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Black Knight, Inc.  (NYSE:BKI)
Q1 2019 Earnings Call
May. 01, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, welcome to Black Knight's First Quarter 2019 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) Please note this conference is being recorded. I would now turn the conference over to Ed Ewing (ph) Investor Relations. Thank you. You may begin.

Ed Ewing -- Investor Relations

Thanks. Good morning, everyone and thank you for joining us for the Black Knight's first quarter 2019 earnings conference call. Joining me today, our 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 -- 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 reconciliations 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.

Anthony Jabbour -- Chief Executive Officer

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 the 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 through continued growth.

We heard from our clients that they are in a difficult environment, and we are able to share our progress on developing products that will help them address will continue to be the 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 Assistant 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 three 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 three 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 Empower system, creating a seamless and quick application process. Second, data stays in sync and 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 and the data review process and can alert a lender's perspective 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 the 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 are extremely pleased with the urgency with which we have 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 reduce 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 has 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 four clients since the launch of Empower now in 2017, based on the momentum we have built in our significant pipeline, we expect to sign two to three times 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 eight MSP implementations and five servicing digital implementations in process including US Bank. On the LOS side, we are currently implementing eight 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 six 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 is 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 will allow MSP clients to add new loans to the system faster and eliminate the need to create manual tax reports.

As a result services will benefit from improved reporting accuracy and faster processing times to pay taxes which mitigates risk by reducing tax 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 to 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 financial update.

Kirk Larsen -- Chief Financial Officer

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 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 the e-lending 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 three 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 31st was $1,680 million. We had revolver borrowings outstanding of $426.5 million and $323.5 million of borrowing capacity remaining under our revolver. Our leverage ratio was 3.1 times on a gross basis and three times on a net basis.

Turning now to slide 8, I'll walk through our outlook for full year 2019, which is unchanged from the outlook provided on our most recent earnings call. GAAP revenues are expected to be in the range of $1,177 million to $1,199 million. Adjusted revenues are expected in the range of $1,178 million 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.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question is from Tien-Tsin Huang with J.P. Morgan. Please proceed.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Hey, good morning, guys. Thanks for taking the question. Just wanted to ask on, first on the Empower Now, I suppose the signings outlook you had 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 more color there.

Anthony Jabbour -- Chief Executive Officer

Sure. Good morning, Tien-Tsin. It's Anthony. The -- I'd say if you look back on our previous earnings calls, we had talked about Empower Now on 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 is a natural progression there. But I think a lot of the innovations that we've been bringing to market as well, creating a lot of interest for our clients. And I think the combination of those two is really what's driven the increase.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Got it. Good. And then just as my follow-up to on the modeling side, maybe for you Kirk, just the lower professional services comment in the origination side, given the implementation level of work that the type of client you have, is there something that we should consider here for the rest of the year on the professional services front and maybe the (inaudible) margins as well? Thanks.

Kirk Larsen -- Chief Financial Officer

So, 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 in the quarter, we saw a couple of clients that pull 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.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

All right. That's helpful. Thank you.

Kirk Larsen -- Chief Financial Officer

Thank you.

Operator

Our next question is from Jason Deleeuw with Piper Jaffray. Please proceed.

Jason Deleeuw -- Piper Jaffray -- Analyst

Yeah. Good morning and thanks for taking my question and thanks for the updates, some more details on the implementation and client wins. And I'm just trying to get a sense for how those implementations and client wins across servicing and origination and innovative solutions, how are those tracking the plan so far in your guidance for the year?

Anthony Jabbour -- Chief Executive Officer

They're tracking well, like I said, at the beginning of the year we're looking at all the implementations and some are larger and 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.

Jason Deleeuw -- Piper Jaffray -- Analyst

Thanks. And then just kind of a higher level question there. A lot of -- there's a lot of talk and 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. And 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 foreseen some of these lenders to look harder at some of these solutions?

Anthony Jabbour -- Chief Executive Officer

Yeah, great question. I'd say, on the innovation front, I wouldn't say there's a lot of challenges for us to continue innovating in the 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've 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 saying, as we all know, we're in the midst of our clients recession, right. I mean, I know the economy is 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 the 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 it -- 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's that always resonate, whether they are in desperate need, have 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 the greatest challenges. And that's what's resonating with them. That's what we're hearing.

Jason Deleeuw -- Piper Jaffray -- Analyst

That sounds good. Thank you.

Anthony Jabbour -- Chief Executive Officer

Thank you, Jason.

Operator

Our next question is from John Campbell with Stephens. Please proceed.

John Campbell -- Stephens -- Analyst

Hey, guys, good morning and congrats on a solid quarter.

Anthony Jabbour -- Chief Executive Officer

Thanks, John.

John Campbell -- Stephens -- Analyst

So there is 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, are you still thinking that mortgages -- I think you guys had a 20 basis point to maybe 30 basis point headwind for the year.

Kirk Larsen -- Chief Financial Officer

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 is always pluses and minuses, but we certainly did see the effect and certainly be terrific if it were to last.

John Campbell -- Stephens -- Analyst

Okay, that's good to hear. And then, Anthony, I believe you said there is three clients live and then maybe five in the implementation process for servicing digital. Just curious, I mean, I think you guys had originally in your -- in your initial guidance for this year that you expected to be modestly accretive for -- 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.

Anthony Jabbour -- Chief Executive Officer

Sure. Yeah, with servicing digital, it was the one that we highlighted last year, when we first announced that, that we thought it would get to market on that first and it would -- it hit the revenue line first. The others, we talked about a buildup and as you've heard in my prepared remarks, with AIP we have over a 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 coming, because it was standing room only and people were waiting outside, so as to give you a sense of the interest in the product.

So, where they're not hitting the revenue line, yet, there is a significant interest from our clients and what it can achieve. So I do feel good about digital coming on, like I 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 solutions, which as you know is important. Our clients, that's the area of spend where there's a lot of focus from them.

John Campbell -- Stephens -- Analyst

Excellent. Thanks, guys.

Anthony Jabbour -- Chief Executive Officer

Thank you, John.

Operator

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

Andrew Jeffrey -- SunTrust -- Analyst

Hi. Good morning, guys.

Anthony Jabbour -- Chief Executive Officer

Good morning, Andrew.

Andrew Jeffrey -- SunTrust -- Analyst

I think you mentioned Anthony, just make sure I have the numbers right eight MSP implementations in process and five servicing digital. I guess my question around that is, what's -- 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.

Anthony Jabbour -- Chief Executive Officer

Sure, I'd say, as you think of some of the newer sales that we've launched we are bundling, the new capabilities with the 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 the -- 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.

Andrew Jeffrey -- SunTrust -- Analyst

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

Kirk Larsen -- Chief Financial Officer

Andrew, the accelerated revenue growth as the year goes on, really is related to implementation timing as to when some go-lives and ramps, that's really what -- 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 have.

Andrew Jeffrey -- SunTrust -- Analyst

Okay. That's helpful, Kirk. And then just one quick one, on DNA 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.

Anthony Jabbour -- Chief Executive Officer

Sure, I think you know to what Kirk had 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.

Kirk Larsen -- Chief Financial Officer

Yeah. I think it really is all about sales execution and that integration, Andrew. So, but is a good -- 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 toward the mid-single digits as opposed to the low-single digits for growth in that business.

Andrew Jeffrey -- SunTrust -- Analyst

Okay. Good news. Thanks.

Anthony Jabbour -- Chief Executive Officer

Thank you, Andrew.

Operator

Our next question is from Bill Warmington with Wells Fargo. Please proceed.

Bill Warmington -- Wells Fargo -- Analyst

Good morning, everyone. So a question -- a question for you on the origination side, 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 beta testing that's going on, how you think about that in terms of the timeframe.

Anthony Jabbour -- Chief Executive Officer

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 is 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 trading, there are longer sales cycles, I'd say. And our approach has been really what solution of ours can we get in to 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.

Kirk Larsen -- Chief Financial Officer

Bill, one thing I'd add is, if you think about Empower as well and the fact that we were 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 our correspondent or home equity, all of which can be done on Empower. You start with one channel and you can grow from there. It's really a good place to start the conversation and then expand.

Bill Warmington -- Wells Fargo -- Analyst

Got it. The -- and that leads to my follow-up question, which is 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 in there as well. I just wanted to get some color there.

Kirk Larsen -- Chief Financial Officer

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.

Bill Warmington -- Wells Fargo -- Analyst

Got it. Thank you for the insight.

Kirk Larsen -- Chief Financial Officer

Thank you, Bill.

Anthony Jabbour -- Chief Executive Officer

You are welcome.

Operator

Our next question is from Bose George with KBW. Please proceed.

Tommy -- KBW -- Analyst

Hey guys, this is Tommy (ph) 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 client adopting service digital versus just what we see with the standard kind of step-up in your contract prices?

Kirk Larsen -- Chief Financial Officer

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.

Tommy -- KBW -- Analyst

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

Anthony Jabbour -- Chief Executive Officer

Well, I think, I'm not sure if it's a trick question, Tommy, because we've got such sales success so early on in the life cycle for our digital offering, that it's just overwhelmingly 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 the banks, I mean, they've had digital capabilities going back eight years or so, yet on the mortgage side, there is a gap that we're filling. And I said, 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, I think we'll do more digital -- use more digital apps in the future versus I do now, it's absolutely, you 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 new home purchase cycle, I think, it's critical and I think our clients agree as well. Like I said I'm very pleased with the results that we're seeing and I'm anticipating continued growth in the business.

Tommy -- KBW -- Analyst

Great. Thanks for the comment.

Anthony Jabbour -- Chief Executive Officer

Thank you, Tommy.

Operator

Our next question is from Ashish Sabadra with Deutsche Bank. Please proceed.

Ashish Sabadra -- Deutsche Bank -- Analyst

Congrats on the pace of implementation as well as the 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?

Anthony Jabbour -- Chief Executive Officer

Well, I'd say -- we first look to build, then we 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 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 lifecycle 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 you're 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 upfront. And so just buying a bunch of companies and never integrating them is not the right answer either, so we are being very thoughtful about, not just what we innovate but how we innovate, how we remove the friction from our clients that can take the solutions that we bring to market quickly and easily. So again it ultimately drives value for them by increasing the revenue, improving the margins, and keeping them compliant.

Ashish Sabadra -- Deutsche Bank -- Analyst

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

Anthony Jabbour -- Chief Executive Officer

Sure. I'll -- maybe take the Ditech one, Kirk, if you can comment on the former question. With Ditech, obviously we're working through and staying very close with them. We are deemed to 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 juncture (ph).

Kirk Larsen -- Chief Financial Officer

Ashish, can you repeat the first question?

Ashish Sabadra -- Deutsche Bank -- Analyst

Yeah, just any initial feedback as of when (ph) is ramping on to the MSP platform.

Kirk Larsen -- Chief Financial Officer

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

Ashish Sabadra -- Deutsche Bank -- Analyst

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

Anthony Jabbour -- Chief Executive Officer

Thank you, Ashish.

Operator

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

Stephen Sheldon -- William Blair -- Analyst

Good morning. 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 financial contributor, the different products could be over the next two to three years. I'm guessing servicing digital would be the front-runner, 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 the today, like the point of sale solution?

Anthony Jabbour -- Chief Executive Officer

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 look at the amount of new really exciting capabilities that we're bringing to market for them. I anticipated that they're 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 the 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, is 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.

Kirk Larsen -- Chief Financial Officer

So from a revenue perspective, Stephen there is 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 eight clients. Two of our top five clients. So we've had 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 up on the level of interest that will ramp up quicker than some of the others.

And then I would say AIP as Anthony has 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, try before you buy a test drive, so to speak, so that -- they start using it, they 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 and others, an incremental solution that has had a lot of interest. I think that, that'll be sort of in line with where AIP is.

From an overall contribution when fully realized, and I mean what time bound that I think that AIP and AIVA really almost have, there is no boundary for those. It's -- AIVA in particular you can say, it starts with origination today and it starts with the skill, then three skills and five skills and keeps growing through all the documents and the origination process. AIVA doesn't have to stop there, AIVA can then go into servicing. And so it really is -- there almost there is 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 two 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 and MSP, it's selling the platforms themselves, both MSP and empower and incremental solutions and data and analytics in that segment. And then, 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.

Anthony Jabbour -- Chief Executive Officer

If I could add to that as well. If you look at AIVA, where it's not driven, any real revenue yet as it's -- where it's at -- and it's lifecycle. The significant increase we're seeing in our loan origination sales, there is 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 in full stride. Our clients are seeing it, they're doing diligence with us on it. They're factoring into their decisions on choosing Empower as we go forward loan origination system.

Stephen Sheldon -- William Blair -- Analyst

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 two?

Kirk Larsen -- Chief Financial Officer

It's a great question and will 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 into one that's -- that's more either a recession or boarding 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 written down over the last few years, 2 points to 3 points of revenue as a result of the decline in refi. And so that would -- 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 looked at prior recessions that 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 will likely happen in that scenario. If you look at past recessions even that's 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 -- with their mortgages. And so foreclosures are heightened. Now the last recession is something 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 are specialty servicing business that are driven off of default volumes. And are don't have minimums and so they're actually has a second order effect of or I should say another effect in the same circumstance where refi could pick back up that -- to the extent the foreclosures also pickup, there is incremental revenue to us. And so there is a counter-cyclical element to our business that hasn't really been what to speak of, over the last several years, because we've been in a great economic situation. But when things do turn that there is actually incremental revenue that would come up.

Anthony Jabbour -- Chief Executive Officer

Again, if I could add on to 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, we 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 had come we're positioned well for that as well.

Stephen Sheldon -- William Blair -- Analyst

That's very helpful. I appreciate all the color.

Anthony Jabbour -- Chief Executive Officer

Thank you.

Operator

Our next question is from Jim Schneider with Goldman Sachs. Please proceed.

Jim Schneider -- Goldman Sachs -- Analyst

Good morning, thanks for taking my question. Anthony, now with Dun & Bradstreet, having benefit of being involved in a 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 park level and maybe some what, those areas might be going forward.

Anthony Jabbour -- Chief Executive Officer

Sure, Jim. We're -- D&B's focus is really a stand-alone 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 to our change agents and that's what is needed at Dun & Bradstreet. We are taking aggressive actions, we restructured the business credit of focus on accountability and we've got a lot done in a very short period of time. There's still more to do as you'd expect them. 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 many 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 is a number of overlapping clients between both organizations. But at this stage it's -- obviously it's anything more than that.

Jim Schneider -- Goldman Sachs -- Analyst

Fair enough. Thank you. And then maybe there's been several comments made about the uptick in originations given what's happened with rates, and I understand that's maybe just be very temporal thing, but can you 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.

Anthony Jabbour -- Chief Executive Officer

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

Jim Schneider -- Goldman Sachs -- Analyst

Got it. Thank you very much.

Operator

Our next question is from Glenn Greene with Oppenheimer. Please proceed.

Glenn Greene -- Oppenheimer -- Analyst

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

Kirk Larsen -- Chief Financial Officer

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 -- that's going to be in the few -- in future quarters that will 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.

Glenn Greene -- Oppenheimer -- Analyst

Okay. And then Kirk, just on the couple of number questions first 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 LOS piece relative to what your initial expectations were?

Kirk Larsen -- Chief Financial Officer

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.

Glenn Greene -- Oppenheimer -- Analyst

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

Kirk Larsen -- Chief Financial Officer

That's correct.

Glenn Greene -- Oppenheimer -- Analyst

All right. Great. Thanks, guys.

Anthony Jabbour -- Chief Executive Officer

Thanks, Glenn.

Operator

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

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Hey guys, thanks for taking my question. On the LERETA tax feature that you mentioned, 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?

Anthony Jabbour -- Chief Executive Officer

We'd get a -- I 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 client's 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 with solve a problem.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

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, what are the things that you really trying to sell to make sure that you kind of retain your market share in terms of the overall origination and servicing revenue spend from clients?

Anthony Jabbour -- Chief Executive Officer

Well, I'm not sure if there 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 go after 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 that?

Kirk Larsen -- Chief Financial Officer

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-tiers, exactly little things along the way like that, Kevin, but nothing gaping as Anthony said.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Okay. Great, thanks -- thanks for taking my questions. That's all I had.

Anthony Jabbour -- Chief Executive Officer

Thank you, Kevin.

Operator

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.

Anthony Jabbour -- Chief Executive Officer

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 for your interest in our great Company. Enjoy the rest of your day.

Operator

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

Duration: 53 minutes

Call participants:

Ed Ewing -- Investor Relations

Anthony Jabbour -- Chief Executive Officer

Kirk Larsen -- Chief Financial Officer

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Jason Deleeuw -- Piper Jaffray -- Analyst

John Campbell -- Stephens -- Analyst

Andrew Jeffrey -- SunTrust -- Analyst

Bill Warmington -- Wells Fargo -- Analyst

Tommy -- KBW -- Analyst

Ashish Sabadra -- Deutsche Bank -- Analyst

Stephen Sheldon -- William Blair -- Analyst

Jim Schneider -- Goldman Sachs -- Analyst

Glenn Greene -- Oppenheimer -- Analyst

Kevin Kaczmarek -- Zelman & Associates -- Analyst

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