Black Knight, inc (BKI) Q3 2021 Earnings Call Transcript

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Black Knight, inc (BKI)
Q3 2021 Earnings Call
Nov 8, 2021, 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 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to Stephen Eagerton, Investor Relations at Black Knight. Thank you. You may begin.

Stephen Eagerton -- Vice President, Investor Relations

Thanks. Good morning, everyone, and thank you for joining us to the Black Knight third quarter 2021 earnings conference call. Joining me today is Chairman and Chief Executive Officer, Anthony Jabbour; and Chief Financial Officer, Kirk Larson. Our results were released this morning in the press release and supplemental slide presentation and then posted to our website. This conference call is being recorded and will later be made available on our website.

This 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 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 -- Chairman and Chief Executive Officer

Thank you, Steve. Good morning, everyone. And thank you for joining us for our third quarter earnings call. Simply put, the third quarter was an outstanding quarter for Black Knight as we once again delivered strong financial results and executed against our strategic growth initiatives, while focusing on integrating the acquisitions we've made over the past 18 months.

Before I provide an update on our business, I'll hit highlights on the financial performance and outlook. In the third quarter, we delivered organic revenue growth of 10% with strength across both segments and outperformance compared to the market as it relates to origination volume-related revenues. Adjusted EBITDA growth was 19.5% and adjusted EPS growth was 15%. As a result of the outstanding third quarter performance and outlook for the fourth quarter, we are raising our full-year guidance for revenue, adjusted EBITDA and adjusted EPS for the third quarter in a row.

We also bought back $100 million of shares in recognition of strong cash flow and our stock trading at levels that we believe is meaningfully below its intrinsic value. Based on the ongoing successful transformation of our business, we're updating our long-term revenue growth expectations to 7% to 9%, an increase from our prior view of 6% to 8% that was in place since our IPO six years ago.

Next, I'll discuss how our ability to deliver new innovative offerings and integrate our solutions has led to our strong sales success. As we've discussed on prior earnings calls and in other meetings with the investment community, a central point of our strategy is to deliver innovative products to further strengthen our enhanced suite of offerings across the mortgage lifecycle and then integrate those offerings so our clients can benefit from a more efficient integrated suite of solutions and their customers can benefit from a greater value proposition in terms of functionality.

I continue to be proud of how our team has delivered these new innovations with urgency and I thank our clients for their insights and continued partnership as we continually develop new solutions.

Let me give you a few examples of recent new innovations. Earlier this year, we launched our Underwriter Assist solution, which uses AI-enhanced automation and advanced decisioning capability to quickly and efficiently review loan package documents, thereby reducing the overall cost to originate a loan. Underwriter Assist reduces manual review from the underwriting workflow to improve efficiency and supports effective decision-making by underwriters.

Also, for our lender clients, we've added an innovative pipeline monitoring functionality through our Optimal Blue PPE. This new functionality continuously monitors for loan scenario data changes that could affect pricing or eligibility and then validates pricing and eligibility for each change. This allows lenders to provide even greater pricing accuracy and reduces manual intervention.

For our servicing clients, we continue to add new innovative capability to our servicing digital platform. As an example, we've recently added the ability to track home care information, like when repairs are done and create schedules for regular home maintenance and store relevant information about your house.

We plan to use this home maintenance data to make our AVMs even more accurate. For example, if we know a house has been maintained well, that data can be added to a condition adjusted AVM to reflect the higher value for the home. We will also be enabling connections to insurance marketplaces, giving customers the ability to browse and select insurance policies directly within Servicing Digital. These enhancements and integration strengthened the value of Servicing Digital by creating more reasons for customers to return to the servicers app, which increases both retention and satisfaction, decreases customer service calls and it gives servicers and other channel to cross-sell new products to their customers.

As part of our growth strategy, we selectively pursue acquisitions and then we integrate those businesses and their offerings into our ecosystem. This enables us to offer more market-leading products to our clients and allows the clients of those acquired businesses to benefit from our comprehensive solutions, our continued investments and our ability to develop and deliver new and innovative offerings.

As I mentioned last quarter, we have integrated our collateral analytics, AVMs, the Optimal Blue PPE and our advanced loss mitigation solution into Servicing Digital. Since then, we've integrated the recently acquired Surefire CRM and marketing automation system into Empower, LoanCatcher and our recently relaunched Capture Solution, which make each of these robust solutions even more powerful.

LoanCatcher, our broker loan origination system, is now integrated with our loan sector PPE, which provides brokers access to products and pricing across hundreds of wholesalers so they can find the best price for their customers.

We have also loaded historical data from eMBS, a business we acquired this summer, into our Rapid Analytics Platform. And we'll continue updating this data monthly. And we have identified opportunities to enhance McDash data with data from eMBS and that we're in the process of enhancing these data sets. These are just a few examples of how our focus on innovation, integration and urgency drive all that we do. And our clients are keenly interested in what we are delivering.

Last month, we attended the MBA's annual convention. We had many valuable meetings with clients and prospects. Interest in our offerings continues to increase and our clients are excited about how we are integrating our solutions to make their operations more effective and help them deliver a better customer experience.

Next, I'm going to discuss how our innovative and integrated offerings have led to successes in all segments of our business. In our Servicing Software segment, we signed four new MSP clients in the third quarter and we've signed 12 new MSP clients through the first three quarters of this year. This is already more clients than we signed in all of 2020.

At the end of the third quarter, we had 21 new client MSP implementations and existing clients adding new loans to their portfolios in progress, representing an incremental 2.1 million loans. One of those implementations, Caliber, went live this past weekend of October. The implementation went very well and we're thrilled to have Caliber live on MSP.

In origination software, we've been focused on executing on our strategy to create a comprehensive end-to-end suite to digitize the origination process and increase efficiency through automation and artificial intelligence to reduce the cost to originate a loan. Today, we continue to execute this strategy as we add more innovative solutions from point-of-sale to PPE to remote online notarizations. As we continue to successfully execute against the strategy, we are seeing significant sales success. In fact, let me share some of our sales path across origination software. We signed six new Empower clients in the third quarter, bringing our total to 20 new clients to the first three quarters of the year.

We added 50 new clients to our PPE solution in the third quarter, which brings the total to 145 for the year. We also signed six new AIVA deals in the third quarter, which brings total AIVA sales to 22 for the year. From an eClose perspective, we signed seven deals this quarter and a total of 26 deals for the year. And finally, the Surefire team that joined Black Knight in July, closed 12 marketing automation deals in the third quarter.

As interest rates continue to climb and origination volumes are slowing, investors are focusing more on managing MSRs. Our hedge platform helps those investors manage hedge positions, mitigate interest rate risk and maximize profitability. We signed three new clients for our hedge platform in the third quarter, which brings the total to 27 new clients for the first three quarters of the year.

To further illustrate the strength of our ability to cross-sell our comprehensive solutions, we bundled product PPE with six clients who signed Empower agreements in the third quarter. Because Optimal Blue has developed strong and trusted relationships with its clients, we're able to cross-sell additional solutions to these clients.

We also sold the new Capture offering to a top 25 servicer. As a reminder, our Capture product monitors lead from various databases and identifies loans with the largest economic incentive to refinance, obtain a home equity product or get a purchase loan. This servicer used Capture to develop a refinance solicitation list based on personalized rate and term for each customer. This was based on the test case of just 36,000 loans, of which 6% of the consumers applied for a loan. With the average origination profit on a new loan of approximately $2,000 for the MBA, this company potentially earned over $4 million on originations.

We continue to see the strong sales success across all the product lines in our Data and Analytics business. Specifically, we are seeing a great deal of momentum with our larger clients around our AVM offering as they focus on implementing a consistent and high quality valuation solution. Lenders are realizing significant savings by using the same valuation from the loan solicitations through origination, especially for home equity lines of credit and portfolio analysis. In addition to reducing costs, using a consistent AVM across the entire process results in a lower risk to the lender.

Same with valuation, the FHFA recently announced that they would allow banks and mortgage lenders to use desktop appraisals instead of in-person home valuations, which is a practice that started during the pandemic. In the spring of 2019, we introduced solutions and workflow tools that can assist appraisers prior to conducting the appraisal or while conducting a desktop appraisal and allow homeowners to submit data to help with the appraisal.

Additionally, the Data and Analytics team's focus on identifying datasets that we can bring together to deliver enhanced insight and create competitive lead generation, customer retention and risk mitigation strategies has led to strong data sales. And as we continue to innovate and enhance our Rapid Analytics Platform, interest from audiences across the mortgage and capital market segments continues to grow.

In summary, during the third quarter, we had very strong sales, delivered more innovative solutions and added value to our current offerings by further integrating new solutions we've introduced and the acquisitions we've made. We continue to make progress implementing the clients we signed and providing superior support during and after implementation.

I'll now turn it over to Kirk to go through the details of the financials and our raised outlook for the year.

Kirk Larsen -- Chief Financial Officer

Thanks and good morning, everyone. As you heard from Anthony, the third quarter was an outstanding quarter for Black Knight and we are very encouraged by the continued momentum across each of our businesses. With that said, I'll take you through the details for the third quarter and our raised outlook for the full year.

Turning to Slide 3. On a GAAP basis, revenues are $378 million, an increase of 21% compared to prior year quarter. Operating income was $83 million, an increase of 39%. Operating margin was 22% compared to 19%. Net earnings attributable to Black Knight were $53 million compared to $128 million and diluted earnings per share was $0.34 compared to $0.82. The prior year period included a non-cash gain of $88 million or $0.56 per diluted share as a result of Dun & Bradstreet initial public offering and concurrent private placement. Net earnings margin was 12% compared to 37%.

Turning to Slide 4, I'll now discuss our adjusted results for the third quarter. Organic revenue growth was 10%, which included a modest headwind of $3 million or 90 basis points from lower origination volumes. To put the origination volume effect in perspective, our revenues that are sensitive to origination volumes represent a 9.5% for our total revenues in the third quarter and they were down 8% compared to a market decline of 21%, as reported by the Mortgage Bankers Association, or MBA.

Adjusted EBITDA was $185 million, an increase of 19.5% compared to the prior year quarter. Adjusted EBITDA margin was 48.9% compared to 49.5%. Adjusted operating income was $148 million, an increase of 23%. Adjusted operating margin was 39.2% compared to 38.6%. Adjusted net earnings were $93 million, an increase of 15% and adjusted earnings per share was $0.60, an increase of 15%.

Turning now to Slide 5, I'll discuss results in our Software Solutions segment. Third quarter revenues for the Software Solutions segment increased 23% to $320 million. Organic revenue growth was 10%. Our servicing software solutions revenues increased 9%. The growth was driven primarily by higher usage-based revenue and MSP, new clients and sales of new innovative solutions. In origination software solutions, revenues increased 66%, including revenue from the acquisition of Optimal Blue as well as growth from new clients, the network effect in Optimal Blue and new innovation sales.

Organic revenue growth was 14%, reflecting approximately 4 percentage point headwind from origination market volumes. EBITDA increased 20% to $183 million and EBITDA margin was 57.1% compared to 58.4% in the prior-year quarter. The margin contraction was driven by revenue mix and increased investments in innovation and client support. Operating income increased 24% to $150 million and operating margin was 46.9% compared to 46.6%.

Turning to Slide 6. Third quarter revenues for the Data and Analytics segment increased 10% to $58 million, primarily driven by strong sales execution across nearly all business lines and revenue from an acquired business. Organic revenue growth was 7%, reflecting approximately 4 percentage point headwind from origination market volumes. EBITDA increased 14% to $21 million. EBITDA margin was 35.8% compared to 34.5%. Operating income increased 16% to $17 million and operating margin was 29.1% compared to 27.7%. Adjusted EBITDA for the Corporate segment in the third quarter with a loss of $19 million compared to $15 million in the prior-year quarter.

Turning to Slide 7, a walk through our balance sheet highlights. At the end of September, we had cash and cash equivalents of $78 million. Total debt principal was $2.497 billion. We had revolver capacity of $663 million and our leverage ratio was 3.4 times on a net basis. During our third quarter, we repurchased 1.4 million shares of our common stock for $100 million on average of $73.32 per share. As of September 30, we had approximately 8 million shares remaining under our share repurchase authorization.

Turning now to Slide 8, I'll walk through our outlook for the full year 2021. We've once again raised our guidance based on a strong third quarter and confidence in the outlook for the fourth quarter. For the year, revenues are expected to be in the range of $1.466 billion to $1.472 billion, which represents raising the midpoint of the range by $14 million. That translates to reported growth approximately 18% to 19% and organic growth approximately 9.5% to 10%. Adjusted EBITDA is expected to be in the range of $720 million to $724 million, which represents raising the midpoint of the range by $12 million. Adjusted earnings per share is expected to be in the range of $2.34 to 2.36, which represents raising the midpoint of the range by $0.09.

Turning now to Slide 9, additional modeling details underlying our outlook are as follows. We continue to plan for incremental foreclosure-related revenues to be delayed until the first quarter of 2022. With the stronger origination volumes in the second half of the year compared to our prior expectations, we now expect no impact from volumes on a full-year basis. As a reminder, we experienced a tailwind of approximately $7 million in the first half of this year, a $3 million headwind in the third quarter, we expect a $3 million to $4 million headwind in the fourth quarter.

In addition, we expect interest expense of $83 million to $84 million, adjusted depreciation and amortization expense of approximately $145 million, excluding a net incremental depreciation and amortization resulting from purchase accounting, adjusted earnings attributable to non-controlling interest of approximately $20 million. This relates to the portion of Optimal Blue that we don't own. We expect an adjusted effective tax rate of approximately 22%, which is at the low end of our prior guidance due to higher expected research and development credits. And we expect full year weighted average shares outstanding of approximately 156 million.

I also want to briefly discuss the raise to our long-term revenue growth guidance. Our continued strong performance and underlying momentum have led us to take this step. If you compare the business today to where we were three years ago, the strength of our continued innovation, accelerating platform sales and the structural benefits of acquisitions give us confidence in our ability to drive long-term revenue growth of 7% to 9%.

That concludes my remarks. I'll now turn the call over to the operator for Q&A.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Ryan Tomasello with KBW. Please proceed with your questions.

Ryan Tomasello -- KBW -- Analyst

Good morning, guys. And thanks for taking the questions and congrats on the strong quarter.

Anthony Jabbour -- Chairman and Chief Executive Officer

Thanks, Ryan.

Ryan Tomasello -- KBW -- Analyst

I appreciate the prepared remarks on the long-term guidance increase, but we're just not going to put a finer point around some of the variables that are really needle moving in terms of the higher conviction and the outlook. Perhaps the specific areas you'd call out across the business and what range of growth the new guidance includes for the three major segments?

And then, I guess just more broadly thinking about the operating environment for the next two to three years, how are you thinking through navigating the business within that new 7% to 9% range inclusive of the mortgage volume headwind that's likely to occur next year as well as just broader competitive dynamics much clearly have evolved materially over the past few years, particularly in the originations business? Thanks.

Anthony Jabbour -- Chairman and Chief Executive Officer

So, maybe what I'll do with that one is, I'll take the competitive landscape first, and then you can, Kirk, give the updates on the longer-term variables. What I say, Ryan, in terms -- from a competitive perspective is, we're very excited with the momentum we continue to make in this space. Our strategy is proving to be the right strategy of innovate and bring a lot of capability to markets, integrate them tightly to provide the real value to our clients and their customers and do it all with urgency so that we're there when our clients need us. And that is working exceptionally well.

I keep reminding our team not to be distracted by any one competitor in any one silo of this industry, but focus on our end-to-end. That's what our clients run end-to-end businesses and we need to help them continue to find opportunity or to mitigate risks in their business. And that's proving to be exceptionally powerful value proposition.

So, we're going to stay focused on that winning formula. But Kirk, did you want to give some guidance around the variables in the long-term?

Kirk Larsen -- Chief Financial Officer

Sure. Ryan, there's a few things I would comment on. The first is, as it relates to volumes, we like to think of long-term growth rate exclusive of volumes because, as you know, origination volumes are a relatively modest percentage of our total revenue sub-10%. They certainly can move around from period to period, but over time they moderate and I think revert to a mean. And so, as we think about that, that 7% to 9%, it really is -- we're looking at that on a volume neutral basis.

If you think about the businesses and what's great -- what growth rates we're expecting from those looking forward in servicing, we'd be thinking of that in the area -- in the mid-single-digit area given its scale and our outlook for that business, which we think is terrific. For origination, we look at that as a double-digit grower. In light of the assets and the runway that we see, they're both from a loan origination system perspective where you've seen terrific sales and you think about all the other solutions that we've added around that. And you think about how we've taken that business from being a loan origination system and a vendor network to really an end-to-end origination software suite both through internal innovation as well as through acquisition. We think the outlook for that business is outstanding.

Then for our Data and Analytics business, had tremendous success there. Teams are doing a great job. We've taken that from really what was really a low-single-digit grower to what has been frankly a high single-digit grower and double-digit grower organically off late. But we're looking at that for the long-term as a kind of mid-single-digit plus growth area. And all those pieces go together to fit in that 7% to 9%. I come to 7% to 9% in a different way as well, just to give you a little bit of extra color, if you think about what the components are.

And a very simple way to think about it is that our annual price escalators and our loan growth on MSP kind of organic loan growth, not new clients, but that offsets the very modest attrition that we have, which is typically sub-2%. And so those really offset. So what that means is -- what it means is that sales is what will drive the growth. And if you think about what would comprise that, two-thirds to three quarters of that would be platform sales. Think, Empower, think MSP and the other platforms that we have. The remainder is innovation and cross-sell.

And if you think about that component, innovation -- why do we have conviction about raising this long-term growth rate? One of the key drivers is innovation. And the success of the new solutions and what that has driven, and not only in isolation of the product revenue solution revenue that they drive, but it helps drive platform sales. And so that really is one somewhat begets the other. But you really can't -- you have to -- you can think of it in either way as well. So, that's really what gives us confidence around raising to that 7% to 9% hit the momentum around innovation, momentum around platform sales that gets us to those higher expectations.

Ryan Tomasello -- KBW -- Analyst

Great. Appreciate all that color. And I guess, just as a follow-up, last quarter you called out incremental investments that you were making in the second half of the year to capitalize on various growth opportunities across the business. Is it possible to quantify what absolute level the guidance reflects in terms of that spend and if there have been any changes to that thinking? And then, as it relates to my first question, clearly the 7% to 9% top-line framework is helpful. But are you also able to provide any context around a bottom line framework, including margin expansion and earnings growth?

Kirk Larsen -- Chief Financial Officer

Sure. On the first part, we don't quantify the specific investments that we've made. You could expect that we would have expanded margins in our typical area, absent those investments. But frankly, right now, they're part of the cost structure there. And we talked about those being not just in period investments that would then go away, but being investments that when resources that we would -- that become part of the business, part of cost structure, we'd be going forward. We haven't quantified what that is specifically.

As far as the long -- the rest of the long-term framework, we continue to expect margin expansion both at the EBITDA level and frankly accelerating. You saw that we disclosed an operating margin metric this quarter and just operating margin metric to really highlight the -- we're growing revenue. We're going to grow EBITDA faster, we're growing revenue. We're going to grow operating margins faster than -- operating income faster, we're growing EBITDA and really scale down to that mid-teens EPS growth that we spoke of, and that frankly you saw this quarter as well. So, the rest of the framework hasn't changed. We really just wanted to clarify where we think the revenue growth expectations are and the rest would flow from there.

Ryan Tomasello -- KBW -- Analyst

Great. Thanks for taking the questions and congrats again on the strong quarter.

Kirk Larsen -- Chief Financial Officer

Thank you, Ryan.

Operator

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

John Campbell -- Stephens -- Analyst

Hey, guys. Good morning. Congrats on the continued success and the momentum of the business.

Anthony Jabbour -- Chairman and Chief Executive Officer

Thanks, John.

Kirk Larsen -- Chief Financial Officer

Thanks, John.

John Campbell -- Stephens -- Analyst

Hey. So I know we're going to have to wait for the 2022 guidance as far as total rev and profit ranges. But if I just kind of double click on the foreclosure revenue, that still feels like a little bit of a black box. I think you guys did $50-ish or so million in 2019. Just hoping if you can provide maybe just some high-level direction around that kind of level of foreclosure recovery next year and how that might ramp starting in 1Q?

Anthony Jabbour -- Chairman and Chief Executive Officer

Sure, John. I think there still are a fair number of variables there. And so, maybe there's a black boxes, as you described. But where we stand today, if there are rules that are from the CFPB that are preventing foreclosures until at least the first quarter, there certainly is a backlog of seriously delinquent borrowers. But with where home prices have gone that certainly could mitigate some of that. And so, as you look out, there certainly could be a backlog of seriously delinquent borrowers that will end up at least with the start of foreclosure process after loss mitigation.

But then, it's going to -- we would expect that it would recover to the point where there's just ongoing activity from borrowers that go into seriously delinquent status and then, the foreclosure process starts. So it's not all a backlog, but potentially going forward, it's really as much of a just new entrants into seriously delinquent status and then eventually, foreclosure. I mean, if I were looking at this as we sit here today, we still see a path over the next couple of years of volumes getting back to those levels of 2019. But the exact timing and pace of that, I think, we're still waiting to see what happens when, when the rules -- when they're allowed to commence in the first quarter and see what that looks like.

So, suffice to say, we will do what we always have done, which is tell you what we know and we know it. And as we bring forward guidance for 2022 in February, we'll tell you exactly what we're assuming and we can all watch what happens together and we'll keep you updated as we see things moving. But this is another one where -- while we continue to get closer, we still -- there's still enough variables that it's difficult to call.

John Campbell -- Stephens -- Analyst

Okay. That's helpful. And then, great work on Caliber. And I know that was an important strategic initiative for you guys. I don't know what you guys can say here, but I'm curious if there's anything to call out just relating to their recent acquisition and maybe any kind of plans to consolidate platforms?

Anthony Jabbour -- Chairman and Chief Executive Officer

Well, thank you, John. First of all, there seems very focused and we're excited with the results that we had together with the Caliber team. I think we've got a great relationship with energy overall, including Shellpoint and, with any large servicers that are out there, we're in constant contact with them. And so, we believe that our MSP platform is the right solution for the market. And we continue to demonstrate it through lots of innovation and integration that we bring to it. And so, as you'd imagine, we are in pursuit of them and other large services, not on the platform today.

John Campbell -- Stephens -- Analyst

Okay. That's helpful. Thank you, guys.

Anthony Jabbour -- Chairman and Chief Executive Officer

Thanks, John.

Operator

Thank you. Our next questions come from the line of Mihir Bhatia with Bank of America. Please proceed with your questions.

Mihir Bhatia -- Bank of America -- Analyst

Hi, thank you for taking my question. Maybe I just wanted to make sure I go back to the long-term organic growth guidance change, just to start. If I understood it correctly, I think historically it used to be price escalators at about 1.5% organic growth, loan growth was 1%, and then new sales was the remaining 3% to 5-ish percent, that got you to your 6% to 8%. Is the new guidance basically that new loan growth? Oh sorry, new sales are going to be what drives -- is what's moving up in the new guidance or is there like am I mixing and matching?

Anthony Jabbour -- Chairman and Chief Executive Officer

No, it absolutely is higher expectations for new sales that is raising. And really, if you look back to when we first introduced the 6% to 8% back in 2015 in connection with the IPO, a revenue growth bridge at that point would not have had an innovation line. You would have had a platform sales line, it would've had price with a loan growth, it would've had an attrition assumption. But what's incremental today is, it's really the innovation bar or step in that guidance. And so, that's really where that change comes in, but it's new sales.

Mihir Bhatia -- Bank of America -- Analyst

Got it. And those innovation sales, do they typically happen when contracts are up for renewal or did -- they're always happening throughout the year even just like, I'm not talking about big one-time innovation, like maybe where you acquire something, I'm talking of just like general innovation that you're doing. When do you actually capture the value for that innovation? Is any of it given as part of the base contract and then when the contract renews, you price up again for it or is it always any innovation is charged for?

Anthony Jabbour -- Chairman and Chief Executive Officer

Well, when I say any innovation, it does have a charge attached to it. And whether we bundle it into a broader deal for a new client or at a renewal, obviously, we decide. But the key thing is, we're in constant communication with our clients even if they're halfway through their contract about these new innovations that we can bring to market. And that's the part that's exciting is, if you think about innovation, it drives growth directly from that innovation.

And as Kirk mentioned earlier, it also helps sell platforms by seeing that innovation and by constantly having a stream of it. There's always a reason for our account executives to be meeting with our clients and always communicating. And the more you do that, obviously the more opportunity that you discover for both us and our clients. So it's a constant throughout the life of the contract and certainly at the beginning or renewal of the contract as well.

Mihir Bhatia -- Bank of America -- Analyst

Thank you. Just a couple of quick ones for me. First is, in terms of service digital, can you tell us how many of your clients -- or rather what percent of the client base of the loan service are now getting -- like doing, using Servicing Digital and some of those particular innovations?

Anthony Jabbour -- Chairman and Chief Executive Officer

Sure. So, there are -- we have 28 Servicing Digital clients that are implemented over half of the loans that are outstanding are actually implemented on Servicing Digital at this point. So there's still some in implementation. That would get us to kind of three quarters of the total loans would be signed up to Servicing Digital.

Mihir Bhatia -- Bank of America -- Analyst

Perfect. And then, my last question is just on capital allocation and share repurchases. Obviously you did some this quarter, and I think, for some shareholders, I'm sure that was nice to see. I guess, my question on that is, your share counts still did increase a little bit this quarter. But is the idea with the buyback do mostly offset the dilution or is it more for value-based call where you just think your shares are cheap and given your leverage, how much capacity do you think you have here in the near-term to continue executing on it?

Anthony Jabbour -- Chairman and Chief Executive Officer

Well, really, for starters we believe our stock is trading meaningfully below its intrinsic value. And it's certainly not reflecting the results we're delivering the robust outlook that we have just what we see on the inside of the company in terms of a company building on momentum and great relationships with our clients.

And that was the reason for this in the third quarter. What I would add to that to your comment of how we buying to offset the dilution, the shares that we acquired and have repurchased in the third quarter significantly exceeded our annual grant of equity. And so, what we do not look at as necessarily offsetting dilution but just we look for the highest value we can create reallocating capital. And so the share count didn't come down as much as you may have expected in the quarter because of the timing of when we were buying. We don't buy an acquired period, for example. And so, later in the quarter, so that it would be over way toward future periods.

Mihir Bhatia -- Bank of America -- Analyst

Got it. Understood. Thank you.

Operator

Thank you. Our next questions come from the line of Andrew Jeffrey with Truist Securities. Please proceed with your questions.

Andrew Jeffrey -- Truist Securities -- Analyst

Hi, good morning. Appreciate you taking the question, guys. The innovation call out, I think, it's really helpful in terms of appreciating how you're innovating the platform. I wonder on a couple of specific points, Anthony, can you talk about some other potentially emerging life of loan solutions and thinking about cyber for one and any thoughts on product development there, and also progress on integration of AIVA into MSP?

Anthony Jabbour -- Chairman and Chief Executive Officer

Yes. So those are two great ones, Andrew. From a client's perspective, on cyber specifically, we've got a very thorough cyber program in place here. And as you think about why, often, I highlight over and over integration, integration and the power of it. It's really -- if you imagine a world where every vendor did one thing and a client had six contracts, 12 contracts every time they wanted to really revamp their platform, you now have that many more data points of risk. You have that many more regression testings. You have to perform on any one of those vendors to upgrade the system. There's just a lot more complexity that gets introduced in cost and impact to the end customer.

So, one of the key values that we rarely talk about -- so I appreciate you asking the question -- on buy more from Black Knight in an integrated manner is, it dramatically reduces the cyber security risk because it's all within our data cloud. And so -- and it's something that we take very seriously. So, we wouldn't look at necessarily offering products to our clients from a cyber perspective. We're not a cyber technology company, but we've got a very, very strong program. As you can imagine, with the scale we have, regulators are constantly in our buildings working with us and we're very strong that way. So, it provides that type of security for our clients, getting it all in one place in a very secure manner and limiting the number of ingress and egress points that they'd have.

To your second question on integrating AIVA to servicing, it's absolutely something that we are looking at doing. There's, I think, a lot of opportunity for us to extend that and we're going to continue to do that, Andrew.

Andrew Jeffrey -- Truist Securities -- Analyst

Okay. Look forward to updates on progress there. And Kirk, could you just quantify for us the amount of acquired revenue in the quarter?

Kirk Larsen -- Chief Financial Officer

It's actually in the press release, in the tables, we have the exact amount with us.

Anthony Jabbour -- Chairman and Chief Executive Officer

I think it's in the footnotes, Andrew. We can share that -- we can look that up on a follow-up call. But it's in the footnotes to the schedules in the back.

Andrew Jeffrey -- Truist Securities -- Analyst

All right. I'll pay better attention next time. Thanks.

Anthony Jabbour -- Chairman and Chief Executive Officer

Thanks, Andrew.

Operator

[Operator Instructions] Our next question comes from the line of Tien-Tsin Huang with JPMorgan. Please proceed with your questions.

Tien-Tsin Huang -- JPMorgan -- Analyst

Thanks so much. Really great results, for sure. Just I want to ask on the backlog growth and sole business qualified pipeline, that kind of thing. Obviously I know you don't take the decision to raise your long-term revenue growth outlook very lightly here, so, you must be very confident in all those things. So, can you give us a little bit more on the growth in the backlog in the qualified pipeline, especially on platform deals?

Anthony Jabbour -- Chairman and Chief Executive Officer

From a quantification of the backlog, it continues to be very strong, Tien-Tsin, and growing. And you can see why it is with the number of sales we've had up to 12 MSP deals this year and 20 in power deals. And that is in part -- that isn't necessarily in part. the backlog number is what would give us confidence in raising our long-term growth outlook. But because it certainly -- but it certainly points to what will drive growth for the next one to two years. But it's certainly, it's more the momentum. What gives us confidence is really where momentum in the sales and the momentum and the innovation that gives us confidence in the long-term growth rates. And you're right, we don't that take raise lightly at all given our nature. But I would say that that certainly does give us confidence. So, we'll continue to evaluate providing a backlog number, but we feel good about what that looks like heading into 2022.

Tien-Tsin Huang -- JPMorgan -- Analyst

Understood. And you sort of asked about it, but just thinking about bundled or integrated sales versus point solutions providers because there are a lot of digital players that do the latter. Do you think there's a pendulum shift in any way toward more point solutions versus bundled or fully outsourced end-to-end? Just trying to understand how -- what you're hearing from clients and what they value?

Anthony Jabbour -- Chairman and Chief Executive Officer

Well, Tien-Tsin, I'll say at the MDA conference that took place, we've had a lot of great conversations with a lot of great clients and prospects and certainly feel the momentum of what we're offering is resonating. And so, I don't -- we're mindful of every siloed competitor out there. But from a client perspective, again, what I said earlier, that power of integration and we're the only ones in our industry that can go end-to-end in our space. And across them, each of those areas, whether it's servicing originations, data and analytics or secondary market technologies, we've got a leading products in those markets. And so, we're not asking someone to compromise one of the components to get an integrated suite.

They're all winning on their own right. And furthermore, we're integrating them tightly, right? And if you think of the Surefire acquisition we did, it's already integrated into our Optimal Blue PPE. So monitoring pipelines of originations coming or monitoring a service portfolio, identifying candidates for refi with a personalized offer, handling that last mile to the clients. Instead of just sending a file to our clients handling it through Surefire, having Surefire populate through Servicing Digital and it being more automated, that's the power, and you've seen it in the core banking industry that they have in terms of being able to bring lots of capability together and make with a very complex technology architecture simple for clients. We're the only ones in our space that can do that. We're focusing on it relentlessly and we're focusing on our client service relentlessly.

You talk to our clients and they know how much we value them. And like I said, I think that's just a winning formula for us in the space. So there'll be point solutions that will constantly come up, but we're focusing on the broader issues for our clients. And the strategy has been working and we will continue to work very well.

Tien-Tsin Huang -- JPMorgan -- Analyst

Yeah. Thank you. No, I value your thoughts. Thank you, Anthony. Thank you, Kirk.

Anthony Jabbour -- Chairman and Chief Executive Officer

Thank you, Tien-Tsin.

Kirk Larsen -- Chief Financial Officer

Thank you, Tien-Tsin.

Operator

Thank you. Our next questions come from the line of Dominick Gabriele with Oppenheimer. Please proceed with your questions.

Dominick Gabriele -- Oppenheimer -- Analyst

Hey, great. Thanks so much for taking my questions and a lot of good commentary already. If you just think about the net of your innovation products, the margin on those products compared to the existing base when you're thinking about that incremental step-up in revenue long-term guidance, how do those two compare to one another? And I just have a follow-up. Thank you.

Anthony Jabbour -- Chairman and Chief Executive Officer

Well, you could imagine as a new product is introduced and gaining scale that it won't be at the same margins as, say, MSP, for example, or the Optimal Blue PPE given the difference in scale. But we look at all of our products and yes, there's a cost to develop, there's capital investment. But then over time, given that all of our solutions are Software-as-a-Service, highly leveraged capabilities, the incremental margins are very attractive. And so, over time, we would expect them to get to levels that are accretive to the total company margin. But certainly, there's a path from inception through maturity that it would take to get there like it would for any new product. But as they scale -- but like I said, the incrementals are very attractive.

Dominick Gabriele -- Oppenheimer -- Analyst

And then, maybe you guys can just take us through sort of some of the investment areas and how the product mix of the new sales can sort of affect the margin over time as we look toward '22 and '23, that'd be really great. Thank you.

Anthony Jabbour -- Chairman and Chief Executive Officer

Well, like I said, it's a steady stream of these activities that would contribute. So, a number of them like Optimal Blue, we said, it's approaching our software solutions margin already. But as we look at some of the new capabilities we've built, Underwriter Assist or Pipeline Monitoring, if we look at Servicing Digital and that might be a good one for us to expand on, we look at that as another platform now, so it's gotten to a scale, the eyeballs from end consumers on a constant basis.

What more can we do with it? We talked about being able to manage contractors online and maintenance of a home. And so, as we just kind of tie it all in together, what all these things are doing are helping sell the overall integrated platform, which is that obviously very attractive margins. So, from a longer-term, midterm perspective, I'll just say that everything that we do, we're doing it in scale. We're building it in a thoughtful multi-tenant way to drive the margins that you would expect and we would expect of the business. And from our client's perspective, the beauty is, they're also saving money as we're expanding margins and doing more together through the innovation and the integration.

Dominick Gabriele -- Oppenheimer -- Analyst

Great. And actually, maybe I can just hop in one more. If we're looking at the adjusted EPS guidance, the 11% to 12%. And as you think about your longer-term EPS potentially accelerating from these levels, given the long-term guidance, how does buybacks -- how do buybacks fit into your EPS growth assumptions as we look ahead? Thank you very much.

Kirk Larsen -- Chief Financial Officer

Sure. What I would say is that, capital allocation certainly fits into that guidance. And that capital allocation could be in the form of -- to be in the form of debt repayment, could be in the form of share repurchase, could be in a form of acquisitions. And so, as we think about which bucket that will be in, we certainly can model it as anyone could as to how you get there and what those trade-offs could look like on a long-term basis.

But as we think about it, in any given period, we would expect capital allocation to be accretive to EPS and again drive it from, EBITDA is growing faster than revenue, operating is growing faster than EBITDA. And then, as we leverage the capital structure, EPS grows faster than income from operations. But I wouldn't peg necessarily a specific percentage as to relate the share repurchase. Just by virtue of it, there are acquisition candidates that we would want to take advantage of acquiring. We would do that, with everything focusing on growth and responsible capital allocation. So it really, in any given, year could depend, Dominick.

Operator

Thank you. Our next question is coming from the line of Patrick O'Shaughnessy with Raymond James. Please proceed with your questions.

Patrick O'Shaughnessy -- Raymond James -- Analyst

Hey, good morning. So I guess sticking with the capital allocation topic, can you maybe provide an update on your outlook or appetite for incremental bolt-on deals at this point?

Anthony Jabbour -- Chairman and Chief Executive Officer

Sure. Like I said, our focus first is always going to be on innovation that we can bring to market. And that's something we've communicated well to all of our colleagues in the company, be creative, find ideas where we can do a simple add on, it's a great return. But I'd also say, we've got work underway finishing our integration for the five deals we've completed in the last year-and-a-half. But look, we were always going to look for ways that we can help create value for our clients and shareholder value. And the beauty with our scale right now is that pretty much anything that's an opportunity out there comes across our desk.

And culturally, I think we've done a good job with the acquisitions that we've made, bringing them into the company. And so, from an employee perspective of an acquired company, they'd be part of the Black Knight family, equal to any Black Knight family member who's been here for a very long time. And so, we're excited about that. And we'll always be on the look for that.

Patrick O'Shaughnessy -- Raymond James -- Analyst

Great. Thank you. And then, clearly innovation has been the theme of this call. How actively are you guys looking into potential use cases for blockchain technology within your solution set? And I asked this in light of one of your servicing competitors announcing a blockchain initiative during the quarter.

Anthony Jabbour -- Chairman and Chief Executive Officer

Thank you, Patrick. The one thing I'll correct is, we talk about innovation on every earnings call because it really is the foundation for our company and the revitalization of our growth. But on the blockchain side, look, we've spent -- when you get into a cab and the driver talks about blockchain, you know it certainly has the buzz. And we've certainly focused on it, spend time talking to all of our clients, every major player in the space. And for the most part, right now, the feedback is it's a good solution looking for a problem. And we're constantly looking to see if there would be a good use for it. And so that's how I would define it right now. In terms of -- as we look at what's going on, how will it help our clients drive revenue, improve their margins or stay compliant? Those are the key things every leader is looking at in terms of running their business. And we're not finding those use cases popping to the top of the table.

Patrick O'Shaughnessy -- Raymond James -- Analyst

All right. Thank you very much.

Anthony Jabbour -- Chairman and Chief Executive Officer

Thank you.

Operator

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

Stephen Sheldon -- William Blair -- Analyst

Hey, good morning. Thanks. I guess, just starting off here. When you think about the workflows of the origination process that you're addressing currently with AI, how far along are you relative to what it could look like if we thought about the next three to five years? Is there a lot of room to move beyond areas like document reviews, etc? And are we generally in the earlier innings there, just given the level of inefficiency in the market?

Anthony Jabbour -- Chairman and Chief Executive Officer

Yes, Stephen, I would say we're in the early innings of it. There's -- because what happens as you get into a user, it just kind of continues to more -- if you can continue to find more and more ways to drive value and add value. And the beauty of it, in terms of working with our clients, as they see the innovation being introduced and they can see the efficiency increasing as well, there's obviously interest in more and more that we can do in the space. But overall, I'd say, we're in the early innings of it.

Stephen Sheldon -- William Blair -- Analyst

Okay. That's helpful. And then, one more. Just I wanted to ask kind of what investments you've been making on the sales capacity side. Is the growth in sales momentum you've been seeing mainly been driven by increasing productivity and some positive impact, I would assume, from enterprise-focused sales motions? Are you also adding to the sales force capacity here?

Anthony Jabbour -- Chairman and Chief Executive Officer

Yeah. So we're constantly focusing on our sales capacity and there isn't a significant increase. Mind you, when we do an acquisition that has a sales force that comes along. But really where we've been successful, like I said, I think, in our previous calls, it's the sales culture. Everyone sells. I always tease our Chief Accounting Officer of office with an Empower deal. But also as we're coming more and more together, each group is helping cross-sell for the other group. And so we're getting the efficiency and productivity out of it more than we're hiring people. Just in terms of putting raw numbers at it, we're getting a lot more efficient and productive with it as well.

Stephen Sheldon -- William Blair -- Analyst

Great. Thank you.

Anthony Jabbour -- Chairman and Chief Executive Officer

Thank you, Stephen.

Operator

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

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Hey, guys. I wanted to ask about the impact of overall inflation on revenue. Can you just remind us of some of the details on the cost of living or inflation component on the long-term contracts, particularly on MSP? I think you've mentioned or pegged a customized inflation index in the past. But can you give us a sense of the contribution to scheduled revenue increases in the current quarter, say, versus a year ago from the COLA adjustments?

Kirk Larsen -- Chief Financial Officer

Sure. It's about 1% revenue growth for the total company in any given quarter. And the way that it is generally calculated is, yes, it's an index but it's a two year average. And so it's -- we do them all at the same time each year. So it's January each year. So we do it for all of our clients at the same time and it's a trailing average of the prior 24 months. And so, we wouldn't see what's happening right now. We wouldn't necessarily see a significant effect as we look to the next year. But as it averages in, we would see that weighted in. But given where the floor is on the annual price escalators, I'm not sure that's going to be something that you'll necessarily notice in the results because hopefully we're in what is a transitory period but we'll see what that ultimately is. But the averaging in is what we pushed the benefit out of it.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Okay. So it's applied in January and then would that be immediately impacted to like on the run rate revenue from each client then if it did move meaningfully?

Kirk Larsen -- Chief Financial Officer

Yes.

Anthony Jabbour -- Chairman and Chief Executive Officer

Yes.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

All right. Everything else -- all my other questions have been answered already. So thanks a lot.

Anthony Jabbour -- Chairman and Chief Executive Officer

Thanks, Kevin.

Operator

Thank you. There are no further questions at this time. I would like to turn the call back over to Anthony Jabbour for any closing comments.

Anthony Jabbour -- Chairman and Chief Executive Officer

Thank you. In closing, we're very pleased once again with our outstanding results. I'd like to thank our clients for their trusted and strong partnership and my colleagues for their focus on providing superior support to our clients and one another. Thank you for joining us on the call and your interest in Black Knight. Enjoy the rest of your day.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Stephen Eagerton -- Vice President, Investor Relations

Anthony Jabbour -- Chairman and Chief Executive Officer

Kirk Larsen -- Chief Financial Officer

Ryan Tomasello -- KBW -- Analyst

John Campbell -- Stephens -- Analyst

Mihir Bhatia -- Bank of America -- Analyst

Andrew Jeffrey -- Truist Securities -- Analyst

Tien-Tsin Huang -- JPMorgan -- Analyst

Dominick Gabriele -- Oppenheimer -- Analyst

Patrick O'Shaughnessy -- Raymond James -- Analyst

Stephen Sheldon -- William Blair -- Analyst

Kevin Kaczmarek -- Zelman & Associates -- Analyst

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