients, cross-selling our offerings, implementing signed clients and delivering new innovative solutions. These solutions help our clients grow revenue by gaining new customers, retaining existing customers and selling more products to those customers, and they help our clients increase efficiency and maintain regulatory compliance. We are excited about our opportunities for the future and to continue the discussions with our clients and prospects that we started at our client conference. Thank you for your time today. Now I would 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 first quarter results and our outlook for the full year.

Turning to Slide 3. On a GAAP basis, first quarter revenues were $283 million, an increase of 5% compared to the first quarter last year. Net earnings were $39 million or $0.27 per diluted share compared to $43 million or $0.29 per diluted share.

Turning to Slide 4. I'll now discuss our adjusted results for the first quarter. First quarter adjusted revenues were $283 million, an increase of 4% compared to the first quarter last year. Adjusted EBITDA was $137 million, an increase of 6%. Adjusted EBITDA margin was 48.4%, an increase of 50 basis points. Adjusted net earnings were $66 million, an increase of 3%. Adjusted EPS was $0.44, an increase of 2%. And finally, first quarter capital expenditures were $23 million.

Turning now to Slide 5. I'll discuss our Software Solutions segment results. First quarter adjusted revenues for the Software Solutions segment increased 4% to $243.5 million. Our servicing Software Solutions had adjusted revenue growth of 4% driven primarily by higher average revenue per loan and loan growth on our core servicing software solution.

In origination software solutions, adjusted revenues increased 7% driven by 25% growth in our loan origination system solutions partially offset by lower professional services and the effect of lower volumes on our exchange and eLending platforms reflecting the decline in refinancing originations as reported by the Mortgage Bankers Association. Adjusted EBITDA increased 3% to $141 million, and adjusted EBITDA margin was 57.8% compared to 58.6%.

Turning to Slide 6. First quarter adjusted revenues for the Data and Analytics segment increased 6% to $40 million primarily driven by growth in our property data and portfolio analytics businesses. Adjusted EBITDA increased 15% to $10 million, and adjusted EBITDA margin was 24.9%, an increase of 200 basis points. Adjusted EBITDA for the corporate segment in the first quarter was $2 million favorable compared to last year primarily driven by lower incentive-based compensation. We expect each of the remaining 3 quarters of 2019 to be higher than the first quarter with quarterly expenses approximating the average for 2018.

Turning to Slide 7. I'll walk through our capital structure. At the end of March, we had cash and cash equivalents of $12 million. Total debt principal as of March 31 was $1.680 billion. We have revolver borrowings outstanding of $426.5 million and $323.5 million of foreign capacity remaining under our revolver. Our leverage ratio was 3.1x on a gross basis and 3x on a net basis.

Turning now to Slide 8. I'll walk through our outlook for full year 2019, which is unchanged for the outlook provided on our most recent earnings call. GAAP revenues are expected to be in the range of $1.177 billion to $1.199 billion. Adjusted revenues are expected to be in the range of $1.178 billion to $1.2 billion. Adjusted EBITDA is expected to be in the range of $581 million to $598 million, and adjusted EPS is expected to be in the range of $1.90 to $2.

Additional modeling details underlying our outlook are as follows: we expect interest expense of approximately $67 million to $69 million; depreciation and amortization expense of approximately $135 million, excluding the net incremental depreciation and amortization resulting from purchase accounting; and adjusted effective tax rate of approximately 26%; and finally, CapEx of approximately $105 million.

Overall, we are pleased with our first quarter results and look forward to another strong year for Black Knight in 2019.

With that, operator, please open the line for Q&A.

(Operator Instructions) Our first question is from Tien-Tsin Huang with JPMorgan.

Just wanted to ask on -- first, on the Empower Now!, I suppose the signings outlook you'd called out. What's driving the step-up there? Is it driven by more sales effort or better capabilities like the mobile POS application tool you've mentioned? Just curious for more color there.

Sure. Good morning, Tien-Tsin. It's Anthony. The -- I'd say if you look back on -- in our previous earnings calls, we had talked about Empower Now! and building up the capability. I understand that market well in terms of what it takes for us to be successful not just in selling, but ultimately, we're focused on delivering well so that we have ongoing success in that space. And we've been building up our capabilities in terms of selling, implementing, supporting, and there's a natural progression there. But I think a lot of the innovations that we've been bringing to market as well are creating a lot of interest for our clients, and I think the combination of those 2 is really what's driven the increase.

Got it. Good. And then just as my follow-up on the modeling side maybe for you Kirk, just the lower professional services comment in the origination side. Given the implementations, level of work with the type of clients you have, is there something that we should consider here for the rest of the year on the professional services front and maybe the implications for margins as well?

Sure. What you're seeing there is -- so that's outside of the implementation process. Those are the sort of ongoing professional services that are performed, in some cases, dedicated teams. And at end of quarter, we saw a couple of clients that pulled back on their usage of those professional services. The good news is we have other places where those resources can be deployed, in many cases, into implementations. So just other work. But we did see a little bit of an effect on a year-over-year basis with a few clients very targeted where there was lower demand there.

Our next question is from Jason Deleeuw with Piper Jaffray.

Thanks for the updates, more details on the implementations and client wins. And I'm just trying to get a sense for how those implementations and client wins across servicing origination and innovative solutions. How are those tracking to plan so far in your guidance for the year?

They're tracking well. Like I said at the beginning of the year, we're looking at all the implementations. And some are larger, more complex. Some are smaller and more cookie-cutter, but we look at the range of them. And that's really what we factored into our long-term views of when revenues would hit.

And then just kind of a higher-level question. There are a lot of -- there's a lot of talk and a lot of players focused on innovation in the mortgage space, especially on the origination side. And obviously, you're doing a lot in that space. So what do you see as some of the biggest challenges to having a more digital and more innovative origination experience for lenders and borrowers?

And then also, is the tough or the slower volume environment, is that a hindrance right now to spending on solutions? Or is that actually forcing some of these lenders to look harder at some of these solutions?

Yes. Great question. I'd say on the innovation front, the -- I wouldn't say there's a lot of challenges for us to continue innovating in this space. When you look back over the past year and the amount of innovation that we've launched, I think it's incredible. And candidly, I don't think any other company in our industry has matched what we brought to market. And it was a real mission on our behalf that we want to help transform this market, and I'm very pleased with the results of the innovations that we have created.

Based on market conditions you're saying, as we all know, we're in the midst of our clients' recession, right? I mean I know the economy's doing well, and other industries are doing well. But with rates rising, it's caused pain. And I know you know that. It's one of things I'm very excited about with our business in terms of how consistently we've performed through a very tough time for our end clients.

But I think whether it's a good time for clients or a bad time for clients, when you're approaching them with solutions that solve their problems, it should always resonate. Whether they're in desperate need of some help and you've got a solution with a high guarantee of it being able to help, or when times are great and it's easier for them to spend, I really don't see either of them as a factor here. The biggest factor is our continued focus on innovation, our continued focus on our clients and delivering these solutions to help them with their greatest challenges, and that's what's resonating with them. That's what we're hearing.

Our next question is from John Campbell with Stephens.

Congrats on a solid quarter. So there was a pretty notable pop in mortgage activity in April, I think particularly refi. I mean who knows if that continues in May and beyond, but I'm just curious if you guys saw the same thing and whether that's considered in guidance. Or are you still thinking that mortgage is -- I think you guys said a 20 to maybe 30 basis point headwind for the year.

John, we did see a bit of a pickup actually even in the first quarter. But as we've talked about before, because it's such a small part of our business where specifically it's in -- on the exchange and in our eLending business where we would see the effect of refi, that it really wasn't a significant effect. And I don't expect it to be in the second quarter or beyond. So I'd say it's within the guidance ranges. There's always pluses and minuses, but we certainly did see the effect and certainly be terrific if it were to last.

Okay. That's great to hear. And then Anthony, I believe you said there's 3 clients live and then maybe 5 in the implementation process for Servicing Digital. Just curious -- I mean, I think you guys said originally in your initial guidance for this year that you expect it to be modestly accretive or a modest help on the revenue line. But how would you characterize just kind of the remaining backlog or maybe just the client conversations happening around, both Servicing Digital -- and then anything else around AIVA and AIP?

Sure. Yes. With Servicing Digital, it was the one that we highlighted to you last year when we first announced it, that we thought it would get to market on mass first and it would -- it hit the revenue line first. The others, we talked about a buildup. And as you heard in my prepared remarks, with AIP, we have over 100 analytics now as part of that package, which is great. It was funny at our client conference in our AIVA session, we had the fire marshal come in because it was standing room only and people were waiting outside. So to give you a sense of the interest in the product. So where they're not hitting the revenue line yet, there is significant interest from our clients and what it can achieve. So I do feel good about digital coming on. Like you said, we're going to price it per loan, and we're executing well against the project plans that we had set up early in the year. And with the addition of the new tools that we're creating to help on the customer service side, whether it be the loan officer for the point of sale or the customer service representative on the servicing side, we're also continuing to keep and enhance the interest in our digital solution which, as you know, is important. Our clients -- that's the area of spend where there's a lot of focus from them.

(Operator Instructions) Our next question is from Andrew Jeffrey with SunTrust.

I think you mentioned, Anthony -- just to make sure I have the numbers right, 8 MSP implementations in process and 5 Servicing Digital. I guess my question around that is what's the overlap? Or is there overlap? I'm thinking from an enterprise sales standpoint. Are any of those customers buying both? What's the frequency with which you've been successful making enterprise sales? Or just an update on that front.

Sure. I'd say as you think of some of the newer sales that we've launched, we are bundling the new capabilities. So if you look at Pentagon, for example, that included Servicing Digital as well as our AIP suite. So with the new clients that are coming on, part of the reason, like I mentioned earlier, we're able to increase our market share interest because they're seeing how the breadth of our solutions really fully integrated could be easily implementable and easily run at their organization. And they can get the benefits of it. So what I'd expect is as we continue to sell more and more into the MSP space, we'll continue to have more and more bundled solutions as part of that.

Okay. Does any of that form -- sort of the implied acceleration in revenue growth as the year goes on?

Andrew, the accelerated revenue growth, as the year goes on, really is related to implementation timing. As to when some go live and ramps, that's really what's driving that, which is really the typical story for us, is the single biggest driver of growth in any given period is going to be implementations.

And one thing I would add, Andrew, to what Anthony said before, from an enterprise concept, I would say that we are doing a better job than we ever have of selling across the enterprise. Ignoring the enterprise client definition for a moment, the level of integration of the sales teams and the businesses, I think, is the strongest that it's ever been. And so hence, we're able to bundle more solutions. We're able to penetrate the base better than we ever have. It's been a progression, but I think we're doing it better now than we ever had.

Okay. That's helpful, Kirk. And then just one quick one. On D&A, second, really nice quarter in a row. Maybe just a little more color, perhaps even from a market share perspective, as to what's driving that growth.

Sure. Well, I think to what Kirk has just mentioned in terms of our strong cross-selling in the organization, that's really been a key contributor for us in terms of facilitating additional sales in the space.

Yes. I think it really is all about sales execution and that integration, Andrew. So -- but it's a good another quarter, second quarter under our belt of above-trend growth. And I think as I look to the rest of the year, I would look more towards the mid-single digits as opposed to the low single digits for growth in that business.

Our next question is from Bill Warmington with Wells Fargo.

So a question for you on the origination side. There's -- you talked about a lot of activity with Empower and Empower Now!. I wanted to ask about -- or ask for an update on the progress penetrating the top 10 banks with Empower. I know it's a longer sales cycle, but maybe you can talk in terms of trials with new customers, some betas testing that's going on, how you think about that in terms of timeframe?

Sure. Well, Bill, like we said, we've got an ongoing focus with really not just the top 10, but that's in our DNA, focusing obviously on the largest clients because we've been servicing them for many, many years, but the entire market. But to answer your question specifically on the top 10, I would say that everything that we're creating, they're longer sales cycles I'd say. And our approach has been really what solution of ours can we get into the organization to help. So if it's not the origination, could it be just AIVA, and then grow the relationship from there. Our focus on correspondent lending, obviously, in Empower Now! is we're seeing growing interest in that space with some of the top lenders, and it's an area as well -- if you think about correspondent lending, it's really a loan that's complete and it's a quality assurance function that comes in. And so now if you look at AIVA and what AIVA can do, it can really help simplify that process. So what we're excited about is these innovations that we're bringing to market and integrating them. We're getting a 1 plus 1 equaling 3, and that's what's got us excited. And it's got a lot of the clients, existing clients who are now prospects with LOS, I think, very interested in our solution.

Bill, one thing I'd add is if you think about Empower as well and the fact that we're adding the corresponding capabilities, we talked about that with the Citi deal, to the extent that you can get in with a lender even in one channel, whether it's home equity or whether it's correspondent, that gives you a foothold from which to further sell. And it's really just turning on capabilities at that point. So whether you start with the retail channel or the wholesale channel or correspondent or home equity, all of which can be done on Empower, you start with one channel, and you can grow from there. And it's really a good place to start the conversation and then expand.

Got it. And that leads to my follow-up question, which as you guys called out, the 25% year-over-year growth in the loan originations piece. That's particularly strong, and I just wanted to ask for some color there in terms of how much is being driven by new clients. Is it expansion of existing clients? Maybe some new products fit in there as well. I just wanted to get some color there.

That's really driven, Bill, by new clients. That's really the driver there. That's been the driver over the last several quarters where the performance has been very strong, and so that's really -- that's the story.

Our next question is from Bose George with KBW.

This is Tommy on for Bose. When I think about the growth in the revenue per loan on the servicing side, is there any way to quantify the impact of clients adopting Servicing Digital versus just what we see with the standard kind of step-up in your contract prices?

Sure. Tommy, just for point of clarity. When we refer to the revenue per loan, that's really more the price per loan for processing on MSP. That's really what we're referring to in that comment. So that's the annual price escalators and any other increases in price upon renewal. What I would say as it relates to some of the other additional services like Servicing Digital and other potentially specialty servicing products that we would also price on a per-loan basis, whether it be loss mitigation or claims or some of the others, those would be -- those are incremental to the price per loan for the base processing of MSP, but they're really incremental. It's not -- order of magnitude, it's very different than the overall processing.

Okay. And for the clients that are -- showcase this and choose not to adopt these solutions, sort of what's the feedback as to why? Is it just not like a willingness to kind of pay up for it? Or is it something that they feel isn't necessary? What's their kind of response there?

Well, I think -- I'm not sure if it's a trick question, Tommy, because we got such sales success so early on in the life cycle for our digital offering that it's just overwhelming. It feels like our solution is resonating with the market, and it's filling a need that doesn't exist. So if you think of it, and if you look specifically at the clients of ours at our banks, I mean, they've had digital capabilities going back 8 years or so. Yet on the mortgage side, there was a gap that we're filling, and I think the message is resonating. It's hard to imagine a world without more and more digital capabilities. And if I asked you or myself do I think we'll do more digital, use more digital apps in the future versus I do now, it's absolutely -- we know we both will. And so our clients are feeling that, seeing that.

The mortgage industry, as I've mentioned previously, has got very low retention rates. And so of all the things that you can do to try and maintain a relationship through a refi cycle or a new home purchase cycle, I think it's critical. And I think our clients agree as well. And like I said I'm very pleased with the results that we're seeing, and I'm anticipating continued growth in the business.

Our next question is from Ashish Sabadra with Deutsche Bank.

Congrats on the pace of implementation as well as solid pace of innovation. So my question was you've done tuck-ins as well as organic innovation and as well as partnership. As you look forward, are there further opportunities for partnership as well as tuck-in acquisition as you increase the portfolio of products that you can offer to your customers?

Well, I'd say we first look to build, and then we'd look to buy in the space. And what I'd say is internally, we're getting more and more in full stride in all aspects of the business. I think from an innovation perspective, candidly, I'm surprised and very excited with the amount of innovation that we created within the year. And I'm grateful obviously for my colleagues who put their shoulders into it. It's certainly more than I thought.

And as Kirk mentioned, on the sales side and integrating of our selling, integrated of our servicing and delivering to our clients, I'm very pleased with the continued progress we're making. And so I think looking to the future, I imagine that we will build more and more innovation just because we're building the muscle. And we're getting better and better at it. So I expect that. But look anytime there's a great tuck-in acquisition opportunity, we always want to take advantage of it.

But what's important here, if you look at the full life cycle is not just buying a product, but when you look at the full cost of how do you integrate that product into everything that you do, into your selling, into your delivering, into your support and implementation, that's what you really have to analyze. And oftentimes, that integration is not kind of factored in up front. And so just buying a bunch of companies and never integrating them is not the right answer either. So we're being very thoughtful about not just what we innovate, but how we innovate, how we remove the friction from our clients so they can take the solutions that we bring to the market quickly and easily. So again, it ultimately drives value for them by increasing the revenue and improving their margins and keeping them compliant.

That's really helpful. And maybe a quick question on servicing. I was just wondering, any initial feedback as often as ramping on your MSP platform? And then just a quick question on the new residential mortgage -- they are moving some of the servicing loans away from Ditech. I was wondering if you had any update on that front?

Sure. I'll maybe take the Ditech one. Kirk, if you can comment on the former question? Now with Ditech, obviously, we're working through and staying very close with them. We're deemed a critical vendor to them, as you'd imagine. And what I can update you on so far is that we've got clarity on one tranche of their loans remaining in the MSP family, which we're obviously very excited about. But that's really the only update we have at this stage.

Ashish, can you repeat the first question?

Yes. No. Just any initial feedback as [often] is ramping onto the MSP platform.

Yes. I'd say that the implementation has gone well. But I think for any specific feedback, I think they'd be -- be best to ask them the question. But it's ongoing. It's going well and progressing as expected.

That's great. Congrats once again on a solid quarter.

Thank you, Ashish.

(Operator Instructions) Our next question is from Stephen Sheldon with William Blair.

First, as we think through all the new products that you've been introducing, you've given some color on this, but just as you've gotten more feedback from clients, especially at the annual conference, can you maybe help us frame your view of how important the financial contributor of the different products could be over the next 2 to 3 years? I'm guessing Servicing Digital would be the frontrunner. But how should we think about the relative significance of other products like AIP, AIVA, the Rapid Analytics Platform and some of the new ones you talked about today like the point-of-sale solution?

Sure. I'll take the first half and let Kirk comment on the revenue timing. What I'd say from our clients at the conference, the feedback was overwhelming. And that wasn't a surprise to me, candidly. I expected -- I looked at the amount of new really exciting capabilities that we were bringing to market for them. I anticipated that they were going to be very excited with that and for us to work with them and find ways to help them enable it and help drive their business.

What I was surprised was the feedback from my colleagues at Black Knight that, for them -- many of them have been in their lanes working hard, delivering their capability. And at the conference, when they met with clients and they had the clients' view of the entire Black Knight relationship, it was really exciting and really rewarding for my colleagues, and I underestimated that. But needless to say, it was a great conference. The mood was great. Our clients feel, like I said, we're in full stride, and I and my colleagues feel like we're in full stride as well with what we need to accomplish.

So from a revenue perspective, Stephen, there's a couple ways we can think about this. One is which will ramp up quicker, and then ultimately, which will contribute more than another. And from a speed perspective, I think we've talked about this. What I would say is I expect Servicing Digital to contribute to revenue faster than the others. It's very easy to demonstrate. We've already sold to 8 clients, 2 of our top 5 clients. So we've had a tremendous success there, and so that will -- we'll see that first. I think AIVA would be the next one where I would expect that, based on the level of interest of that, that will ramp up quicker than some of the others.

And then I would say AIP, as Anthony's talked about in the past, harder to demonstrate. There's 100 analytics. It's just more difficult to demonstrate and take up, and so what we're doing is we're actually having people do a try-before-you-buy, a test drive so to speak, so that they start using it, they get used to it. And at the end of the trial period, they take it up. No different than many other consumer products. And so we think that, that's a terrific strategy. And so I think as we go forward in future quarters, we'll talk more about what that has looked like and how that has been received. And I think the Rapid Analytics Platform, we know there's an incremental solution that has had a lot of interest. But I think that'll be sort of in line with where AIP is.

From an overall contribution, when fully realized and [I mean] won't time bound that, I think that AIP and AIVA really almost have -- there's no boundary for those. It's -- AIVA, in particular, you can say it starts with origination today, and it starts with a skill, then 3 skills, then 5 skills and keeps growing through all the documents in the origination process. AIVA doesn't have to stop there. AIVA can then go into servicing. And so it really is -- they're almost -- there's no boundary as to what we can do with AIVA. AIP, same thing. It's going to continue to grow. It's going to continue to expand, and the universe is very large. And so I think those 2 really have limited boundaries as we look out a number of years. And certainly, we'll continue to penetrate with Servicing Digital and penetrate the MSP base.

And so I think they all -- as you think about our overall growth strategy and how we plan to grow, it's loan growth on our clients' platforms on MSP, it's selling the platforms and sales, both MSP and Empower and incremental solutions in Data and Analytics in that segment and then as new products on top of it. So these are each individual incremental growth elements that I think over time we'll continue to build and just become part of our regular way how we grow.

Yes. If I could add to that as well. If you look at AIVA, it -- where it's not driven any real revenue yet as it's -- where it at in its life cycle, the significant increase we're seeing in our loan origination sales, there's a direct correlation with how AIVA is helping. So there is revenue AIVA's contribution -- contributing to our company, even though it's not fully live and in full stride. Our clients are seeing it. They're doing diligence with us on it. They're factoring it into their decisions on choosing Empower as a go-forward loan origination system.

That's great. Really appreciate the color. And then as a follow-up on the origination business, you talked about seeing limited drag from overall industry volumes right now given that many clients are implementing and ramping and kind of below-contracted minimums. But how should we think about the upside potential if mortgage volumes stabilize and start to grow in the next year or 2?

It's a great question, and I'll take it even further than what you're asking. If you were to -- if you were to look forward and say what will ultimately result in rates being low enough that refi comes back and what effect does that have, that starts to go forward out of potentially the current economic situation and into one that's more either recession or bordering around a recession and what happens there. We would certainly see an uptick on the exchange as a result of higher refinance volumes. We've ridden down, over the last few years, 2 to 3 points of revenue as a result of the decline in refi. And so that would pick up over time. It wouldn't be just in a particular quarter, it all comes back. It would be really -- as we look at prior recessions, it would come up back over a couple of years. And so there's certainly noteworthy revenue that would come back in that instance.

The piece where I'll take it a little bit beyond the question that you asked is the other thing that would likely happen in that scenario. If you look at past recessions, even not just the Great Recession, but before that, is in the event of a recession, what happens is rates are low for a while and so refi accelerates. The other thing that happens is unemployment rises. More people have unfortunate issues with their mortgages and so foreclosures are heightened. Now the last recession is something that I think was unique. But if you were to go back to prior recessions and see what that elevated level looks like, you would see foreclosures are higher. And we haven't talked about it for the last couple of years because it hasn't been meaningful enough for us to talk about. But it's -- we do have platforms that in our specialty servicing business that are driven off of default volumes and are -- don't have minimums. And so there actually is a second order effect of -- or I should say another effect in the same circumstance where refis could pick back up that, to the extent that foreclosures also pick up, there's incremental revenue to us. And so there's a countercyclical element to our business that hasn't really been what to speak of over the last several years because we've been in the great economic situation. But when things do turn, there is actually incremental revenue that would come up.

Yes. Again, if I could add onto that. Everyone is aware of the significant market share that we have with our MSP platform. With our foreclosure and bankruptcy market share, it's greater than our market share for MSP. It's about 70% currently. So to Kirk's point, when the cycle turns, and none of us can predict when that's going to happen, we're positioned well for that. So again, feel very good about where the company is situated right now. And whether the recession comes or doesn't come, very confident in our future. And should it come, we're positioned well for that as well.

Our next question is from Jim Schneider with Goldman Sachs.

Anthony, now [Al] with Dun & Bradstreet, having benefit of being involved in that business for a while, can you maybe give us a sense of some of the dimensions of the strategic interplay between Black Knight and D&B and how that might reflect either in terms of cross-selling of clients or potential synergies from a product level and maybe some of what those areas might be going forward?

Sure, Jim. Where -- D&B's focus is really a standalone company not an acquisition by Black Knight and an integration with Black Knight. So we've been very focused on what it needs to do, and I'm very pleased with the progress that we've made really in a short period of time. We closed on it first week in February. We made significant changes to the executive team, and the new team is working very well together. It's a team recruited who are change agents, and that's what is needed at Dun & Bradstreet. We've taken aggressive actions. We've restructured the business, created a focus on accountability. And we got a lot done in a very short period of time. There's still more to do as you'd expect, but I'm very confident in our ability to significantly improve the performance of D&B.

And as time goes by, we'll continue to find opportunities. And the space, like I said many times, the data and analytics space is very critical. And I think to the future of any organization -- and there's a lot of great work being done here. There's a lot of great math being implemented here. And I'm confident that there will be -- certainly, on the client side, there's a number of overlapping clients between both organizations. But at this stage, it's -- I don't want to say it's anything more than that.

Fair enough. And then maybe there's been several comments made about the uptick in originations given what's happened with rates, and understand that's -- maybe just be a very temporal thing. But can you maybe just kind of give us an update as of the last quarter, on average, how far below your contractual minimums are the current level of originations you saw last quarter?

What I'll say is that for our -- on our loan origination systems, the clients that are at or below the minimums represent 98% of that processing revenue. So last quarter, that was 94%. Now it's actually 98%.

Our next question is from Glenn Greene with Oppenheimer.

I actually wanted to ask a D&B question as well, Anthony. Given Black Knight's sort of significant economic interest in D&B, is -- are you going to be sharing or could you share at some point what sort of the profitability expectations might be in sort of 1, 2 years or what's kind of the big vision game plan?

Glenn, what I would say is it's a little early to -- we will -- between ourselves and Cannae Holdings who actually is even a larger owner than we are, we'll certainly provide more financial details going forward and updates on cost savings and business performance. I'd say that, that's going to be in the future quarters that we'll talk through those things. I don't think that there -- we don't plan on giving those details today, and I don t believe Cannae does next week as well. But certainly, going forward, more detail will be provided.

Okay. And then Kirk, just on a couple of number of questions just to close it out for me. It was helpful to get the update on the D&A growth expectations for the year. Could you give us the current expectations for the Software Solutions components, meaning, the services piece and the OS piece relative to what your initial expectations were?

The expectations haven't changed. I think what I talked about last quarter was that servicing would be at last year's growth or slightly below and that the origination software business would be high single, low double-digit growth.

Okay. And then just finally, are you still tracking to convert 20% to 25% of the backlog in '19?

That's correct.

Our next question is from Kevin Kaczmarek with Zelman & Associates.

On the LERETA tax faded picture that you mentioned, do you guys get revenue directly from clients if they use that for the tax processing? Or is it more of an add-on or a reason to stick with the platform?

We'd get a -- think of it as a smaller piece of the revenue for the integration work that we're doing as part of it. So from a pure revenue perspective, it's not meaningful in that regard. But again, we're focused on solving our clients' problems. And that is one of the pain points that they have, and that's the real reason. So we're getting some revenue along the way, but helping them to solve a problem.

Okay. And I guess in terms of the broader product capabilities, you mentioned you're getting up to speed on AI, point of sale. You seem to have a lot going on, but I guess where are the remaining holes at this point? Where are the things that you're really trying to fill to make sure that you kind of retain your market share in terms of the overall origination and servicing revenue spend from clients?

Well, I'm not sure if there are any gaping holes really at this stage. We're thoughtful about it, and we're always asking our clients. And we're moving with urgency to the pain points that our clients have. Whether it's pain or opportunity, we're moving with urgency. And I feel very good about the makeup of the company and how we're organized to the [last] each of these kind of major innovations. So I wouldn't say there is anything that jumps to mind. But Kirk, do you have any thoughts on...

No. I agree that there -- from time to time, we could find a sliver of a process where we say, you know what, if we would do that for our clients, that would help them incrementally. Last year, that's why we bought Ernst -- was to add capability to solve a sliver of the process that will help us as we sell more to the mid-tier. So there could be little things along the way like that, Kevin, but nothing gaping, as Anthony said.

We have reached the end of our question-and-answer session. I would like to turn the call back over to Anthony Jabbour for closing remarks.

Thank you. As always, I'd like to thank our clients for their strong partnerships and my Black Knight colleagues for their exceptional efforts. Thank you for joining us on the call today and for your interest in our great company. Enjoy the rest of your day.

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