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Black Knight, Inc. (NYSE:BKI)
Q2 2020 Earnings Call
Aug 10, 2020, 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 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

[Operator Instructions]

It is now my pleasure to introduce your host, Steve Eagerton, Vice President of Investor Relations at Black Knight. Thank you sir, 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 2020 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 reconciliations between our 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. Good morning everyone and thank you for joining us for our second quarter earnings call.

Overall, this was another solid quarter during which we continued to execute against our strategy, and demonstrated that, despite facing headwinds resulting from the COVID-19 pandemic, the core fundamentals of our business remained strong. We continue to sign and implement new clients, deliver innovative solutions, and pursue strategic acquisitions.

Now let me provide an update on our business. In our servicing software business, we continued to sign clients to our industry-leading MSP platform. Since the beginning of the year, four servicers representing more than 700,000 loans selected MSP, including Caliber, a top 25 non-bank servicer. As a result, our client list now includes 18 of the top 25 servicers. These new sales are further evidence of our ability to add both top-tier and mid-tier companies to our client list.

In our origination software business, we had continued success in the second quarter, selling our Empower, Empower Now! and our complementary origination solutions to companies of all sizes. As an example, in April, Carrington Mortgage Services, a top 50 originator, selected Empower as its LOS. Additionally two lenders, including a current MSP client, selected Empower Now! for their origination platform.

Our relentless focus on delivering innovative and integrated solutions and providing superior client support are the fundamental reasons we're able to win new clients and continually renew existing clients. One specific renewal I'd like to call out is, Truist, which was created from the merger of SunTrust and BB&T, and is now the sixth largest commercial bank in the country.

In addition to signing a multi-year renewal, Truist also expanded its use of our solutions across the enterprise, including MSP, Empower, LendingSpace and several of our Data and Analytics offerings. As part of Truist enterprise renewal, the bank will be consolidating its BB&T origination volume onto our Empower and LendingSpace platforms. It's important to note that BB&T was a top 25 originator prior to the merger.

I am proud of how our sales team has embraced the current environment and has leveraged new ways to engage with clients and prospects. Our efforts have resulted in total new sales contract value increasing double digits compared to last year. We also continue to make progress with implementations, which we are doing while many of our clients and team members continue to work remotely. In our servicing software business, we currently have 10 new MSP implementations and five new home equity conversions in process. We're also very pleased to have successfully completed the Bank of America implementation this past week. This is just another proof point of our ability to manage conversions for the largest servicers. We look forward to working with Bank of America and building on our already strong partnership.

As part of our ongoing strategy to expand our addressable market and to deliver additional value to our clients, over the past few quarters, we've discussed some of the solutions we are developing to help our clients better serve their customers, increase productivity and comply with regulatory requirements. For origination clients, we've launched new solutions such as Expedite Close, AIVA, Regulatory Assist, and AIP, the actionable intelligence platform. For our servicing clients, we've delivered powerful solutions such as Servicing Digital and our enhanced Loss Mitigation Solution, and we continue to add actionable servicing analytics to AIP. These offerings have clearly resonated with the market. We've been very pleased with the positive response from our clients and the resulting demand. Most recently, we've seen a significant interest in and adoption of our Expedite eClose and eSign solutions as well as our Loss Mitigation Solution since the beginning of the pandemic.

Speaking of innovation, next I'd like to discuss our announcement regarding our plans to acquire Optimal Blue. We are incredibly excited about this acquisition as it joins two industry leaders who together will deliver more industry leading, innovative and integrated solutions that will transform the industry. This acquisition further positions us as a leader in the originations and secondary market space, and it provides significant potential for cross-sell opportunities to our combined client base, all of which support our long-term strategy. The acquisition broadens our product, pricing and eligibility engine's client base by adding Optimal Blue's network of nearly 1,000 originators, 185 investors and more than 3,500 industry participants in total.

We also see a great deal of opportunity with Optimal Blue's Resitrader online loan trading platform, which connects investors to a large base of sellers.

By adding our comprehensive data assets and making minimal investments to enhance the trading platform, we will be able to offer this solution to our servicing clients to facilitate the buying and selling of new and seasoned loans as well as MSRs. We will then be able to easily transfer those loans between clients, which will further streamline this process for our clients.

Optimal Blue also has origination-centric data and analytics that will enhance our existing data assets. Specifically, because of their expansive network of providers and robust technology solutions, Optimal Blue is able to provide accurate, granular and real-time insights into pricing data, competitive positioning and industry trends. This data enables lenders to benchmark their products and services against others in the market, validate their strategies and maximize the revenue. We are extremely excited about our ability to integrate this data into our comprehensive offerings to deliver even greater, more timely and actionable insights to our clients. We look forward to sharing our progress as we integrate and deliver these solutions to the market.

Lastly, I'd like to give a brief update on our investment in Dun & Bradstreet. As I said, when we made the investment in D&B, our baseline assumption was that we would generate a strong financial return on our investment for the benefit of Black Knight shareholders. We were confident the company would perform well and meet the aggressive financial and operational goals that were set at the time the company went private. And in fact, D&B met those goals ahead of schedule. During the IPO, investors recognized the transformation that has taken place and also the significant opportunities that lay ahead. The result was a significantly oversubscribed order book that created opportunity to increase the size of the offering and increase the price above the high end of the original range. For Black Knight, the outcome is an investment that is worth about $1.4 billion.

In closing, as we look back on the first half of the year and prepare for the many opportunities ahead, it is clear that the core fundamentals of our business remain strong and we continue to execute on our strategy to drive revenue growth by adding new clients, expanding relationships with existing clients, delivering innovative solutions and pursuing strategic acquisitions. Few businesses have the dynamic growth and margin profile that Black Knight and Optimal Blue can deliver. We are excited about the opportunities this acquisition will give us and how together we will continue to transform the industry. Thank you for your time today.

Now, I'd like to turn the call over to Kirk for our financial update.

Kirk Larsen -- Chief Financial Officer

Thank you, Anthony, and good morning everyone. I am going to take the next few minutes to discuss our second quarter results and our updated outlook for the year, before we open it up for Q&A.

At a high level, the second quarter came in as we expected with a couple of exceptions. Origination volumes came in stronger than planned and expenses came in lower due to favorable medical costs as a result of employees and their families opting to limit hospital and doctor visits amid the COVID-19 pandemic and other favorable experiences. Overall, it was another quarter that demonstrated resilience, visibility and predictability of our business.

With that said, I'll take you through the details [Phonetic] and our outlook. Turning to Slide 3, I'll walk through our GAAP results. On a GAAP basis, second quarter revenues were $293 million, a decline of 1% compared to the prior year quarter. Earnings before equity in losses of unconsolidated affiliates were $65 million, an increase of 44%. Net earnings were $39 million, an increase of 20%, and diluted earnings per share was $0.26, an increase of 18%.

The effect of our indirect investment in D&B was a reduction of net earnings of $31 million or $0.21 per diluted share. The D&B results reflect, among other things, the incremental amortization related to the application of purchase accounting as well as other non-operating charges. Net earnings margin was 13.3%, an increase of 220 basis points compared to the prior year quarter.

For the first half of the year, revenues were $584 million, an increase of 1% compared to the prior year period. Earnings before equity in losses of unconsolidated affiliates were $110 million, an increase of 30%; net earnings were $89 million, an increase of 52%; and diluted earnings per share was $0.60, an increase of 54%. The effect of the D&B investment in the first half was a reduction in net earnings of $25 million or $0.17 per diluted share. Net earnings margin was 15.3%, an increase of 520 basis points compared to the prior year period.

Net earnings for the quarter and first half of 2020 include a one-time gain of $18.5 million pre-tax, $14 million after tax or $0.09 per diluted share related to the favorable resolution of a legacy Lender Processing Services legal matter that is included in other income and expense.

Turning to Slide 4. I'll now discuss our adjusted results for the second quarter and first half. Second quarter adjusted revenues were $293 million, a decrease of 0.6% compared to the prior year quarter; adjusted EBITDA was $147 million, a decrease of 0.4%; adjusted EBITDA margin was 50.2%, an increase of 10 basis points; adjusted net earnings were $78 million, an increase of 7%, reflecting lower interest expense and a lower tax rate; adjusted earnings per share was $0.52, an increase of 6%.

For the first half of 2020, adjusted revenues were $584 million, an increase of 1% compared to the prior year period; adjusted EBITDA was $287 million, an increase of 1%; adjusted EBITDA margin was 49.2%, a decrease of 10 basis points; adjusted net earnings were $148 million, an increase of 6%; and adjusted earnings per share was $0.99, an increase of 5%. I'll mention for clarity that the one-time gain that I discussed earlier is not included in the adjusted results for the second quarter and first half of 2020.

To now [Phonetic], Slide 5, I'll discuss our Software Solutions segment results. Second quarter revenues for the Software Solutions segment decreased 4% to $245 million. Our servicing software solutions revenue declined 12.5% as a result of the previously discussed headwinds, including the effect of the foreclosure moratorium. We continue to be pleased with the underlying performance in our servicing software business and the outlook for growth as we look beyond the anomalous headwinds. In origination software solutions, revenues increased 36% driven by new clients, higher refinance origination volumes, and revenue from an acquired business. Second quarter EBITDA decreased 5% to $146 million and EBITDA margin was 59.6%, a decrease of 70 basis points due to the revenue decline and unfavorable mix.

For the first half, revenues in the Software Solutions segment declined 2% to $490 million. EBITDA decreased 3% to $286 million, while EBITDA margin decreased 70 basis points to 58.3%.

Turning to Slide 6. Second quarter revenues for the Data & Analytics segment increased 21% to $48 million, driven primarily by strong sales execution, higher origination volumes and revenue from an acquired business. EBITDA increased 71% to $16 million EBITDA margin was 33.4%, an increase of 970 basis points from the prior year period. First half revenues increased 19% to $94 million; EBITDA increased 59% to $31 million, while EBITDA margin was 32.6%, an increase of 830 basis points. Adjusted EBITDA for the corporate segment in the second quarter and the first half was effectively flat compared to the prior year periods.

Turning now to Slide 7, I'll walk through our capital structure. At the end of June, we had cash and cash equivalents of $228 million. Total debt principal, as of June 30, was $1,204 million and we had remaining revolver capacity of $750 million. Our leverage ratio was 2.1 times on a gross basis and 1.7 times on a net basis.

Before I walk through our outlook for 2020, I'll go through the details of our investment we've [Phonetic] done in DNB shares after their IPO. Turning now to Slide 8, following the IPO, we own 54.8 million shares. The market value of this investment was $1,413 million, based on the average closing price in July of $25.76. Our total investment is $493 million, including the $100 million from the private placement in connection with the IPO that puts our pre-tax cash gain at $920 million, our after-tax gain at $688 million and the after-tax value of our D&B investment at $1,180 million.

Turning to Slide 9, I'll discuss our outlook for 2020. It's important to note that the outlook, we are providing, does not include the effect of the Optimal Blue acquisition. We will update our outlook after we close on the transaction. Okay, now for the outlook. Revenues and adjusted revenues are expected to be in the range of $1,170 million to 1,184 million; adjusted EBITDA is expected to be in the range of $572 million to $583 million; and adjusted earnings per share is expected to be in the range of $1.94 to $1.99.

Additional modeling details underlying our outlook are as follows. We expect interest expense of approximately $50 million to $52 million; depreciation and amortization expense of $137 million to $140 million, excluding the net incremental depreciation and amortization resulting from purchase accounting; and adjusted effective tax rate approximately 23% in the third and fourth quarters, excluding potential discrete tax benefits; and finally, our third quarter and fourth quarter weighted average shares outstanding of approximately 156 million and full year weighted average shares outstanding of approximately 153 million.

Although we do not provide quarterly guidance, I'll provide you with some color as to how we expect to progress for the remainder of the year. Regarding revenue, we expect third quarter revenues to increase sequentially from the second quarter, due to a large implementation in servicing software and fourth quarter revenues are expected to be flat to the third quarter.

And finally, we expect operating expenses to grow sequentially from the second quarter to [Phonetic] third quarter with another step-up in the fourth quarter, due to seasonality and other investments.

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

Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session.

[Operator Instructions]

Thank you. Our first question comes from the line of Tien-Tsin Huang with JPMorgan. Please proceed with your question.

Tien-Tsin Huang -- JPMorgan -- Analyst

Thanks so much and congrats on the DNB IPO, a lot of work on that for sure. So let me ask on Optimal Blue, if that's OK? I know you're not updating guidance here, but can you give us a little bit of help on how could -- how we might think about revenue synergies as well as integration costs for bringing that JV on, once it closes?

Anthony Jabbour -- Chief Executive Officer

Sure. Good morning Tien-Tsin. Thank you. Yeah, we're obviously very excited with Optimal Blue. We think that there are a lot of opportunities there. In addition to the reasons that we're excited to acquire them, they've got a really sticky network effect in their marketplace where they bring mortgage originators and investors together. And we see a lot of cross-sell opportunity in terms of us selling some of our capabilities into their client base and for them to sell some of those capabilities to our client base. So as we look at it, from that perspective, we think there are, as you can imagine with any acquisition, you always find the obvious. And then there's always hidden gems, we always look for, and we see some of those as well, such as, the trading platform that they have. We've been talking about that for a while, adding our loans -- seasoned loans on top of that, as well as all of our data and our analytics that have tremendous insight into those loans and facilitating trading. So we see a lot of areas of revenue synergy from that perspective.

And from a synergy perspective, Kirk.

Kirk Larsen -- Chief Financial Officer

Sure, Tien-Tsin. From an integration cost perspective, what I would say is, I think that'll be relatively modest. I mean, if you think about what type of cost would fall in that bucket, it's going to be where there's functional overlaps, where we're doing product integration, so you can imagine that, that we're going to integrate the Optimal Blue PPE tightly with Empower which I think will create tremendous opportunity for revenue synergies as well. But I think that will be relatively modest. And just to give you a sense of scale as well, regarding the business and kind of a preview into what guidance is going to look like. The business this year will do about $120 million of revenue and about $60 million of EBITDA. So very attractive business from a scale perspective.

From a growth perspective, year-to-date, it's growing 35% in a very high subscription business, so it's almost 80% subscription. So it's really now a transactional business that will have the cyclicality that some origination businesses could have. So it's very consistent with our business model. And very attractive margins in that 50% area. So it's that rare combination of a business that is long-term accretive to our growth rate, it's accretive to our margins, when we are able to achieve cost synergies, which again this is a growth play, not a cost synergy play, but we have proven to be an end company in the past where we can grow businesses as well as make them more efficient. And those are things that we find very attractive about adding Optimal Blue to the family.

Tien-Tsin Huang -- JPMorgan -- Analyst

And that's great color. Thanks for share all that. Maybe I might follow-up, I'd just ask, you mentioned that new sales GCV [Phonetic] was up double-digit. We're in a weird market obviously with rate so low and people work from home and I'm curious how the pipeline is shaping up? I would imagine a lot of the lenders, the banks are struggling with demand and struggling with the tech demands. On top of that work from home remotely all that good stuff. So can we say, this last quarter then the pipeline has gotten larger and demand has gone up for outsourcing?

Anthony Jabbour -- Chief Executive Officer

Yeah, without question, Tien-Tsin. We've seen, not just double-digit growth year-over-year and strong performance in that regard, but early, I'd say Q3 results and forward pipeline that we see gives us real confidence that 2020 is going to be another strong sales year for us. We're excited with the momentum that we have. And again, I'm very grateful for my colleagues and the company pushing hard through this COVID-19 pandemic working from home. But really as you look at all the results in this quarter, there is nothing at all slowing down. If anything, we're getting faster and faster of what we're doing and just excited really that, our passion for our clients, our focus on innovation, we're reaping the benefits of it right now. The solution that we are driving to in this, all digital mortgage world that we've been talking about many times on these calls, the pandemic has accelerated the need for them. So we're just in a great spot right now.

Tien-Tsin Huang -- JPMorgan -- Analyst

Great to hear. Thank you.

Anthony Jabbour -- Chief Executive Officer

Thank you. Thank you, Tien-Tsin.

Operator

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

John Campbell -- Stephens Inc. -- Analyst

Hey, guys, good morning.

Anthony Jabbour -- Chief Executive Officer

Hey good morning, John.

John Campbell -- Stephens Inc. -- Analyst

Hey, congrats on a great quarter and the recent wins and then getting Bank of America live, that's good stuff. And then I wanted to touch on Optimal Blue first, just the kind of follow-up question on that. I mean obviously an exciting deal for you guys. But it seemed like it was a pretty sought after asset. I mean, I think ICE was there, I think Ellie Mae was there kind of both aggressively chasing that. They don't win the bid and then they impair up. So I just was curious about, maybe what they were looking for on their side? And then any kind of high level thoughts on what Ellie Mae might look like now with ICE into?

Anthony Jabbour -- Chief Executive Officer

Well, I think in terms of what they may be looking forward with Optimal Blue, obviously, I'd ask you to ask them that question. But I think there's some things which would be obvious that they're looking for, because it's more just fact. And as Kirk said, you're looking at the stickiness of the solutions that they have and the complexity in terms of replicating that network effect, bringing investors and lenders together in the marketplace is a -- it's one of those businesses, which isn't -- it's just not technology, it's technology and years of selling and implementing and creating, but also the revenue growth that they're seeing from it, the margins that they're demonstrating, it's hard, you know, from a Black Knight perspective, as we look at companies to buy, there just aren't many that are growing faster than us and have margins that look like ours. It's a thing that's I got really excited about it.

And so, I'm sure those were some of the elements there as well. And being in that marketplace, the ability to drive more innovation from it, I have to believe it was at the heart of what they're looking for. And from an Ellie perspective, I'd say going forward with the ICE acquisition, I'd say ICE will integrate the Simplifile acquisition that they made to Ellie as they had said publicly, as well as MERS. I think those are good moves for them to make. From us, we've got our game plan that we've been on for a number of years here in terms of really building a digital front to back capability in this space and that's really what we've been doing.

Like year at our conference, I think updated you, we demonstrated working with a full digital journey, working -- consumer working with a realtor to find a home, engaging a lender to originate the loan then working with their servicer on the loan, all the way to capital markets. And we've got a very deep understanding of our clients and of this industry. And so, the level of functionality and integration that we're pursuing across the full loan life cycle has been very comprehensive. And so, the path that we've been on, in terms of executing against our game plan is, it's resonating -- it's working for us. And we're pleased to see the ICE and Ellie combination as a validation of what we are doing.

John Campbell -- Stephens Inc. -- Analyst

Yeah, it's very helpful. Thank you, Anthony. Kirk a follow-up for you. I know you hate these kind of questions, but I have to shoot the shot. You guys, with the 2Q, you put up north of 50% margins, the high end of your guidance for kind of what's implied in the back half, I think is roughly 49% or so margins. I mean you've got Bank of America coming on, I think that probably offset the PennyMac loss. As long as origination is not kind of falling off a cliff, what explains kind of the step down in margin in the back half?

Kirk Larsen -- Chief Financial Officer

Sure. There is a couple of things. In the second quarter and I mentioned this in my remarks that we had lower than expected medical costs in the first half. And I think a good chunk of that -- part of it's just favorable experience, which is terrific, but that can be fleeting. And then the second part is that, our employees and their families were not going to doctors and hospitals for non-essential things because of COVID. And so, that's not something we're planning for in the second half. And so, there is a possibility, we could have similar experience in the second half, but that's not what we're planning for because it really was just so far below trend.

And then I would say, there certainly are investments that come with bringing on a client as large as Bank of America onto the platform. And then fourth quarter is always a little unusual because there is less cap and deferred work that goes on the balance sheet because of holidays and there is just -- there is expense uptick on a net basis in that quarter. So that being said, John, you've known us for a very long time, we will certainly push the business as hard as we can from a margin perspective and discipline around spending. But we also are using this opportunity to continue to invest in the business for the long term, so that margins aren't peaking today. And then we bear the brunt of it in the future. So we'll continue to push it and -- but those are a couple of things that we're planning for in the second half.

John Campbell -- Stephens Inc. -- Analyst

Okay, very helpful. Thank you, Kirk.

Operator

Our next question comes from the line of Andrew Jeffrey with SunTrust Robinson Humphrey. Please proceed with your question.

Andrew Jeffrey -- Truist Securities -- Analyst

Thank you. Good morning. The new Truist Securities actually.

Anthony Jabbour -- Chief Executive Officer

Yeah, that's right, Andrew.

Andrew Jeffrey -- Truist Securities -- Analyst

Exciting times. One of the things I notice, second quarter in a row now, very strong D&A momentum. I wonder if you could elaborate a little bit on what you're seeing in that business? Really three quarters in a row with some acceleration in the first half. How much of that is share shift versus new solutions and maybe what are some of those solutions that are allowing you to accelerate the growth in that business?

Anthony Jabbour -- Chief Executive Officer

Andrew, I would unpack that growth a little bit. First of all, we're obviously very pleased with 21% growth and another quarter solidly above 30%. The sales execution continues to be good, in this particular quarter, it was really from a sales perspective, it was in our public records business. So, data licensing was very strong in the quarter. And then if you look at that 21%, we had our Collateral Analytics acquisition for a full quarter and frankly is performing above our expectations already, which is consistent with the last three acquisitions that we've done. We did benefit from volumes in the quarter. So it's in my remarks, I talked about volumes being better than we expected. That certainly benefited the Data & Analytics business in this quarter as well as the origination business, but a little bit more on the Data & Analytics side.

And then kind of the underlying third leg of that would be the sales execution. And as I talked about, that was in the public records business where we saw that in this particular quarter. So we're still growing in that, it's going to back out the other components, the underlying sales execution is driving mid single-digit growth, which is frankly where we happen, where we would be on a sustained basis based on our expectations. So we're pleased with that performance. The team continues to do a great job, but that's what we saw in this particular quarter.

Andrew Jeffrey -- Truist Securities -- Analyst

Okay. It's encouraging. Thank you. And then just broadly, especially given Optimal Blue and this accelerating shift to digitization, do you feel like Black Knight is approaching a point where you can really begin to price to value and more explicitly quantify savings for customers and therefore maybe a little bit of a pricing tailwind over the next few years.

Anthony Jabbour -- Chief Executive Officer

Well, I think those points are great ones, Andrew. In terms of where the industry is shifting and it's certainly how we're measuring everything that we do and it's part of the, I'd say, the sales process that we have. So we're very much focused on value. For we're innovating, it has to drive revenue for our clients, it has to drive margin expansion or it has to drive compliance. And we're very focused and disciplined on what we're doing and how it lines up to one of those goals that our clients need and it's part of the process that we follow through. So if you look at it from an MSP to implement that, it's part of the sales process, we're doing a very detailed operational review. Again, we're not looking to slide in and slide out with a quick sale, we actually slow it down and go into detail with it, in terms of showing what the sales -- sorry, what the results will be from the operational review. And we do that with really all of our solutions. We had mentioned a few calls back with AIVA for example that, having the four skills, say $437 is part of the close -- about the cost source for origination of a loan.

And so, we are very focused on that as part of our -- a natural sales motions and we're going to continue to do that, Andrew. So, I do feel that more and more we're getting a lot of great momentum here in the space, lots of ways for us to help our clients. And it's one of the things that just really have all of us really energized and excited.

Kirk Larsen -- Chief Financial Officer

Andrew, one thing I would add would be, all the capabilities that we've added over the years both internal development as well as through acquisition and our origination business, we've gone from being an LOS provider with the Exchange -- with that network. And that was the core and we keep adding capabilities. And so, when we price it on a per loan basis, the price per loan that we're charging today versus where we were before, because of all the additional capabilities is significantly higher. We've talked about more than doubling, it's probably conservative the addressable market with all the other solutions we've been able to add. And so, the price to value, certainly think there is more room to go, as Anthony just said, but I would also say, we're capturing a lot of value as we add additional capabilities.

Andrew Jeffrey -- Truist Securities -- Analyst

Thank you very much.

Anthony Jabbour -- Chief Executive Officer

Thanks, Andrew.

Kirk Larsen -- Chief Financial Officer

Thanks, Andrew.

Operator

Our next question comes from the line of Ryan Tomasello with KBW. Please proceed with your question.

Ryan Tomasello -- Keefe, Bruyette & Woods -- Analyst

Good morning, everyone. Thanks for having me on the call this morning. Also wanted to ask a bit about Optimal Blue, what type of organic growth rate do you think is achievable in that business over let's say the next three years to five years relative to that 35% I believe you mentioned. Do you think that, that level of growth is sustainable and maybe some color around, which products of the Optimal Blue platform are really driving that? And then on the cross-sell side, perhaps you can help frame the synergy opportunity there in terms of the customer overlap and if you think that opportunity might be accretive to that 35% growth rate, they are currently achieving. Thanks.

Anthony Jabbour -- Chief Executive Officer

Sure. Ryan, I'd say looking forward, what we've modeled was a 20% growth rate over the next number of years in the business. And the products that we see contributing to that is there product and pricing engine as a key component and us building onto the momentum with it. We see opportunities as well with their Data & Analytics solutions that would add to it. And like I said, some of the hidden jewels that we're pursuing right now, such as the trading platform.

From a cross-sell perspective, we are excited about that. It's what we do, obviously, right. It's the first place that we look, it's the lowest hanging fruit in terms of us helping our clients by integrating the next piece of the adjacent solution, which will help them realize the benefits sooner. And from us, it's also the lowest hanging fruit in terms of revenue generation. And so, we're very focused obviously on the cross selling capabilities. What we're pleased with Optimal Blue was, a number of things in terms of the product, they've got a very strong management team, they run a great business and we're really pleased with the state, I should say, their status in the industry, they're highly sought of. And that's always critical as you want to cross-sell. How are they treating their clients? Are they taking care of them? Are they doing the right things by them? Are they continuing to lead them? Those are things that we're doing at Black Knight. And we believe those lead to sales and lead to trusted relationships. And they're doing the same. So that gives us confidence that we will continue to be able to cross sell into their base, like we'll be able to sell their capabilities into our client base.

Kirk Larsen -- Chief Financial Officer

A couple of things I'd add Ryan would be, from an overlap perspective, we have 47 Empower clients and none of them use Optimal Blue's product pricing eligibility engine. So that gives you -- that's one area to cross-sell, they have a thousand lenders on their PPE that we can certainly go with, whether it's our loan origination system or our other ancillary solutions. In origination, we can go to that base. And so, it's really -- there is a lot of white space there for us to try to capitalize on. And I think that's just -- that gives you a little context for the opportunity.

Ryan Tomasello -- Keefe, Bruyette & Woods -- Analyst

Great, that's super helpful. And then in terms of the structure of the deal, what drove the decision to syndicate the minority interest to Cannae and THL. And Kirk, maybe you can give us what -- where you see pro forma leverage shaking out after the deal closes? And just broadly, your thoughts on M&A after assuming this deal gets done and how you're balancing that with leverage and integration of this acquisition?

Kirk Larsen -- Chief Financial Officer

Sure. As you've seen over the past, frankly since we've been public for last 5 years, we look at things from every angle. We look at things for all of our stakeholders as well. And so, as we are looking at this deal and where the price ended up, frankly the -- syndicating a portion of it with Cannae and THL who are partners that we have known and worked with for a very, very long time, partners that we know and trust and can work very well with, it really was balancing financial risk. So, it really was looking at leverage and where we thought that each of our stakeholders, whether they'd be our lenders, the equity markets, the rating agencies, our clients, the way everybody would look at it, we wanted to keep our leverage under 4 times. And so, our leverage will be high threes.

When we -- at closing as an estimate, and we can de-lever very quickly both through EBITDA growth, as well as through actually paying down debt. And so, we can do it on a pretty -- on a very accelerated basis and get back down to our target or below that target being 3 times. And so, it really was a financial risk play. And frankly the only reason why we were willing to do it was because we were able to bring in partners that, as I said before, have known a long time, are very, very strong operators. And so, we're actually really, really pleased to have Cannae and THL alongside us for this transaction.

Ryan Tomasello -- Keefe, Bruyette & Woods -- Analyst

Great. Thanks for taking the questions.

Kirk Larsen -- Chief Financial Officer

Thank you.

Operator

[Operator Instructions]

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

Ashish Sabadra -- Deutsche Bank Research -- Analyst

Hi, thanks for taking my question and congrats on a good quarter, the DNB IPO as well as the Optimal Blue acquisition.

Anthony Jabbour -- Chief Executive Officer

Thank you, Ashish.

Ashish Sabadra -- Deutsche Bank Research -- Analyst

Yeah. Just on the digital mortgages, thanks Anthony for providing color on the eClose and Loss mitigation. I was wondering, as you think about end to end, I was wondering if you can comment on the digital POS as well. And are there more opportunities to enhance the digitization of mortgage origination? Thanks.

Anthony Jabbour -- Chief Executive Officer

Sure. Yeah, we think that there is and there will continue to be more and more capabilities that we can bring to market to help streamline the process. And to your question, specifically on the digital point of sale, I'll just give you some color on, on what Optimal Blue can bring to that part of the solution set. So, now imagine you are applying for a loan there, for a point of sale, with Optimal Blue having access to the product and pricing capabilities, we can pull forward what your rate is. So now as you're applying for a mortgage, being able to present you with what your exact rate is, that we're pulling straight from that database. And at the same time, from our Ernst acquisition, pulling the exact fees from what you'll pay to actually close on the loan. So right upfront, before you start applying, you know, what your total cost would be and what the rate would be. It's powerful and as we keep looking at ways to create a more compelling value proposition and to drive momentum in this space, this is the type of capability that we're really excited about and that we think could really differentiate.

Ashish Sabadra -- Deutsche Bank Research -- Analyst

That's very helpful color. And Kirk, maybe just a quick clarification on the origination business. I was wondering if you can help parse how much of the growth came from the refinancing volume, acquisition and the growth in the underlying business. Thanks.

Kirk Larsen -- Chief Financial Officer

Sure. The benefit of refi was about $1 million in origination. And it was up -- and the acquisition added a couple of points of growth to the total company for the quarter.

Ashish Sabadra -- Deutsche Bank Research -- Analyst

That's very helpful. Congrats once again. Thanks.

Anthony Jabbour -- Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Jake Williams with Wells Fargo. Please proceed with your question.

Jake Williams -- Wells Fargo Securities, LLC -- Analyst

Good morning, everyone.

Anthony Jabbour -- Chief Executive Officer

Good morning.

Kirk Larsen -- Chief Financial Officer

Good morning.

Jake Williams -- Wells Fargo Securities, LLC -- Analyst

Quick question on the step-up in expenses related to the Bank of America going live. Can we expect those to taper off some or will that be kind of a steady run-rate just with maintaining that relationship?

Kirk Larsen -- Chief Financial Officer

That will be, I mean, those are support costs. And so, that's an ongoing cost as we bring a client on. We always talk about there being very high incremental margins when we bring a client on, but they certainly aren't infinite. And so, there is an element of computing cost, there is an element of support cost that goes with the client, particularly when we're talking about client that's the single largest conversion of a servicing client in the last decade. So we're certainly thrilled to have them on, but that, as we think about the cost structure, there certainly is a cost to support.

Jake Williams -- Wells Fargo Securities, LLC -- Analyst

Got it. Very helpful. Thank you.

Anthony Jabbour -- Chief Executive Officer

Thanks Jake.

Operator

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

Stephen Sheldon -- William Blair & Co. -- Analyst

Thanks, good morning. First, any update on how meaningful some of the new products have been for your financial growth so far this year between servicing digital, AIP, AIVA, any others that are worth calling out? And have these really started to move the revenue needle so far this year? And additionally, I guess, within AIVA, how are you thinking about expanding capabilities there to drive origination costs down even more?

Anthony Jabbour -- Chief Executive Officer

Sure, I'll start Stephen. First with the contribution from innovation. So we talked about, on an ongoing basis, that's driving 1% to 2% of revenue growth per year kind of an aggregate for recently innovative solutions. I would say, in the first half, we aren't yet to that 1%, nor do we expect to. I think that was considered more of a long-term guidepost the 1% to 2%. So we're probably between 0.5 point and 1 point of our growth this quarter was from recently innovative solutions.

Kirk Larsen -- Chief Financial Officer

Yeah, I only thing I'd add to that as well is, a lot of these innovations are helping drive other products. So last year with MSP, we signed 9 new clients. It was the best sales year I think since 2013 loosely. And so far, like for this year, we've signed four of them. So there is also this inherent value that this innovation brings as we're selling all of our platform products as well, but I just didn't want to be lost in this.

The second part of your question, Stephen, on AIVA. We're continuing to build out the skills so that we can continue to help lower the cost of origination for our clients. And again, the team has got great focus on this, great momentum and great partnership with many of our clients working with us, feeding us more and more of their loan documents for AIVA to continue to learn more and more different forms across different parts of the country, which obviously, once it learns, it helps in the automation process.

Stephen Sheldon -- William Blair & Co. -- Analyst

Got it. That helps. And then, I guess, on Optimal Blue, I wanted to ask some more about how quickly you can start to realize some of the cross-selling opportunities after the Close. Sounds like there could be some integration needed on the product and database side, but maybe not overly burdensome. So would you be able to hit the ground running on some of the cross-selling and go-to-market efforts pretty quickly after it closes?

Anthony Jabbour -- Chief Executive Officer

Yeah, now we definitely will hit the ground running like we always do with acquisitions. And again, what I'd say, I had a couple of clients reach out to me that, so they were going to come on, once they heard of us acquiring Optimal Blue and obviously we've got very trusted relationships with our clients. And so, I expect that we'll certainly hit the ground running from that perspective. From an integration perspective, it will take us probably good part of the rest of this year to really integrate it to the level that our clients expect of us. And very detailed comprehensive and -- but we'll certainly hit the ground running once we close on the sales side.

Stephen Sheldon -- William Blair & Co. -- Analyst

Great. Thank you.

Anthony Jabbour -- Chief Executive Officer

Thank you, Stephen.

Operator

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

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Hey, guys. On Optimal Blue, you mentioned, it gave you the capability for borrowers to know the exact rate and fees for potential mortgage. Is what are the pieces missing that can allow Black Knight to enable your MSP and Empower clients to get the time and cost of processing let's say a refi down further with perhaps the end goal of being something along the timeline of an auto loan where it's something like hours and instead of weeks. What are the bigger pieces that are missing there?

Anthony Jabbour -- Chief Executive Officer

Well, a lot of parts in the processing or from an origination perspective, Kevin, is on the stare and compare. So still having documents to prove what you said in your application is true, that takes a long part of the process and certainly a lot of the work that we're doing with AIVA is to help us in that regard, streamline and automate that. So, if you were to apply for a mortgage from your mobile device and you take pictures of these documents, AIVA recognizing them on the fly, being able to extract data on the fly and really streamlining that process, getting back to you if one of the forms you sent was an incorrect form for example or if you sent two bank statement. Two of the same bank statements versus sequential months.

So in a lot of times, in that process, that's where there is typically a lot of a breakdown. It's getting back to consumers on the loans, questions on the documents, I should say. And so, being able to really do all that right upfront, we think is probably one of the biggest savings that you'll find in streamlining now the mortgage process. So, we've got strong eClose capabilities. Right now we continue to build that out. We are launching a guided close capability with Fidelity National Financial, the industry's largest [Indecipherable] agent. And so, we think that part obviously will help, there is a lot of parts that can help, but the biggest is really from a document perspective the ability to get it quickly, recognize it right away, extract the data and popped into your workflow, which, again we always talk about ancillary systems, I always want to bring everyone back to the actual loan origination system itself that we have with Empower is, world-class in terms of how it's so automated in light of processing and just really drives out exceptions. We kind of take that for granted, but we shouldn't. I mean, as you get into the details, that's where the differentiation really occurs. And that's what we see being able to help streamline the process as well.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Okay, thank you. That's very helpful. And then one quick one, on the forward guidance, given the timing of Bank of America, all else equal, one would expect an uptick in the fourth quarter because they came on mid-quarter, in the third quarter. So I guess, what's offsetting that in the fourth quarter? I think you mentioned the downtick in the services revenue. But is there something else there as well and is that correct?

Anthony Jabbour -- Chief Executive Officer

No, that's exactly right, Kevin. Fourth quarter always has less professional services, just because of holidays and the like. We are planning it as if it's a typical year. We're not adjusting anything because of COVID or that any behavior would be differently. So we're assuming that, there will be vacations and holidays and the like and shut downs such that professional services will be lower in Q4 versus Q3.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Okay, great. Thank you. That's all I have.

Anthony Jabbour -- Chief Executive Officer

Thanks Kevin.

Operator

[Operator Instructions]

Thank you. It appears we have no further questions at this time. Mr. Jabbour, I would now like to turn the floor back over to you for closing comments.

Anthony Jabbour -- Chief Executive Officer

Wonderful. Thank you. Despite this unprecedented environment, our new sales, client renewals, implementations, and ability to deliver innovative solutions has not wavered, which further demonstrates our talented team members ability to rise to any challenge. I'd like to thank our clients with a strong partnership and my Black Knight colleagues for their exceptional efforts. Thank you for joining us on the call today and for your interest in our great company.

Operator

[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

Steve Eagerton -- Vice President of Investor Relations

Anthony Jabbour -- Chief Executive Officer

Kirk Larsen -- Chief Financial Officer

Tien-Tsin Huang -- JPMorgan -- Analyst

John Campbell -- Stephens Inc. -- Analyst

Andrew Jeffrey -- Truist Securities -- Analyst

Ryan Tomasello -- Keefe, Bruyette & Woods -- Analyst

Ashish Sabadra -- Deutsche Bank Research -- Analyst

Jake Williams -- Wells Fargo Securities, LLC -- Analyst

Stephen Sheldon -- William Blair & Co. -- Analyst

Kevin Kaczmarek -- Zelman & Associates -- Analyst

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