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Black Knight, Inc. (NYSE:BKI)
Q3 2019 Earnings Call
Nov 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 Third Quarter 2019 Earnings Call. [Operator Instructions] It is now my pleasure to introduce your host Steven Eagerton Vice President of Investor Relations. Please proceed sir.

Steven Eagerton -- Vice President Investor Relations, Sales Operations and Strategi

Thanks. Good morning everyone and thank you for joining us for the Black Knight Third Quarter 2019 Earnings Conference call. Joining me today are Chief Executive Officer Anthony Jabbour; and Chief Financial Officer Kirk Larsen. Our results were released this morning and the press release and supplemental slide presentation have been posted to our website. This conference call will include statements related to the expected future results of our company and are therefore forward-looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties 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 M. Jabbour -- Chief Executive Officer, Director

Thank you Steve. Good morning everyone and thank you for joining us for our third quarter earnings call. Overall this was another solid quarter. And despite facing near-term headwinds the core fundamentals of our business remain strong. Over the last two years we have amplified our focus on delivering innovative solutions that will further our position as the leading provider of software data and analytics to the markets we serve. Today I'm going to give an update on each of our major lines of business provide an update on a recent announcement and share feedback from the MBA conference that was held last week in Austin Texas. I'll begin by discussing our industry-leading servicing software business which represents 70% of our overall revenue and continues to be the cornerstone of our company. By focusing on delivering best-in-class comprehensive capabilities and exemplary client service we have built a market position with our MSP platform that is second to none. To illustrate that fact MSP's market share for first mortgages has grown from 49% in 2010 to 63% as of the end of the third quarter.

And the home equity market share has increased from 6% in 2010 to 19% at the end of the third quarter. As I've said on previous calls we are committed to growing our market share by focusing on winning the top 25 servicers who are not currently using MSP and adding new mid-tier servicers to our client list. To that end we have signed six clients so far this year and I am confident that with our proven and comprehensive solutions we will continue to win in the market with top-tier and mid-tier servicers. While we are focused on adding new clients to the MSP family we are equally focused on retaining and growing our relationships with existing clients. For example we recently signed multiyear renewals with Flagstar Bank a top 15 MSP client and the fifth largest subserver in the country and with U.S. Bank a top five MSP client. Over the years we have developed a solid reputation for successful implementations which is a differentiator for Black Knight.

We're currently working on implementing first mortgage portfolios for seven new clients and home equity portfolios for eight new and existing clients. Next I'd like to give you an update on our progress selling our industry-leading Servicing Digital app. We currently have eight clients using Servicing Digital and we've signed contracts with nine additional clients and we continue to add to our strong pipeline. To put this in perspective over the next couple of years the expected revenue from Servicing Digital alone will be similar to that of a top 15 MSP client demonstrating the value that can be created through innovation. Next I'm going to talk about our origination software business which represents 16% of our overall revenue and represents a tremendous growth opportunity for Black Knight. Over the past two years we have significantly enhanced our existing products and filled product gaps both through internal development and acquisition to create an integrated end-to-end origination suite that no other company can match. What makes the addition and integration of these capabilities so exciting is that it has enabled us to double the total addressable market in the origination software business. As an example we recently acquired Compass Analytics which offers an advanced product pricing and eligibility engine or PPE engine pipeline risk management and MSR valuation. In addition to expanding our reach in the capital market sector this acquisition establishes end-to-end connectivity and pricing from originators to investors. And by integrating Compass' PPE engine into Empower we are able to significantly enhance our industry-leading LOS.

In a recent meeting we have received extremely positive feedback on the Compass Analytics acquisition and the power of this solution it brings to Black Knight. We continue to have momentum selling Empower to the top 50 lenders while making significant progress in the mid-tier market with our Empower Now! offering. In fact we signed three new Empower Now! deals in the third quarter and seven so far this year. We expect to sign a few more before year-end and are confident we will deliver on the commitment we made to sign eight to 12 new Empower Now! deals in 2019. These wins further demonstrate our ability to gain new clients in all tiers of the lending market. Next I'm going to talk about our Data and Analytics business which represents 14% of our overall revenue. Our D&A business had a strong third quarter with growth of more than 9%. This growth was a result of gaining new clients through competitive takeaways cross-sales delivering new and innovative products and integrating them with our key platforms. Some examples include Property Tax data integrated into Empower our Lien Alert data integrated into MSP and our property data integrated into Servicing Digital. Next I'd like to update you on a recent announcement.

We take our responsibilities to protect our stakeholders very seriously. In my second week at Black Knight PennyMac Loan Services notified us that they were working on an MSP replacement. Soon after we noticed some anomalies in their usage of MSP and began a more in-depth review which uncovered actions by PennyMac that showed their improper use of the MSP system to unfairly accelerate the development testing and implementation of PennyMac's system. Even after we identified these violations we attempted to reach a long-term agreement that would allow us to continue a business relationship with PennyMac. In September we determined that we were unable to agree to terms that would protect our trade secrets our business and our shareholders. As a result yesterday we filed a lawsuit against PennyMac for breach of contract and misappropriation of trade secrets. PennyMac deconverted from MSP at the end of October. While we worked diligently to achieve a different outcome as you would expect we have been working in parallel to take the necessary expense actions to protect our margins while not affecting our ability to continue innovating and providing superior support to our clients. Before I conclude my comments I want to provide an update on client and prospect meetings we had at the recent Mortgage Bankers Association Annual Conference in Austin Texas. The tone at these meetings was very positive. And the feedback from our clients is that our speed of innovation has dramatically increased and our partnerships are stronger than ever. Additionally a large prospect that we have been working with for some time recently told us during a meeting that we are definitely not the same Black Knight they knew in the past and were impressed with the progress we have made over the past two years. In closing I'm confident in our ability to grow market share and continue delivering significant value to our clients through our powerful and integrated solutions and by acting with urgency to support their success. I am also confident that those efforts will drive long-term growth and create value for our shareholders. Thank you for your time today. Now I would like to turn the call over to Kirk for a financial update.

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Thank you Anthony and good morning everyone. Today I'm going to discuss our third quarter results and our outlook for 2019. Turning to slide three. On a GAAP basis third quarter revenues were $299 million an increase of 6% compared to the prior year quarter. Earnings before equity and losses of unconsolidated affiliates were $49 million an increase of 14%. Net earnings were $37 million a decrease of 13%. Diluted net earnings per share was $0.25 a decrease of 14%. The effect of our indirect investment in Dun & Bradstreet or D&B was a reduction of net earnings of $12 million or $0.08 per diluted share. The D&B results reflect among other things the incremental amortization related to the application of purchase accounting as well as onetime restructuring charges. Net earnings margin was 12.5% a decrease of 280 basis points. For the year-to-date period revenues were $877 million an increase of 6% compared to the prior year. Earnings before equity and losses of unconsolidated affiliates were $134 million an increase of 6%. Net earnings were $96 million or $0.65 per diluted share a decrease of 24%. The effect of the D&B investment in the year-to-date period was a reduction in net earnings of $38 million or $0.25 per diluted share.

Net earnings margin was 10.9% a decrease of 430 basis points compared to the prior year. As it relates to D&B beginning this quarter we are no longer reporting on a 1-quarter lag. So results for the third quarter and year-to-date reflect the D&B results for those respective periods. Turning to slide four. I'll now discuss our adjusted results for the third quarter and year-to-date period. Third quarter adjusted revenues were $299 million an increase of 6% compared to the prior year quarter. Adjusted EBITDA was $150 million an increase of 8%. Adjusted EBITDA margin was 50.1% an increase of 110 basis points. Adjusted net earnings were $76 million an increase of 7% or $0.51 per diluted share an increase of 6%. And finally third quarter capital expenditures were $23 million. For the year-to-date period adjusted revenues were $878 million an increase of 6% compared to the prior year period. Adjusted EBITDA was $435 million an increase of 8%. Adjusted EBITDA margin was 49.5% an increase of 110 basis points. And adjusted net earnings were $215 million an increase of 6% or $1.45 per diluted share an increase of 5%. And finally capital expenditures were $69 million. Turning now to slide five. I'll discuss our Software Solutions segment results. Third quarter adjusted revenues for the Software Solutions segment increased 5% to $257 million. Our servicing software solutions had adjusted revenue growth of 1% driven by loan growth on our core servicing software solution from new and existing clients as well as higher average revenue per loan. This growth was partially offset by lower ancillary revenues and transaction volumes in our core servicing solution lower specialty servicing volumes and the client deconversion and early client termination that we mentioned on our second quarter earnings call. In origination software solutions adjusted revenues increased 25% driven by new client growth a contract termination fee related to a client that was acquired in our loan origination software business and the benefit of higher refinanced volumes in our exchange and e-lending businesses. Adjusted EBITDA increased 6% to $153 million and adjusted EBITDA margin was 59.5% an increase of 20 basis points. Year-to-date adjusted revenues in the Software Solutions segment increased 6% to $756 million. Adjusted EBITDA increased 6% to $448 million while adjusted EBITDA margin increased 10 basis points to 59.2%.

Turning to slide six. Third quarter adjusted revenues for the Data and Analytics segment increased 9% to $42 million driven by growth across nearly all business lines. Adjusted EBITDA increased 7% to $11 million. Adjusted EBITDA margin was 25.1% and compared to 25.5% in the prior year quarter. Year-to-date adjusted revenues increased 6% to $121 million adjusted EBITDA increased 6% to $30 million while adjusted EBITDA margin was 24.6% in both periods. Adjusted EBITDA for the corporate segment in the third quarter was $2 million favorable compared to the prior year quarter driven by lower incentive-based compensation. Year-to-date adjusted EBITDA for the corporate segment was $6 million favorable compared to the prior year period. Turning now to slide seven. I'll walk through our capital structure. At the end of September we had cash and cash equivalents of $10 million. Total debt principal as of September 30 was $1.644 billion. We had revolver borrowings outstanding of $416 million and $334 million of borrowing capacity remaining under our revolver. Our leverage ratio was 2.9x on a gross basis and 2.8x on a net basis. Turning to Slide eight. I'll discuss our outlook for 2019 which remains unchanged from the guidance we provided last quarter with the exception of our adjusted earnings per share which is a bit higher than what we guided last quarter. GAAP revenues are expected to be at the low end of the original guidance range of $1.177 billion to $1.199 billion.

Adjusted revenues are expected to be at the low end of the original guidance range of $1.178 billion to $1.200 billion. Adjusted EPS is expected to be in the range of $1.92 to $1.94 and adjusted EBITDA is expected to be at the low end of the original guidance range of $581 million to $598 million. Additional modeling details underlying our outlook are as follows. We expect interest expense of approximately $65 million; depreciation and amortization expense of $136 million to $138 million excluding the net incremental depreciation and amortization resulting from purchase accounting; an adjusted effective tax rate of approximately 24% to 25%; and finally capex of approximately $105 million. With that operator please open the line for Q&A.

Questions and Answers:

Operator

[Operator Instructions]Our first question comes from Tien-Tsin Huang with JPMorgan.

Tien-Tsin Huang -- JP Morgan Chase & Co Research Division -- Analyst

I know you're not going to give us 2020 guidance per se. But I know there's some moving pieces. So maybe we can talk about it really quickly here. You have I know we had that one servicing client deconvert at the end of the second quarter. We had PennyMac it sounds like in October then there's the backlog conversion for next year. So can you quickly maybe help us with if there's any change in the backlog conversion and what you talked about in the past as well as the impact of some of the revenue attrition that you called out as well as maybe term fee compares that we should consider? I think I heard one for LOS in the third quarter.

Anthony M. Jabbour -- Chief Executive Officer, Director

Sure Tien-Tsin it's Anthony I'll take that. As you can imagine we haven't finished our budget process for 2020 so we won't be providing specific guidance. But we do have some visibility into drivers of growth for next year. And based on what we see 2020 would be a strong year for Black Knight without the extraordinary and enormous headwinds that we talked about and you referenced on the past two earnings call. The growth drivers are the same that we always talked to you about in terms of price organic loan growth revenue from implementing signed clients and new sales related to new and innovative solutions we're bringing as well as the attrition which we usually have seen historically around 2%.

But the other dimension is the extraordinary and anomalous headwinds for 2020 and you covered them off. It's the deconversion of the specialty servicing client talked about in the second quarter call the MSP client that was acquired by non-MSP client the PennyMac situation and the Ditech loans that we are assuming will go to Shellpoint in connection with NRZ's acquisition of Ditech. Their plans aren't finalized but we are assuming the loans will go off to Shellpoint for planning purposes. And these headwinds in total represent about 5% of revenue. And so I look at it and say the fundamental underlying strength of the core business hasn't changed. It's very strong in 2020. Like I said it would have been a very strong year if it wasn't for the unusual headwinds that will cloud the performance.

Tien-Tsin Huang -- JP Morgan Chase & Co Research Division -- Analyst

Great. That's extremely helpful. So thinking about that 5% you I think you both mentioned your ability to adjust your cost structure for PennyMac and things like that. So maybe your the levers that you can pull to visibility there how much can you protect the bottom line with those headwinds?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Tien-Tsin I would say given the visibility we had into the PennyMac situation it's something that we have been looking into and working on diligently as a leadership team here. And so I would say that the actions that we're looking at are broad-based. We're looking at sort of every pocket that we can to increase the efficiency of the organization in light of some of these headwinds. And so it's really across the board around streamlining facilities and in a variety of other actions that I think you would expect that we would take. But it's something that certainly we didn't just start last week but it's been something that we've been working on over time to protect our margins.

Tien-Tsin Huang -- JP Morgan Chase & Co Research Division -- Analyst

Good. Okay. Thanks for the update.

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Thanks.

Operator

Our next question comes from John Campbell with Stephens.

John Robert Campbell -- Stephens Inc. -- Analyst

So I went through all the legal documents on PennyMac. It looks like some really questionable behavior there. But I know you really can't comment on that. I saw the PennyMac CEO has thrown some jabs in their press release. But hopefully you guys take the high road and let what appears to be I guess an open-and-shut case kind of play its course. But my question here is on the moving parts with PennyMac rev. I want to make sure I get everything down right. Last quarter when you guys said the $16 million of the non-core client deconversion is that related to PennyMac?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

It was not. John that was a specialty servicing client that deconverted at the end of June.

John Robert Campbell -- Stephens Inc. -- Analyst

Okay got it. So this is I guess the way to size this up if we just kind of annualize the impact was about a $33 million or so headwind from PennyMac is that the right way to think about it?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

That's correct.

John Robert Campbell -- Stephens Inc. -- Analyst

Okay. And then I think that's just on the servicing side. So correct me if I'm wrong there but I think there are also correspondent customer within origination. Safe to assume that that's probably off the table as well?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Yes that's there's a contract through the third quarter of next year and then that revenue will go away as well.

John Robert Campbell -- Stephens Inc. -- Analyst

Okay. And can you help maybe size up the extent of that?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

It's a couple of million dollars.

John Robert Campbell -- Stephens Inc. -- Analyst

Okay. And then the last question here on Compass Analytics I've seen some stats out there that they were maybe doing about $10 million or $11 million or so. Is that about the right revenue contributions we should be expecting? And then is there any kind of deferred revenue swings on that?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

There are no deferred revenue swings on that. I would say rather than be somewhat specific I would say it's similar to prior tuck-in acquisitions that we acquire because they have innovative technology. And frankly on Compass we're actually really excited about it. And our clients have proven to be very excited about it as well from the opportunity to integrate with Empower the there's a bit of a Data and Analytics opportunity as well as some connectivity through the MSR valuations with servicing. So yes tuck-in acquisition I won't specifically quantify because frankly it's already being integrated. And so we'll just measure it as part of the origination business going forward.

John Robert Campbell -- Stephens Inc. -- Analyst

Okay, that's helpful. Thanks, guys.

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Thanks, john.

Operator

Our next question comes from Bill Warmington with Wells Fargo.

William Arthur Warmington -- Wells Fargo Securities LLC -- Analyst

So the first question I have for you was are you aware of any other clients who are working on an MSP replacement?

Anthony M. Jabbour -- Chief Executive Officer, Director

No. And with this one like I said we're notified. And two weeks after I joined us over 1.5 years ago we had visibility into what was going on. And so as I sit here today I'm not aware of any other client that is developing their own system. We're and as you can imagine we're looking specifically to see if there are any trends. And we feel very confident that there aren't any. I feel very positive about the momentum that we've made over the last couple of years here. And that we're seeing that from our clients and our prospects. I'd ask if you ask me to take it one step further and ask me to bet would we sign another top 25 client or lose a top 25 client I'd bet on us winning every time. We're very confident about that.

William Arthur Warmington -- Wells Fargo Securities LLC -- Analyst

And as a follow-up I just wanted to make sure I understood the math. In terms of the fourth quarter impact from PennyMac that looks like it's $5 million or $6 million?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

That's correct.

William Arthur Warmington -- Wells Fargo Securities LLC -- Analyst

Thank you very much.

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Thank you.

Operator

[Operator Instructions]Our next question comes from Jason Deleeuw with Piper Jaffray.

Jason Scott Deleeuw -- Piper Jaffray Companies Research Division -- Analyst

Looking for a little bit more color on the implementation pipeline over the next couple of years any updates there in kind of the cadence and timing of the pipeline? Has there been any meaningful change? Or how is that looking?

Anthony M. Jabbour -- Chief Executive Officer, Director

No on track things are going as per schedule.

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Yes. So Jason what that translates to is basically the same range that we have been talking about for revenue from implementations next year so in that 30% to 40% of that old backlog number.

Jason Scott Deleeuw -- Piper Jaffray Companies Research Division -- Analyst

All right. And then can we get an update on the competitive environment for the mortgage origination software? Just how is that coming along? And then also for the large originators. What's their appetite for outsourcing? If you can just give us any color on how things are going there.

Anthony M. Jabbour -- Chief Executive Officer, Director

Sure. I'd say we continue to do well. In my prepared remarks I talked about the seven Empower Now! clients that we signed so far this year obviously U.S. Bank which we announced earlier this year. So we're very pleased with the traction that we're getting. And what I'd say is with the acquisitions specifically with the recent one with Compass Analytics at our at the MBA conference I spoke with many clients and prospects there's a lot of excitement about that. And we're looking at creating a lot of capability I can get into later with that and our other innovations in terms of really creating streamlined capability that highlights the functionality of the innovation but also the integration of it as well. Team feels very good about the pipeline on the loan origination side. Like I said the add-on capabilities that we've brought and the way we've integrated them all it's really blurring the lines for us in terms of what was in LOS before in terms of what's the whole solution look like.

And that's really exciting. That's what our clients want. That's what our prospects are looking for. So we feel good about that. And we continue to have conversations as well with the large originators as well. As you can imagine the large ones take longer to sign. There is just inertia as well as just risk of change. But what I'd say for the most part is our prospects that have seen what we've built here just continue to congratulate us and applaud the innovations that we've brought to market in a short period of time.

Jason Scott Deleeuw -- Piper Jaffray Companies Research Division -- Analyst

Sounds good. Thank you.

Anthony M. Jabbour -- Chief Executive Officer, Director

Thank you, Jason.

Operator

Our next question comes from Bose George with KBW.

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

This is Tommy McJoynt on for Bose. I wanted to ask about the originations technology within Software Solutions is obviously a very strong growth on a year-over-year basis. And you guys named a few of the sources there. Could you actually quantify how much came from the higher refinances versus new clients coming onboard?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Sure. The biggest number was from new clients coming onboard in the quarter. We also talked about the client termination fee which was about $4 million. The benefit of the refi volumes was a little less than half of that so right around a couple million bucks that benefited in the quarter. But the growth was clearly driven by the clients that went live in new signings.

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

Okay. And then switching over to the Data and Analytics they had another great year as well or a great quarter I guess on a year-over-year basis. Was there anything to call out there? And is that kind of high single-digit growth rate sustainable over the near and medium term?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Yes. I would say that the third quarter was a continuation of what I consider to be it starts with strong sales execution by Ben Graboske and his team. We added resources there in the fourth quarter of last year and that clearly is paying dividends. There was a little bit that if you think about last quarter we talked about one point or two that shifted into this quarter that benefited the growth rate. But frankly it's something where I think the execution has been strong. The proof points of integration with our Software Solutions has proven to bear itself out. And frankly we're just flat out winning competitively. And so I think all those point to good performance for Data and Analytics. I would still say think of it in the mid-single digits. I would not expect to have 9% growth on a sustained basis. But we're very pleased with the performance in that business over the course of the first nine months of the year.

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

That's great. And then just last one for me. You guys have always mentioned the 70% kind of pro forma market share on the first lien servicing side. With what happened with the FSI and Ditech earlier in the year is that 70% still a number that you guys are kind of looking toward?

Anthony M. Jabbour -- Chief Executive Officer, Director

Yes we're currently at about 63% is what we have right now. And if you said "Let's look out this same time next year where would we be" I think we'd still be at 63% or higher.

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

Okay, thank

Operator

Our next question comes from Chris Gamatoni with Compass Point.

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

I'm trying to reconcile just the servicing revenue it looked like there's about a $9 million quarter-over-quarter drop the deconversion. You disclosed $16 million annually so that should be about a $4 million headwind. Is the rest just the transaction volume? I'm trying to get the rest of what else dropped. And there wasn't any additional growth on top of that on a sequential basis.

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Sure. So you had the deconversion of the specialty servicing client. You had the also the MSP client was acquired by another MSP client. And that had the termination fee in the second quarter so that was sequentially a $6 million decline. And then you had the so those would be the components.

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

Okay. That makes sense. And just to clarify your guidance was unchanged from your prior guidance. So can we take that as the PennyMac loss in the fourth quarter was already included in your prior guidance? Or were there positive offsets to that?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

We were certainly thinking about that when we gave guidance the last time. We also had a pretty high degree of confidence that we were going to get Compass closed when we put that guidance together. Now certainly when we put that guidance together last quarter we were working diligently toward a long-term business relationship with PennyMac. And so when that didn't happen that was a little different than what we expected. And so with all the puts and takes I'd say it somewhat came out that we could hold our guidance at the low end of the range for revenue and EBITDA which consider that basically a spot estimate so the low end of the range not the lower end of the range. And then we were able to raise EPS because of the great work that our tax team has done on our tax rate as well. So that flows through for the year as well as diligence around cost.

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

Okay that's great. And then just on the origination side mentioning kind of the components of where the revenue growth came from. Sequentially is it similar with mostly new clients coming on versus kind of the refinance jump versus year-over-year I think with your prior statement?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Yes. Yes that is that really is what it was. It was new clients as well as we had Compass for a month as well. And then we have and then we have the termination fee that I spoke of before which is $4 million.

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

Absolutely. And is that the priorly announced part of the mostly second lien conversions? Or was it first lien conversions as well?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

In origination it's primarily on the first lien side.

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

Okay. Thank you so much.

Operator

Our next question comes from Stephen Sheldon with William Blair.

Stephen Hardy Sheldon -- William Blair & Company -- Analyst

Appreciate the color on the headwinds you'll be facing next year. But just wanted to ask about potential offsets to that given other initiatives in the business. And specifically would you expect new products AIVA Servicing Digital etc to maybe have a larger positive impact on organic revenue growth next year than you saw this year? And then with the pace of implementations next year kind of trending higher can you maybe frame what type of support that could provide to organic revenue growth?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

What I would say is absent those the five percentage points of anomalous headwinds I would say next year will be a strong year. Certainly the drivers if you think about them and you think of it kind of in context of price increases being 1.5 points or so organic loan growth being 0.5 point or so kind of in that range and then implementations where they are in that range that I spoke of before. And then I do expect that innovation will drive incremental revenue compared to what it did this year meaning higher growth than it did this year. So I think all those things considered. But that being said five percentage points is on top of the typical couple points of attrition I think is the reason why we spoke of it. So strong year absent those but I think which gives us confidence frankly as we look forward to 2021 and beyond that when the core drivers of growth remain strong and remain consistent then we see the anomalies next year but then we work our way through them and look forward to the future is the way I would characterize it. But it's all the fundamental drivers that we're excited about.

Anthony M. Jabbour -- Chief Executive Officer, Director

Yes. And I'd say the actual innovations themselves are hitting full stride. Compass Analytics we've bundled into a number of deals already. The prospects are very excited about the capabilities that it can bring versus using a third party or us not having a solution for it. With AIVA we had a regional bank that was starting to use it for classifications and 99.7% accuracy rate with it. So we're starting to see real signs of this innovation coming to market and most importantly helping our clients right? That's we would always come back to that how we help our clients grow their revenues how do we help our clients improve their margins how do we help our clients remain compliant. The fundamental driver for us here that's what's enabled us to continue to grow market share over the years as well as investment in the product. And we're pleased to see the progress of those innovations and how they will help next year.

Stephen Hardy Sheldon -- William Blair & Company -- Analyst

Okay that's helpful. And then second can you just talk about the sales environment right now for Empower and Empower Now!? And has the delayed time line for the new URLA form from Fannie and Freddie slowed some potential conversions here? Or is that change and the need for compliance here at some point still driving a lot of positive conversations and potential kind of new contract wins?

Anthony M. Jabbour -- Chief Executive Officer, Director

Yes. No I'd say we continue to see strong demand for our loan origination systems and prospects out there are seeing the leadership position we're taking from an innovation perspective they see how all of it starts with them. And we tie all the work we're doing in terms of how we'll help them compete and win in their markets. Clients don't want proprietary systems. They're looking for a commercial software scalable efficient integrated and feature-rich. And we believe our solutions are well positioned to meet the needs of these prospects. But the demand environment remains strong like I said. We're picking up momentum. We feel good about that. And our focus on the mid-tier has been paying dividends. Our focus on adding corresponding capabilities to Empower is paying dividends. So we feel very good about where we're at.

Stephen Hardy Sheldon -- William Blair & Company -- Analyst

Thanks.

Operator

Our next question comes from Andrew Jeffrey with SunTrust.

Andrew William Jeffrey -- SunTrust Robinson Humphrey Inc. -- Analyst

I'm wondering Anthony how you think about strategic M&A at this point? You've done some nice tuck-ins that are bringing new solutions. Are there some transformative deals out there sort of valuation notwithstanding which you might contemplate to kind of change the complexion of the business?

Anthony M. Jabbour -- Chief Executive Officer, Director

Well it's a good question Andrew. Our I'd say our focus on capital allocation remains the same. And as we've talked about it was my main priority coming into the role and continues to be. It's something we talk about at every board meeting. So it's not a set-and-forget policy that we have around capital allocation. We're always looking to see what makes sense. And from our perspective as we said the innovations that we create often delivers the highest risk-adjusted returns for us. And similarly tuck-in acquisitions have proven to be very successful for us as well. Because with the tremendous brand that we have the great client relationships and scale we've got an ability to take something I'll say relatively small and make it bigger when it comes out the other end of our engine. So we have been focused on that because that's what I'd consider low-hanging fruit and it's solving specific needs for our clients and our prospects. That being said we do look at all opportunities. And being the real only end-to-end provider in the space. As you can imagine we get a look at everything that does come up. And so we will look. Andrew you know my background specifically in terms of doing large M&A. It's something that I'm accustomed to doing and I see the value in it. And at the same time I'm not trying to take a formula that I followed previously in my careers and saying that's what the right answer is here. But instead coming here and saying what's the right answer for us and for our clients at Black Knight. And if there is a large one that does make sense we absolutely would look at it.

Andrew William Jeffrey -- SunTrust Robinson Humphrey Inc. -- Analyst

Okay. I appreciate the philosophy. And then you mentioned something interesting. Another question came up about the sustainable growth in D&A. Kirk it may have been in your comments you talking about the integration of D&A and other solutions. I wonder if you could elaborate that elaborate on that a little bit. Is that do you see that as both a barrier to entry or I guess a share gain driver as well as just an intrinsic revenue enhancement? Are we going to hear more about those types of integrations of D&A back into the core MSP offering?

Anthony M. Jabbour -- Chief Executive Officer, Director

Yes Andrew it's Anthony. I'll take that again. It was in my prepared remarks. And yes we had talked about Property Tax data integrated into Empower Lien Alert data integrated into MSP and property data integrated into Servicing Digital. Our mantra here was innovation integration and urgency. And the innovation is obvious and the urgency I think is obvious as well. Integration to me has always been obvious in my career. And as you look around at our clients they're busy. They have a lot going on as we keep looking at how do we simplify their lives. It comes from integration. It comes from removing friction and just making it easier for them to move forward. So it actually is a key strategy for us in D&A but also in the rest of the business. And it's something that we'll continue to do.

Andrew William Jeffrey -- SunTrust Robinson Humphrey Inc. -- Analyst

And appreciate it. Thank you.

Anthony M. Jabbour -- Chief Executive Officer, Director

Thanks, Andrew.

Operator

Our next question comes from Jack Micenko with Susquehanna.

John Gregory Micenko -- Susquehanna Financial Group -- Analyst

The strong growth in D&A this quarter was there anything in there transaction-driven with the higher loan volumes in the quarter? Or is it can you parse out maybe what's better execution better penetration versus maybe volume-driven there?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Very little of it was volume-driven maybe 0.5 point or so. There's not a lot of a volume-driven component to the D&A business tied to origination volume. So there's a little bit on the fringes but it was not the it didn't it really wasn't a material contributor to it.

John Gregory Micenko -- Susquehanna Financial Group -- Analyst

Okay great. And then was PennyMac a material D&A customer? Is there going to be any impact? I know we've got the origination piece as well. But is there anything to think through there on a go-forward?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

It's very very small. It's several hundred thousand dollars tiny.

John Gregory Micenko -- Susquehanna Financial Group -- Analyst

Okay. Great. Thank you.

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Thank you.

Operator

Our next question comes from Glenn Greene with Oppenheimer.

Glenn Edward Greene -- Oppenheimer & Co. -- Analyst

I just wanted to go back to sort of just thinking at a high level about 2020 and the puts and takes. And Kirk you talked about the implementation backlog and I think you sort of talked about promoting 30% to 40% of it. By my math that kind of offsets the headwind. Then you talked about pricing loan growth. Your long-term guidance is obviously 6% to 8%. I just want to make sure that you're actually going to see some growth given the 500 basis point aggregate headwind in 2020. Am I thinking about it right?

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Yes we expect to grow in 2020. That absolutely is the case. And if you think about the building blocks that I spoke of price organic loan growth the implementation and of course we'll annualize Compass less the other headwinds yes there is still growth.

Glenn Edward Greene -- Oppenheimer & Co. -- Analyst

Okay. And then Anthony maybe if you can just give us a high-level update on the Dun & Bradstreet progress how that's going so far sort of thinking like EBITDA growth that kind of thing?

Anthony M. Jabbour -- Chief Executive Officer, Director

Sure Glenn. Yes the aggressive actions that we took to transform Dun & Bradstreet are really showing through in the results. We're very excited about it. The cost actions that we discussed on prior calls have materially improved the margins. Cannae will walk you through them but they're very impressive. And the structural and strategic changes we've made contribute to a strong increase in the revenue growth in the third quarter. So again we're very excited about the results that we're seeing from that and our investment in D&B.

Glenn Edward Greene -- Oppenheimer & Co. -- Analyst

That's very helpful. Thanks again.

Anthony M. Jabbour -- Chief Executive Officer, Director

Thank you.

Operator

Our next question is from Ashish Sabadra with Deutsche Bank.

Ashish Sabadra -- Deutsche Bank -- Analyst

Anthony in your prepared remarks you also talked about winning a new client a competitive takeaway in the D&A space the Data and Analytics. I was just wondering if you could provide some more color on that front. What drove that? When was it access to proprietary data that your competitors don't have? Or is it also the combination with software as you talked about? So any color on what drove that competitive effect?

Anthony M. Jabbour -- Chief Executive Officer, Director

Sure Ashish. Most of it I'd say would be tied to the integration into our software. And when we talk about integration we're integrating a number of things. We're integrating our products. We're integrating our service integrating our customer support integrating our selling integrating our billing. And when we think through integration it covers so much and therefore can have a material impact for our clients. So through our integrated selling efforts and our integrated product development we have seen the lift from the team. So again we're very excited about the great work that they've done in this past quarter.

Ashish Sabadra -- Deutsche Bank -- Analyst

No that's great. And maybe just a follow-up question to that the whole integration piece and as we think about the origination software you recently introduced the digital POS. But is there more opportunity for more cross-sell on the Empower existing Empower customer base as well as the new Empower Now! customers that you're signing in selling more of the digital POS but also selling more data and other solutions as part of the origination software?

Anthony M. Jabbour -- Chief Executive Officer, Director

Yes. Without question there is. And if you think about it and I go even beyond origination into servicing really what we're doing is blurring all the lines between where one of our product starts and where one of our product stops. And we're creating solutions not a bunch of stand-alone products. And so the integration I think is powerful and will help drive additional sales of all of our products. So the one that's very top of mind with clients right now is around recapture. And for clients who have borrowers and they want to have them stay with them and refinance the loan we're bringing in all of these innovations that we've talked about on these calls. If you think of an MSP client they could use our AIP solution to identify mortgage customers that are good candidates for refi then they can deliver that refi offer to the mortgage customer through our Servicing Digital app right powerful drives the cross-sell.

As a result of the acquisition of Ernst and Compass Analytics we can also now present the exact rate the exact terms and the exact fees at the time the offer is made. So the consumer has a personalized offer that enables them to take immediate action. Again it's a first-to-market Black Knight innovation. The customer accepts the offer they click a button it populates the data from MSP into the point-of-sale applications. They can upload their documents through AIVA which is all very powerful and Empower is orchestrating all this activity. And then it can also leverage our eClose solution depending on the regulations and the local jurisdiction right then load it all back to MSP. So give you a real quick example of a use case that's very much top of mind for our clients and you could see the power of that and how that can cross-sell. So our belief that as we come up with solutions our clients will want to take the full solution versus has four different vendors that play a certain role in that. And I know your question was related specifically to data but I just want to show the power of integration and how it can drive the entire company forward.

Operator

At this time I would like to turn the call back over to Mr. Anthony Jabbour for closing comments.

Anthony M. Jabbour -- Chief Executive Officer, Director

Thank you. As always I'd like to thank my Black Knight colleagues for the urgency they demonstrate in delivering innovative solutions to help our clients. And I'd like to thank our clients for their strong partnerships. Thank you for joining us on the call today and for your interest in our great company enjoy the rest of your day.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

Steven Eagerton -- Vice President Investor Relations, Sales Operations and Strategi

Anthony M. Jabbour -- Chief Executive Officer, Director

Kirk T. Larsen -- Chief Financial Officer, Executive Vice President

Tien-Tsin Huang -- JP Morgan Chase & Co Research Division -- Analyst

John Robert Campbell -- Stephens Inc. -- Analyst

William Arthur Warmington -- Wells Fargo Securities LLC -- Analyst

Jason Scott Deleeuw -- Piper Jaffray Companies Research Division -- Analyst

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

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

Stephen Hardy Sheldon -- William Blair & Company -- Analyst

Andrew William Jeffrey -- SunTrust Robinson Humphrey Inc. -- Analyst

John Gregory Micenko -- Susquehanna Financial Group -- Analyst

Glenn Edward Greene -- Oppenheimer & Co. -- Analyst

Ashish Sabadra -- Deutsche Bank -- Analyst

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