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Black Knight, Inc.  (NYSE:BKI)
Q4 2018 Earnings Conference Call
Feb. 13, 2019, 8:30 a.m. ET

Contents:

Prepared Remarks:

Operator

Greetings and welcome to the Black Knight Fourth Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ed (inaudible), Investor Relations for Black Knight. Thank you. You may begin.

Ed -- Investor Relations

Thank you. Good morning, everyone and thank you for joining us for the Black Knight fourth Quarter 2018 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 for our company and are therefore forward-looking statements. Our actual results may differ materially from our projections due to the number of risks and uncertainties. The risks and uncertainties and 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 reconciliations between non-GAAP financial information to the GAAP financial information as 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.

Anthony M. Jabbour -- Chief Executive Officer

Thank you, Ed, and good morning. Thank you for joining us for our fourth quarter earnings call. I'd like to take some time today to discuss highlights from 2018 and our plans for 2019. When I joined the company almost a year ago, I was excited about our opportunities to leverage our many industry touch points and drive innovation for our clients and the industry. A year later, I'm proud of the progress we made in 2018 and equally excited about our plans for the future.

Let me take the next few minutes to discuss what we're focused on in 2018 and how we delivered on our commitments. In 2018, we are committed to achieving our financial targets, working closely with our clients on implementations, adding top tier originators to our Empower platform, further penetrating the home equity loan market, and launching innovative solutions to help our clients.

From a financial performance perspective, 2018 was another solid year where we delivered on our targets. Adjusted revenue was $1.116 billion just above the midpoint of our original guidance range and up 6% from last year. Adjusted EBITDA was $542 million toward the high end of our original guidance range. And adjusted earnings per share was $1.87, which was above the high end of our range due to efficient capital allocation and the lower tax rate.

From an implementation perspective, we successfully converted a long list of top lenders onto our Empower loan origination system, including PNC, Fifth Third, Navy Federal Credit Union and Santander Bank. On the servicing side, we added more than 1 million loans to MSP through implementations for servicers of all sizes, including KeyBanc, First Bank, Old National and Lake Michigan Credit Union. We made significant progress signing new top tier lenders to our Empower platform. About a year ago, we announced the signing of JPMorgan Chase & CitiMortgage onto Empower. I'm thrilled to say that we completed the implementation for both JPMorgan Chase & CitiMortgage onto Empower in less than a year.

We work closely with our clients to achieve these expedited timelines and are continually focused on improving our implementation process. Regarding home equity expansion in 2018, we increased our home equity market share on MSP from 13% to 19%. Commerce Bank, a client for more than 30 years, extended its use of MSP and is having its home equity loans and lines, and we'll be implementing KeyBanc's and region's home equity loans to MSP in the future.

We also added home equity loans to Empower for JPMorgan Chase, Union Bank and Santander. We have a strong pipeline of implementations for both Empower and MSP. Other highlights from the year include a multi-year renewal for Quicken Loans and adding ServiceMac to our growing list of MSP clients. Quicken Loans, which is ranked number 1 by JD Power for client satisfaction, signed a multi-year renewal for MSP. As part of the renewal, Quicken CEO, Jay Farner, said that in order to continue to meet the needs of their service customers, it is imperative that they work with the best technology companies out there and they have that with Black Knight. ServiceMac, a new entrant in the mortgage servicing market, led by industry veteran Bob Caruso, selected MSP because of Black Knight's reputation for successful conversions, superior client support and dedication to helping clients achieve their goals.

And lastly, let me summarize the progress we made on innovation. In 2018, we launched servicing digital, AIVA, our Artificial Intelligence Virtual Assistant, our Actionable Intelligence Platform or AIP, an enhanced Expedite Close solution, and our Rapid Analytics platform. We've signed eight clients since the launch of servicing digital last summer, including two of our top five client. Interest in our servicing digital offering continues to grow and we look forward to announcing additional clients taking advantage of this capability in the near future.

We've discussed AIVA and AIP throughout the year, and I'm excited about the momentum we are seeing with these innovative solutions. We also enhanced our Expedite Close solution to include advanced intelligence where Expedited Close process can be determined the way that we close a loan based on lender preferences and county requirements. Whether that means the closing requires wet-ink signatures, can be signed digitally or is a combination of both.

And our last innovation, our steady stream for transformative solutions is a Rapid Analytics Platform or RAP. RAP provides data scientists a virtual analytics lab, where they can leverage Black Knight's data assets in conjunction with our own data to create models and analytics to help them drive additional revenue and efficiencies within their companies. We have a strong pipeline for RAP in both mortgage and secondary markets. We believe that our growing collection of innovative solutions will help us expand our market share because they help our clients grow revenue and reduce the overall cost to originate and service loans.

As we move to 2019, our strategic initiatives remain the same and we continue to be focused on delivering value for our clients through innovative solutions, integration and acting with urgency. I'm excited about the opportunities we have ahead of us and I'm energized by the excitement, the commitment and the dedication of my colleagues continue to demonstrate as we deliver transformative new solutions, delight our clients and set our course for the future. Thank you for your time today and I would like to turn the call over to Kirk for an in depth financial update.

Kirk Larsen -- Chief Financial Officer

Thanks, Anthony and good morning, everyone. Today, I am going to discuss our fourth quarter and full year 2018 financial results and our financial plan for 2019.

Turning to slide 3, on a GAAP basis, full year 2018 revenues were $1.114 billion, an increase of 6% compared to 2017. Net earnings attributable to Black Knight, Inc. were $168.5 million or $1.14 per diluted share, compared to $182.3 million or $1.47 per diluted share. For the fourth quarter, revenues were $285.4 million, an increase of 7% compared to the prior year quarter. Net earnings attributable to Black Knight, Inc. were $42.8 million or $0.29 per diluted share, compared to $147.2 million or $0.97 per diluted share. The fourth quarter and full year GAAP results for 2017 include a tax benefit of $111 million related to the revaluation of our net deferred income tax liabilities to reflect the lower tax rates resulting from the tax form legislation passed in December 2017.

Turning to slide 4, I'll now discus our adjusted results for the full year and fourth quarter. Full year 2018 adjusted revenues were $1,116.5 billion, an increase of 6% compared to 2017. Adjusted EBITDA was $542.5 million, an increase of 7%. Adjusted EBITDA margin was 48.6%, an increase of 70 basis points. Adjusted net earnings was $277.9 million, an increase of 33%. Adjusted net earnings per share was $1.87, an increase of 36%. And finally, 2018 CapEx was $103.1 million.

For the fourth quarter, adjusted revenues were $285.6 million, an increase of 6% compared to the prior year quarter. Adjusted EBITDA increased 6% to $140 million, compared to $131.9 million. Adjusted EBITDA margin was 49%, compared to 49.1%. Adjusted net earnings was $74.1 million, an increase of 31%. Adjusted net earnings per share was $0.50, an increase of 35%. Adjusted net earnings and adjusted net earnings per share for the fourth quarter and full year 2017, do not include the one-time tax benefit resulting from the tax reform legislation that I mentioned earlier.

Capital expenditures in the fourth quarter totaled $29.4 million. Turning now to slide 5. I'll discuss our Software Solutions segment results, in the fourth quarter, adjusted revenues for the Software Solutions segment increased 6% to $245.8 million. Our servicing software solutions had adjusted revenue growth of 7%, driven primarily by strong loan growth on our core servicing software platform from new and existing clients, higher average revenue per loan and new client wins. In origination software solutions, adjusted revenues increased 4% driven by 35% growth in our loan origination system solutions, partially offset by lower volumes on our exchange and the e-lending platforms, primarily as a result of the 40% decline in refinancing originations as reported by the Mortgage Bankers Association.

Adjusted EBITDA increased 7% to $144 million and adjusted EBITDA margin was 58.6%, an increase of 60 basis points. Full year 2018 adjusted revenue increased 6% to $962 million and adjusted EBITDA increased 10% to $567.2 million. Adjusted EBITDA margin was 59%, an increase of 190 basis points.

Turning to slide 6, in the fourth quarter, adjusted revenues for the Data and Analytics segment increased 7% to $39.8 million, primarily driven by growth in our portfolio analytics and multiple listing service businesses. Adjusted EBITDA increased 13% to $11.3 million and adjusted EBITDA margin was 28.4%, an increase of 150 basis point. Full year 2018 adjusted revenues increased 2% to $154.5 million and adjusted EBITDA increased 3% to $39.5 million. Adjusted EBITDA margin was 25.6%, an increase of 30 basis points. Adjusted EBITDA for the corporate segment in the fourth quarter was $3.1 million unfavorable, compared to the prior quarter and $15.1 million unfavorable for the full year 2018. Both the fourth quarter and full year reflected higher incentive-based compensation and incremental corporate costs following the spin-off from FNF last year.

Turning to slide 7, I'll walk through our capital structure. At the end of December, we had cash and cash equivalents of $20 million. Total debt principal as of December 31 was $1.350 billion. We had revolver borrowings outstanding of $82.5 million and $667.5 million of borrowing capacity remaining under our revolver. Our leverage ratio was 2.5 times on both a gross and net basis.

Turning now to slide 8, I'll walk through our outlook for full year 2019. 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 currently expect interest expense of approximately $68 million to $70 million, reflecting the effect of higher interest rates, expiring interest rate swaps and the borrowings related to our investment in Dun & Bradstreet. 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. Although we do not provide quarterly guidance, I want to provide you with some color as to how we expect to progress through the year. We expect to grow first quarter adjusted revenues and adjusted EBITDA approximately 4% compared to the first quarter of last year.

The first quarter will also include higher interest expense for the reasons I mentioned earlier. For the remainder of the year, we expect to see year-over-year growth accelerate from Q1 to Q2 and then be more consistent for the third and fourth quarter growth rates, compared to the prior year. Overall, we are pleased with our fourth quarter and full year results, and look forward to another strong year for Black Knight in 2019.

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

Questions and Answers:

Operator

(Operator Instructions) Thank you. Our first question comes from the line of Jason Deleeuw with Piper Jaffray. Please proceed with your question.

Jason Deleeuw -- Piper Jaffray -- Analyst

Thank you. Good morning and congratulations on the solid strong results here.

Anthony M. Jabbour -- Chief Executive Officer

Thank you, Jason.

Jason Deleeuw -- Piper Jaffray -- Analyst

Yeah, I was just wondering on the guidance. The contribution to the revenue guidance from complementary solutions. I'm just wondering how much you're expecting those solutions to add to the 2019 revenue? And then also if you could just talk about the sales cycle. And just how that's going, is it a shorter, much shorter sales cycle than the other products, if you can just give us some color on that.

Anthony M. Jabbour -- Chief Executive Officer

Sure. And maybe I'll start with the sales cycle, Jason. It's progressing well. We're seeing a lot of excitement in the market for what we're bringing to market with our new solutions. And in some cases, it's a very, very short sales cycle such as in the digital space, where -- with our first client that we had mentioned, with Amerifirst, we have signed and they're live in 2018 on our servicing digital capability. And with our others, there are broader changes as we said they'd be in terms of changing more of the infrastructure of how our clients run in leveraging the analytics et cetera. But I'm very excited about it, there smaller and easier implementations as well, so that's going well.

Kirk Larsen -- Chief Financial Officer

And from -- Jason from a perspective of how much the innovative solutions are contributing to revenue in 2019, relatively small, as we talked about AIVA, when we bought it, we bought that business, we bought HeavyWater, it didn't -- it was pre-revenue. We certainly are expecting, we've signed a few clients and we expect to see revenue from them in 2019, but I'll say on a relatively small basis. Digital, we have the eight clients that Anthony mentioned, they will all each contribute to revenue in 2019.

But I would say it's still on a relatively small basis, but will grow over time. And then the others are also in their early stages. So we see each of those solutions as a terrific opportunities as Anthony mentioned. To grow revenue, we see it building over time starting with 2019 and ramping from there.

Jason Deleeuw -- Piper Jaffray -- Analyst

Thanks, that's helpful. And then just wondering on the guidance range. The revenue guidance range. What are the drivers that we should be thinking about from that would factor in for the low versus the high end of the range?

Anthony M. Jabbour -- Chief Executive Officer

Sure, great question, Jason, thanks for asking. Our philosophy on guidance is that we plan around the midpoint. And the things that -- if all the stars align, then we could end up at the higher end and conversely, if things don't go as we expect, we could end up at the lower end. The things that will drive us from above or below the midpoint really are consistent with what they've been in prior years, which is implementation timing, the nature and timing of professional services. And then our success with sell and deliver, as I refer to it, go get revenue. So it's really the same factors that there always are kind of moving around the midpoint.

John Campbell -- Stephens, Inc. -- Analyst

Great. Thank you very much.

Anthony M. Jabbour -- Chief Executive Officer

Thank you.

Operator

Thank you. And next question comes from the line of Tien Tsin Huang with JPMorgan. Please proceed with your question.

Tien Tsin Huang -- JPMorgan -- Analyst

Hey, good morning. Just a follow-up to the last question. Just on the timing of backlog conversion, maybe a cadence for the year or is there anything correct specific that we should consider quarter-to-quarter-to-quarter here as the year plays out?

Anthony M. Jabbour -- Chief Executive Officer

Sure. As far as the aggregate amount, we see what's coming in for the year, consistent whether we talked about at Investor Day, which is a 20% to 25% of the backlog number that we -- that I've discussed as the $160 million. As far as the cadence through the year, it builds through the year. So when I talked about the quarterly cadence of revenue growth being about 4% in the first quarter. And then accelerating in Q2 and staying steady for the rest of the year, that's really based upon implementation timing.

Tien Tsin Huang -- JPMorgan -- Analyst

Yeah. Okay. And just maybe a big picture question just with Ellie Mae. Going private here, any implications for Black Knight and how that might change the go to market in anyway?

Anthony M. Jabbour -- Chief Executive Officer

Good morning, Tien Tsin, it's Anthony. As I've said before, our success is really based on how we perform, it's not dictated by our competitors and I really believe that. We feel very good about our competitive position. Our loan origination system, the business is performing at a very high level, we continue to see opportunities both at the high end and the mid-tier space. So, we feel very good about where we are right now.

Tien Tsin Huang -- JPMorgan -- Analyst

Okay. Appreciate it. Thanks for the update.

Anthony M. Jabbour -- Chief Executive Officer

Thanks, Tien Tsin.

Operator

Thank you. Our next question comes from the line of Bill Warmington with Wells Fargo. Please proceed with your question.

Bill Warmington -- Wells Fargo -- Analyst

Good morning, everyone.

Anthony M. Jabbour -- Chief Executive Officer

Good morning.

Bill Warmington -- Wells Fargo -- Analyst

And a shout out to Brian Hipsher and his new job as CFO of Dun & Bradstreet joining the Short Hills gang. So first question on the, I wanted to ask about the negative revenue impact in the 2019 guidance coming from the mortgage volume headwinds. The NBA is looking at total unit volumes down about 7% in 2019 versus down about 13% and '18. So a little better, but still a headwind.

Anthony M. Jabbour -- Chief Executive Officer

Sure. It's certainly compared to 2018 and 2017 in particular. It is much less of a headwind as the volumes are declining, refi specifically, the percentages still can look a little daunting, but it's the law of large numbers working in reverse. So it's on a smaller base. So the effect of that is real, it's less than 0.5 point. It's 0.2, 0.3 percentage point of a headwind in 2019.

Bill Warmington -- Wells Fargo -- Analyst

Okay. And then on the Ernst Publishing acquisition, was just going to ask if you could comment, how it fits in strategically and how much it's contributing to 2019 revenue and EBITDA if anything?

Anthony M. Jabbour -- Chief Executive Officer

Yeah. With Ernst, part of our strategy on the loan origination side is bringing more and more capability to our solution set and integrating tighter and tighter. The more that we integrate the greater functionality that we can provide for our clients and greater functionality that they can provide to their customers. So, with Ernst, it's really tightening down the fee calculations upfront, which is continuing to be very important from a customer satisfaction perspective as well as a financial perspective for our clients. So that was the reason there. And again as we continue to look at building out more capabilities in the loan origination space that was what was driving that.

Kirk Larsen -- Chief Financial Officer

And Bill, from a contribution perspective, it's a very small business. So it's just like adding another product into the solution set. So it's a very small contribution from a revenue and EBITDA perspective.

Bill Warmington -- Wells Fargo -- Analyst

Got it. Thank you very much.

Anthony M. Jabbour -- Chief Executive Officer

Thank you, Bill.

Operator

Thank you. Our next question comes from the line of John Campbell with Stephens, Inc. Please proceed with your question.

John Campbell -- Stephens, Inc. -- Analyst

Hey guys, good morning. Congrats on a great year.

Anthony M. Jabbour -- Chief Executive Officer

Thank you, John. Good morning.

John Campbell -- Stephens, Inc. -- Analyst

So, I know Ditech, they're going through some challenges right now. I know you guys really can't comment on that. But any sense for what their plan is for their loan service? And then maybe if you could talk to just kind of broadly, how you are accounting within 2019 guidance?

Anthony M. Jabbour -- Chief Executive Officer

I'll start. Obviously, we're still operating as business as usual with Ditech right now. As you can imagine, we're a critical vendor and want to make sure we do everything to support them along the journey. But, what I'd say maybe at a high level is with our market share as loan moves, we have a high likelihood of the loans remaining on MSP.

Kirk Larsen -- Chief Financial Officer

And John, I would add. For for that reason, we haven't factored anything into our 2019 guidance just because the uncertainty around what the ultimate outcome would be. So we're letting it run its course supporting them as we always will support our clients, and we'll see what happens from a financial perspective.

John Campbell -- Stephens, Inc. -- Analyst

Okay, that makes sense. And then two quick kind of housekeeping questions. We can wait on the 10-Q for this. But if you got it handy, what was the ending load count for first and second lien on MSP?

Anthony M. Jabbour -- Chief Executive Officer

The ending the loan count was -- I'm describing as we speak. It was -- on MSP was 34.6 million.

John Campbell -- Stephens, Inc. -- Analyst

That was total above for...

Anthony M. Jabbour -- Chief Executive Officer

Yeah. First is about 32 and second is about 2.5.

John Campbell -- Stephens, Inc. -- Analyst

Okay. And then on D&B, are you guys going to run that with equity method accounting. Have you really worked through all that?

Anthony M. Jabbour -- Chief Executive Officer

That's our expectation.

John Campbell -- Stephens, Inc. -- Analyst

Okay, great, thanks guys.

Anthony M. Jabbour -- Chief Executive Officer

Thank you, John.

Operator

Thank you. Our next question comes from the line of Ashish Sabadra with Deutsche Bank. Please proceed with your question.

Ashish Sabadra -- Deutsche Bank -- Analyst

Thanks. And just a quick question on the announced BB&T and Suntrust merger. Can you just give us any information on whether these are your existing customers and how should we think about any kind of benefit from those mergers?

Anthony M. Jabbour -- Chief Executive Officer

Sure, sure. Yeah, they're both clients of ours today and we're looking forward to continuing to work with them and do more with them in the future. First of all, I'm very happy and excited for them. I mean they're making a real pivot in their strategies and by coming together with a lot of energy and a lot of focus on technology in general. So we're excited, we think it fits well with our innovations that we brought to market and we're going to continue to bring to market. And I think directionally, where we're heading is in the same, same line of direction as they are as well. So we're very excited for them.

Ashish Sabadra -- Deutsche Bank -- Analyst

Thanks. And maybe a quick question on CoreLogic. They made a decision in December to exit the loan origination system, their Dorado business. Does that open up opportunity in particularly the JPMorgan first lien origination, because you already do the second lien origination as well as servicing for both first and second lien...

Anthony M. Jabbour -- Chief Executive Officer

Sure.

Ashish Sabadra -- Deutsche Bank -- Analyst

Any thoughts there -- any color?

Anthony M. Jabbour -- Chief Executive Officer

Sure, I'd say time a competitor sunsets a product, it creates opportunity for others that are in the industry. And we are certainly aware of it and certainly focused on it. And I'd also say with JPMorgan Chase, more generically, can't talk specifically in terms of where things are, but what I'd say is the second lien has gone very well and we're going to continue to work hard with them as we do with all of our clients to expand what we do and show them the value that we can deliver to them.

Ashish Sabadra -- Deutsche Bank -- Analyst

Thanks and congrats.

Anthony M. Jabbour -- Chief Executive Officer

Thank you so much.

Operator

Thank you. (Operator Instructions). Our next question comes from the line as Bose George with KBW. Please proceed with your question.

Tommy -- KBW -- Analyst

Hey guys, this is Tommy (inaudible) on for Bose. Just want to ask on the origination side, how many of your clients were operating at the contractual floors in the fourth quarter?

Anthony M. Jabbour -- Chief Executive Officer

A significant majority of our -- within that business, if you look at just the processing revenues within loan origination system, 94% of the revenue was at or below the minimum and 6% would be the revenue of the processing revenue that's above. As you think about that as part of the revenue base, there is that component, then we have professional services and we have the implementation revenue that we amortize over the life of the deal. So the processing is a significant component and that piece, 94% is at or below the minimum.

Tommy -- KBW -- Analyst

Thanks. And then just the other one. In the data and analytics segment, looks like the EBITDA margin got a nice bump this quarter. Was there anything to call out there?

Anthony M. Jabbour -- Chief Executive Officer

No, I mean with stronger revenue growth than it had in previous quarters. And so -- and what was driving that frankly with the higher-margin businesses which are portfolio analytics business as well as our multiple listing service business. So, higher growth in businesses that have higher contribution margins.

Tommy -- KBW -- Analyst

Got it. Thanks, guys.

Anthony M. Jabbour -- Chief Executive Officer

Thank you, Tommy.

Operator

Thank you. Our next question comes from the line of Stephen Sheldon with William Blair. Please proceed with your question.

Stephen Sheldon -- William Blair -- Analyst

Good morning. Thanks and congrats on all the implementations. I was just curious with the JPMorgan & Chase implementations, kind of when those are completed and how the success of those implementations may be impacting conversations with other big banks? Has that driven more in-depth conversations with other potential big clients about switching onto Empower?

Anthony M. Jabbour -- Chief Executive Officer

Sure. Thank you, Stephen. Yeah, I mean they went live in the fourth quarter and I'd say a real testament to both our teams are working exceptionally well together to bring it live so quickly. But like I said, I do believe that there is opportunity. I believe that large clients had built proprietary systems in the past. And as everyone looks at how do they pivot the relative businesses, where should they be spending their capital and their energy, it's shifting from loan origination to other areas. And we've got such a strong proven, scalable feature function rich capability that I do believe it's of interest really for the largest lenders in the country.

Stephen Sheldon -- William Blair -- Analyst

Okay, that's helpful. And then, I appreciate the commentary on the first quarter growth expectations. But just as we think about the full year, I mean, can you maybe talk about high level growth expectations between servicing, originations and DNA. And especially if you're expecting any significantly, I guess, different trend by business relative to what we've seen so far this year?

Anthony M. Jabbour -- Chief Executive Officer

Sure. Thinking of it at one level below, I would say that servicing would continue to grow about the level that it has been, maybe a little bit lighter than that. So it's kind of in the mid to high single in origination, I would look at that in the high-single to low double kind of range and then D&A, I would say, continuing in that low to mid single digit area.

Stephen Sheldon -- William Blair -- Analyst

Great, thank you.

Anthony M. Jabbour -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Chris Gamaitoni with Compass Point. Please proceed with your question.

Christopher Gamaitoni -- Compass Point Research & Trading -- Analyst

Good morning.

Anthony M. Jabbour -- Chief Executive Officer

Good morning, Chris.

Christopher Gamaitoni -- Compass Point Research & Trading -- Analyst

To follow up on the large vendor proprietary system opportunity, do you have an estimate not through to the client, but in the aggregate of the potential market that is still out there for you to go after either in market size or loans or operating (inaudible) disclose it?

Anthony M. Jabbour -- Chief Executive Officer

I mean it's significant. And it's something obviously that we could feed off for many off years to come. I'd say that a very high level that way. So it's -- we don't see a shortage of opportunity. And it's also important as you think about loan origination that you pivot from that to other areas, right? such as our robotic robotic process automation, our artificial intelligence with AIVA and our actionable intelligence platforms where there is an opportunity to sell additional capability to our clients running our loan origination software. So, I'd say, as you look at it, I wanted to see it the way we're seeing it, which is you can get the actual origination software. But there's a whole lot more that goes around it that candidly is what's really, it's one of the key areas it's generating a lot of excitement, it's -- this add-on capability and innovation that we brought to market in 2018 has given us a little more wind in our sales.

Kirk Larsen -- Chief Financial Officer

And Chris, just to give you a sense of magnitude, if you go back to our Investor Day deck, when Anthony talked about the opportunity and origination, it showed our market share and how much we could add as we grew in certain segments of the market. So I don't have it in front of me, but I'd ask you to go back and look at that to help get a sense.

Christopher Gamaitoni -- Compass Point Research & Trading -- Analyst

Okay, perfect. And could you provide an update on Empower now and kind of where your sales focus is on -- in that -- on product focusing on mid market?

Anthony M. Jabbour -- Chief Executive Officer

Sure. We continue to be very pleased with the progress that we're making with Empower now and not just on the sales effort, but on the implementation results that we're seeing and the support, right, which like I said, it's important as you look at scale and how you scale for the mid-market, but it continues to go well. We've hired additional sales resources for that and it is a big focus for us.

Christopher Gamaitoni -- Compass Point Research & Trading -- Analyst

Perfect. That's all I have. Thank you.

Anthony M. Jabbour -- Chief Executive Officer

Thank you, Chris.

Operator

Thank you. Our next question comes from the line of Jim Schneider with Goldman Sachs. Please proceed with your question.

James Schneider -- Goldman Sachs -- Analyst

Good morning, thanks for taking my question. Can you maybe just kind of give us a little bit more color on -- and I appreciate it on the cadence of revenue through 2019. But any more color on the client environment with respect to the implementations. Does everything you kind of thought you saw in the pipeline with the 25% for this year, still hold in terms of when most those clients finally implementing relative to maybe what you thought about three months ago or so?

Anthony M. Jabbour -- Chief Executive Officer

Sure, Jim. Yeah. The things are very much still on track as we look to 2018, we're very pleased with the cadence we had on our implementations, there is great focus by the team and great results are very much in line. And we expect that as well so far going into 2019.

James Schneider -- Goldman Sachs -- Analyst

Okay. And then relative to the revenue commentary you gave, Kirk, on data and Analytics still relatively sluggish. Maybe you can talk about, if you look at the overall strategic priorities for the company, does that really rank in terms of the top three in terms of kind of accelerating that revenue growth, you're getting in that segment or is it more focused around all the core initiatives at this point?

Anthony M. Jabbour -- Chief Executive Officer

I would say, Jim, that it's -- we are focused on growing all of our businesses. And so we have very specific strategies and how we will grow the Data and Analytics business and certainly we have higher expectations than low to mid single digits for that business. And so we do strategy that we'll execute against under the leadership of that business. And we'd also have a continued focus on improving margins in that business. So, I mean, it's one of our initiatives. We don't narrowly think of two of three of our initiatives and focus on those, it's broader than that, it's really across each of them, across each of the segments. So we have strategies, we're focused on them and we certainly will work to improve the performance to that business.

James Schneider -- Goldman Sachs -- Analyst

Thank you.

Anthony M. Jabbour -- Chief Executive Officer

Thank you.

Operator

Thank you. (Operator Instructions) Our next question comes from the line of Henry Coffey with Wedbush Securities. Please proceed with your question.

Henry Coffey -- Wedbush Securities -- Analyst

Yes, good morning and thank you for taking my question. First, I know you did make some comment about the mortgage headwind. If you focus that just on your loan origination systems, how does that sort of translate into a likely impact?

Anthony M. Jabbour -- Chief Executive Officer

That impact actually is is virtually zero on our loan origination system because of the nature of our contract, long-term in nature, subject to minimums. And as I talked about before, 6% of that -- the processing revenue in loan origination systems is above the minimum. If there's a negligible, there's not a measurable effect in 2019. Where we will see the effect is really on our lending solutions or exchange platform. That is refi-centric platform that really has caused the majority of the headwind related to lower refi volumes and also on our eLending platform, we also see a component of that, but it's most on the exchange platform that we see it, it's really not measurable on LOS.

Henry Coffey -- Wedbush Securities -- Analyst

And this a very general question and would appreciate a layman's answer. But everyone we talk to, complains about their mortgage system and talks about the next generation. Maybe you could put some color on that for me in terms of where you think Black Knight is in providing that "next generation"? And what is it that they're looking for? What is that you think you can provide? And besides Ellie, if you could identify two or three large competitors in this space, that would be helpful as well?

Anthony M. Jabbour -- Chief Executive Officer

Well, I'd say generically and we've seen it through the cycles, you see it in the general banking cycle, you're seeing it on the mortgage cycle in reverse, but when -- everyone's more critical when times are tougher. And so right now in the mortgage, especially for originators, it is a tough time for them and they're looking for help, right? And that's really what we wake up every day to try and answer the call. How can we help them? And it really was the impetus for the direction we took the company last year. I know as I joined, I met with the majority of our clients immediately, spent time really understanding what their needs were. And it was obvious where the industry was heading, where interest rates were heading. And so we pivoted a focus on automation, on leveraging artificial intelligence and adding capabilities that would impress their customers as well as lower their internal cost such as our digital solution.

So I think from a perspective of what clients are faced with right now and what we can do for them, I think there's a great opportunity. I mean very few of them are leveraging our artificial -- any of our new products really. I mean a very, very small percentage of them are leveraging them. And there's a great ability for us to step in, lean in and help, and that's what they're seeing. So we've got an incredibly functionally rich, strongly compliant solution with our servicing platform, our origination platform has really shown that it's got the chops to handle the largest lenders in the country, from a feature functionality perspective, a scale perspective, a configuration perspective and we've also brought analytics to leverage our tremendous data assets as well as just our overall view of our client. So there's no one else that really has a total view of our clients like we do, because we're covering it really from the servicing side all the way to the origination side and leveraging everything and anything we can to help them.

Henry Coffey -- Wedbush Securities -- Analyst

Is it -- who's competing? I'm assuming it's not one set of products by someone, obviously except for Ellie Mae and maybe Cadence. But -- are there modules where you're competing with "better products" someone has a better POS system, someone has more share there. And if you think of what the mortgage technology chain looks like. Are there names that pop up that are really worth watching to try to understand what's going on here?

Anthony M. Jabbour -- Chief Executive Officer

Well, I think on any given day, someone's message may resonate with a prospect of there's. So it maybe a new feature that they just launched, it could be an incredibly low price they're willing to offer, it could be a range of things but, but there are players in that space, you need -- you asked me the name a few names. Blue Sage is there in that space, Cadence is there. Blend. On the point of sale side, Rustify(ph), Digital Risk, there's a number of them. And they're solving a piece of the solution. And like I said, I think what's really important is how do we help drive the broader relationship and help solve broader business dynamics for our clients. So -- and that's certainly how we're trying to approach, we're trying to take our solutioning to the next level.

Henry Coffey -- Wedbush Securities -- Analyst

Great, thank you very much.

Anthony M. Jabbour -- Chief Executive Officer

Thank you, Andrew.

Operator

Thank you. Our next question comes from the line of Kevin Kaczmarek with Zelman & Associates. Please proceed with your question.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Hi, guys, thanks for taking my questions. Can I get your latest thoughts on capital allocation going forward and how you think about incremental share repurchases versus maybe some debt pay down and more acquisitions or other investments?

Anthony M. Jabbour -- Chief Executive Officer

Sure. Kevin the strategy really hasn't changed, been consistent for the last three or four years now, where we're going to focus on investing and growth with a pivot strongly toward innovation while also maintaining strong balance sheet and ample liquidity. So we'll focus on investing and growth where there could be internal, that could be tuck in acquisitions or other external investments. And beyond those investments and growth, we'll balance debt repayment and share repurchase. So as we think about 2019, what we've assumed is that, we'll partially pay down the revolver -- partially pay down the revolver in the first course, so we use excess cash flow for that. And then in the -- second, third and fourth quarter, we would balance between share repurchase and paying down the revolver. Thinking of it as, if you look over the last couple of years, our share repurchase volumes both in shares and dollars was relatively consistent. And that's really what we would look to do this year as well.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Okay, thanks. That's very helpful. And on the D&B investment, can you give us a sense of what contribution that makes to your EPS guidance kind of outright or net of the incremental debt? And how will you report that investment going forward? Are you going to give us perhaps a mark-to-market or some measure of earnings outside of what shows up in the income statement?

Anthony M. Jabbour -- Chief Executive Officer

We will -- so we'll report on an equity method. So our -- will report our share of their -- of their GAAP earnings, which will reflect purchase accounting and initially will reflect costs related to the transaction and cost to achieve the savings that are targeted there. So it's going to be relatively noisy, I think, for some amount of time. I don't plan on providing a mark-to-market, because that would -- I think that could be potentially misleading. So as far as other updates on that, I think, the more detailed updates just so will there is consistency will largely come from (inaudible) as it's a material investment to them, it's a 5% of our market cap investment to us. And so we'll provide some updates on progress, but focus on the core Black Knight business. And as far as what's assumed, there is nothing assumed in the guidance related to the earnings of Dun & Bradstreet. My plan is to that -- that it won't be included in adjusted earnings, because it will be non-cash until a monetization event.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Okay. So forward guy would just include the incremental interest expense with no income assumed from D&B.

Anthony M. Jabbour -- Chief Executive Officer

That's correct. That's correct, Kevin.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Okay. All right, thank you. That's all I had.

Operator

Thank you. Our next question comes from the line of Oscar Turner with SunTrust Robinson Humphrey. Please proceed with your question.

Oscar Turner -- SunTrust Robinson Humphrey -- Analyst

Hey, guys. Good morning.

Anthony M. Jabbour -- Chief Executive Officer

Good morning.

Oscar Turner -- SunTrust Robinson Humphrey -- Analyst

Just had a question on margin -- on the margin outlook. So it looks like next year's guide implies expansion of 100 basis points, which is at the high end of your long-term guidance. Can you give us some color on the key drivers underlying that 100 basis points? And then how should we think about longer-term truck drivers of margin expansion? I assume that the D&A segment scaling as one?

Anthony M. Jabbour -- Chief Executive Officer

What I would summarize it as each of our businesses have high -- have high incremental margins on revenue growth and that's going to be the fundamental driver of margin expansion both in 2019, and going forward. What you could see from time to time is a little bit of noise around corporate costs. Like this year, we had higher incentive compensation costs and it's an incremental corporate cost following the spin-off from FNF. There could be some noise like that going forward just from year-to-year, not necessarily spin-off related costs, but corporate can move around a little bit, but I would say, set that noise aside, it's really all about the incremental margins on revenue growth. So if we grow in the midpoints of that range, we would expect to be able to expand margins in the mid-point of our long-term range or toward the higher end just be -- due to the due that the upward pressure from the contribution margins.

Oscar Turner -- SunTrust Robinson Humphrey -- Analyst

Okay. Thanks. And then how should we think about the margin potential for data and analytics?

Anthony M. Jabbour -- Chief Executive Officer

We are absolutely committed to getting that business to 30%, that timeline of course as we talked about is a journey, that's a business that had pretty weak margins if you go back a few years. We're getting that now to the mid to high 20s. And so we continue to target that 30%, and as I've said before, we don't plan to stop there. That business certainly can go above 30% as well. So we're focused on that, we're pushing that business to not only grow as rapidly as it can and that's a work in progress, but also to increase efficiency, so we can drive margins up beyond just the pure contribution margin on revenue growth.

Oscar Turner -- SunTrust Robinson Humphrey -- Analyst

Okay, thanks. That's, helpful.

Anthony M. Jabbour -- Chief Executive Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Anthony for any final comments.

Anthony M. Jabbour -- Chief Executive Officer

Thank you. As always, I'd like to thank my Black Knight colleagues for their exceptional efforts and our clients for their strong partnerships. 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.

Operator

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

Duration: 46 minutes

Call participants:

Ed -- Investor Relations

Anthony M. Jabbour -- Chief Executive Officer

Kirk Larsen -- Chief Financial Officer

Jason Deleeuw -- Piper Jaffray -- Analyst

John Campbell -- Stephens, Inc. -- Analyst

Tien Tsin Huang -- JPMorgan -- Analyst

Bill Warmington -- Wells Fargo -- Analyst

Ashish Sabadra -- Deutsche Bank -- Analyst

Tommy -- KBW -- Analyst

Stephen Sheldon -- William Blair -- Analyst

Christopher Gamaitoni -- Compass Point Research & Trading -- Analyst

James Schneider -- Goldman Sachs -- Analyst

Henry Coffey -- Wedbush Securities -- Analyst

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Oscar Turner -- SunTrust Robinson Humphrey -- Analyst

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