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Black Knight, Inc. (NYSE:BKI)
Q2 2019 Earnings Call
Aug 6, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Black Knight Second Quarter 2019 Earnings Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Steve Eagerton, VP of Investor Relations. You may begin.

Steve Eagerton -- Vice President of Investor Relations

Thanks. Good morning, everyone, and thank you for joining us for the Black Knight Second Quarter 2019 Earnings Conference Call. Joining me today are Chief Executive Officer, Anthony Jabbour and Chief Financial Officer, Kirk Larsen. Our results were released this morning and the press release and supplemental slide presentation have been posted to our website.

This conference call will include statements related to the expected future results of our Company are therefore forward-looking statement. Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward-looking statements are subject to, are described in our earnings release, Form 10-K and other SEC filings.

Today's remarks will also include references to non-GAAP financial measures. Additional information including reconciliation between non-GAAP financial information to the GAAP financial information is provided in the press release and supplemental slide presentation.

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

I'll now turn over the call to Anthony.

Anthony Jabbour -- Chief Executive Officer

Thank you, Steve, and welcome to the Investor Relations team. Good morning everyone and thank you for joining us for our second quarter earnings call. Overall, the second quarter was another solid quarter. The core fundamentals of our business remained strong and we continue to execute on our strategy to drive revenue growth by expanding relationships with existing clients, adding new clients and delivering innovative solutions.

We continue to make great progress developing and selling innovative new solutions that are helping our clients gain new customers, improve customer retention, and operate more efficiently, while also helping them to manage risk. Since launching Servicing Digital as part of our digital suite, 14 clients representing more than 25% of the loans on MSP have signed up to use this innovative solution to enhance customer experience and retention.

Of the total, six clients signed in the second quarter, including two top 15 servicers. Interest and excitement for this product is growing and we continue to enhance the functionality. For example, we are currently working on an integration with Househappy to offer capabilities to simplify the customer's home care and maintenance needs through digital ordering and scheduling of services as well as convenient storage of home related information.

It's an additional feature within Servicing Digital that will create increased customer engagement and lead to increased customer retention for our clients. At the end of last year, we introduced the Rapid Analytics Platform or RAP which provides data scientists a cloud-based analytics plan, where they can use Black Knight's data assets in conjunction with their own data to create models and analytics to help them drive additional revenue and efficiencies. Since launching, we have signed three clients, including a top five credit union and we continue to build a strong pipeline.

Another innovative solution currently in development and an example of how we're helping our clients manage risk is our Regulatory Assist solution. This tool is integrated within Empower and performs origination compliance testing against state and federal regulations, while checking for high cost mortgage violations, allowable fees and client-specific compliance rules. Based on our preliminary conversations with clients, there is strong demand for this product, because it eliminates the need to integrate with another provider.

Finally, let me give you an update on AIVA or Artificial Intelligence Virtual Assistant with a quantifiable example of the value AIVA delivers. Consulting firm MarketWise Advisors performed an independent study with the top 50 lender who is using AIVA. They found that using AIVA skills for just income, asset, insurance and file intake could decrease the cost of origination by up to $437 per loan at this lender.

MarketWise said that the anticipated cost savings will grow significantly as AIVA's machine learning enhances, to include more skill sets. Clients have shown a lot of interest in using AIVA to help lower their origination cost, which has significantly increased over the past few years. I look forward to continuing to update you on AIVA's progress.

From a new sales perspective, we had a very solid second quarter and total new sales contract value is tracking to our plan through the first half of the year. In our origination software business, we had continued success in the second quarter selling our Empower and Empower now solutions.

On our first quarter call, I talked about the development of enhanced correspondent functionality in Empower. Those efforts have paid off as we have established a new origination relationship with U.S. Bank to use Empower to manage loans purchased through its correspondent channel. U.S. Bank is also going to use AIVA for document classification, data extraction and exception management. We believe AIVA was a key factor in U.S. Bank's selection of Empower.

I also talked about our expectations for accelerating sales of Empower now. To that end, we signed three Empower now deals in the second quarter, which brings us to four new clients in the first half of the year. I continue to be confident that we can sign eight to 12 new Empower now clients this year. I'm also excited to announce that our top 20 lender recently renewed their Empower contract.

This lender was operating in a self-hosted environment and with their renewal made the decision to move to the Black Knight hosted environment. When we host the software, our clients benefit from significant economies of scale, timely enhancements and the ability to focus their employees on the functions that will drive revenue for their businesses.

In servicing software, we continue to have success adding clients to our industry-leading MSP platform. In the second quarter, two mortgage companies, Triad Financial Services and Fidelity Bank, selected MSP for loan servicing. And we have a strong new sales pipeline including servicers of all sizes. Fidelity Bank is also implementing Servicing Digital, Empower, our Default suite of solutions, as well as our Actionable Intelligence platform. This is another example of the exponentially greater value clients can realize when using multiple Black Knight products.

We continue to make progress with implementation. In June, we announced that more than 1 million Ocwen loans were converted MSP. We are in the process of converting first mortgages for seven new MSP clients and converting home equity portfolios for four existing clients. We are also implementing Empower for first mortgages for four new clients, while adding home equity capabilities for five existing clients.

As you can see, clients continue to see the value of using our proven software to originate and service both first mortgages and home equity loans. As a leader in our industry, we are focused on growing our business while also actively managing risk. As a result, a couple of years ago, we made a strategic and risk-based decision to sunset our non-core single client platform and our specialty servicing business.

Although profitable, this business posed the potential risk to our franchise. Based on the complexity to convert to another platform, we had expected the client to de-convert from our system in 2020. However, the de-conversion occurred at the end of the second quarter, resulting in a revenue headwind in the second half of this year.

In closing, the core fundamentals of our business remains strong, and we continue to focus on and make progress signing new clients, cross selling our offerings, implementing signed clients, and delivering new innovative solutions.

Thank you for your time today. I'll now turn the call over to Kirk for a financial update.

Kirk Larsen -- Chief Financial Officer

Thank you, Anthony, and good morning everyone. Today, I am going to discuss our second quarter results and our outlook for the second half of the year. Turning to Slide 3, on a GAAP basis, second quarter revenues were $295 million, an increase of 7% compared to the prior year quarter. Net earnings were $32 million, a decrease of 20% compared to the prior year quarter.

Diluted net earnings per share was $0.21, a decrease of 22% compared to last year. The effect of our indirect investment in Dun & Bradstreet or D&B was a reduction of net earnings of $13 million or $0.09 per diluted share. The D&B results reflect, among other things, the incremental amortization related to the application of purchase accounting as well as significant one-time restructuring charges. Net earnings margin decreased 370 basis points to 10.8% compared to 14.5% in the prior year quarter.

Year-to-date, revenues were $578 million, an increase of 6%. Net earnings were $71 million or $0.48 per diluted share, a decrease of 14%. And net earnings margin was 12.3%, a decrease of 280 basis points compared to the prior year period.

Turning to Slide 4, I'll now discuss our adjusted results for the second quarter and first half of 2019. Second quarter adjusted revenues were $295 million, an increase of 6% compared to the prior year quarter. Adjusted EBITDA was $148 million, an increase of 10%. Adjusted EBITDA margin was 50.1%, an increase of 170 basis points. Adjusted net earnings were $73 million or $0.49 per diluted share, an increase of 7%. And finally, second quarter capital expenditures were $23 million.

Year-to-date, adjusted revenues were $578 million, an increase of 5% compared to the prior year period. Adjusted EBITDA was $285 million, an increase of 8%. Adjusted EBITDA margin was 49.3%, an increase of 120 basis points, and adjusted net earnings per share was $0.94, an increase of 6%. And finally, capital expenditures were $45 million.

Turning now to Slide 5, I'll discuss our Software Solution segment results. Second quarter adjusted revenues for the Software Solution segment increased 7% to $255 million. Our Servicing Software Solution had adjusted revenue growth of 7% driven by loan growth on our core Servicing Software Solution from new and existing clients, higher average revenue per loan, and a contract termination fee related to a client that was acquired, partially offset by lower ancillary revenues in transaction volumes on our core servicing solutions.

In Origination Software Solutions, adjusted revenues increased 8% driven by growth in our loan origination software business. Adjusted EBITDA increased 9% to $154 million and adjusted EBITDA margin was 60.3%, an increase of 90 basis points. Year-to-date adjusted revenues in the Software Solutions segment increased 6% to $499 million. Adjusted EBITDA increased 6% to $295 million, while adjusted EBITDA margin was 59% in both periods.

Turning to slide 6, second quarter adjusted revenues for the Data & Analytics segment increased 3% to $40 million driven by growth across nearly all business lines. Adjusted EBITDA decreased 4% to $9 million due to higher personnel cost as we grew our sales team and experienced higher medical costs. Adjusted EBITDA margin was 23.7% compared to 25.3% in the prior year quarter. Year-to-date adjusted revenues increased 4% to $79 million. Adjusted EBITDA increased 5% to $19 million, while adjusted EBITDA margin was 24.3%, an increase of 20 basis points compared to the 2018 period.

Adjusted EBITDA for the Corporate segment in the second quarter was $2 million favorable compared to last year, driven by lower incentive-based compensation. Year-to-date, adjusted EBITDA for the Corporate segment was $4 million favorable compared to the 2018 period.

Turning now to Slide 7, I'll walk through our capital structure. At the end of June, we had cash and cash equivalents of $9 million. Total debt principal, as of June 30th was $1,644 million with revolver borrowings outstanding of $403.5 million and $346.5 million of borrowing capacity remaining under our revolver.

Our leverage ratio was 2.9 times on a gross and net basis. Finally, we repurchased 205,000 shares for $12 million during the second quarter and continue to have approximately 3.6 million shares available to repurchase under our share repurchase authorization.

Turning to Slide 8, primarily as a result of the earlier than planned client de-conversion that Anthony mentioned, we are revising our outlook for full year 2019. We now expect GAAP revenues to be at the low end of the prior guidance range of $1,177 million to $1,199 million. Adjusted revenues are expected to be at the low end of the prior guidance range of $1,178 million to $1,200 million. Adjusted EPS is expected to be at the low end of the prior guidance range of $1.90 to $2.00 and adjusted EBITDA is expected to be at the low end of the prior guidance range of $581 million to $598 million.

Additional modeling details underlying our outlook are as follows; we expect interest expense of approximately $64 million to $66 million; depreciation and amortization expense of $138 million to $140 million excluding the net incremental depreciation and amortization resulting from purchase accounting; and adjusted effective tax rate of approximately 25% to 26%; and finally, capex of approximately $105 million. Overall, we are pleased with our second quarter and first half results and look forward to another solid year for Black Knight in 2019.

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

Questions and Answers:

Operator

Thank you. We will now begin -- conducting a question-and-answer session. [Operator Instructions] Our first question comes from John Campbell of Stephens.

John Campbell -- Stephens -- Analyst

Hey guys, good morning.

Anthony Jabbour -- Chief Executive Officer

Good morning, John.

John Campbell -- Stephens -- Analyst

Hey, on the client de-conversion, can you maybe provide a little bit more color around, I guess, the decision to roll it off, why it happened this year versus next? And then, I might have missed this, but what was the rev impact? Just trying to get a better sense for the impact of the back half guidance.

Anthony Jabbour -- Chief Executive Officer

Sure. Yes, the revenue impact, it is a $16 million a year client and the reason that we did that was we've got a great company, like I said in my prepared remarks, and we need to grow it responsibly and that involves managing risk; operational risk, security risk, reputational risk, etc. and this client was a single client that did no other business with us and it was a non-core platform that no other client was using and it wasn't core to our business that we thought introduced some unnecessary risk to Black Knight.

So like I said, a couple of years ago, we made the decision to no longer offer the platform to the client and the client went on to build a replacement product with another partner, a custom solution. And based on the complexity of the platform and the conversion and -- we assumed that they would maintain the full scope of the project which they didn't toward the end. So there were a couple of changes that had accelerated the de-conversion to the second quarter versus 2020.

John Campbell -- Stephens -- Analyst

Okay, that's very helpful. And then on the origination channel, I just want to check on the pricing environment. We've been hearing that, I guess one of your top competitors on the origination side just is pushing price pretty, pretty dramatically. I don't know if you can comment on that, if not, maybe if you could just talk about kind of just the broader health of the channel, if it's gotten back to a point of health where you guys might be able to take some price here and there?

Anthony Jabbour -- Chief Executive Officer

Yeah, sure. We're very pleased and you see it in the results of our origination business. We've got great momentum and it's our origination platform, but it's all the other innovation that we're coming to market with seamlessly integrating to origination platform. So our capability and our story gets bigger and bigger. I'd say we're well within our range on pricing from the origination channel and feel good about the prospects there.

John Campbell -- Stephens -- Analyst

Okay, great, thanks guys.

Anthony Jabbour -- Chief Executive Officer

Thank you John.

Kirk Larsen -- Chief Financial Officer

Thank you.

Operator

Our next question comes from Jason Deleeuw of Piper Jaffray.

Jason Deleeuw -- Piper Jaffray -- Analyst

Yeah, good morning. Thanks for taking the question. It's great to see the momentum here and the Servicing Digital wins and some of the things with AIVA and some of the other complementary solutions out there. I'm trying to get a sense of the incremental revenue and the benefit that we're going to get for revenue and earnings from those. Is there any way you can kind of help us think about that? Is this a material amount of revenue or how should we think about it?

Kirk Larsen -- Chief Financial Officer

Sure. Jason, it's Kirk. It's a great question. As we've talked about in the past, looking at each of the individual ones we've been talking about now for a while being Servicing Digital and AIVA and AIP are some of the more significant ones, they will be gradual. So for example, the wins on Servicing Digital, we're really thrilled to have the level that we've signed so far. The revenue will be coming on. There is some revenue this year it will ramp next year and then we believe we'll continue to sell and sort of ramp for the next couple of years thereafter.

That product is certainly a great add-on to our servicing platform and by order of magnitude could be 1% to 2% of revenue, just looking at relative to our current base as it ramps up. And that'll be the quickest to ramp. The next one I would say would be AIVA and that's one again was pre-revenue when we acquired it last year, we continue to add skills. It continues to gain momentum with the client base. The excitement is tremendous related to AIVA, but that's one that, again, is going to ramp over time.

And as we've talked about in the past, thinking about the magnitude of that, it's certainly is going to play out over years as we continue to build skills and continue to roll it out, but it's not something that I could even range bound by how large it could be, because frankly, it will grow in servicing -- I'm sorry it will grow in origination, adding skills. Adding skills will expand it into servicing and there's just so much that we can do that I really can't range bound that with size.

And with AIP, with the 100 analytics that we have there and including it in deals and signings that we're very pleased with in the quarter and the prospects there, that's another one that will just -- that will ramp up, I'd say a bit slower than the first two, but that's something that I think again is hard to range bound from a size perspective.

So, as we look forward and think about the way that we're going to continue to grow this business at the levels that we have and that 6% to 8% going forward, I think that introducing these new solutions will really be key to that last leg of growth which is driving new deals and we think those three plus the other ones that we've been talking about, you'll notice as you go back over the last several calls, say over the last year or so, each quarter there's new things that we're talking about.

This quarter, it was Regulatory Assist that we're talking about which there's a lot of excitement in the client base around. So it's really important that not only that each of them contributes individually, but that we continue the engine of innovation to drive that aspect of growth.

Jason Deleeuw -- Piper Jaffray -- Analyst

That's very helpful. Thanks for all that detail. And then another question on the mortgage origination front, a number of banks or a lot of banks still run separate platforms, I believe on the correspondent channel versus the retail channel, and I'm just trying to better understand why -- is that changing? Are there compelling reasons to just integrate both of those channels on the one platform? Just like to get your perspective on that.

Anthony Jabbour -- Chief Executive Officer

Sure Jason, it's Anthony. The -- without question, it makes a lot of sense for them to combine on the Empower platform. I think at the end of the day, as they look at their different channels, their needs need to be satisfied. And when we look at all the different channel capabilities we have on Empower, we can meet them and exceed them.

And -- so if you can do that by channel, then certainly putting them all on the same platform, which is going to give them synergies and efficiencies and the type of leverage that everyone's looking for in running their business. So we strongly believe that that makes sense. That's -- it was the strategy that we called out that we're going after and we're working tirelessly against and we're very pleased with the results that we're seeing so far.

Jason Deleeuw -- Piper Jaffray -- Analyst

Sounds good. Thank you.

Anthony Jabbour -- Chief Executive Officer

Thank you Jason.

Kirk Larsen -- Chief Financial Officer

Thanks, Jason.

Operator

Our next question comes from Tien-Tsin Huang of JPMorgan.

Puneet Jain -- JPMorgan -- Analyst

This is Puneet sitting in for Tien-Tsin. A follow-up question on AIVA like -- Anthony, in the past you have talked about like that focus on increasing revenue per loan. So can you talk about like your progress there, like how is that metric trending, and are you seeing any improvement in that, with technology investments like AIVA or is it too early?

Anthony Jabbour -- Chief Executive Officer

Sure. No, thank you Puneet. Well, we want to quantify, so first of all, we focused our AIVA efforts around origination for a couple of reasons. We knew originations would really be a tailwind of growth for us in the Company and we wanted to wrap lots of capability around it. We saw that the spent for origination has continued to grow over the years and there is an opportunity to help our clients lower costs and be more efficient.

And when we looked at it, we wanted to quantify it for our clients so that it was something that they could bank on. And with the top 50 lender who is using AIVA, hire MarketWise Advisors and as I said in my prepared remarks, just on the income asset insurance and file intake, those four skills save $437 per loan. So we're very confident, if we can make it a very mathematical conversation with our clients to show the skills, show the savings, it becomes a capability and a skill set that sells itself.

So we're excited about it, because again on our, I'd say my very first earnings call, I talked about our strategy to help transform the industry and to really help drive revenue growth, efficiency and manage risk for our clients. This is one where we've got a clear line of sight into how we can help them on the revenue side and on the efficiency side and we're very focused on it.

Kirk Larsen -- Chief Financial Officer

And Puneet, what I would add is, if you go back a couple of years and think about how we were selling our loan origination system, we are selling the loan origination system somewhat on a stand-alone basis and selling the processing. What's happened since then is, frankly, we have worked to increase that revenue per loan by adding in additional capabilities, whether it'd be Data & Analytics or the Exchange or e-Lending and really bundling it altogether, so that revenue per loan on a -- at a client level is increasing. And you've seen us further that with the fee capabilities that we acquired late last year with Ernst and then AIVA would be additive to that. So it is something that we absolutely have been focused on as we brought the entire Company together and integrated components and then took it one step further by really bundling all of that -- all of those capabilities into our individual client deals. So, that absolutely is the plan and you will see that going forward to continue.

Puneet Jain -- JPMorgan -- Analyst

Got it. And quickly, how fast your origination business responds to change -- changes in interest rate environment? I know, on the downside, you are protected by the minimums, on the upside, if refi volume improves, how fast -- how quickly should we expect that to reflect in your origination business?

Anthony Jabbour -- Chief Executive Officer

Sure. If you look at the origination business in two buckets, and you look at the loan origination system component where we have the contractual protections with the minimums that as of last quarter, 98% of the processing revenues were at or below the minimums. This quarter it's 95%. So there was -- there is a little bit of improvement with the drop in rates, but still there is room to go.

The components of the business that we've talked about in the past, being highly sensitive to refinance volumes is the Exchange, which is the network that connects lenders and service providers during the origination process to order settlement services. And that business, we saw the uptick in -- we saw the benefit of lower rates and increase in refi volumes in the quarter as it went from -- as it went up. I think it was $28 billion or so according the NBA from Q2 last year to Q2 this year.

Frankly, not a very big increase in the grand scheme of things. On a -- at a dollar basis, percentage wise, it looked like something, but they're still at relatively low levels and have -- clearly have room to go from there. You look at the last 10-year average, the average quarterly origination volumes -- refi origination volumes were $229 billion and this quarter they were like a $146 billion.

So we're still nowhere near historical averages. But we did see the uptick, so that is what we would expect to see, and it happens quickly, but it really the magnitude wasn't that great. And frankly was offset by lower foreclosure volumes, because the quality of originations continue to be very high and in a good economy foreclosure volumes just really aren't very high which then lends itself to an environment when a recession does come and rates continue to go down and refi volumes accelerate back up to the elevated levels that you've seen in prior recessions and unemployment rises and foreclosure volumes go up. And that's where, frankly -- the business will perform very well in that environment. So there is that aspect too which I know you're well aware of.

Puneet Jain -- JPMorgan -- Analyst

Got it, thank you.

Operator

Our next question comes from Bose George of KBW.

Thomas Patrick Mcjoynt-Griffith -- Keefe, Bruyette, & Woods, Inc. -- Analyst

Hey guys, this is Tommy on for Bose.

Anthony Jabbour -- Chief Executive Officer

Hi Tommy.

Thomas Patrick Mcjoynt-Griffith -- Keefe, Bruyette, & Woods, Inc. -- Analyst

I wanted to get an update on the changes at Ditech. So did that early -- did that initial move from earlier this year impact 2019 numbers and do you have an expectation for kind of how future numbers could be impacted, depending on what happens to the rest of Ditech?

Anthony Jabbour -- Chief Executive Officer

Yeah, yeah. The loans have been or are in the process of moving related to that earlier announcement this year. As far as the path forward, the public announcement about NRZ acquiring some assets of Ditech and planning to move those loans to Shellpoint, which is their captive servicer they talked about that on their earnings call. There has been no public disclosure on timing related to that, but what I would say is, to the extent that those loans move to Shellpoint who is not an MSP client at this time, I would say, to the extent that those -- if those do eventually move to Shellpoint that -- suffice to say, we will work tirelessly to work with Shellpoint to try to bring them into the Black Knight family. So they are growing, which by virtue of their loans, and clearly are in a space where we think that there is a lot that we can do for them that there is a lot that where we could benefit them and frankly any servicer of size that MSP would be the -- we think would be a great solution for them.

Thomas Patrick Mcjoynt-Griffith -- Keefe, Bruyette, & Woods, Inc. -- Analyst

Got it. Thanks, and sorry if I missed this. Was the de-conversion which segment and I guess revenue line item did that hit? And what was the, I guess, general margin profile of those revenues?

Anthony Jabbour -- Chief Executive Officer

It's in servicing. So it's within the Software Solutions segment and the profitability was pretty good on it, but it was not, it's was not to the point where we were willing to continue to take that risk.

Thomas Patrick Mcjoynt-Griffith -- Keefe, Bruyette, & Woods, Inc. -- Analyst

Got it, thanks guys.

Anthony Jabbour -- Chief Executive Officer

Thank you.

Operator

Our next question comes from Stephen Sheldon of William Blair.

Stephen Sheldon -- William Blair -- Analyst

Good morning.

Anthony Jabbour -- Chief Executive Officer

Good morning.

Stephen Sheldon -- William Blair -- Analyst

Within the origination business, I think you've talked about high-single to low double-digit growth this year. You saw little acceleration this quarter. Can you maybe talk about expectations over the rest of the year? Would you expect maybe continued acceleration given implementations and the potential modest uplift from higher refi activity?

Kirk Larsen -- Chief Financial Officer

Yeah, we would expect there'd be faster growth in the second half than in the first half. By virtue of sales and as well as an element of the volumes, but that's a business that, certainly as the headwinds abate from lower refinance volumes and we continue to have this success, which we're very excited about around Empower now and our penetration with large lenders that we've talked about, we think the performance of that business is going to be terrific.

Stephen Sheldon -- William Blair -- Analyst

Great. And then, Anthony, maybe one for you. Clearly, you have a lot on your plate running two large complex organizations. So I guess can you maybe provide some updates on where you plan to focus your time over the rest of the year within -- and kind of between the two businesses and maybe just a broader update on how things are progressing at Dun & Bradstreet, in your view?

Anthony Jabbour -- Chief Executive Officer

Sure. I mean, all my time is spent on creating shareholder value for Black Knight either directly here or through our investment in Dun & Bradstreet. And we've got very strong teams in place at both companies. We've had it here at Black Knight for a while, and I'd say on the Dun & Bradstreet side, we've made a lot of changes at the early start of this year and have a very, very strong, very capable team running that operation.

But I'd say on the results, we're -- I know [Indecipherable] will be updating in a couple of days. But we continue to be ahead of schedule on the cost take out and on the reengineering of the business. So again, we're very pleased with that, and again, in terms of the natural timing of these things, when we looked at how we went through that process with Black Knight, what then followed was really the push on innovation, which we're seeing right now at Black Knight.

And as Kirk said, every quarter we're coming out with more and more new capability or functionality. So it's an innovation engine that we have here, which is running full speed and it's something which I joke internally that I pushed on it a bit and then the teams all ran with it and they're running really in front of all of us. And there is a spirit of innovation that's going on and an excitement around it. So that's how I kind of summarize where we are with both companies at a high level.

Stephen Sheldon -- William Blair -- Analyst

Great, thank you.

Anthony Jabbour -- Chief Executive Officer

Thank you.

Operator

Our next question comes from Chris Gamaitoni of Compass Point.

Chris Gamaitoni -- Compass Point -- Analyst

Hi, good morning everyone.

Anthony Jabbour -- Chief Executive Officer

Good morning, Chris.

Chris Gamaitoni -- Compass Point -- Analyst

I wanted to talk about the strategic direction for the LOS business. I look at the announcement for a digital point of sale and the integration with Docutech, it appears to me that it signals a more concentrated push down market to kind of out of the box more standardized solution. Maybe just talk about your focus for Empower now over the next two years?

Anthony Jabbour -- Chief Executive Officer

Sure. Well, as I said with Empower now and it going more down market on a few of the calls we had last year when the questions came up, I answered them saying I understand the down market space and what we need to do and it goes beyond just the product. It goes into the implementation, it goes into the customer servicing and it goes into the integration and the out-of-the-box integration capabilities.

And I feel we've made very steady progress on that. We've hired additional sales executives on to sell the product and you see again the suite of solutions that we have around it. So, as an example, looking at the AIVA product and what we talked about with the savings per loan would be, they're significant compared to what we've charged for in an origination software per loan.

So really the value that we're creating for our clients, when you look at their total cost of ownership and capabilities are significant. We expect that we'll continue to increase our sales of Empower now and continue to broaden out the family. Like I said on the last call, we doubled or tripled the amount of sales we've had over the last few years on Empower now. In 2019, I feel confident, we are on track with that.

I'd say with the digital point of sale capabilities, we're very excited with that offering. And again what we're doing with it is, we are taking the additional capability such as AIVA and bringing it into the digital point of sale solution so that it's adding new and unique capability that doesn't exist in the market today, with existing point of sale solutions.

So that's just an example, but what I'd say, the message is resonating though not with just Empower now and going down market, but also with our larger clients as they look at our point of sale, as they look at these other capabilities and innovations that we brought in an integrated to them. So I'm very pleased with the progress we're making, because we're not selecting going down market at the expense of ignoring the upper end of the market, we're an AND company and we're focused on both those markets. So -- and I expect that will continue for some time.

Chris Gamaitoni -- Compass Point -- Analyst

All right. And I'm not -- I think I missed exactly, you noted you added sales force in the quarter, was that in Data & Analytics, was that correct?

Kirk Larsen -- Chief Financial Officer

We -- Anthony was referring to the sales resources we added in origination. But yes, we did add to the sales force in Data & Analytics as well.

Chris Gamaitoni -- Compass Point -- Analyst

Okay, thank you so much.

Kirk Larsen -- Chief Financial Officer

Thank you.

Operator

Our next question comes from Bill Warmington of Wells Fargo.

Bill Warmington -- Wells Fargo -- Analyst

Good morning, everyone.

Anthony Jabbour -- Chief Executive Officer

Good morning, Bill.

Kirk Larsen -- Chief Financial Officer

Good morning Bill.

Bill Warmington -- Wells Fargo -- Analyst

So the stats we've seen on average spend per mortgage origination show about $8,100 and I wanted to ask if that stat was consistent with what you've seen and to ask what type of percentage savings can you promise clients and does it differ between Empower and Empower now clients?

Anthony Jabbour -- Chief Executive Officer

Well, the $8,100, it's in the range, right, in the last number, I saw -- I think had a nine handle, the $9000, but plus or minus, it's in the range. And really the goal that I had set for the team was, I wanted us to find ways to reduce it significantly and everyone -- like I said, when you look at the total spend, not all of the spend is actionable, right. So for example, what's being paid to loan officers in the form of commissions is not something we could really action here.

Now we could indirectly action it with point of sale. So as our point of sale solution grows more and more and that becomes a primary channel and they change maybe how their sales efforts work or how they compensate, there may be some indirect savings from it, but I do think that there is meaningful ways that we can increase it, like I said, with the AIVA example that we gave that we've quantified and through a thorough analysis it's $437 per loan and that's just for skills.

So we think it's a meaningful opportunity there for us and we think -- again just going through the math with our clients and with our prospects, it will be obvious of ways that we can help them save significant dollars on this channel. But at the same time, improve the quality of it through the Artificial Intelligence.

Bill Warmington -- Wells Fargo -- Analyst

Okay. And then a couple of housekeeping questions. Was there any revenue impact from the de-conversion in Q2?

Kirk Larsen -- Chief Financial Officer

No.

Bill Warmington -- Wells Fargo -- Analyst

And then my other one is, just to ask about what happened on the D&A side, the deceleration to 2.6% growth versus the easiest comp in 2018. What was driving that?

Kirk Larsen -- Chief Financial Officer

Yeah, what I would say, actually there is a little bit of embedded tough comp in Q2 of last year. We had a couple of things that not significant to the enterprise, but to that segment in particular, probably cost -- a point or two relative to this year's growth rate. And the other thing I'd say is, we had probably a one point headwind from deals that we would have expected to sign in the second quarter that pushed into Q3. It doesn't change our outlook for the year. Last quarter I talked about a mid-single digit growth and we still believe that is the case as is this time for the D&A segment for the year.

Bill Warmington -- Wells Fargo -- Analyst

Got it. Well, thank you very much.

Anthony Jabbour -- Chief Executive Officer

Thank you, Bill.

Kirk Larsen -- Chief Financial Officer

Thanks Bill.

Operator

Our next question comes from Ashish Sabadra of Deutsche Bank.

Ashish Sabadra -- Deutsche Bank -- Analyst

Hi, thanks for taking my question. Just quickly, a quick clarification on the de-conversion impact. The $16 million that's the annualized, right? So when we think about this year, just think about the back half impact, $8 million, is that the right way to think about it?

Anthony Jabbour -- Chief Executive Officer

That's exactly the right way to think about it.

Ashish Sabadra -- Deutsche Bank -- Analyst

Okay. Thanks. Kirk, you also provided a lot of good color on the origination software side, but I was wondering and if I missed it, could you provide what the growth rate was for Empower versus Exchange?

Kirk Larsen -- Chief Financial Officer

It was -- so the loan origination system business grew 18%.

Ashish Sabadra -- Deutsche Bank -- Analyst

And that's the Empower -- that's the exchange piece or the Empower piece, I'm sorry?

Kirk Larsen -- Chief Financial Officer

That's the -- that's Empower and lending space.

Ashish Sabadra -- Deutsche Bank -- Analyst

Okay. And what about the Exchange, any colors like how much was the kind of the headwind or the tailwind in this quarter from your refinance activity. I know you gave a lot of good color on the amounts, but any anything on percentage terms?

Kirk Larsen -- Chief Financial Officer

Yeah, it was very -- it's relatively small. It was -- I mean you think about the, again the relatively small percent dollar value increase in origination volumes, it was a pretty small increase on the Exchange as a result of refi.

Ashish Sabadra -- Deutsche Bank -- Analyst

Okay, that's helpful. Maybe a quick clarification, I think you mentioned there was a terms fees in the -- automation fees in the quarter, second quarter. Will it be possible to quantify how big they were?

Kirk Larsen -- Chief Financial Officer

Yeah, it was $4 million. It was a client that was acquired and terminated in the quarter, and the annual revenue for that client, it's really more of an impact on next year, is about $8 million.

Ashish Sabadra -- Deutsche Bank -- Analyst

Perfect, that's helpful. And maybe just a final clarification on the NRZ acquisition of Ditech. Again, you provided some really good color. But as we think about it, just in terms of normally the amount of time it takes for any kind of conversion, you wouldn't necessarily think about -- the timing would be more next year, would that be a fair assumption as well?

Kirk Larsen -- Chief Financial Officer

Yeah, that's our assumption at this stage.

Ashish Sabadra -- Deutsche Bank -- Analyst

Okay, that's helpful. And Anthony, congrats on solid momentum in new product launches and adoption by the marketplace. So thanks. Thank you for the color.

Anthony Jabbour -- Chief Executive Officer

Thank you so much, Ashish. Team has done a great job here.

Operator

Our next question comes from Andrew Jeffrey of SunTrust.

Andrew Jeffrey -- SunTrust -- Analyst

Hey, good morning guys. Thanks for taking the question.

Anthony Jabbour -- Chief Executive Officer

Good morning, Andrew.

Andrew Jeffrey -- SunTrust -- Analyst

Very thorough as usual, I wonder if I could delve into the point of sale opportunity a little bit, as the environment is sort of changing for banks in terms of third-party originations for example. Is there an opportunity to expand your technology exposure beyond mortgage and point of sale into other lending verticals? And I guess sort of as a corollary, is there any talk, I know you've got lots of different initiatives, but has there been any discussion about, for example, expanding MSP beyond mortgages. So I guess a beyond mortgage question broadly.

Anthony Jabbour -- Chief Executive Officer

Yeah. Andrew, it's Anthony. It is something that we've looked at and continue to look at in terms of seeing what the opportunity is. As we look at other growth channels such as geographic etc. But what I'd say at this stage and having spent time working across all the different asset types previously in my career, there's a lot of new launch there, which -- as we look at what we see that we can do in terms of impact, we see the impact that we can have really in mortgage for the next number of years, just greatly outweighing what a more diluted focus would bring to us in that space.

And so that's really the priority that we've got right now and it's really strategy is always about how do you want to spend your time, energy, and resources, and for us, we see a big opportunity here that we want to make sure it's like AIVA, right. We see opportunity with AIVA on the servicing side of the business, but we've got it very targeted on origination because, we believe by doing it that way, we're going to create something phenomenal. It's going to be very measurable and quantifiable and that's going to help us grow and take full advantage of it.

It's the same thing I'd say on the point of sale and MSP in terms of focus on the space. As you know, we're well into the home equity space right. Pro forma, we've got about a third of the market already after a very short period of time. So on all of these things, our strategy is really making sure we've got the focus to execute and to capture the market versus be notionwide in a range or -- across a lot of different capabilities.

Andrew Jeffrey -- SunTrust -- Analyst

Okay. That's a high class problem in that regard.

Anthony Jabbour -- Chief Executive Officer

Yeah, perfect.

Andrew Jeffrey -- SunTrust -- Analyst

And then, Kirk I just wanted to clarify a comment, did you say the Company invested in -- incrementally in D&A sales in the quarter and is that sort of an indication of perhaps an opportunity that you see to accelerate growth? I just wanted to get a little color on that.

Kirk Larsen -- Chief Financial Officer

Yeah. The resources were hired late last year, early this year. It affected the quarter which is why I brought it up. I would say that we continue to focus on sales execution in Data & Analytics as well as increasing productivity there, and frankly the performance we think has been very good. But do we think there's an opportunity to accelerate? We sure do, but certainly sales force productivity takes time, and so that's something that we expect to see going forward, but it shows commitment to the business and the space and a focus on growth.

Andrew Jeffrey -- SunTrust -- Analyst

Okay look forward to that [Speech Overlap].

Anthony Jabbour -- Chief Executive Officer

If I could add on to that, we've got a real focus not just integration of our products and our solutions, but also of our teams and our account management and our sales teams and we see an opportunity to ramp that up as well and so we're really just -- and it's not just D&A, it's in all the products that we have, how do we bring it all together for our clients in a frictionless way beyond technology and beyond just account and sales management.

Andrew Jeffrey -- SunTrust -- Analyst

Appreciate it, thank you.

Anthony Jabbour -- Chief Executive Officer

Thank you Andrew.

Kirk Larsen -- Chief Financial Officer

Thank you.

Operator

Our next question comes from Jim Schneider of Goldman Sachs.

Jim Schneider -- Goldman Sachs -- Analyst

Good morning, thanks for taking my question. Relative to the outlook, I just wanted to kind of confirm and apologies if I missed it before, are there any changes to the existing kind of on-boarding assumptions about your clients who are coming on to the servicing and origination platforms in the back half of the year, or is the entire update simply to replace that one big conversion in Q2?

Anthony Jabbour -- Chief Executive Officer

Sure Jim. No, what I'd say is, we're pleased with the implementations that we've got under way, things are on track and teams continue to do a great job that way.

Kirk Larsen -- Chief Financial Officer

And Jim, one last thing I'd add would be, as you think about the guidance revision, we talked about the $8 million. Well, first of all, let me just take a step back, when we put guidance together at the beginning of the year we plan at the midpoint. And so as you think about that and the relative change that we made today, we've got the $8 million related to the client de-conversion. And then I mentioned in my remarks in the Software segment, ancillary services and transaction volumes in servicing and that really would be the other component of it that historically we've seen steady growth in some of the activity based charges in servicing and this year it's frankly been relatively flat. And so that really is the other aspect of it.

Jim Schneider -- Goldman Sachs -- Analyst

That's helpful, thanks. And then maybe Anthony relative to your commentary on Empower -- Empower now sales, I think you talked about I believe eight to 10 wins you expect for the year. Can you maybe just talk about at what point you feel that's going to be materially accretive to the overall growth on that sub segment? And I guess any of that impacting the current year outlook or is that more of like a kind of a mid-2020 statement?

Anthony Jabbour -- Chief Executive Officer

No, we are confident with our capabilities there and we're on track with what I had mentioned as our projection with Empower now and it already is accretive. It's adding value and growth to the business already. So we're excited about that and we think it will continue and ramp up next year and the year after.

Jim Schneider -- Goldman Sachs -- Analyst

Thank you very much.

Anthony Jabbour -- Chief Executive Officer

Thank you Jim.

Kirk Larsen -- Chief Financial Officer

Thank you.

Operator

[Operator Instructions] Our next question comes from Kevin Kaczmarek of Zelman & Associates.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Hey guys, thanks for taking my questions. Regarding the de-conversion, can you give us a sense of how many other like non-core single client platforms do you have, maybe a percent of revenue?

Anthony Jabbour -- Chief Executive Officer

Sure. I'll start and I think Kirk you can chime in. I'd say like all great companies, we've consistently focused on a product portfolio to balance financial performance and to balance risk. We've sunsetted a number of products over the years, but it's usually a business as usual event. We're only mentioning this one because of the -- really the timing and the magnitude of it. So I'd say there are pockets of them as there are in every company, but they're nowhere near the scale of what this one.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Okay, thanks for that. That was very helpful. And regarding the -- you mentioned the Fidelity and Triad MSP wins, when you think about moving to maybe away from some of the very largest servicers, can you talk about the general fee per loan trends and incremental margins versus your historical base of larger customers? Obviously something like MSP isn't cheap to implement and it comes with a certain amount of fixed costs.

So when you're going after the smaller clients, can you talk about how you're balancing the price per loan, the incremental margins and maybe comment on the cash flow during implementation? And how you balance that with what you want to charge versus what they can reasonably pay?

Kirk Larsen -- Chief Financial Officer

What I would say, Kevin, is that our pricing is tiered pricing, and so a smaller client will pay at a lower-tier, so to speak, meaning a higher price, but it still is incredibly efficient for them relative to other options and puts them in a much more safe and secure place from a regulatory perspective. And so actually the lower end of the market is very attractive to us from a price per loan perspective, but yet is a tremendous value for the client. As far as the complexity to implement and certainly for a smaller client, it's less complex to implement than it is for a larger client. And so, therefore, it should be on the quicker side and less expensive side to implement.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Okay, and roughly -- I know you don't want to give specifics on exactly when a client comes on. But when we're talking about a range of in terms of maybe number of quarters or number of months. How long might these be?

Kirk Larsen -- Chief Financial Officer

A typical client is 12 to 18 months. It could be a little inside of that for -- but really a lot of that is dependent on the client and not just on us.

Anthony Jabbour -- Chief Executive Officer

Yeah, and I'd say, yes so for the two -- you'd look at most likely the 12 month range where what they're looking for from us in the way we're able to do it cost effectively is our clients are looking for us to be more prescriptive with them in terms of what we think they should do versus erasing what's on the whiteboard letting them design how they want us to retrofit our system to match their needs.

They're seeing with our scale and with the level of expertise we have, with our colleagues here in Black Knight that they want us to be more prescriptive of how they should set up the system, and by doing that, it's easier for us to implement. It's faster and it's less expensive and it works out really for both parties in this example.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Okay, great. Thanks for taking my questions.

Anthony Jabbour -- Chief Executive Officer

Thank you, Kevin.

Kirk Larsen -- Chief Financial Officer

Thanks Kevin.

Operator

There are no further questions at this time. I would like to turn the floor back over to Anthony for closing comments.

Anthony 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 the 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.

Operator

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Duration: 54 minutes

Call participants:

Steve Eagerton -- Vice President of Investor Relations

Anthony Jabbour -- Chief Executive Officer

Kirk Larsen -- Chief Financial Officer

John Campbell -- Stephens -- Analyst

Jason Deleeuw -- Piper Jaffray -- Analyst

Puneet Jain -- JPMorgan -- Analyst

Thomas Patrick Mcjoynt-Griffith -- Keefe, Bruyette, & Woods, Inc. -- Analyst

Stephen Sheldon -- William Blair -- Analyst

Chris Gamaitoni -- Compass Point -- Analyst

Bill Warmington -- Wells Fargo -- Analyst

Ashish Sabadra -- Deutsche Bank -- Analyst

Andrew Jeffrey -- SunTrust -- Analyst

Jim Schneider -- Goldman Sachs -- Analyst

Kevin Kaczmarek -- Zelman & Associates -- Analyst

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