Black Knight Financial Services, Inc. (Form: 10-Q, Received: 07/28/2017 17:24:43)

Large accelerated filer þ

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

(Do not check if a smaller reporting company)

Emerging growth company o

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017



o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-37394

Black Knight Financial Services, Inc.

______________________________________________________________________________________________________________________________________________________

(Exact name of registrant as specified in its charter)



Delaware		36-4798491
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

601 Riverside Avenue, Jacksonville, Florida		32204
(Address of principal executive offices)		(Zip Code)

(904) 854-5100

___________________________________________________________________

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO þ

The number of shares outstanding of the Registrant's common stock as of July 27, 2017 were:

Class A common stock 68,839,048 shares

Class B common stock 84,612,711 shares

FORM 10-Q

QUARTERLY REPORT

Quarter Ended June 30, 2017

TABLE OF CONTENTS




	Page
Part I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
A. Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2017 and December 31, 2016	1
B. Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) for the three and six months ended June 30, 2017 and 2016	2
C. Condensed Consolidated Statement of Equity (Unaudited) for the six months ended June 30, 2017	3
D. Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2017 and 2016	4
E. Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosure About Market Risk	32
Item 4. Controls and Procedures	33
Part II: OTHER INFORMATION	34
Item 1. Legal Proceedings	34
Item 1A. Risk Factors	34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3. Defaults Upon Senior Securities	34
Item 4. Mine Safety Disclosures	34
Item 5. Other Information	34
Item 6. Exhibits	35

Table of Contents

Part I: FINANCIAL INFORMATION


Item 1.	Condensed Consolidated Financial Statements (Unaudited)

BLACK KNIGHT FINANCIAL SERVICES, INC.

Condensed Consolidated Balance Sheets

(In millions, except share data)



	June 30, 2017			December 31, 2016
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	99.3		$	133.9
Trade receivables, net	163.6			155.8
Prepaid expenses and other current assets	58.7			45.4
Receivables from related parties	11.0			4.1
Total current assets	332.6			339.2
Property and equipment, net	170.7			173.0
Computer software, net	432.7			450.0
Other intangible assets, net	265.3			299.5
Goodwill	2,306.8			2,303.8
Other non-current assets	211.1			196.5
Total assets	$	3,719.2		$	3,762.0
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable and other accrued liabilities	$	45.8		$	55.2
Accrued compensation and benefits	39.1			61.1
Current portion of long-term debt	55.0			63.4
Deferred revenues	47.2			47.4
Total current liabilities	187.1			227.1
Deferred revenues	91.2			77.3
Deferred income taxes	12.4			7.9
Long-term debt, net of current portion	1,499.7			1,506.8
Other non-current liabilities	2.9			3.5
Total liabilities	1,793.3			1,822.6
Commitments and contingencies (Note 6)
Equity:
Class A common stock; $0.0001 par value; 350,000,000 shares authorized; 70,057,538 and 68,867,482 shares issued and outstanding as of June 30, 2017 and 69,091,008 shares issued and outstanding as of December 31, 2016	—			—
Class B common stock; $0.0001 par value; 200,000,000 shares authorized, 84,612,711 and 84,826,282 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	—			—
Preferred stock; $0.0001 par value; 25,000,000 shares authorized; issued and outstanding, none	—			—
Additional paid-in capital	816.5			810.8
Retained earnings	86.1			65.7
Accumulated other comprehensive earnings (loss)	0.1			(0.8		)
Treasury stock, 1,190,056 and 0 shares as of June 30, 2017 and December 31, 2016, respectively, at cost	(46.6		)	—
Total shareholders' equity	856.1			875.7
Noncontrolling interests	1,069.8			1,063.7
Total equity	1,925.9			1,939.4
Total liabilities and equity	$	3,719.2		$	3,762.0

See Notes to Condensed Consolidated Financial Statements (Unaudited).

BLACK KNIGHT FINANCIAL SERVICES, INC.

Condensed Consolidated Statements of Earnings and Comprehensive Earnings

(Unaudited)

(In millions, except per share data)



	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Revenues	$	262.2		$	255.5		$	520.3		$	497.4
Expenses:
Operating expenses	142.0			144.4			287.5			281.2
Depreciation and amortization	50.1			49.2			102.9			97.4
Transition and integration costs	3.3			1.1			4.5			1.1
Total expenses	195.4			194.7			394.9			379.7
Operating income	66.8			60.8			125.4			117.7
Other income and expense:
Interest expense	(14.0		)	(16.9		)	(30.7		)	(33.7		)
Other expense, net	(14.5		)	(4.0		)	(16.5		)	(4.8		)
Total other expense, net	(28.5		)	(20.9		)	(47.2		)	(38.5		)
Earnings before income taxes	38.3			39.9			78.2			79.2
Income tax expense	9.1			6.7			15.1			12.9
Net earnings	29.2			33.2			63.1			66.3
Less: Net earnings attributable to noncontrolling interests	21.0			21.8			42.7			43.5
Net earnings attributable to Black Knight Financial Services, Inc.	$	8.2		$	11.4		$	20.4		$	22.8
Other comprehensive earnings (loss):
Unrealized holding gains (losses), net of tax	1.4			(0.6		)	0.6			(1.3		)
Reclassification adjustments for losses included in net earnings, net of tax (1)	0.1			0.2			0.2			0.3
Total unrealized gains (losses) on interest rate swaps, net of tax (2)	1.5			(0.4		)	0.8			(1.0		)
Foreign currency translation adjustment	—			(0.1		)	0.1			(0.1		)
Other comprehensive earnings (loss)	1.5			(0.5		)	0.9			(1.1		)
Comprehensive earnings attributable to noncontrolling interests	24.0			21.1			44.3			41.7
Comprehensive earnings	$	33.7		$	32.0		$	65.6		$	63.4

	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Earnings per share:
Net earnings per share attributable to Black Knight Financial Services, Inc., Class A common shareholders:
Basic	$	0.12		$	0.17		$	0.30		$	0.35
Diluted	$	0.11		$	0.17		$	0.29		$	0.34
Weighted average shares of Class A common stock outstanding (Note 2):
Basic	67.7			65.9			67.7			65.9
Diluted	153.0			152.7			153.0			152.7

______________________________

(1)

Amounts reclassified to net earnings relate to losses on interest rate swaps and are included in Interest expense on the Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited). Amount is net of income tax expense of less than $0.1 million for the three months ended June 30, 2017 and $0.1 million for the three months ended June 30, 2016 . Amount is net of income tax expense of $0.1 million and $0.2 million for the six months ended June 30, 2017 and 2016 , respectively.


(2)	Net of income tax expense of $0.9 million and $0.5 million for the three and six months ended June 30, 2017 , respectively. Net of income tax benefit of $0.3 million and $0.6 million for the three and six months ended June 30, 2016 , respectively.

See Notes to Condensed Consolidated Financial Statements (Unaudited).

BLACK KNIGHT FINANCIAL SERVICES, INC.

Condensed Consolidated Statement of Equity

(Unaudited)

(In millions)



	Class A common stock				Class B common stock												Treasury stock
	Shares		$		Shares		$		Additional paid-in capital			Retained earnings		Accumulated other comprehensive earnings (loss)			Shares		$			Noncontrolling interests			Total equity
Balance, December 31, 2016	69.1		$	—	84.8		$	—	$	810.8		$	65.7	$	(0.8	)	—		$	—		$	1,063.7		$	1,939.4
Issuance of restricted shares of Class A common stock	0.9		—		—		—		—			—		—			—		—			—			—
Exchange of Class B common stock for Class A common stock	0.2		—		(0.2	)	—		—			—		—			—		—			—			—
Tax withholding payments for restricted share vesting	(0.1	)	—		—		—		(4.3		)	—		—			—		—			—			(4.3		)
Purchases of treasury stock	—		—		—		—		—			—		—			(1.2	)	(46.6		)	—			(46.6		)
Equity-based compensation expense	—		—		—		—		10.0			—		—			—		—			—			10.0
Net earnings	—		—		—		—		—			20.4		—			—		—			42.7			63.1
Foreign currency translation adjustment	—		—		—		—		—			—		0.1			—		—			0.1			0.2
Unrealized gain on interest rate swaps	—		—		—		—		—			—		0.8			—		—			1.6			2.4
Tax distributions to members	—		—		—		—		—			—		—			—		—			(38.3		)	(38.3		)
Balance, June 30, 2017	70.1		$	—	84.6		$	—	$	816.5		$	86.1	$	0.1		(1.2	)	$	(46.6	)	$	1,069.8		$	1,925.9

See Notes to Condensed Consolidated Financial Statements (Unaudited).

BLACK KNIGHT FINANCIAL SERVICES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In millions)



	Six months ended June 30,
	2017			2016
Cash flows from operating activities:
Net earnings	$	63.1		$	66.3
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	102.9			97.4
Amortization of debt issuance costs, bond premium and original issue discount	1.2			1.4
Loss on extinguishment of debt, net	12.6			—
Deferred income taxes, net	4.5			1.9
Equity-based compensation	10.1			6.1
Changes in assets and liabilities, net of acquired assets and liabilities:
Trade and other receivables, including receivables from related parties	(16.3		)	(5.9		)
Prepaid expenses and other assets	(15.1		)	(16.5		)
Deferred contract costs	(25.6		)	(28.6		)
Deferred revenues	13.7			3.0
Trade accounts payable and other accrued liabilities, including accrued compensation and benefits	(27.7		)	(2.7		)
Net cash provided by operating activities	123.4			122.4
Cash flows from investing activities:
Additions to property and equipment	(4.0		)	(17.4		)
Additions to computer software	(26.5		)	(22.1		)
Business acquisitions, net of cash acquired	—			(150.2		)
Net cash used in investing activities	(30.5		)	(189.7		)
Cash flows from financing activities:
Borrowings	400.0			55.0
Senior Notes redemption	(390.0		)	—
Senior Notes redemption fee	(18.8		)	—
Debt service payments	(12.0		)	(97.0		)
Distributions to members	(38.3		)	(48.5		)
Purchases of treasury stock	(46.6		)	—
Capital lease payments	(9.0		)	—
Tax withholding payments for restricted share vesting	(4.3		)	—
Debt issuance costs	(8.5		)	—
Net cash used in financing activities	(127.5		)	(90.5		)
Net decrease in cash and cash equivalents	(34.6		)	(157.8		)
Cash and cash equivalents, beginning of period	133.9			186.0
Cash and cash equivalents, end of period	$	99.3		$	28.2

Supplemental cash flow information:
Interest paid	$	(32.6	)	$	(30.1	)
Income taxes paid	$	(11.9	)	$	(12.2	)

See Notes to Condensed Consolidated Financial Statements (Unaudited).

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Except as otherwise indicated or unless the context otherwise requires, all references to "Black Knight," the "Company," "we," "us" or "our" are to Black Knight Financial Services, Inc., a Delaware corporation, and its subsidiaries.


(1)	Basis of Presentation

The accompanying Condensed Consolidated Financial Statements (Unaudited) were prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), and all adjustments considered necessary for a fair presentation have been included. All significant intercompany accounts and transactions have been eliminated. The preparation of these Condensed Consolidated Financial Statements (Unaudited) in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements (Unaudited), as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission ("SEC") on February 24, 2017.

Description of Business

Black Knight, a majority-owned subsidiary of Fidelity National Financial, Inc. ("FNF"), is a holding company that conducts business through our interest in Black Knight Financial Services, LLC ("BKFS LLC"), our sole asset and a provider of integrated technology, data and analytics solutions that facilitates and automates many of the business processes across the mortgage lifecycle. We believe we differentiate ourselves by the breadth and depth of our comprehensive, integrated solutions and the insight we provide to our clients.

Reporting Segments

We conduct our operations through two reporting segments: (1) Technology and (2) Data and Analytics. See further discussion in Note 8 — Segment Information .

Consolidation

BKFS LLC is subject to the consolidation guidance related to variable interest entities as set forth in Accounting Standards Codification ("ASC") Topic 810, Consolidation ("ASC 810"). Black Knight, as the sole managing member of BKFS LLC, has the exclusive authority to manage, control and operate the business and affairs of BKFS LLC and its subsidiaries, pursuant to the terms of the Second Amended and Restated Limited Liability Company Agreement ("LLC Agreement"). Under the terms of the LLC Agreement, Black Knight is authorized to manage the business of BKFS LLC, including the authority to enter into contracts, manage bank accounts, hire employees and agents, incur and pay debts and expenses, merge or consolidate with other entities and pay taxes. Because Black Knight is the primary beneficiary through its sole managing member interest and possesses the rights established in the LLC Agreement, in accordance with the requirements of ASC 810, Black Knight controls BKFS LLC and appropriately consolidates the operations thereof.

We account for noncontrolling interests in accordance with ASC 810. Our Class A shareholders indirectly control BKFS LLC through our managing member interest. Our Class B shareholders have a noncontrolling interest in BKFS LLC. Their share of equity in BKFS LLC is reflected in Noncontrolling interests in our Condensed Consolidated Balance Sheets (Unaudited) and their share of net earnings or loss in BKFS LLC is reported in Net earnings attributable to noncontrolling interests in our Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited). Net earnings attributable to noncontrolling interests do not include expenses incurred directly by Black Knight, including income tax expense attributable to Black Knight.

Planned Distribution of FNF's Ownership Interest

On December 7, 2016, we announced that FNF's Board of Directors approved a tax-free plan (the "Distribution Plan") whereby FNF intends to distribute all 83.3 million shares of Black Knight common stock that it currently owns to FNF Group shareholders. We expect the Distribution Plan to be effectuated through four newly-formed corporations, New BKH Corp. ("New BKH"), Black Knight Holdco Corp. ("New Black Knight"), New BKH Merger Sub, Inc. ("Merger Sub One") and BKFS Merger Sub, Inc. ("Merger Sub Two") as follows:


•	Black Knight Holdings, Inc. ("BKHI"), a wholly-owned subsidiary of FNF, will contribute all of its 83.3 million shares of Black Knight Class B common stock and all of its units of BKFS LLC to New BKH in exchange for 100% of the shares of New BKH common stock;

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)


•	Following which BKHI will convert into a limited liability company and will then distribute to FNF all of the shares of New BKH common stock held by BKHI;


•	Immediately thereafter, FNF will distribute the shares of New BKH common stock to its shareholders (the "Spin-off"), provided that such distribution shall be subject to the conversion of such shares of New BKH common stock into shares of New Black Knight common stock.


•	Immediately following the Spin-off, Merger Sub One will merge with and into New BKH (the "New BKH merger").


•	In the New BKH merger, each outstanding share of New BKH common stock (other than shares owned by New BKH) will be exchanged for one share of New Black Knight common stock. New BKH shares owned by New BKH immediately prior to the New BKH merger shall be canceled for no consideration.


•	Immediately following the New BKH merger, Merger Sub Two will merge with and into Black Knight (the "BKFS merger").


•	In the BKFS merger, each outstanding share of Black Knight Class A common stock (other than shares owned by Black Knight) will be exchanged for one share of New Black Knight common stock. Black Knight Class A shares owned by Black Knight immediately prior to the BKFS merger shall be canceled for no consideration; and


•	New Black Knight will be the public company following the completion of the distribution and mergers.

The Distribution Plan is subject to the filing and acceptance of registration statements relating to the Black Knight spin-off with the SEC; Black Knight shareholder approval; and other customary closing conditions.

Significant progress was made on the planned distribution of FNF's ownership interest in Black Knight during the second quarter, with several milestones achieved. FNF announced the receipt of the private letter ruling from the Internal Revenue Service ("IRS") approving certain aspects relating to the tax-free spin-off of the Black Knight shares on May 10, 2017, formal agreements with FNF were signed on June 8, 2017, preliminary Registration Statements on Forms S-4 and S-1 were filed with the SEC on June 13, 2017 and June 21, 2017, respectively, comments from the SEC were received on July 10, 2017 and Amendment No. 1 to Forms S-1 and S-4 were filed with the SEC on July 18, 2017. Once the SEC declares the Registration Statements on Forms S-1 and S-4 effective, the proxy statement/prospectus will be mailed to shareholders and the shareholder vote will be held at the earliest twenty business days after the mailing. We still expect a third quarter closing for the distribution.

Realignment of Property Insight

Effective January 1, 2017, Property Insight, LLC ("Property Insight"), a Black Knight subsidiary that provides information used by title insurance underwriters, title agents and closing attorneys to source and underwrite title insurance for real property sales and transfer, realigned its commercial relationship with FNF. In connection with the realignment, Property Insight employees responsible for title plant posting and maintenance were transferred to FNF. Under the new commercial arrangement, Black Knight continues to own the title plant technology and retains sales responsibility for third parties, other than FNF. As a result of the realignment, Black Knight no longer recognizes revenues or expenses related to title plant posting and maintenance, but charges FNF a license fee for use of the technology to access and maintain the title plant data. This transaction did not result in any gain or loss.

Share Repurchase Program

On January 31, 2017, our Board of Directors authorized a three -year share repurchase program, effective February 3, 2017, under which the Company may repurchase up to 10 million shares of its Class A common stock. The timing and volume of share repurchases will be determined by our management based on ongoing assessments of the capital needs of the business, the market price of Black Knight common stock and general market conditions. The repurchase program authorizes us to purchase Black Knight common stock from time to time through February 2, 2020, through open market purchases, negotiated transactions or other means, in accordance with applicable securities laws and other restrictions. During the three months ended June 30, 2017 , we repurchased approximately 1.2 million shares of our Class A common stock for $46.6 million , or an average of $39.18 per share. At the end of the second quarter, we had approximately 8.8 million shares remaining under our share repurchase program.

THL Secondary Offering

On May 8, 2017, Black Knight announced the pricing of an underwritten secondary offering of 5,000,000 shares of its Class A common stock (the “Offering”) by affiliates of Thomas H. Lee Partners, L.P. (“THL”) pursuant to a shelf registration statement on Form S-3 filed with the SEC on May 8, 2017. Affiliates of THL in the Offering granted the underwriter an option to purchase up to 750,000 additional shares (the “Overallotment Option"). The Offering closed on May 12, 2017, and the full exercise of the Overallotment Option closed on May 18, 2017. The Company did not sell any shares and did not receive any proceeds related to

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

the Offering or Overallotment Option. See Note 3 — Related Party Transactions for the change in ownership percentages related to these transactions.

Reclassifications

Certain reclassifications have been made in the 2016 Condensed Consolidated Financial Statements (Unaudited) to conform to the classifications used in 2017. These reclassifications have not changed previously reported Net earnings or Total equity.

Cash and Cash Equivalents

Cash and cash equivalents include the following (in millions):



	June 30, 2017		December 31, 2016
Unrestricted:
Cash	$	85.1	$	129.8
Cash equivalents	12.2		1.8
Total unrestricted cash and cash equivalents	97.3		131.6
Restricted cash equivalents (1)	2.0		2.3
Total cash and cash equivalents	$	99.3	$	133.9

_______________

(1) Restricted cash equivalents relate to our subsidiary, I-Net Reinsurance Limited, and are held in trust until the final reinsurance policy is canceled.

Trade Receivables, Net

A summary of Trade receivables, net of allowance for doubtful accounts, as of June 30, 2017 and December 31, 2016 is as follows (in millions):



	June 30, 2017			December 31, 2016
Trade receivables — billed	$	123.4		$	115.4
Trade receivables — unbilled	42.5			42.6
Total trade receivables	165.9			158.0
Allowance for doubtful accounts	(2.3		)	(2.2		)
Total trade receivables, net	$	163.6		$	155.8

Capital Leases

Black Knight entered into a one-year capital lease agreement commencing January 1, 2017 with a bargain purchase option for certain computer equipment. The leased equipment has a useful life of five years and will be depreciated on a straight-line basis over this period. The leased equipment was valued based on the net present value of the minimum lease payments, which was $8.4 million (net of imputed interest of $0.1 million ).

The gross value of assets subject to capital leases was $8.4 million (net of imputed interest of $0.1 million ) and $10.0 million (net of imputed interest of $0.1 million ) as of June 30, 2017 and December 31, 2016 , respectively, and is included in Property and equipment, net on the Condensed Consolidated Balance Sheets (Unaudited). The remaining capital lease obligation of $4.4 million and $5.0 million as of June 30, 2017 and December 31, 2016 , respectively, is included in Trade accounts payable and other accrued liabilities on the Condensed Consolidated Balance Sheets (Unaudited). The non-cash investing and financing activity for the six months ended June 30, 2017 and 2016 was $4.4 million and $10.0 million , respectively, and relates to the unpaid portion of the capital lease obligation.

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

Equity-Based Compensation

During the first quarter of 2017, Black Knight adopted Accounting Standards Update ("ASU") 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . In connection with the adoption, we made a policy election to account for forfeitures as they occur. The adoption of this ASU did not have a material effect on our business, financial condition or our results of operations.

Depreciation and Amortization

Depreciation and amortization on the Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) include the following (in millions):



	Three months ended June 30,				Six months ended June 30,
	2017		2016		2017		2016
Property and equipment	$	7.3	$	7.3	$	14.4	$	14.2
Computer software	20.7		18.6		41.2		36.9
Other intangible assets	17.0		17.9		34.0		35.7
Deferred contract costs	5.1		5.4		13.3		10.6
Total	$	50.1	$	49.2	$	102.9	$	97.4

Deferred contract costs amortization for the six months ended June 30, 2017 includes accelerated amortization of $3.3 million recorded in the first quarter related to certain deferred implementation costs.

Transition and Integration Costs

Transition and integration costs during the three and six months ended June 30, 2017 primarily represent legal and professional fees related to the planned distribution of FNF's ownership interest in Black Knight. Transition and integration costs during the three and six months ended June 30, 2016 primarily represent acquisition-related costs.

Recent Accounting Pronouncements

Revenue Recognition (ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"))

In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). This ASU supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition . The guidance requires a five-step analysis of transactions to determine when and how revenue is recognized based upon the core principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendment also requires additional disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers. The FASB has issued several additional ASUs since this time that add additional clarification. All of the new standards are effective for the Company on January 1, 2018.

In preparation for adoption of ASC 606, we have formed a project team and engaged a third-party professional services firm to assist us with our evaluation. We are applying an integrated approach to analyzing ASC 606's impact on our pattern of revenue recognition, including a review of accounting policies and practices, evaluating differences from applying the requirements of the new standard to our contracts and business practices and assessing the need for changes to our processes, accounting systems and design of internal controls. Based upon our initial assessment, we currently do not anticipate a material change to the pattern of revenue recognition related to revenue earned from the majority of our Technology segment hosted software arrangements, Data and Analytics segment arrangements with transaction or volume-based fees and perpetual license arrangements in our Technology and Data and Analytics segments. However, due to the complexity of certain of our contracts, including contracts for multiple products and services related to each of our segments, the final determination will be dependent on contract-specific terms.

During the second quarter, we continued our assessment with increased focus on more detailed contract reviews and further identification of data and disclosure requirements, including the effect on our processes, accounting system and design of internal controls.

We continue to assess whether ASC 606 will result in a change in the number of distinct performance obligations within our contractual arrangements for set up and implementation services, which may affect the timing of revenue recognition. Additionally, as ASU 2014-09 includes new accounting principles related to the deferral and amortization of contract acquisition and fulfillment costs, we are evaluating if this will result in any effect to our current capitalization and deferral policies. Based on our initial assessment, we do not expect a significant change to our current practice for capitalizing such costs; however, in certain instances

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

ASC 606 may result in a change to the related amortization period. Further, we continue to analyze our term license arrangements across our segments to determine the effect of any changes in revenue recognition treatment. Under ASC 606, we would generally be required to recognize term license revenues upfront at time of delivery rather than ratably over the related contract period. While our assessment of whether the term license is distinct in certain instances based on the nature of the contract is still ongoing, we have identified circumstances where the promised software license and ongoing services are not distinct from each other. In these scenarios, the timing of revenue recognition will be over time, which is consistent with the treatment under the current revenue recognition standard.

We are still in the process of quantifying the effects ASC 606 will have on our consolidated financial statements.

The standard allows companies to use either a full retrospective or a modified retrospective adoption approach. We currently anticipate adopting the new standard using the modified retrospective transition approach. Our decision to adopt using the modified retrospective transition approach is dependent on the completion of our analysis of the effect the adoption of ASC 606 will have on our results of operations, financial position and related disclosures.

Other Accounting Pronouncements

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting . This ASU provides clarity and reduces both diversity in practice and cost and complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. This update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This ASU is effective prospectively in fiscal years beginning after December 15, 2017 with early adoption permitted. We do not expect this update to have a material effect on our results of operations or our financial position.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . This ASU eliminates Step 2 of the goodwill impairment test that required a hypothetical purchase price allocation. Rather, entities should apply the same impairment assessment to all reporting units and recognize an impairment loss for the amount by which a reporting unit's carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This update is effective prospectively for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, or those beginning after January 1, 2017 if early adopted. We do not expect this update to have a material effect on our results of operations or our financial position.

(2) Earnings Per Share

Basic earnings per share is computed by dividing Net earnings attributable to Black Knight by the weighted-average number of shares of Class A common stock outstanding during the period.

For the periods presented, potentially dilutive securities include unvested restricted stock awards and the shares of Class B common stock. The numerator in the diluted net earnings per share calculation is adjusted to reflect our income tax expense at an expected effective tax rate assuming the conversion of the shares of Class B common stock into shares of Class A common stock on a one -for-one basis. The expected effective tax rate for the three and six months ended June 30, 2017 was 54.6% and 43.4% , respectively, including certain discrete items recorded during the second quarter. The estimated effective tax rate during the three and six months ended June 30, 2016 was 35.2% and 35.3% , respectively. The denominator includes approximately 84.7 million and 84.8 million shares of Class B common stock outstanding for the three and six months ended June 30, 2017 , respectively, and approximately 84.8 million shares for the three and six months ended June 30, 2016 . The denominator also includes the dilutive effect of approximately 0.6 million and 0.5 million shares of unvested restricted shares of Class A common stock for the three and six months ended June 30, 2017 , respectively, and approximately 2.0 million shares for the three and six months ended June 30, 2016 .

The shares of Class B common stock do not share in the earnings or losses of Black Knight and are, therefore, not participating securities. Accordingly, basic and diluted net earnings per share of Class B common stock have not been presented.

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share amounts):



	Three months ended June 30,				Six months ended June 30,
	2017		2016		2017		2016
Basic:
Net earnings attributable to Black Knight	$	8.2	$	11.4	$	20.4	$	22.8
Shares used for basic net earnings per share:
Weighted average shares of Class A common stock outstanding	67.7		65.9		67.7		65.9
Basic net earnings per share	$	0.12	$	0.17	$	0.30	$	0.35

Diluted:
Earnings before income taxes	$	38.3	$	39.9	$	78.2	$	79.2
Income tax expense excluding the effect of noncontrolling interests	20.9		14.0		33.9		28.0
Net earnings	$	17.4	$	25.9	$	44.3	$	51.2
Shares used for diluted net earnings per share:
Weighted average shares of Class A common stock outstanding	67.7		65.9		67.7		65.9
Dilutive effect of unvested restricted shares of Class A common stock	0.6		2.0		0.5		2.0
Weighted average shares of Class B common stock outstanding	84.7		84.8		84.8		84.8
Weighted average shares of common stock, diluted	153.0		152.7		153.0		152.7
Diluted net earnings per share	$	0.11	$	0.17	$	0.29	$	0.34

(3) Related Party Transactions

We are party to certain related party agreements, including those with FNF and THL. The following table sets forth the ownership interests of FNF, THL and other holders of Black Knight common stock (shares in millions):



	June 30, 2017			December 31, 2016
	Shares	Ownership Percentage		Shares	Ownership Percentage
Class A common stock:
THL and its affiliates	33.8	22.0	%	39.3	25.5	%
Restricted shares	1.9	1.3	%	2.9	1.9	%
Other, including those publicly traded	33.2	21.6	%	26.9	17.5	%
Total shares of Class A common stock	68.9	44.9	%	69.1	44.9	%
Class B common stock:
FNF subsidiary	83.3	54.3	%	83.3	54.1	%
THL and its affiliates	1.3	0.8	%	1.5	1.0	%
Total shares of Class B common stock	84.6	55.1	%	84.8	55.1	%
Total common stock outstanding	153.5	100.0	%	153.9	100.0	%

Transactions with FNF and THL are described below.

FNF

We have various agreements with FNF and certain FNF subsidiaries to provide technology, data and analytics services, as well as corporate shared services and information technology. We are also a party to certain other agreements under which we incur other expenses or receive revenues from FNF.

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

A detail of the revenues and expenses, net from FNF is set forth in the table below (in millions). The decrease in Revenues from the prior year period are primarily the result of the Property Insight realignment as described in Note 1 — Basis of Presentation .



	Three months ended June 30,				Six months ended June 30,
	2017		2016		2017		2016
Revenues	$	17.2	$	17.8	$	29.4	$	34.2
Operating expenses	3.1		4.3		6.4		7.7
Guarantee fee	0.2		1.0		1.2		2.0

We paid to FNF a guarantee fee of 1.0% of the outstanding principal of the Senior Notes (as defined in Note 4 — Long-Term Debt ) in exchange for the ongoing guarantee by FNF of the Senior Notes. The guarantee fee is included in Interest expense on the Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited). On April 26, 2017, the Senior Notes were redeemed (see Note 4 — Long-Term Debt for further information), and we are no longer required to pay a guarantee fee.

FNF subsidiaries held $49.0 million and $49.3 million as of June 30, 2017 and December 31, 2016 , respectively, of principal amount of our Term B Loan (as defined in Note 4 — Long-Term Debt ) from our credit agreement dated May 27, 2015, as amended.

THL

Two managing directors of THL currently serve on our Board of Directors. We purchase software and systems services from certain entities over which THL exercises control.

A detail of the expenses, net from THL is set forth in the table below (in millions):



	Three months ended June 30,				Six months ended June 30,
	2017		2016		2017		2016
Operating expenses	$	0.1	$	0.4	$	0.2	$	0.8
Software and software-related purchases	—		0.2		—		1.1

Certain affiliates of THL held $39.4 million of principal amount of our Term B Loan (as defined in Note 4 — Long-Term Debt ) as of December 31, 2016 from our credit agreement dated May 27, 2015. They did not hold any of our debt as of June 30, 2017 .

Revenues and Expenses

A detail of related party items included in Revenues is as follows (in millions):



	Three months ended June 30,				Six months ended June 30,
	2017		2016		2017		2016
Data and analytics services	$	8.3	$	11.5	$	12.7	$	21.9
Servicing, origination and default technology services	8.9		6.3		16.7		12.3
Total related party revenues	$	17.2	$	17.8	$	29.4	$	34.2

A detail of related party items included in Operating expenses (net of expense reimbursements) is as follows (in millions):



	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Data entry, indexing services and other operating expenses	$	1.1		$	2.6		$	2.5		$	4.9
Corporate services	2.5			2.9			5.0			5.2
Technology and corporate services	(0.4		)	(0.8		)	(0.9		)	(1.6		)
Total related party expenses, net	$	3.2		$	4.7		$	6.6		$	8.5

Additionally, related party prepaid fees were less than $0.1 million as of June 30, 2017 and $0.1 million as of December 31, 2016 . These fees are included in Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets (Unaudited). Finally, related party deferred revenues were $1.9 million as of June 30, 2017 , which are included in current Deferred revenues on the Condensed Consolidated Balance Sheets (Unaudited).

We believe the amounts earned from or charged by us under each of the foregoing arrangements are fair and reasonable. We believe our service arrangements are priced within the range of prices we offer to third parties, except for certain corporate services

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

provided to an FNF subsidiary and certain corporate services provided by FNF, which are at cost. However, the amounts we earned or that were charged under these arrangements were not negotiated at arm's length, and may not represent the terms that we might have obtained from an unrelated third party.

( 4 ) Long-Term Debt

Long-term debt consisted of the following (in millions):



	June 30, 2017										December 31, 2016
	Principal		Debt Issuance Costs			Discount			Total		Principal		Debt Issuance Costs			Premium (Discount)			Total
Term A Loan	$	1,030.0	$	(8.2	)	$	—		$	1,021.8	$	740.0	$	(7.0	)	$	—		$	733.0
Term B Loan	392.0		(2.7		)	(1.6		)	387.7		394.0		(3.4		)	(0.8		)	389.8
Revolving Credit Facility	150.0		(4.8		)	—			145.2		50.0		(3.7		)	—			46.3
Senior Notes, issued at par	—		—			—			—		390.0		—			11.1			401.1
Total long-term debt	1,572.0		(15.7		)	(1.6		)	1,554.7		1,574.0		(14.1		)	10.3			1,570.2
Less: Current portion of long-term debt	55.5		(0.5		)	—			55.0		64.0		(0.6		)	—			63.4
Long-term debt, net of current portion	$	1,516.5	$	(15.2	)	$	(1.6	)	$	1,499.7	$	1,510.0	$	(13.5	)	$	10.3		$	1,506.8

Principal maturities as of June 30, 2017 for each of the next five years and thereafter are as follows (in millions):



2017 (remaining)	$	27.8
2018	55.5
2019	81.3
2020	107.0
2021	132.7
Thereafter	1,167.7
Total	$	1,572.0

Scheduled maturities noted above exclude the effect of the debt issuance costs of $15.7 million as well as $1.6 million net unamortized debt premium.

Credit Agreement

On May 27, 2015, our indirect subsidiary, Black Knight InfoServ, LLC ("BKIS"), entered into a credit and guaranty agreement (the "Credit Agreement") with JPMorgan Chase Bank, N.A., as administrative agent, the guarantors party thereto and the other agents and lenders party thereto. The Credit Agreement provided for (i) an $800.0 million term loan A facility (the "Term A Loan"), (ii) a $400.0 million term loan B facility (the "Term B Loan") and (iii) a $400.0 million revolving credit facility (the "Revolving Credit Facility", and collectively with the Term A Loan and Term B Loan, the "Facilities"). The Facilities are guaranteed by substantially all of BKIS's wholly-owned domestic restricted subsidiaries and BKFS LLC, and are secured by associated collateral agreements that pledge a lien on virtually all of BKIS's assets, including fixed assets and intangible assets, and the assets of the guarantors.

As of June 30, 2017 , the Term A Loan and the Revolving Credit Facility bear interest at the Eurodollar rate plus a margin of 175 basis points, and the Term B Loan bears interest at the Eurodollar rate plus a margin of 225 basis points, subject to a Eurodollar rate floor of 75 basis points. As of June 30, 2017 , we have $350.0 million capacity on the Revolving Credit Facility and pay an unused commitment fee of 25 basis points. During the six months ended June 30, 2017 , there were $100.0 million of incremental borrowings and no payments on our Revolving Credit Facility and $55.0 million of borrowings and $75.0 million of payments during the six months ended June 30, 2016 . As of June 30, 2017 , the interest rates on the Term A Loan, Term B Loan and Revolving Credit Facility were 3.00% , 3.50% and 3.00% , respectively.

Term B Loan Repricing

On February 27, 2017, BKIS entered into a First Amendment to Credit and Guaranty Agreement (the "Credit Agreement First Amendment") with JPMorgan Chase Bank, N.A. as administrative agent. Pursuant to the Credit Agreement First Amendment, the

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

Term B Loan bears interest at rates based upon, at the option of BKIS, either (i) the base rate plus a margin of 125 basis points, or (ii) the Eurodollar rate plus a margin of 225 basis points, subject to a Eurodollar rate floor of 75 basis points. The Term B Loan matures on May 27, 2022. In addition, the Credit Agreement First Amendment permits the Distribution Plan. The amount included in Other expense, net on the Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) related to the Term B Loan repricing was $1.1 million .

Term A Loan and Revolver Refinancing

On April 26, 2017, BKIS entered into a Second Amendment to Credit and Guaranty Agreement (the “Credit Agreement Second Amendment”) with the JPMorgan Chase Bank, N.A. as administrative agent, the guarantors party thereto, the other agents party thereto and the lenders party thereto. The Credit Agreement Second Amendment increases (i) the aggregate principal amount of the Term A Loan by $300.0 million to $1,030.0 million and (ii) the aggregate principal amount of commitments under the Revolving Credit Facility by $100.0 million to $500.0 million . The Credit Agreement Second Amendment also reduces the pricing applicable to the loans under the Term A Loan and Revolving Credit Facility by 25 basis points and reduces the unused commitment fee applicable to the Revolving Credit Facility by 5 basis points. The Term A Loan and Revolving Credit Facility bear interest at rates based upon, at the option of BKIS, either (i) the base rate plus a margin of between 25 and 100 basis points depending on the total leverage ratio of BKFS LLC and its restricted subsidiaries on a consolidated basis (the “Consolidated Leverage Ratio”) and (ii) the Eurodollar rate plus a margin of between 125 and 200 basis points depending on the Consolidated Leverage Ratio, subject to a Eurodollar rate floor of zero basis points. In addition, BKIS will pay an unused commitment fee of between 15 and 30 basis points on the undrawn commitments under the Revolving Credit Facility, also depending on the Consolidated Leverage Ratio. Pursuant to the terms of the Credit Agreement Second Amendment, the Term A Loan and the Revolving Credit Facility mature on February 25, 2022. The amount included in Other expense, net on the Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) related to the Term A Loan and Revolving Credit Facility refinancing was $3.3 million .

Senior Notes

Through April 25, 2017, BKIS had 5.75% Senior Notes, interest paid semi-annually, which were scheduled to mature on April 15, 2023 (the "Senior Notes"). The Senior Notes were senior unsecured obligations, registered under the Securities Act and contained customary affirmative, negative and financial covenants, and events of default for indebtedness of this type (with grace periods, as applicable, and lender remedies). On April 26, 2017, we redeemed the outstanding Senior Notes at a price of 104.825% (the "Redemption") and paid $0.7 million in accrued interest. The amount included in Other expense, net on the Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) related to the Senior Notes redemption was $8.2 million .

Fair Value of Long-Term Debt

The fair value of our Facilities approximates their carrying value at June 30, 2017 . The fair value of our Facilities is based upon established market prices for the securities using level 2 inputs.

Interest Rate Swaps

On March 7, 2017, we entered into an interest rate swap agreement to hedge forecasted monthly interest rate payments on $200.0 million of our floating rate debt (the "March 2017 Swap Agreement"). Under the terms of the March 2017 Swap Agreement, we receive payments based on the 1-month LIBOR rate (equal to 1.25% as of June 30, 2017 ) and pay a fixed rate of 2.08% . The effective term for the March 2017 Swap Agreement is March 31, 2017 through March 31, 2022.

On January 20, 2016, we entered into two interest rate swap agreements to hedge forecasted monthly interest rate payments on $400.0 million of our floating rate debt ( $200.0 million notional value each) (the "January 2016 Swap Agreements", and together with the March 2017 Swap Agreement, the "Swap Agreements"). Under the terms of the January 2016 Swap Agreements, we receive payments based on the 1-month LIBOR rate (equal to 1.25% as of June 30, 2017 ) and pay a weighted average fixed rate of 1.01% . The effective term for the January 2016 Swap Agreements is February 1, 2016 through January 31, 2019.

We entered into the Swap Agreements to convert a portion of the interest rate exposure on our floating rate debt from variable to fixed. We designated these Swap Agreements as cash flow hedges. A portion of the amount included in Accumulated other comprehensive earnings (loss) is reclassified into Interest expense as a yield adjustment as interest payments are made on the hedged debt. The fair value of our Swap Agreements is based upon level 2 inputs. We have considered our own credit risk when determining the fair value of our Swap Agreements.

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

The estimated fair values of our Swap Agreements are as follows (in millions):



Balance Sheet Account	June 30, 2017		December 31, 2016
Other non-current assets	$	2.8	$	—
Other non-current liabilities	$	2.1	$	2.2

As of June 30, 2017 , a cumulative gain of $0.3 million ( $0.2 million net of tax) is reflected in Accumulated other comprehensive earnings (loss), and a cumulative gain of $0.4 million is reflected in Noncontrolling interests. As of December 31, 2016 , a cumulative loss of $1.0 million ( $0.6 million net of tax) is reflected in Accumulated other comprehensive earnings (loss), and a cumulative loss of $1.2 million is reflected in Noncontrolling interests. Below is a summary of the effect of derivative instruments on amounts recognized in Other comprehensive earnings (loss) ("OCE") on the accompanying Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) for the three months ended June 30, 2017 and 2016 (in millions):



	Three months ended June 30, 2017				Three months ended June 30, 2016
	Amount of Gain Recognized in OCE		Amount of Loss Reclassified from Accumulated OCE into Net earnings		Amount of Gain (Loss) Recognized in OCE			Amount of Loss Reclassified from Accumulated OCE into Net earnings
Swap agreements
Attributable to noncontrolling interests	$	2.8	$	0.2	$	(1.0	)	$	0.3
Attributable to Black Knight Financial Services, Inc.	1.4		0.1		(0.6		)	0.2
Total	$	4.2	$	0.3	$	(1.6	)	$	0.5

Below is a summary of the effect of derivative instruments on amounts recognized in other comprehensive earnings ("OCE") on the accompanying Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) for the six months ended June 30, 2017 and 2016 (in millions):



	Six months ended June 30, 2017				Six months ended June 30, 2016
	Amount of Gain Recognized in OCE		Amount of Loss Reclassified from Accumulated OCE into Net earnings		Amount of Loss Recognized in OCE			Amount of Loss Reclassified from Accumulated OCE into Net earnings
Swap agreements
Attributable to noncontrolling interests	$	1.2	$	0.4	$	(2.3	)	$	0.5
Attributable to Black Knight Financial Services, Inc.	0.6		0.2		(1.3		)	0.3
Total	$	1.8	$	0.6	$	(3.6	)	$	0.8

Approximately $0.3 million ( $0.2 million net of tax) of the balance in Accumulated other comprehensive earnings (loss) and Noncontrolling interests as of June 30, 2017 is expected to be reclassified into Interest expense over the next 12 months.

It is our policy to execute such instruments with credit-worthy banks and not to enter into derivative financial instruments for speculative purposes. As of June 30, 2017 , we believe our interest rate swap counterparties will be able to fulfill their obligations under our agreements, and we believe we will have debt outstanding through the various expiration dates of the swaps such that the occurrence of future cash flow hedges remains probable.

(5) Income Taxes

As of June 30, 2017 and December 31, 2016 , we had no uncertain tax positions. We record interest and penalties related to income taxes, if any, as a component of Income tax expense. Our effective tax rate for the three months ended June 30, 2017 and 2016 was 23.8% and 16.8% , respectively, and 19.3% and 16.3% for the six months ended June 30, 2017 and 2016 , respectively. These rates are lower than the typical federal and state statutory rate because of the effect of our noncontrolling interests. The increase in the effective tax rate for the three and six months ended June 30, 2017 is primarily driven by the resolution of a legacy tax matter, partially offset by the effect on adoption of ASU 2016-09 related to the income tax effects of awards that vested.

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

Tax Distributions

The taxable income of BKFS LLC is allocated to its members, including Black Knight, and the members are required to reflect on their own income tax returns the items of income, gain, deduction and loss and other tax items of BKFS LLC that are allocated to them. BKFS LLC makes tax distributions to its members in order to enable them to pay taxes on their allocable share of BKFS LLC's taxable income. Tax distributions are calculated based on allocations of income to a member for a particular taxable year without taking into account any losses allocated to the member in a prior taxable year. This practice is consistent with IRS regulations. Subject to certain reductions, tax distributions are generally made based on an assumed tax rate equal to the highest combined marginal federal, state and local income tax rate applicable to a U.S. corporation. BKFS LLC made tax distributions of $38.3 million and $48.5 million during the six months ended June 30, 2017 and 2016 , respectively.

( 6 ) Commitments and Contingencies

Legal and Regulatory Matters

In the ordinary course of business, we are involved in various pending and threatened litigation and regulatory matters related to our operations, some of which include claims for punitive or exemplary damages. Our ordinary course litigation includes purported class action lawsuits, which make allegations related to various aspects of our business. From time to time, we also receive requests for information from various state and federal regulatory authorities, some of which take the form of civil investigative demands or subpoenas. Some of these regulatory inquiries may result in the assessment of fines for violations of regulations or settlements with such authorities requiring a variety of remedies. We believe that none of these actions depart from customary litigation or regulatory inquiries incidental to our business.

We review lawsuits and other legal and regulatory matters (collectively “legal proceedings”) on an ongoing basis when making accrual and disclosure decisions. When assessing reasonably possible and probable outcomes, management bases its decision on its assessment of the ultimate outcome assuming all appeals have been exhausted. For legal proceedings where it has been determined that a loss is both probable and reasonably estimable, a liability based on known facts and which represents our best estimate has been recorded. Actual losses may materially differ from the amounts recorded and the ultimate outcome of our pending cases is generally not yet determinable. While some of these matters could be material to our operating results or cash flows for any particular period if an unfavorable outcome results, at present we do not believe that the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on our financial condition.

Indemnifications and Warranties

We often agree to indemnify our clients against damages and costs resulting from claims of patent, copyright, trademark infringement or breaches of confidentiality associated with use of our software through software licensing agreements. Historically, we have not made any payments under such indemnifications, but continue to monitor the conditions that are subject to the indemnifications to identify whether a loss has occurred that is both probable and estimable that would require recognition. In addition, we warrant to clients that our software operates substantially in accordance with the software specifications. Historically, no costs have been incurred related to software warranties and none are expected in the future, and as such, no accruals for warranty costs have been made.

Indemnification Agreement

We are party to a cross-indemnity agreement dated December 22, 2014 with ServiceLink Holdings, LLC ("ServiceLink"). Pursuant to this agreement, ServiceLink indemnifies us from liabilities relating to, arising out of or resulting from the conduct of ServiceLink's business or any action, suit or proceeding in which we or any of our subsidiaries are named by reason of being a successor to the business of Lender Processing Services, Inc. and the cause of such action, suit or proceeding relates to the business of ServiceLink. In return, we indemnify ServiceLink for liabilities relating to, arising out of, or resulting from the conduct of our business.

(7) Equity-Based Compensation

On February 3, 2017, we granted 884,570 restricted shares of our Class A common stock with a grant date fair value of $37.90 per share, which was based on the closing price of our common stock on the date of grant. Of the 884,570 restricted shares granted, 203,160 restricted shares vest over a three -year period and 681,410 restricted shares vest over a four -year period. The vesting of all the restricted shares granted on February 3, 2017 is also based on certain operating performance criteria.

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

Restricted stock transactions in 2017 are as follows:



	Shares		Weighted Averaged Grant Date Fair Value
Balance, December 31, 2016	2,908,374		*
Granted	884,570		$	37.90
Forfeited	(19,163	)	$	29.35
Vested	(1,840,719	)	*
Balance, June 30, 2017	1,933,062		*

______________________________

The BKFS LLC profits interest units that were converted into restricted shares in connection with our initial public offering had a weighted average grant date fair value of $2.10 per unit. The fair value of the restricted shares at the date of conversion, May 20, 2015, was $24.50 per share. The original grant date fair value of the vested restricted shares, which were originally granted as profits interests units, was $2.01 per unit.

Equity-based compensation expense was $4.9 million and $3.4 million for the three months ended June 30, 2017 and 2016 , respectively, and $10.1 million and $6.1 million for the six months ended June 30, 2017 and 2016 , respectively. These expenses are included in Operating expenses in the Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited).

Total unrecognized compensation cost was $47.9 million as of June 30, 2017 and is expected to be recognized over a weighted average period of approximately 2.9 years.

( 8 ) Segment Information

ASC Topic 280, Segment Reporting ("ASC 280") establishes standards for reporting information about segments and requires that a public business enterprise reports financial and descriptive information about its segments. Segments are components of an enterprise for which separate financial information is available and are evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. Black Knight’s chief executive officer is identified as the CODM as defined by ASC 280. To align with the internal management of our business operations based on service offerings, our business is organized into two segments:


•	Technology - offers software and hosting solutions that support loan servicing, loan origination and settlement services.


•	Data and Analytics - offers data and analytics solutions to the mortgage, real estate and capital markets industries. These solutions include property ownership data, lien data, servicing data, automated valuation models, collateral risk scores, prepayment and default models, lead generation and other data solutions.

Separate discrete financial information is available for these two segments and the operating results of each segment are regularly evaluated by the CODM in order to assess performance and allocate resources. We use EBITDA as the primary profitability measure for making decisions regarding ongoing operations. EBITDA is earnings before Interest expense, Income tax expense and Depreciation and amortization. We do not allocate Interest expense, Other expense, net, Income tax expense, equity-based compensation and certain other items, such as purchase accounting adjustments and acquisition-related costs to the segments, since these items are not considered in evaluating the segments' overall operating performance.

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

Summarized financial information concerning our segments is shown in the tables below (in millions):



	Three months ended June 30, 2017
	Technology		Data and Analytics		Corporate and Other				Total
Revenues	$	220.5	$	42.9	$	(1.2	)	(1)	$	262.2
Expenses:
Operating expenses	91.0		33.0		18.0				142.0
Transition and integration costs	—		—		3.3				3.3
EBITDA	129.5		9.9		(22.5		)		116.9
Depreciation and amortization	23.5		3.8		22.8			(2)	50.1
Operating income (loss)	106.0		6.1		(45.3		)		66.8
Interest expense									(14.0		)
Other expense, net									(14.5		)
Earnings before income taxes									38.3
Income tax expense									9.1
Net earnings									$	29.2

_______________________________________________________


(1)	Revenues for Corporate and Other represent deferred revenue purchase accounting adjustments recorded in accordance with GAAP.


(2)	Depreciation and amortization for Corporate and Other primarily represents net incremental depreciation and amortization adjustments associated with the application of purchase accounting recorded in accordance with GAAP.



	Three months ended June 30, 2016
	Technology		Data and Analytics		Corporate and Other				Total
Revenues	$	213.2	$	44.3	$	(2.0	)	(1)	$	255.5
Expenses:
Operating expenses	90.3		37.5		16.6				144.4
Transition and integration costs	—		—		1.1				1.1
EBITDA	122.9		6.8		(19.7		)		110.0
Depreciation and amortization	25.8		2.3		21.1			(2)	49.2
Operating income (loss)	97.1		4.5		(40.8		)		60.8
Interest expense									(16.9		)
Other expense, net									(4.0		)
Earnings before income taxes									39.9
Income tax expense									6.7
Net earnings									$	33.2

_______________________________________________________


(1)	Revenues for Corporate and Other represent deferred revenue purchase accounting adjustments recorded in accordance with GAAP.


(2)	Depreciation and amortization for Corporate and Other primarily represents net incremental depreciation and amortization adjustments associated with the application of purchase accounting recorded in accordance with GAAP.

Table of Contents

BLACK KNIGHT FINANCIAL SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)



	Six months ended June 30, 2017
	Technology		Data and Analytics		Corporate and Other				Total
Revenues	$	441.1	$	81.8	$	(2.6	)	(1)	$	520.3
Expenses:
Operating expenses	184.7		66.5		36.3				287.5
Transition and integration costs	—		—		4.5				4.5
EBITDA	256.4		15.3		(43.4		)		228.3
Depreciation and amortization	50.6		7.3		45.0			(2)	102.9
Operating income (loss)	205.8		8.0		(88.4		)		125.4
Interest expense									(30.7		)
Other expense, net									(16.5		)
Earnings before income taxes									78.2
Income tax expense									15.1
Net earnings									$	63.1

Balance sheet data:
Total assets	$	3,182.2	$	352.6	$	184.4			$	3,719.2
Goodwill	$	2,115.0	$	191.8	$	—			$	2,306.8

_______________________________________________________


(1)	Revenues for Corporate and Other represent deferred revenue purchase accounting adjustments recorded in accordance with GAAP.


(2)	Depreciation and amortization for Corporate and Other primarily represents net incremental depreciation and amortization adjustments associated with the application of purchase accounting recorded in accordance with GAAP.



	Six months ended June 30, 2016
	Technology		Data and Analytics		Corporate and Other				Total
Revenues	$	415.6	$	86.1	$	(4.3	)	(1)	$	497.4
Expenses:
Operating expenses	177.3		72.5		31.4				281.2
Transition and integration costs	—		—		1.1				1.1
EBITDA	238.3		13.6		(36.8		)		215.1
Depreciation and amortization	51.2		4.4		41.8			(2)	97.4
Operating income (loss)	187.1		9.2		(78.6		)		117.7
Interest expense									(33.7		)
Other expense, net									(4.8		)
Earnings before income taxes									79.2
Income tax expense									12.9
Net earnings									$	66.3

Balance sheet data:
Total assets	$	3,240.8	$	352.9	$	110.1			$	3,703.8
Goodwill	$	2,106.1	$	191.5	$	—			$	2,297.6

_______________________________________________________


(1)	Revenues for Corporate and Other represent deferred revenue purchase accounting adjustments recorded in accordance with GAAP.


(2)	Depreciation and amortization for Corporate and Other primarily represents net incremental depreciation and amortization adjustments associated with the application of purchase accounting recorded in accordance with GAAP.

Table of Contents

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including statements regarding expectations, hopes, intentions or strategies regarding the future. Forward-looking statements are based on Black Knight management's beliefs, as well as assumptions made by, and information currently available to, them. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. Black Knight Financial Services, Inc. ( "Black Knight," the "Company," "we," "us" or "our" ) undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties that forward-looking statements are subject to include, but are not limited to:


•	our ability to successfully achieve the conditions to and consummate the tax-free spin-off of Black Knight from Fidelity National Financial, Inc. ("FNF");


•	uncertainties as to the timing of the spin-off of Black Knight from FNF and any costs, expenses and utilization of resources relating thereto;


•	the risk of shareholder litigation in connection with the spin-off;


•	diversion of Black Knight management's time and attention in connection with the spin-off;


•	security breaches against our information systems;


•	our ability to maintain and grow our relationships with our customers;


•	changes to the laws, rules and regulations that affect our and our customers' businesses;


•	our ability to adapt our services to changes in technology or the marketplace;


•	the effect of any potential defects, development delays, installation difficulties or system failures on our business and reputation;


•	changes in general economic, business, regulatory and political conditions, particularly as they affect the mortgage industry;


•	risks associated with the availability of data;


•	the effects of our substantial leverage on our ability to make acquisitions and invest in our business;


•	risks associated with our structure and status as a "controlled company";


•	our ability to successfully integrate strategic acquisitions; and


•	other risks and uncertainties detailed in the "Statement Regarding Forward-Looking Information," "Risk Factors" and other sections of our Annual Report on Form 10-K for the year ended December 31, 2016 and other filings with the Securities and Exchange Commission ("SEC").

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 24, 2017.

History

Black Knight, a majority-owned subsidiary of FNF, is a holding company that conducts business through our interest in Black Knight Financial Services, LLC ("BKFS LLC"). Through its subsidiaries, BKFS LLC is a leading provider of integrated technology, workflow automation, data and analytics to the mortgage and real estate industries. Our solutions facilitate and automate many of the mission-critical business processes across the entire mortgage loan life cycle, from origination until asset disposition. We believe we differentiate ourselves by the breadth and depth of our comprehensive, integrated solutions and the insight we provide to our clients.

Overview

We have market-leading positions in mortgage processing and technology solutions combined with comprehensive real estate data and extensive analytic capabilities. Our solutions are utilized by U.S. mortgage originators and mortgage servicers, as well as other financial institutions, investors and real estate professionals, to support mortgage lending and servicing operations, analyze portfolios and properties, operate more efficiently, meet regulatory compliance requirements and mitigate risk.

The U.S. mortgage market is undergoing significant change, and mortgage market participants have been subjected to more stringent oversight in recent years. Regulators have increasingly focused on better disclosure, improved risk mitigation and enhanced oversight. Mortgage lenders large and small have experienced higher costs in order to comply with this higher level of regulation. Despite these new regulatory requirements, the mortgage industry remains a competitive marketplace with numerous large lenders and smaller institutions competing for new loan originations. In order to comply with the increased regulatory requirements and compete more effectively, mortgage market participants have continued to outsource mission-critical functions to third party technology providers that can offer comprehensive and integrated solutions, which are also cost-effective, due to their deep domain expertise and economies of scale.

Table of Contents

We believe our comprehensive end-to-end, integrated solutions differentiate us from other technology providers serving the mortgage industry and position us particularly well for evolving opportunities in this market. We have served the mortgage and real estate industries for over 50 years and utilize this experience to design and develop solutions that fit our clients’ ever-evolving needs. Our proprietary technology platforms and data and analytics capabilities reduce manual processes, improve compliance and quality, mitigate risk and deliver significant cost savings to our clients. Our scale allows us to continually and cost-effectively invest in our business in order to meet evolving industry requirements and maintain our position as an industry-standard platform for mortgage market participants.

The table below summarizes active first and second lien mortgages on our mortgage servicing platform (in millions) and the related market data (in millions), reflecting our leadership in the mortgage servicing technology market:



	First lien mortgages						Second lien mortgages
	as of June 30,						as of June 30,
	2017			2016			2017			2016
Active loans	31.4			31.3			2.0			1.1
Market size	50.8		(1)	50.7		(1)	15.4		(2)	15.8		(2)
Market share	62	%		62	%		13	%		7	%

_______________________________________________________


(1)	According to the May Black Knight Mortgage Monitor Report as of May 31, 2017 and 2016 for U.S. first lien mortgages.


(2)	According to the May 2017 Equifax National Consumer Credit Trends Report as of March 31, 2017 and June 30, 2016 for U.S. second lien mortgages.

Our business is organized into two segments:

• Technology - offers software and hosting solutions that support loan servicing, loan origination and settlement services.


•	Data and Analytics - offers data and analytics solutions to the mortgage, real estate and capital markets industries. These solutions include property ownership data, lien data, servicing data, automated valuation models, collateral risk scores, prepayment and default models, lead generation and other data solutions.

We offer our solutions to a wide range of clients across the mortgage and real estate industries. The quality and breadth of our solutions contribute to the long-standing nature of our relationships with our clients, the majority of whom enter into long-term contracts across multiple products that are embedded in their mission critical workflow and decision processes. Given the contractual nature of our revenues and stickiness of our client relationships, our revenues are highly visible and recurring in nature. Due to our integrated suite of solutions and our scale in the mortgage market, we are able to drive significant operating leverage, which we believe enables our clients to operate more efficiently while allowing us to generate strong margins and cash flow.

Business Trends and Conditions

General

The U.S. mortgage market is large, and the loan life cycle is complex and consists of several stages. The mortgage loan life cycle includes origination, servicing and default. Mortgages are originated to finance home purchases or refinance existing mortgages. Once a mortgage is originated, it is serviced on a periodic basis by mortgage servicers, which may not be the lenders that originated the mortgage. Furthermore, if a mortgage experiences default, it triggers a set of multifaceted processes with an assortment of potential outcomes depending on a mix of variables.

Underlying the three major components of the mortgage loan life cycle are the technology, data and analytics support behind each process, which has become increasingly critical to industry participants due to the complexity of regulatory requirements. As the industry has grown in complexity, participants have responded by outsourcing to large scale specialty providers, automating manual processes and seeking end-to-end solutions that support the processes required to manage the entire mortgage loan life cycle.

The U.S. mortgage market has seen significant change over the past few years and is expected to continue to evolve going forward. Key regulatory actions arising from the recent financial crisis, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") and the establishment of the Consumer Financial Protection Bureau ("CFPB"), impose new and evolving standards for market participants. These regulatory changes have spurred lenders and servicers to seek technology solutions that facilitate the meeting of compliance obligations in the face of a changing regulatory environment while remaining efficient and profitable.


•	Evolving regulation . Most U.S. mortgage market participants have become subject to increased regulatory oversight and regulatory requirements as federal and state governments have enacted various new laws, rules and regulations. One

Table of Contents

example of such legislation is the Dodd-Frank Act, which contained broad changes for many sectors of the financial services and lending industries and established the CFPB, the federal regulatory agency responsible for regulating consumer financial protection within the United States. It is our experience that mortgage lenders have become more focused on minimizing the risk of non-compliance with these evolving regulations and are looking toward technologies and solutions that help them comply with the increased regulatory oversight and requirements.

•

Lenders increasingly focused on core operations. As a result of greater regulatory scrutiny and the higher cost of doing business, we believe lenders have become more focused on their core operations and customers. We believe that lenders are increasingly shifting from in-house technologies to solutions with third-party providers who can provide better technology and services more efficiently. Lenders require these vendors to provide best-in-class technology and deep domain expertise and to assist them in maintaining regulatory compliance.

•

Growing role of technology in the U.S. mortgage industry. Banks and other lenders and servicers have become increasingly focused on technology automation and workflow management to operate more efficiently and meet their regulatory guidelines. We believe that vendors must be able to support the complexity of the market, display extensive industry knowledge and possess the financial resources to make the necessary investments in technology to support lenders.

•

Increased demand for enhanced transparency and analytic insight . As U.S. mortgage market participants work to minimize the risk in lending, servicing and capital markets, they rely on the integration of data and analytics with technologies that enhance the decision making process. These industry participants rely on large comprehensive third party databases coupled with enhanced analytics to achieve these goals.

Mortgage Originations

Our various businesses are affected differently by the level of mortgage originations, including refinancing transactions. Our mortgage servicing platform is minimally affected by varying levels of mortgage originations because it earns revenues based on the total number of mortgage loans it processes, which tend to stay more constant than the market for originations. Our origination technology and some of our data businesses may be affected by the volume of real estate transactions and mortgage originations, but many of our client contracts for origination technology contain minimum charges.

Economic Conditions

Our various businesses may also be affected by general economic conditions. For example, in the event that a difficult economy or other factors lead to a significant decline in levels of home ownership and a significant reduction in the number of mortgage loans outstanding and we are not able to counter the effect of those events with increased market share or higher fees, it could have a material adverse effect on our mortgage processing revenues. In contrast, we believe that a weaker economy tends to increase the volume of consumer mortgage defaults, which can increase the revenues in our specialty servicing technology business that is used to service residential mortgage loans in default. Also, interest rates tend to decline in a weaker economy driving higher than normal refinance transactions that provide potential volume increases to our origination technology offerings, most specifically the Exchange platform.

Planned Distribution of FNF's Ownership Interest

On December 7, 2016, we announced that FNF's Board of Directors approved a tax-free plan (the "Distribution Plan") whereby FNF intends to distribute all 83.3 million shares of Black Knight common stock that it currently owns to FNF Group shareholders as described in Note 1 to the Notes to Condensed Consolidated Financial Statements (Unaudited).

Significant progress was made on the planned distribution of FNF's ownership interest in Black Knight during the second quarter, with several milestones achieved. FNF announced the receipt of the private letter ruling from the Internal Revenue Service approving certain aspects relating to the tax-free spin-off of the Black Knight shares on May 10, 2017, formal agreements with FNF were signed on June 8, 2017, preliminary Registration Statements on Forms S-4 and S-1 were filed with the SEC on June 13, 2017 and June 21, 2017, respectively, comments from the SEC were received on July 10, 2017 and Amendment No. 1 to Forms S-1 and S-4 were filed with the SEC on July 18, 2017. Once the SEC declares the Registration Statements on Forms S-1 and S-4 effective, the proxy statement/prospectus will be mailed to shareholders and the shareholder vote will be held at the earliest twenty business days after the mailing. We still expect a third quarter closing for the distribution.

Table of Contents

Realignment of Property Insight

Effective January 1, 2017, Property Insight, LLC ("Property Insight"), a Black Knight subsidiary that provides information used by title insurance underwriters, title agents and closing attorneys to source and underwrite title insurance for real property sales and transfer, realigned its commercial relationship with FNF. In connection with the realignment, Property Insight employees responsible for title plant posting and maintenance were transferred to FNF. Under the new commercial arrangement, Black Knight continues to own the title plant technology and retains sales responsibility for third parties, other than FNF. As a result of the realignment, Black Knight no longer recognizes revenues or expenses related to title plant posting and maintenance, but charges FNF a license fee for use of the technology to access and maintain the title plant data. Had the realignment taken place on January 1, 2016, Black Knight revenues and expenses for 2016 would have been lower by approximately $30 million with essentially no effect to operating income. This transaction did not result in any gain or loss.

Share Repurchase Program

On January 31, 2017, our Board of Directors authorized a three-year share repurchase program, effective February 3, 2017, under which the Company may repurchase up to 10 million shares of its Class A common stock. The timing and volume of share repurchases will be determined by our management based on ongoing assessments of the capital needs of the business, the market price of Black Knight common stock and general market conditions. The repurchase program authorizes us to purchase Black Knight common stock from time to time through February 2, 2020, through open market purchases, negotiated transactions or other means, in accordance with applicable securities laws and other restrictions. During the three months ended June 30, 2017 , we repurchased approximately 1.2 million shares of our Class A common stock for $46.6 million , or an average of $39.18 per share. At the end of the second quarter, we had approximately 8.8 million shares remaining under our share repurchase program.

Term B Loan Repricing

On February 27, 2017, Black Knight InfoServ, LLC ("BKIS") entered into a First Amendment to Credit and Guaranty Agreement (the "Credit Agreement First Amendment" or "Term B Loan Repricing") with JPMorgan Chase Bank, N.A. as administrative agent. Pursuant to the Credit Agreement First Amendment, the Term B Loan, as described in Note 4 to the Notes to Condensed Consolidated Financial Statements (Unaudited), bears interest at rates based upon, at the option of BKIS, either (i) the base rate plus a margin of 125 basis points, or (ii) the Eurodollar rate plus a margin of 225 basis points, subject to a Eurodollar rate floor of 75 basis points. The Term B Loan matures on May 27, 2022. In addition, the Credit Agreement First Amendment permits the Distribution Plan.

Debt Refinancing and Senior Notes Redemption

On April 26, 2017, BKIS entered into a Second Amendment to Credit and Guaranty Agreement (the “Credit Agreement Second Amendment”) with the JPMorgan Chase Bank, N.A. as administrative agent, the guarantors party thereto, the other agents party thereto and the lenders party thereto. The Credit Agreement Second Amendment increases (i) the aggregate principal amount of the Term A Loan, as described in Note 4 to the Notes to Condensed Consolidated Financial Statements (Unaudited), by $300.0 million to $1,030.0 million and (ii) the aggregate principal amount of commitments under the Revolving Credit Facility, as described in Note 4 to the Notes to Condensed Consolidated Financial Statements (Unaudited), by $100.0 million to $500.0 million . The Credit Agreement Second Amendment also reduces the pricing applicable to the loans under the Term A Loan and Revolving Credit Facility by 25 basis points and reduces the unused commitment fee applicable to the Revolving Credit Facility by 5 basis points. The Term A Loan and Revolving Credit Facility bear interest at rates based upon, at the option of BKIS, either (i) the base rate plus a margin of between 25 and 100 basis points depending on the total leverage ratio of BKFS LLC and its restricted subsidiaries on a consolidated basis (the “Consolidated Leverage Ratio”) and (ii) the Eurodollar rate plus a margin of between 125 and 200 basis points depending on the Consolidated Leverage Ratio, subject to a Eurodollar rate floor of zero basis points. In addition, BKIS will pay an unused commitment fee of between 15 and 30 basis points on the undrawn commitments under the Revolving Credit Facility, also depending on the Consolidated Leverage Ratio. Pursuant to the terms of the Credit Agreement Second Amendment, the Term A Loan and the Revolving Credit Facility mature on February 25, 2022.

On April 26, 2017, we redeemed the outstanding Senior Notes, as described in Note 4 to the Notes to Condensed Consolidated Financial Statements (Unaudited), at a price of 104.825% (the "Redemption") and paid $0.7 million in accrued interest.

THL Secondary Offering

Table of Contents

the Offering or Overallotment Option. See Note 1 to the Notes to Condensed Consolidated Financial Statements (Unaudited) for the change in ownership percentages related to these transactions.

Results of Operations

Key Performance Metrics

We use Adjusted Revenues, Adjusted EBITDA and Adjusted EBITDA Margin for financial and operational decision making and as a means to evaluate period-to-period comparisons. Adjusted Revenues, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures, which we believe are useful for investors in evaluating our overall financial performances. Black Knight believes these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making, including determining a portion of executive compensation.

Adjusted Revenues and Adjusted EBITDA for the Technology and Data and Analytics segments are presented in conformity with Accounting Standards Codification 280, Segment Reporting . These measures are reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For these reasons, these measures are excluded from the definition of non-GAAP financial measures under the Securities and Exchange Commission's Regulation G and Item 10(e) of Regulation S-K.


•	Adjusted Revenues - We define Adjusted Revenues as Revenues adjusted to include the revenues that were not recorded by Black Knight during the periods presented due to the deferred revenue purchase accounting adjustment recorded in accordance with GAAP. These adjustments are reflected in Corporate and Other.


•	Adjusted EBITDA - We define Adjusted EBITDA as Net earnings, with adjustments to reflect the addition or elimination of certain income statement items including, but not limited to:


◦	Depreciation and amortization;


◦	Interest expense;


◦	Income tax expense;


◦	Other expense, net;


◦	Loss (gain) from discontinued operations, net of tax;


◦	deferred revenue purchase accounting adjustment recorded in accordance with GAAP;


◦	equity-based compensation, including related payroll taxes;


◦	costs associated with debt and/or equity offerings, including the planned tax-free spin-off of Black Knight from FNF;


◦	spin-off related transition costs; and


◦	acquisition-related costs.

These adjustments are reflected in Corporate and Other.


•	Adjusted EBITDA Margin - Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by Adjusted Revenues.

Table of Contents



Consolidated Results of Operations
The following table presents certain financial data for the periods indicated (in millions):
	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Revenues	$	262.2		$	255.5		$	520.3		$	497.4
Expenses:
Operating expenses	142.0			144.4			287.5			281.2
Depreciation and amortization	50.1			49.2			102.9			97.4
Transition and integration costs	3.3			1.1			4.5			1.1
Total expenses	195.4			194.7			394.9			379.7
Operating income	66.8			60.8			125.4			117.7
Operating margin	25.5		%	23.8		%	24.1		%	23.7		%
Interest expense	(14.0		)	(16.9		)	(30.7		)	(33.7		)
Other expense, net	(14.5		)	(4.0		)	(16.5		)	(4.8		)
Earnings before income taxes	38.3			39.9			78.2			79.2
Income tax expense	9.1			6.7			15.1			12.9
Net earnings	$	29.2		$	33.2		$	63.1		$	66.3

Key Performance Metrics (Non-GAAP)
Adjusted Revenues	$	263.4		$	257.5		$	522.9		$	501.7
Adjusted EBITDA	$	126.3		$	116.5		$	245.7		$	226.6
Adjusted EBITDA Margin	47.9		%	45.2		%	47.0		%	45.2		%

A reconciliation of the above non-GAAP financial measures to the most directly comparable GAAP financial measures is presented in the tables below (in millions):



	Three months ended June 30,				Six months ended June 30,
	2017		2016		2017		2016
Revenues	$	262.2	$	255.5	$	520.3	$	497.4
Deferred revenue purchase accounting adjustment	1.2		2.0		2.6		4.3
Adjusted Revenues	$	263.4	$	257.5	$	522.9	$	501.7

Table of Contents



	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Net earnings	$	29.2		$	33.2		$	63.1		$	66.3
Depreciation and amortization	50.1			49.2			102.9			97.4
Interest expense	14.0			16.9			30.7			33.7
Income tax expense	9.1			6.7			15.1			12.9
Other expense, net	14.5			4.0			16.5			4.8
EBITDA	116.9			110.0			228.3			215.1
Deferred revenue purchase accounting adjustment	1.2			2.0			2.6			4.3
Equity-based compensation	4.9			3.4			10.3			6.1
Debt and/or equity offering expenses	2.2			0.1			3.4			0.1
Spin-off related transition costs	1.1			—			1.1			—
Acquisition-related costs	—			1.0			—			1.0
Adjusted EBITDA	$	126.3		$	116.5		$	245.7		$	226.6
Adjusted EBITDA Margin	47.9		%	45.2		%	47.0		%	45.2		%

Revenues

Consolidated Revenues were $262.2 million in the three months ended June 30, 2017 compared to $255.5 million in the 2016 period, an increase of $6.7 million , or 3% . Consolidated Revenues were $520.3 million in the six months ended June 30, 2017 compared to $497.4 million in the 2016 period, an increase of $22.9 million , or 5% . The change in revenues is discussed further at the segment level below.

The following table sets forth revenues by segment for the periods presented (in millions):



	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Technology	$	220.5		$	213.2		$	441.1		$	415.6
Data and Analytics	42.9			44.3			81.8			86.1
Corporate and Other (1)	(1.2		)	(2.0		)	(2.6		)	(4.3		)
Total	$	262.2		$	255.5		$	520.3		$	497.4

_______________________________________________________


(1)	Revenues for Corporate and Other represent deferred revenue purchase accounting adjustments recorded in accordance with GAAP.

Technology

Revenues were $220.5 million in the three months ended June 30, 2017 compared to $213.2 million in the 2016 period, an increase of $7.3 million , or 3% . Our servicing technology business contributed $12.0 million of this increase, primarily driven by favorable client mix, price increases and higher transactional volumes. Our origination technology business declined $4.7 million, primarily driven by lower consulting revenues and volumes on the Exchange as a result of a decline in refinancing originations, partially offset by the eLynx Holdings, Inc. ("eLynx") acquisition.

Revenues were $441.1 million in the six months ended June 30, 2017 compared to $415.6 million in the 2016 period, an increase of $25.5 million , or 6% . Our servicing technology business contributed $29.5 million of this increase, primarily driven by higher average loan volumes on our servicing platform, which increased 2.8% to 32.6 million average loans, price increases and higher transactional volumes. Our origination technology business declined $4.0 million, primarily driven by lower consulting revenues, volumes on the Exchange as a result of a decline in refinancing originations and client contract termination fees, partially offset by the eLynx acquisition.

Data and Analytics

Revenues were $42.9 million in the three months ended June 30, 2017 compared to $44.3 million in the 2016 period, a decrease of $1.4 million , or 3% . The decrease was driven by the effect of the Property Insight realignment, partially offset by incremental revenues from the Motivity Solutions, Inc. ("Motivity") acquisition and growth in our property data and multiple listing service

Table of Contents

businesses. Had the realignment taken place on January 1, 2016, Black Knight revenues for the three months ended June 30, 2016 would have been lower by $7.8 million.

Revenues were $81.8 million in the six months ended June 30, 2017 compared to $86.1 million in the 2016 period, a decrease of $4.3 million , or 5% . The decrease was driven by the effect of the Property Insight realignment, partially offset by incremental revenues from the Motivity acquisition and growth in our property data and multiple listing service businesses. Had the realignment taken place on January 1, 2016, Black Knight revenues for the six months ended June 30, 2016 would have been lower by $15.0 million.

Operating Expenses

Consolidated Operating expenses were $142.0 million in the three months ended June 30, 2017 compared to $144.4 million in the 2016 period, a decrease of $2.4 million , or 2% . Consolidated Operating expenses were $287.5 million in the six months ended June 30, 2017 compared to $281.2 million in the 2016 period, an increase of $6.3 million , or 2% . The changes in operating expenses are discussed further at the segment level below.

The following table sets forth operating expenses by segment for the periods presented (in millions):



	Three months ended June 30,				Six months ended June 30,
	2017		2016		2017		2016
Technology	$	91.0	$	90.3	$	184.7	$	177.3
Data and Analytics	33.0		37.5		66.5		72.5
Corporate and Other	18.0		16.6		36.3		31.4
Total	$	142.0	$	144.4	$	287.5	$	281.2

Technology

Operating expenses were $91.0 million in the three months ended June 30, 2017 compared to $90.3 million in the 2016 period, an increase of $0.7 million , or 1% . The increase was primarily due to the eLynx acquisition, partially offset by lower personnel and IT costs.

Operating expenses were $184.7 million in the six months ended June 30, 2017 compared to $177.3 million in the 2016 period, an increase of $7.4 million , or 4% . The increase was primarily due to the eLynx acquisition.

Data and Analytics

Operating expenses were $33.0 million in the three months ended June 30, 2017 compared to $37.5 million in the 2016 period, a decrease of $4.5 million , or 12% . The decrease was primarily driven by the Property Insight realignment, partially offset by the Motivity acquisition and the effect of costs associated with the data hub.

Operating expenses were $66.5 million in the six months ended June 30, 2017 compared to $72.5 million in the 2016 period, a decrease of $6.0 million , or 8% . The decrease was primarily driven by the Property Insight realignment, partially offset by the Motivity acquisition and the effect of costs associated with the data hub.

Corporate and Other

Operating expenses were $18.0 million in the three months ended June 30, 2017 compared to $16.6 million in the 2016 period, an increase of $1.4 million , or 8% . The increase was primarily driven by higher equity-based compensation, partially offset by lower incentive bonus accruals.

Operating expenses were $36.3 million in the six months ended June 30, 2017 compared to $31.4 million in the 2016 period, an increase of $4.9 million , or 16% . The increase was primarily driven by higher equity-based compensation and professional fees, partially offset by lower incentive bonus accruals.

Depreciation and Amortization

Consolidated Depreciation and amortization was $50.1 million in the three months ended June 30, 2017 compared to $49.2 million in the 2016 period, an increase of $0.9 million , or 2% . Consolidated Depreciation and amortization was $102.9 million in the six months ended June 30, 2017 compared to $97.4 million in the 2016 period, an increase of $5.5 million , or 6% . The changes in depreciation and amortization are discussed further at the segment level below.

Table of Contents

The following table sets forth depreciation and amortization by segment for the periods presented (in millions):



	Three months ended June 30,				Six months ended June 30,
	2017		2016		2017		2016
Technology	$	23.5	$	25.8	$	50.6	$	51.2
Data and Analytics	3.8		2.3		7.3		4.4
Corporate and Other (1)	22.8		21.1		45.0		41.8
Total	$	50.1	$	49.2	$	102.9	$	97.4

_______________________________________________________


(1)	Depreciation and amortization for Corporate and Other primarily represents net incremental depreciation and amortization adjustments associated with the application of purchase accounting recorded in accordance with GAAP.

Technology

Depreciation and amortization was $23.5 million in the three months ended June 30, 2017 compared to $25.8 million in the 2016 period, a decrease of $2.3 million , or 9% . The decrease is primarily due to lower deferred contract costs amortization.

Depreciation and amortization was $50.6 million in the six months ended June 30, 2017 compared to $51.2 million in the 2016 period, a decrease of $0.6 million , or 1% .

Data and Analytics

Depreciation and amortization was $3.8 million in the three months ended June 30, 2017 compared to $2.3 million in the 2016 period, an increase of $1.5 million , or 65% . The increase is primarily due to increased depreciation from both computer hardware and new software development.

Depreciation and amortization was $7.3 million in the six months ended June 30, 2017 compared to $4.4 million in the 2016 period, an increase of $2.9 million , or 66% . The increase is primarily due to increased depreciation from both computer hardware and new software development.

Transition and Integration Costs

Consolidated Transition and integration costs were $3.3 million in the three months ended June 30, 2017 compared to $1.1 million in the 2016 period, an increase of $2.2 million . Consolidated Transition and integration costs were $4.5 million in the six months ended June 30, 2017 compared to $1.1 million in the 2016 period, an increase of $3.4 million . Transition and integration costs for the 2017 period primarily represents legal and professional fees related to the planned distribution of FNF's ownership interests in Black Knight. Transition and integration costs for the 2016 period primarily represent costs associated with the eLynx and Motivity acquisitions.

Operating Income (Loss)

Consolidated Operating income was $66.8 million in the three months ended June 30, 2017 compared to $60.8 million in the 2016 period, an increase of $6.0 million , or 10% . Consolidated Operating income was $125.4 million in the six months ended June 30, 2017 compared to $117.7 million in the 2016 period, an increase of $7.7 million , or 7% . The changes in operating income (loss) are discussed further at the segment level below.

The following table sets forth operating income (loss) by segment for the periods presented (in millions):



	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Technology	$	106.0		$	97.1		$	205.8		$	187.1
Data and Analytics	6.1			4.5			8.0			9.2
Corporate and Other	(45.3		)	(40.8		)	(88.4		)	(78.6		)
Total	$	66.8		$	60.8		$	125.4		$	117.7

Technology

Operating income was $106.0 million in the three months ended June 30, 2017 compared to $97.1 million in the 2016 period, an increase of $8.9 million , or 9% . Operating margin was 48.1% in the three months ended June 30, 2017 compared to 45.5% in 2016 . The increase in operating income is primarily due to revenue growth within servicing technology and lower depreciation and amortization.

Table of Contents

Operating income was $205.8 million in the six months ended June 30, 2017 compared to $187.1 million in the 2016 period, an increase of $18.7 million , or 10% . Operating margin was 46.7% in the six months ended June 30, 2017 compared to 45.0% in 2016 . The increase in operating income is primarily due to revenue growth within servicing technology and lower depreciation and amortization.

Data and Analytics

Operating income was $6.1 million in the three months ended June 30, 2017 compared to $4.5 million in the 2016 period, an increase of $1.6 million , or 36% . Operating margin was 14.2% in the three months ended June 30, 2017 compared to 10.2% in 2016 . The increase is primarily due to the effect of the Property Insight realignment, partially offset by costs associated with Motivity and the data hub and higher depreciation and amortization.

Operating income was $8.0 million in the six months ended June 30, 2017 compared to $9.2 million in the 2016 period, a decrease of $1.2 million , or 13% . Operating margin was 9.8% in the six months ended June 30, 2017 compared to 10.7% in 2016 . The decrease is primarily due to the effect of costs associated with Motivity and the data hub and higher depreciation and amortization.

Corporate and Other

Operating loss was $45.3 million in the three months ended June 30, 2017 compared to $40.8 million in the 2016 period, an increase of $4.5 million , or 11% . The increase was primarily driven by higher equity-based compensation and legal and professional fees related to the planned distribution of FNF's ownership interest in Black Knight, partially offset by lower incentive bonus accruals.

Operating loss was $88.4 million in the six months ended June 30, 2017 compared to $78.6 million in the 2016 period, an increase of $9.8 million , or 12% . The increase was primarily driven by higher equity-based compensation and legal and professional fees related to the planned distribution of FNF's ownership interest in Black Knight, partially offset by lower incentive bonus accruals.

Interest Expense

Consolidated Interest expense was $14.0 million in the three months ended June 30, 2017 compared to $16.9 million in the 2016 period, a decrease of $2.9 million , or 17% . Consolidated Interest expense was $30.7 million in the six months ended June 30, 2017 compared to $33.7 million in the 2016 period, a decrease of $3.0 million , or 9% . The decrease is driven by lower interest from the Term B Loan repricing and debt refinancing.

Other Expense, Net

Consolidated Other expense, net was $14.5 million in the three months ended June 30, 2017 compared to $4.0 million in the 2016 period. The 2017 amount was primarily related to the Senior Notes redemption, Term A Loan and Revolving Credit Facility refinancing and the resolution of a legacy legal matter. Consolidated Other expense, net was $16.5 million in the six months ended June 30, 2017 compared to $4.8 million in the 2016 period. The 2017 amount primarily includes the amounts included in the second quarter and the Term B Loan repricing.

Income Tax Expense

Consolidated Income tax expense was $9.1 million in the three months ended June 30, 2017 compared to $6.7 million in the 2016 period. Consolidated Income tax expense was $15.1 million in the six months ended June 30, 2017 compared to $12.9 million in the 2016 period. Our effective tax rate was 23.8% in the three months ended June 30, 2017 compared to 16.8% in the 2016 period. Our effective tax rate was 19.3% in the six months ended June 30, 2017 compared to 16.3% in the 2016 period. The increase is related to certain discrete items recorded during the quarter. These rates are lower than the typical federal and state statutory rate because of the effect of our noncontrolling interests.

Table of Contents

Adjusted Revenues

Consolidated Adjusted Revenues were $263.4 million in the three months ended June 30, 2017 compared to $257.5 million in the 2016 period, an increase of $5.9 million , or 2% . The increase was driven by favorable client mix, price increases, higher transactional volumes and the eLynx and Motivity acquisitions, partially offset by the effect of the Property Insight realignment.

Consolidated Adjusted Revenues were $522.9 million in the six months ended June 30, 2017 compared to $501.7 million in the 2016 period, an increase of $21.2 million , or 4% . The increase was driven by higher average loan volumes on our servicing platform, price increases, higher transactional volumes and the eLynx and Motivity acquisitions, partially offset by the effect of the Property Insight realignment.

Adjusted EBITDA and Adjusted EBITDA Margin

Consolidated Adjusted EBITDA was $126.3 million in the three months ended June 30, 2017 compared to $116.5 million in the 2016 period, an increase of $9.8 million , or 8% . Consolidated Adjusted EBITDA was $245.7 million in the six months ended June 30, 2017 compared to $226.6 million in the 2016 period, an increase of $19.1 million , or 8% . The changes in Adjusted EBITDA are discussed further at the segment level below.

Consolidated Adjusted EBITDA Margin was 47.9% in the three months ended June 30, 2017 compared to 45.2% in the 2016 period, an increase of 270 basis points. Consolidated Adjusted EBITDA Margin was 47.0% in the six months ended June 30, 2017 compared to 45.2% in the 2016 period, an increase of 180 basis points. The changes in Adjusted EBITDA Margin are discussed further at the segment level below.

The following tables set forth Adjusted EBITDA (in millions) and Adjusted EBITDA Margin by segment for the periods presented:



	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Technology	$	129.5		$	122.9		$	256.4		$	238.3
Data and Analytics	9.9			6.8			15.3			13.6
Corporate and Other	(13.1		)	(13.2		)	(26.0		)	(25.3		)
Total	$	126.3		$	116.5		$	245.7		$	226.6



	Three months ended June 30,				Six months ended June 30,
	2017		2016		2017		2016
Technology	58.7	%	57.6	%	58.1	%	57.3	%
Data and Analytics	23.1	%	15.3	%	18.7	%	15.8	%
Corporate and Other	N/A		N/A		N/A		N/A
Total	47.9	%	45.2	%	47.0	%	45.2	%

Technology

Adjusted EBITDA was $129.5 million in the three months ended June 30, 2017 compared to $122.9 million in the 2016 period, an increase of $6.6 million , or 5% , with an Adjusted EBITDA Margin of 58.7% , an increase of 110 basis points from the 2016 period. The increase was primarily driven by incremental margins on revenue growth.

Adjusted EBITDA was $256.4 million in the six months ended June 30, 2017 compared to $238.3 million in the 2016 period, an increase of $18.1 million , or 8% , with an Adjusted EBITDA Margin of 58.1% , an increase of 80 basis points from the 2016 period. The increase was primarily driven by incremental margins on revenue growth.

Table of Contents

Data and Analytics

Adjusted EBITDA was $9.9 million in the three months ended June 30, 2017 compared to $6.8 million in the 2016 period, an increase of $3.1 million , or 46% , with an Adjusted EBITDA Margin of 23.1% , compared to 15.3% in the prior year period, an increase of 780 basis points from the 2016 period. The Adjusted EBITDA Margin increase was primarily due to the effect of incremental revenue growth and the Property Insight realignment, partially offset by costs associated with Motivity and the data hub.

Adjusted EBITDA was $15.3 million in the six months ended June 30, 2017 compared to $13.6 million in the 2016 period, an increase of $1.7 million , or 13% , with an Adjusted EBITDA Margin of 18.7% , compared to 15.8% in the 2016 period, an increase of 290 basis points from the 2016 period. The Adjusted EBITDA Margin increase was primarily due to the effect of incremental revenue growth and the Property Insight realignment, partially offset by costs associated with Motivity and the data hub.

Liquidity and Capital Resources

Cash Requirements

Our primary sources of liquidity are our existing cash balances, cash flows from operations and borrowings on our Revolving Credit Facility.

Our primary cash requirements include operating expenses, debt service payments (principal and interest), capital expenditures (including property, equipment and computer software expenditures) and income tax payments and may include share repurchases, business acquisitions and/or dividends. Our cash requirements may also include tax distributions to holders of membership units of BKFS LLC units, the timing and amount of which will be dependent upon the taxable income allocable to such holders. BKFS LLC made tax distributions of $38.3 million during the six months ended June 30, 2017 for the 2016 tax year. Tax distributions are also expected to be made during 2017 for the 2017 tax year relating to the period before the planned distribution of FNF's ownership interest.

As of June 30, 2017 , we had cash and cash equivalents of $99.3 million and debt of $1,572.0 million , excluding debt issuance costs and original issue discount. We believe our cash flow from operations and available cash and cash equivalents are sufficient to meet our liquidity needs, including the repayment of our outstanding debt, for at least the next 12 months. We anticipate that to the extent that we require additional liquidity, it will be funded through borrowings on our revolving credit facility, the incurrence of other indebtedness, equity issuance or a combination thereof. We cannot be assured that we will be able to obtain this additional liquidity on reasonable terms, or at all. The loss of the largest lender on our revolving credit facility would reduce our borrowing capacity by $41.3 million . Additionally, our liquidity and our ability to meet our obligations and fund our capital requirements are also dependent on our future financial performance, which is subject to general economic, financial and other factors that are beyond our control. Accordingly, we cannot be assured that our business will generate sufficient cash flow from operations or that future borrowings will be available from additional indebtedness or otherwise to meet our liquidity needs. Although we have no specific current plans to do so, if we decide to pursue one or more significant acquisitions, we may incur additional debt or sell additional equity to finance such acquisitions.

Cash Flows

The following table provides a summary of cash flows from operating, investing and financing activities for the periods presented (in millions):



	Six months ended June 30,
	2017			2016
Cash flows provided by operating activities	$	123.4		$	122.4
Cash flows used in investing activities	(30.5		)	(189.7		)
Cash flows used in financing activities	(127.5		)	(90.5		)
Net decrease in cash and cash equivalents	$	(34.6	)	$	(157.8	)

Operating Activities

Cash provided by operating activities was $123.4 million and $122.4 million for the six months ended June 30, 2017 and 2016 , respectively. The increase in cash provided by operating activities in the six months ended June 30, 2017 compared to the 2016 period is primarily related to increased earnings excluding the increase in non-cash expenses from the loss on extinguishment of debt, depreciation and amortization and equity-based compensation, partially offset by an increase in working capital.

Table of Contents

Investing Activities

Cash used in investing activities was $30.5 million and $189.7 million for the six months ended June 30, 2017 and 2016 , respectively. The decrease in cash used in investing activities in the six months ended June 30, 2017 as compared to the 2016 period is related to the eLynx and Motivity acquisitions in 2016 and lower capital expenditures in 2017.

Financing Activities

Cash used in financing activities was $127.5 million and $90.5 million for the six months ended June 30, 2017 and 2016 , respectively. The 2017 period includes cash outflows related to the Senior Notes redemption and related redemption fee of $408.8 million , purchases of treasury stock of $46.6 million , tax distributions to BKFS LLC members of $38.3 million , debt service payments of $12.0 million , capital lease payments of $9.0 million , debt issuance costs of $8.5 million and tax withholding payments for restricted share vesting of $4.3 million , partially offset by cash inflows of $400.0 million in borrowings. In the 2016 period, we had cash outflows of $97.0 million in debt service payments and tax distributions to BKFS LLC members of $48.5 million , partially offset by cash inflows of $55.0 million in borrowings.

Financing

For a description of our financing arrangements, see Note 4 — Long-Term Debt in the Notes to Condensed Consolidated Financial Statements (Unaudited) included in Item 1 of Part 1 of this Report, which is incorporated by reference into this Part I Item 2.

Contractual Obligations

Our long-term contractual obligations generally include our debt and related interest payments, data processing and maintenance commitments, purchase commitments, operating lease payments and capital lease payments on certain computer equipment. Other than the items included below, there were no significant changes to contractual obligations from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2016 .

In January 2017, we entered into a one-year capital lease agreement with a bargain purchase option for certain computer equipment as described in Note 1 — Basis of Presentation in the Notes to Condensed Consolidated Financial Statements (Unaudited). In February 2017, we repriced our Term B Loan as described in Note 4 — Long-Term Debt in the Notes to Condensed Consolidated Financial Statements (Unaudited).

On April 26, 2017, we refinanced our Term A Loan and Revolving Credit Facility and redeemed the outstanding Senior Notes.

As of June 30, 2017 , required annual payments relating to our long-term debt and related interest were as follows (in millions):



			Payments due by period
	Total		2017		2018-2019		2020-2021		Thereafter
Long-term debt	$	1,572.0	$	27.8	$	136.8	$	239.7	$	1,167.7
Interest on long-term debt (1)	219.0		25.4		96.9		87.1		9.6
Total	$	1,791.0	$	53.2	$	233.7	$	326.8	$	1,177.3

_______________


(1)	These calculations include the effect of our interest rate swaps and assume that (a) applicable margins remain constant; (b) the Term A Loan, Term B Loan and Revolving Credit Facility variable rate debt is priced at the one-month LIBOR rate in effect as of June 30, 2017 ; (c) only mandatory debt repayments are made; and (d) no refinancing occurs at debt maturity.

Share Repurchase Program

During the three months ended June 30, 2017 , we repurchased approximately 1.2 million shares of our Class A common stock for $46.6 million , or an average of $39.18 per share. At the end of the second quarter, we had approximately 8.8 million shares remaining under our share repurchase program.

Table of Contents

Indemnifications and Warranties

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements other than operating leases and interest rate swaps.

Critical Accounting Policies

There have been no material changes to our critical accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2016 .

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Market Risk

We regularly assess market risks and have established policies and business practices designed to protect against the adverse effects of these exposures. We are exposed to market risks primarily from changes in interest rates. We use interest rate swaps to manage interest rate risk. We do not use interest rate swaps for trading purposes, to generate income or to engage in speculative activity.

Interest Rate Risk

In addition to existing cash balances and cash provided by operating activities, we use fixed rate and variable rate debt to finance our operations. We are exposed to interest rate risk on these debt obligations and related interest rate swaps. We had $1,572.0 million in long-term debt principal outstanding as of June 30, 2017 . The Senior Notes were redeemed on April 26, 2017 and represented all of our fixed-rate long-term debt obligations.

The credit facilities as described in Note 4 to the Condensed Consolidated Financial Statements (Unaudited) represent our variable rate long-term debt obligations as of June 30, 2017 . The principal outstanding related to these facilities was $1,572.0 million as of June 30, 2017 . We performed a sensitivity analysis on the principal amount of our long-term debt subject to variable interest rates as of June 30, 2017 . This sensitivity analysis is based solely on the principal amount of such debt as of June 30, 2017 , and does not take into account any changes that occurred in the prior 12 months or that may take place in the next 12 months in the amount of our outstanding debt or in the notional amount of outstanding interest rate swaps. Further, in this sensitivity analysis, the change in interest rates is assumed to be applicable for an entire year. An increase of 100 basis points in the applicable interest rate would cause an increase in interest expense of $15.7 million on an annual basis ( $9.7 million including the effect of our current interest rate swaps). A decrease of 100 basis points in the applicable rate would cause a decrease in interest expense of $13.8 million on an annual basis ( $7.8 million including the effect of our current interest rate swaps) as the LIBOR rate was 1.25% as of June 30, 2017 .

On March 7, 2017, we entered into an interest rate swap agreement to hedge forecasted monthly interest rate payments on $200.0 million of our floating rate debt (the "March 2017 Swap Agreement"). Under the terms of the March 2017 Swap Agreement, we receive payments based on the 1-month LIBOR rate and pay a fixed rate of 2.08% . The effective term for the March 2017 Swap Agreement is March 31, 2017 through March 31, 2022.

On January 20, 2016, we entered into two interest rate swap agreements to hedge forecasted monthly interest rate payments on $400.0 million of our floating rate debt ( $200.0 million notional value each) (the "January 2016 Swap Agreements", and together with the March 2017 Swap Agreement, the "Swap Agreements"). Under the terms of the January 2016 Swap Agreements, we receive payments based on the 1-month LIBOR rate and pay a weighted average fixed rate of 1.01% . The effective term for the January 2016 Swap Agreements is February 1, 2016 through January 31, 2019.

The Swap Agreements were designated as cash flow hedging instruments. A portion of the amount included in Accumulated other comprehensive earnings (loss) is reclassified into Interest expense as a yield adjustment as interest payments are made on the hedged debt. In accordance with the authoritative guidance for fair value measurements, the inputs used to determine the estimated fair value of our interest rate swaps are level 2 inputs. We have considered our own credit risk and the credit risk of the counterparties when determining the fair value of our Swap Agreements.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of June 30, 2017 , under the supervision and with the participation of our Chief Executive Officer ("CEO") and Executive Vice President and Chief Financial Officer ("CFO"), management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.

Based on that evaluation, our CEO and CFO concluded that as of June 30, 2017 , our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit with the SEC are recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

Part II: OTHER INFORMATION

Item 1. Legal Proceedings

See discussion of legal proceedings in Note 6 — Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements (Unaudited) included in Item 1of Part I of this Quarterly Report on Form 10-Q, which is incorporated by reference into this Item 1 of Part II.

Item 1A. Risk Factors

There have been no material changes in our risk factors since the filing of our Annual Report on Form 10-K for the year ended December 31, 2016 .

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes share repurchases during the three months ended June 30, 2017 :



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program (1)	Maximum Number of Shares That May Yet Be Purchased Under the Program (2)
4/1/2017 - 4/30/2017	—	$	—	—	10,000,000
5/1/2017 - 5/31/2017	416,462	39.00		416,462	9,583,538
6/1/2017 - 6/30/2017	773,659	39.28		773,659	8,809,879
Total	1,190,121	$	39.18	1,190,121

_______________________________________________________


(1)	On January 31, 2017, our Board of Directors authorized a three-year share repurchase program, effective February 3, 2017, under which the Company may repurchase up to 10 million shares of its Class A common stock through February 2, 2020.


(2)	As of the last day of the applicable month.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits



2.1		Agreement and Plan of Merger, dated as of June 8, 2017, by and among New BKH Corp., Black Knight Financial Services, Inc., Black Knight Holdco Corp., New BKH Merger Sub, Inc., BKFS Merger Sub, Inc. and Fidelity National Financial, Inc. (incorporated by reference to Exhibit 2.1 to the Form 8-K filed by Black Knight Financial Services, Inc. on June 9, 2017 (No. 001-37394))

10.1		Interest Exchange Agreement, dated as of June 8, 2017, by and among Black Knight Financial Services, Inc., Black Knight Holdco Corp., THL Equity Fund VI Investors (BKFS-LM), LLC and THL Equity Fund VI Investors (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by Black Knight Financial Services, Inc. on June 9, 2017 (No. 001-37394))

10.2		Amended and Restated Employment Agreement by and between Joseph M. Nackashi and BKFS I Management, Inc. effective July 17, 2017

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by Chief Executive Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

32.2		Certification by Chief Financial Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

101		Interactive data files.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Date:	July 28, 2017	BLACK KNIGHT FINANCIAL SERVICES, INC. (registrant)
		By:	/s/ Kirk T. Larsen
			Kirk T. Larsen
			Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT INDEX



Exhibit
No.		Description
2.1		Agreement and Plan of Merger, dated as of June 8, 2017, by and among New BKH Corp., Black Knight Financial Services, Inc., Black Knight Holdco Corp., New BKH Merger Sub, Inc., BKFS Merger Sub, Inc. and Fidelity National Financial, Inc. (incorporated by reference to Exhibit 2.1 to the Form 8-K filed by Black Knight Financial Services, Inc. on June 9, 2017 (No. 001-37394))

10.1		Interest Exchange Agreement, dated as of June 8, 2017, by and among Black Knight Financial Services, Inc., Black Knight Holdco Corp., THL Equity Fund VI Investors (BKFS-LM), LLC and THL Equity Fund VI Investors (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by Black Knight Financial Services, Inc. on June 9, 2017 (No. 001-37394))

10.2		Amended and Restated Employment Agreement by and between Joseph M. Nackashi and BKFS I Management, Inc. effective July 17, 2017

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by Chief Executive Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

32.2		Certification by Chief Financial Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

101		Interactive data files.

Exhibit 10.2

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is effective as of July 17, 2017 (the "Effective Date"), by and between BKFS I MANAGEMENT, INC., a Delaware corporation (the "Company"), and Joseph M. Nackashi (the "Employee"). In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows:

1. Purpose and Release . The purpose of this Agreement is to recognize Employee's significant contributions to the overall financial performance and success of the Company and its affiliates, to protect the Company's and its affiliates’ business interests through the addition of restrictive covenants, and to provide a single, integrated document which shall provide the basis for Employee's continued employment by the Company. Employee and the Company are currently parties to that certain Employment Agreement between the Employee and the Company, dated as of January 3, 2014 (“Prior Agreement”). The parties hereto desire to enter into this Agreement, which will be effective as of the Effective Date, upon such effectiveness, will amend, restate and supersede the Prior Agreement. In consideration of the execution of this Agreement and the amendment and restatement of the Prior Agreement, the Employee releases all rights and claims that he has, had or may have arising under such Prior Agreement.

2. Employment and Duties . Subject to the terms and conditions of this Agreement, as of the Effective Date, the Company employs Employee as President, Black Knight Financial Services, Inc., or in such other capacity as may be mutually agreed upon by the parties. Employee accepts such employment and agrees to undertake and discharge the duties, functions and responsibilities commensurate with the aforesaid position and such other duties and responsibilities as may be prescribed from time to time by the Company or its affiliates. Employee shall be required to comply with the Company’s and its affiliates employee policies applicable to him or her and Company employees generally as from time to time enacted. During the Employment Term, Employee shall devote substantially all business time, attention and effort to the performance of duties hereunder and shall not engage in any business, profession or occupation, for compensation or otherwise without the express written consent of the Company, other than personal, personal investment, charitable, or civic activities or other matters that do not conflict with Employee's duties.

3. Term . The term of this Agreement shall commence on the Effective Date and shall continue for a period of three (3) years ending on the third anniversary of the Effective Date or, if later, ending on the last day of any extension made pursuant to the next sentence, subject to prior termination as set forth in Section 8 (such term, including any extensions pursuant to the next sentence, the "Employment Term"). The Employment Term shall be extended automatically for one (1) additional year on the second anniversary of the Effective Date and for an additional year each anniversary thereafter unless and until either party gives written notice to the other not to extend the Employment Term before such extension would be effectuated.

4. Salary . During the Employment Term, the Company shall pay Employee an annual base salary, before deducting all applicable withholdings, of $600,000 per year, payable at the time

and in the manner dictated by the Company's standard payroll policies. Such minimum annual base salary may be periodically reviewed and increased (but not decreased without Employee's express written consent except in the case of a salary decrease for all executive officers of the Company) at the discretion of the Company (such annual base salary, including any increases, the "Annual Base Salary").

5. Other Compensation and Benefits . During the Employment Term:


(a)	Benefits . Employee shall be eligible to receive standard medical and other insurance coverage (for Employee and any covered dependents) provided by the Company or an affiliate to employees generally; and

(b)

Annual Bonus Opportunity . Employee shall be eligible to receive an annual incentive bonus opportunity under the Black Knight Financial Services, Inc. incentive plan for each calendar year included in the Employment Term during which Employee is an employee of the Company, with such opportunity to be earned based upon attainment of performance objectives established by the Company, Black Knight Financial Services, Inc. or the Compensation Committee of Black Knight Financial Services, Inc. ("Annual Bonus"). Employee's target Annual Bonus shall is 100% of Employee’s Annual Base Salary and maximum Annual Bonus is 200% of Employee’s Annual Base Salary. Employee’s Annual Bonus is subject to the clawback policy of Black Knight Financial Services, Inc., pursuant to which Black Knight Financial Services Inc. may recoup all or a portion of any bonus paid if, after payment, there is a finding of fraud, a restatement of financial results, or errors or omissions that negatively affects or calls into question the business results on which the bonus was based. If owed pursuant to the terms of the plan, the Annual Bonus shall be paid no later than the March 15 ^th first following the calendar year to which the Annual Bonus relates. Except as otherwise provided herein or if the Company, Black Knight Financial Services Inc. or the Compensation Committee of Black Knight Financial Services Inc. determines otherwise, no Annual Bonus shall be paid to Employee unless Employee is employed by the Company on the last day of the measurement period.

6. Vacation . For and during each calendar year within the Employment Term, Employee shall be entitled to paid vacation plus recognized Company holidays in accordance with the Company’s vacation policy.

7. Expense Reimbursement . In addition to the compensation and benefits provided herein, the Company shall, upon receipt of appropriate documentation, reimburse Employee each month for reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses incurred during the Employment Term to the extent such reimbursement is permitted under the Company's expense reimbursement policy. Subject to Section 26(b) hereof, the Company shall be entitled to deduct from Employee’s salary or other payments due to Employee any money the Employee owes to the Company, including any expenses wrongfully reimbursed as business expenses in an amount equal to the total value of such expenses.

8. Termination of Employment . During the period of Employee’s employment with the Company, the Company or Employee may terminate Employee's employment at any time and for any reason in accordance with Subsection (a) below. The Employment Term shall be deemed to have ended on the last day of Employee's employment. The Employment Term shall terminate automatically upon Employee's death.

(a)

Notice of Termination . Any purported termination of Employee's employment (other than by reason of death) shall be communicated by written Notice of Termination (as defined herein) from one party to the other in accordance with the notice provisions contained in this Agreement. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that indicates the "Date of Termination" and, with respect to a termination due to "Cause", "Disability" or "Good Reason", sets forth in reasonable detail the facts and circumstances that are alleged to provide a basis for such termination. A Notice of Termination from the Company shall specify whether the termination is with or without Cause or due to Employee's Disability. A Notice of Termination from Employee shall specify whether the termination is with or without Good Reason.

(b)

Date of Termination . For purposes of this Agreement, "Date of Termination" shall mean the date specified in the Notice of Termination (but in no event shall such date be earlier than the fourteenth (14 ^th ) day following the date the Notice of Termination is given) or the date of Employee's death. If the Company disagrees with an Employee’s designated Date of Termination, the Company shall have the right to set an alternative earlier final Date of Termination, which, in and of itself, shall not change the characterization of the termination (e.g., from an Employee Termination Without Good Reason to a Company Termination Without Cause).


(c)	No Waiver . The failure to set forth any fact or circumstance in a Notice of Termination, which fact or circumstance was not known to the party giving the Notice of Termination when the notice was given, shall not constitute a waiver of the right to assert such fact or circumstance in an attempt to enforce any right under or provision of this Agreement.

(d)

Cause . For purposes of this Agreement, a termination for "Cause" means a termination by the Company based upon Employee's: (i) persistent failure to perform duties consistent with a commercially reasonable standard of care (other than due to a physical or mental impairment or due to an action or inaction directed by the Company that would otherwise constitute Good Reason); (ii) willful neglect of duties (other than due to a physical or mental impairment or due to an action or inaction directed by the Company that would otherwise constitute Good Reason); (iii) conviction of, or pleading nolo contendere to, criminal or other illegal activities involving dishonesty or moral turpitude; (iv) material breach of this Agreement; (v) material breach of the Company's, Black Knight Financial Services Inc.’s business policies, accounting practices or standards of ethics; (vi) material breach of any applicable non-competition, non-solicitation, trade secrets, confidentiality or similar

restrictive covenant, or (vii) failure to materially cooperate with or impeding an investigation authorized by the Board of Directors of Black Knight Financial Services Inc.


(e)	Disability . For purposes of this Agreement, a termination based upon "Disability" means a termination by the Company based upon Employee's entitlement to long-term disability benefits under the Company's long-term disability plan or policy, as the case may be, as in effect on the Date of Termination.


(f)	Good Reason . For purposes of this Agreement, a termination for "Good Reason" means a termination by Employee based upon the occurrence (without Employee's express written consent) of any of the following:


(i)	The Company causes a material change in the geographic location of Employee's principal working location, which the Company has determined to be a relocation of more than thirty-five (35) miles;


(ii)	The Company causes a material diminution in Employee's title, Annual Base Salary or Annual Bonus cap; or


(iii)	The Company materially breaches any of its obligations under this Agreement.

Notwithstanding the foregoing, Employee being placed on a paid leave for up to sixty (60) days pending a determination of whether there is a basis to terminate Employee for Cause shall not constitute Good Reason. Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder; provided, however, that no such event described above shall constitute Good Reason unless: (1) Employee gives Notice of Termination to the Company specifying the condition or event relied upon for such termination within ninety (90) days of the initial existence of such event and (2) the Company fails to cure the condition or event constituting Good Reason within thirty (30) days following receipt of Employee's Notice of Termination.

9. Obligations of the Company upon Termination .


(a)	Termination by the Company for a Reason Other than Cause, Death or Disability and Termination by Employee for Good Reason . If Employee's employment is terminated during the Employment Term by: (1) the Company for any reason other than Cause, Death or Disability; or (2) Employee for Good Reason:


(i)	The Company shall pay Employee the following (collectively, the "Accrued Obligations"): (A) within five (5) business days after the Date of Termination, any earned but unpaid Annual Base Salary; (B) within a reasonable time following submission of all applicable documentation, any expense

reimbursement payments owed to Employee for expenses incurred prior to the Date of Termination; and (C) no later than March 15th of the year in which the Date of Termination occurs, any earned but unpaid Annual Bonus payments relating to the prior calendar year;

(ii)

The Company shall pay Employee no later than March 15 ^th of the calendar year following the year in which the Date of Termination occurs, a prorated Annual Bonus based upon the actual Annual Bonus that would have been earned by Employee for the year in which the Date of Termination occurs, ignoring any requirement under the incentive plan that Employee must be employed on the payment date (using Employee's Annual Bonus Opportunity for the prior year if no Annual Bonus Opportunity has been approved for the year in which the Date of Termination occurs), multiplied by the percentage of the calendar year completed before the Date of Termination; and

(iii)

Subject to Section 26(b) hereof, the Company shall pay Employee as soon as practicable, but not later than the sixty-fifth (65th) day after the Date of Termination, a lump-sum payment equal to 200% of the sum of Employee's (A) Annual Base Salary in effect immediately prior to the Date of Termination (disregarding any reduction in Annual Base Salary to which Employee did not expressly consent in writing), and (B) target Annual Bonus in the year in which the Date of Termination occurs.


(b)	Termination by the Company for Cause and by Employee without Good Reason . If Employee's employment is terminated during the Employment Term by the Company for Cause or by Employee without Good Reason, the Company's only obligation under this Agreement shall be payment of any Accrued Obligations.

(c)

Termination due to Death or Disability . If Employee’s employment is terminated during the Employment Term due to death or Disability, the Company shall pay Employee (or to Employee’s estate or personal representative in the case of death), as soon as practicable, but not later than the sixty-fifth (65 ^th ) day after the Date of Termination: (i) any Accrued Obligations; plus (ii) the amount of Employee’s accrued Annual Bonus as contained on the internal books of the Company for the month in which the Date of Termination occurs. Additionally, subject to Section 27(b) hereof, all stock option, restricted stock, profits interest and other equity-based incentive awards granted by the Company that were outstanding but not vested as of the Date of Termination shall become immediately vested and/or payable.

10. Non-Delegation of Employee's Rights . The obligations, rights and benefits of Employee hereunder are personal and may not be delegated, assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer.

11. Confidential Information . Employee will occupy a position of trust and confidence and will have access to and learn substantial information about the Company and its affiliates and

their respective operations that is confidential or not generally known in the industry including, without limitation, information that relates to purchasing, sales, customers, marketing, and the financial positions and financing arrangements of the Company and its affiliates. Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company and/or its affiliates, as the case may be. Employee will keep confidential and, outside the scope of Employee's duties and responsibilities with the Company and its affiliates, will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company's or its affiliates' methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence or records, or any other documents used or owned by the Company or any of its affiliates, nor will Employee advise, discuss with or in any way assist any other person, firm or entity in obtaining or learning about any of the items described in this section. Accordingly, during the Employment Term and at all times thereafter Employee will not disclose, or permit or encourage anyone else to disclose, any such information, nor will Employee utilize any such information, either alone or with others, outside the scope of Employee's duties and responsibilities with the Company and its affiliates. Nothing in this Agreement prohibits Employee from reporting possible violations of law to any government agency or entity or making other disclosures that are protected under the law. Employee acknowledges that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret if: (1) The disclosure is made in confidence to a government official or an attorney and the purpose of the disclosure is for reporting or investigating a suspected violation of law; or (2) The disclosure is made in a complaint or document filed in a lawsuit or other legal proceeding if the filing is made under seal. Further, an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose a trade secret to an attorney and use the trade secret in a court proceeding if the document containing the trade secret is filed under seal and is not disclosed except pursuant to a court order.


12.	Non-Competition .

(a)

During Employment Term . During the Employment Term Employee will devote such business time, attention and energies reasonably necessary to the diligent and faithful performance of the services to the Company and its affiliates, and will not engage in any way whatsoever, directly or indirectly, in any business that is a direct competitor with the Company's or its affiliates' principal business, nor solicit customers, suppliers or employees of the Company or its affiliates on behalf of, or in any other manner work for or assist any business which is a direct competitor with the Company's or its affiliates' principal business. In addition, during the Employment Term, Employee will undertake no planning for or organization of any business activity competitive with the work performed as an employee of the Company, and Employee will not combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity.


(b)	After Employment Term . The parties acknowledge that Employee will acquire substantial knowledge and information concerning the business of the Company and its affiliates as a result of employment. The parties further acknowledge that the

scope of business in which the Company and its affiliates are engaged is national and very competitive and one in which few companies can successfully compete. Competition by Employee in that business after the Employment Term would severely injure the Company and its affiliates. Accordingly, for a period of one (1) year after Employee's employment terminates for any reason whatsoever with the Company, Employee agrees: (1) not to engage in any way whatsoever, directly or indirectly, including, as an employee, consultant, advisor, principal, partner or substantial shareholder with any firm or business that directly competes with the Company or its affiliates in their principal products or markets, including, but not limited to, any firm or business that provides loan origination or loan servicing software or systems; and (2), on behalf of any such competitive firm or business, not to solicit any person or business that was at the time of such termination and remains a customer or prospective customer, a supplier or prospective supplier, or an employee of the Company or its affiliates.

(c)

Notice to Prospective Employers . Employee agrees that, with respect to each prospective employer with which Employee applies or interviews for employment during the term of Employee’s employment with the Company and within one year after the termination of the Employee’s employment with the Company, Employee will inform the prospective employer of the existence of this Agreement and will provide the prospective employer with a copy of this Agreement.

13. Return of Company Documents . Upon termination of the Employment Term, Employee shall immediately return to the Company or in the case of electronic records, delete under the Company’s supervision, all records and documents of or pertaining to the Company or its affiliates and shall not make or retain any copy or extract of any such record or document, or any other property of the Company or its affiliates.

14. Improvements and Inventions . Any and all improvements or inventions that Employee may make or participate in during the Employment Term, unless wholly unrelated to the business of the Company and its affiliates and not produced within the scope of Employee's employment hereunder, shall be the sole and exclusive property of the Company. Employee shall, whenever requested by the Company, execute and deliver any and all documents that the Company deems appropriate in order to apply for and obtain patents or copyrights in improvements or inventions or in order to assign and/or convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents, copyrights or applications.

15. Actions and Survival . The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by Employee to abide by its terms and conditions, nor will money damages adequately compensate for such injury. Therefore, in the event of a breach of this Agreement by Employee, the Company shall have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from a court of competent jurisdiction to restrain or compel Employee to perform as agreed herein without posting any bond. Notwithstanding any termination of this Agreement or Employee's employment, Section

9 shall remain in effect until all obligations and benefits resulting from a termination of Employee’s employment during the Employment Term are satisfied. In addition, Sections 10 through 26 shall survive the termination of this Agreement or Employee’s employment and shall remain in effect for the periods specified therein or, if no period is specified, until all obligations thereunder have been satisfied. Nothing in this Agreement shall in any way limit or exclude any other right granted by law or equity to the Company.

16. Release . Notwithstanding any provision herein to the contrary, the Company may require that, prior to payment, distribution or other benefit under this Agreement (other than due to Employee's death), Employee shall have executed a complete release of the Company and its affiliates and related parties in such form as is reasonably required by the Company, any waiting periods contained in such release shall have expired. With respect to any release required to receive payments, distributions or other benefits owed pursuant to this Agreement, the Company must provide Employee with the form of release no later than seven (7) days after the Date of Termination and the release must be signed by Employee and returned to the Company, unchanged, effective and irrevocable, no later than sixty (60) days after the Date of Termination.

17. No Mitigation . The Company agrees that, if Employee's employment hereunder is terminated during the Employment Term, Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to Employee by the Company hereunder. Further, the amount of any payment or benefit provided for hereunder shall not be reduced by any compensation earned by Employee as the result of employment by another employer, by retirement benefits or otherwise.

18. Entire Agreement and Amendment . This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter of this Agreement, and supersedes and replaces all prior agreements, understandings and commitments with respect to such subject matter. This Agreement may be amended only by a written document signed by all parties to this Agreement.

19. Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Florida, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. Any litigation pertaining to this Agreement shall be adjudicated in courts located in Duval County, Florida.

20. Successors . This Agreement may not be assigned by Employee. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the stock, business and/or assets of the Company, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption by a successor shall be a material breach of this Agreement. Employee agrees and consents to any such assumption by a successor of the Company, as well as any assignment of this Agreement by the Company for that purpose. As used in this Agreement, the "Company" shall mean the Company as herein before defined as well as any such successor that expressly assumes

this Agreement or otherwise becomes bound by all of its terms and provisions by operation of law. This Agreement shall be binding upon and inure to the benefit of the parties and their permitted successors or assigns.

21. Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

22. Attorneys' Fees . If any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to interpret or enforce any of the terms hereof, the party prevailing in any such action or other proceeding shall be promptly paid by the other party its reasonable legal fees, court costs and litigation expenses, all as determined by the court and not a jury, and such payment shall be made by the non-prevailing party within sixty (60) days of the date the right to the payment amount is so determined; provided, however, that following Employee’s termination of employment with the Company, if any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to interpret or enforce any of the terms hereof, the Company shall pay (on an ongoing basis) to Employee to the fullest extent permitted by law, all legal fees, court costs and litigation expenses reasonably incurred by Employee or others on Employee’s behalf (such amounts collectively referred to as the "Reimbursed Amounts"); provided, further, that Employee shall reimburse the Company for the Reimbursed Amounts if it is determined that a majority of Employee's claims or defenses were frivolous or without merit. Requests for payment of Reimbursed Amounts, together with all documents required by the Company to substantiate them, must be submitted to the Company no later than ninety (90) days after the expense was incurred. The Reimbursed Amounts shall be paid by the Company within ninety (90) days after receiving the request and all substantiating documents requested from Employee. The rights under this section shall survive the termination of employment and this Agreement until the expiration of the applicable statute of limitations.

23. Severability . If any section, subsection or provision hereof is found for any reason whatsoever to be invalid or inoperative, that section, subsection or provision shall be deemed severable and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement.

24. Notices . Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States Certified Mail, postage prepaid, with Return Receipt Requested, to the parties at their respective addresses set forth below:

To the Company:

BKFS I Management, Inc.

601 Riverside Avenue

Jacksonville, FL 32204

Attention: General Counsel

To Employee:

The address last provided to the Company as recorded in the Company’s Human Resource system.

25. Waiver of Breach . The waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party.

26. Tax .


(a)	Withholding . The Company or an affiliate thereof may deduct from all compensation and benefits payable under this Agreement any taxes or withholdings the Company is required to deduct pursuant to state, federal or local laws.

(b)

Section 409A . This Agreement and any payment, distribution or other benefit hereunder shall comply with the requirements of Section 409A of the Code, as well as any related regulations or other guidance promulgated by the U.S. Department of the Treasury or the Internal Revenue Service ("Section 409A"), to the extent applicable. To the extent Employee is a "specified employee" under Section 409A, no payment, distribution or other benefit described in this Agreement constituting a distribution of deferred compensation (within the meaning of Treasury Regulation Section 1.409A-1(b)) to be paid during the six-month period following a separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)) will be made during such six-month period. Instead, any such deferred compensation shall be paid on the first business day following the six-month anniversary of the separation from service. In no event may Employee, directly or indirectly, designate the calendar year of a payment. To the extent the payment of any amount pursuant to Section 9 of this Agreement constitutes deferred compensation (within the meaning of Treasury Regulation Section 1.409A-1(b)) and such amount is payable within a number of days (e.g., no later than the sixty-fifth (65th) day after the Date of Termination) that begins in one calendar year and ends in a subsequent calendar year, such amount shall be paid in the subsequent calendar year. Any provision that would cause this Agreement or a payment, distribution or other benefit hereunder to fail to satisfy the requirements of Section 409A shall have no force or effect and, to the extent an amendment would be effective for purposes of Section 409A, the parties agree that this Agreement shall be amended to comply with Section 409A. Such amendment shall be retroactive to the extent permitted by Section 409A. For purposes of this Agreement, Employee shall not be deemed to have terminated

employment unless and until a separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)) has occurred. All reimbursements and in-kind benefits provided under this Agreement that are subject to Section 409A shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (i) any reimbursement shall be for expenses incurred during the time period specified in this Agreement, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made not later than the last day of the Employee's taxable year following the taxable year in which such expense was incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

(c)

Excise Taxes . If any payments or benefits paid or provided or to be paid or provided to Employee or for Employee’s benefit pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, employment with the Company or its subsidiaries or the termination thereof (a "Payment" and, collectively, the "Payments") would be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then Employee may elect for such Payments to be reduced to one dollar less than the amount that would constitute a "parachute payment" under Section 280G of the Code (the "Scaled Back Amount"). Any such election must be in writing and delivered to the Company within thirty (30) days after the Date of Termination. If Employee does not elect to have Payments reduced to the Scaled Back Amount, Employee shall be responsible for payment of any Excise Tax resulting from the Payments and Employee shall not be entitled to a gross-up payment under this Agreement or any other for such Excise Tax. If the Payments are to be reduced, they shall be reduced in the following order of priority: (i) first from cash compensation, (ii) next from equity compensation, then (iii) pro-rated among all remaining payments and benefits. To the extent there is a question as to which Payments within any of the foregoing categories are to be reduced first, the Payments that will produce the greatest present value reduction in the Payments with the least reduction in economic value provided to Employee shall be reduced first.

IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of the date first set forth above.



	BKFS I MANAGEMENT, INC.
	By:	/s/ Thomas J. Sanzone
	Its:	Chief Executive Officer

	JOSEPH M. NACKASHI
	/s/ Joseph M. Nackashi

Exhibit 31.1

CERTIFICATIONS

I, Thomas J. Sanzone, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Black Knight Financial Services, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):


(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 28, 2017



By:		/s/ Thomas J. Sanzone
		Thomas J. Sanzone Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, Kirk T. Larsen, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Black Knight Financial Services, Inc.;


(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 28, 2017



By:		/s/ Kirk T. Larsen
		Kirk T. Larsen Executive Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATION OF PERIODIC FINANCIAL REPORTS PURSUANT TO 18 U.S.C. §1350

The undersigned hereby certifies that he is the duly appointed and acting Chief Executive Officer of Black Knight Financial Services, Inc., a Delaware corporation (the “Company”), and hereby further certifies as follows.


1.	The periodic report containing financial statements to which this certificate is an exhibit fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.


2.	The information contained in the periodic report to which this certificate is an exhibit fairly presents, in all material respects, the financial condition and results of operations of the Company.

In witness whereof, the undersigned has executed and delivered this certificate as of the date set forth opposite his signature below.

Date: July 28, 2017



By:	/s/ Thomas J. Sanzone
	Thomas J. Sanzone
	Chief Executive Officer

Exhibit 32.2

CERTIFICATION OF PERIODIC FINANCIAL REPORTS PURSUANT TO 18 U.S.C. §1350

The undersigned hereby certifies that he is the duly appointed and acting Executive Vice President and Chief Financial Officer of Black Knight Financial Services, Inc., a Delaware corporation (the “Company”), and hereby further certifies as follows.


1.	The periodic report containing financial statements to which this certificate is an exhibit fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.


2.	The information contained in the periodic report to which this certificate is an exhibit fairly presents, in all material respects, the financial condition and results of operations of the Company.

In witness whereof, the undersigned has executed and delivered this certificate as of the date set forth opposite his signature below.

Date: July 28, 2017



By:	/s/ Kirk T. Larsen
	Kirk T. Larsen
	Executive Vice President and Chief Financial Officer