Black Knight, Inc. (Form: 10-Q, Received: 05/05/2020 17:12:51)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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

For the quarterly period ended March 31, 2020



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

Commission File Number 001-37394

Black Knight, Inc.

______________________________________________________________________________________________________________________________________________________

(Exact name of registrant as specified in its charter)



Delaware					81-5265638
(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)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value	BKI	New York Stock Exchange

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes ☑ No ☐

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):



Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
						Emerging growth company	☐

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. ☐

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

Yes ☐ No ☑

There were 149,916,435 shares outstanding of the Registrant's common stock as of May 4, 2020.

FORM 10-Q

QUARTERLY REPORT

Quarter Ended March 31, 2020

TABLE OF CONTENTS




	Page
Part I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
A. Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2020 and December 31, 2019	1
B. Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) for the three months ended March 31, 2020 and 2019	2
C. Condensed Consolidated Statements of Equity (Unaudited) for the three months ended March 31, 2020 and 2019	3
D. Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2020 and 2019	4
E. Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosure About Market Risk	29
Item 4. Controls and Procedures	30
Part II: OTHER INFORMATION	31
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3. Defaults Upon Senior Securities	32
Item 4. Mine Safety Disclosures	32
Item 5. Other Information	32
Item 6. Exhibits	33

Table of Contents

Part I: FINANCIAL INFORMATION


Item 1.	Condensed Consolidated Financial Statements (Unaudited)

BLACK KNIGHT, INC.

Condensed Consolidated Balance Sheets

(In millions)

(Unaudited)



	March 31, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	66.5		$	15.4
Trade receivables, net	180.8			175.1
Prepaid expenses and other current assets	73.2			64.8
Receivables from related parties	0.4			0.2
Total current assets	320.9			255.5
Property and equipment, net	170.5			176.9
Computer software, net	430.3			406.0
Other intangible assets, net	154.9			150.0
Goodwill	2,386.9			2,361.4
Investments in unconsolidated affiliates	302.7			294.9
Deferred contract costs, net	163.2			159.3
Other non-current assets	151.4			158.8
Total assets	$	4,080.8		$	3,962.8
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable and other accrued liabilities	$	62.9		$	65.3
Accrued compensation and benefits	42.2			65.5
Current portion of debt	84.1			79.1
Deferred revenues	52.5			50.9
Total current liabilities	241.7			260.8
Deferred revenues	106.1			98.0
Deferred income taxes	181.0			185.3
Long-term debt, net of current portion	1,551.5			1,465.1
Other non-current liabilities	80.9			55.1
Total liabilities	2,161.2			2,064.3
Commitments and contingencies (Note 13 )
Equity:
Common stock; $0.0001 par value; 550,000,000 shares authorized; 152,958,427 shares issued and 149,941,484 shares outstanding as of March 31, 2020, and 153,062,920 shares issued and 149,697,754 shares outstanding as of December 31, 2019	—			—
Preferred stock; $0.0001 par value; 25,000,000 shares authorized; issued and outstanding, none as of March 31, 2020 and December 31, 2019	—			—
Additional paid-in capital	1,562.7			1,586.8
Retained earnings	540.0			490.6
Accumulated other comprehensive loss	(41.0		)	(20.2		)
Treasury stock, at cost, 3,016,943 shares as of March 31, 2020 and 3,365,166 shares as of December 31, 2019	(142.1		)	(158.7		)
Total equity	1,919.6			1,898.5
Total liabilities and equity	$	4,080.8		$	3,962.8

See Notes to Condensed Consolidated Financial Statements (Unaudited).

BLACK KNIGHT, INC.

Condensed Consolidated Statements of Earnings and Comprehensive Earnings

(In millions, except per share data)

(Unaudited)



	Three months ended March 31,
	2020			2019
Revenues	$	290.7		$	283.1
Expenses:
Operating expenses	162.4			160.0
Depreciation and amortization	57.7			56.9
Transition and integration costs	2.4			0.9
Total expenses	222.5			217.8
Operating income	68.2			65.3
Other income and expense:
Interest expense, net	(14.7		)	(15.0		)
Other expense, net	(0.8		)	(0.3		)
Total other expense, net	(15.5		)	(15.3		)
Earnings before income taxes and equity in earnings (losses) of unconsolidated affiliates	52.7			50.0
Income tax expense	8.2			10.7
Earnings before equity in earnings (losses) of unconsolidated affiliates	44.5			39.3
Equity in earnings (losses) of unconsolidated affiliates, net of tax	5.6			(13.3		)
Net earnings	$	50.1		$	26.0
Other comprehensive (loss) earnings:
Unrealized holding losses, net of tax⁽¹⁾	(21.6		)	(6.2		)
Reclassification adjustments for losses (gains) included in net earnings, net of tax⁽²⁾	1.2			(0.7		)
Total unrealized losses on interest rate swaps, net of tax	(20.4		)	(6.9		)
Foreign currency translation adjustment⁽³⁾	(0.2		)	—
Unrealized losses on investments in unconsolidated affiliates⁽⁴⁾	(0.2		)	(0.2		)
Other comprehensive losses	(20.8		)	(7.1		)
Comprehensive earnings	$	29.3		$	18.9

Net earnings per share:
Basic	$	0.34		$	0.18
Diluted	$	0.34		$	0.18
Weighted average shares of common stock outstanding (Note 4):
Basic	148.0			147.5
Diluted	148.7			148.2

______________________________


(1)	Net of income tax benefit of $7.3 million and $2.2 million for the three months ended March 31, 2020 and 2019, respectively.


(2)	Amounts reclassified to net earnings relate to losses (gains) on interest rate swaps and are included in Interest expense, net above. Amounts are net of income tax benefit of $0.4 million and income tax expense of $0.2 million for the three months ended March 31, 2020 and 2019, respectively.


(3)	Net of income tax benefit of $0.1 million for the three months ended March 31, 2020.

(4) Net of income tax benefit of $0.1 million for the three months ended March 31, 2020 and 2019.

See Notes to Condensed Consolidated Financial Statements (Unaudited).

BLACK KNIGHT, INC.

Condensed Consolidated Statements of Equity

(In millions)

(Unaudited)



	Three months ended March 31, 2020
	Common stock				Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Treasury stock
	Shares		$		Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Shares		$			Total equity
Balance, December 31, 2019	153.1		—		1,586.8			490.6			(20.2		)	3.4		(158.7		)	1,898.5
Effect of CECL adoption (Note 1)	—		—		—			(1.1		)	—			—		—			(1.1		)
Adjusted balance at January 1, 2020	153.1		—		1,586.8			489.5			(20.2		)	3.4		(158.7		)	1,897.4
Grant of restricted shares of common stock	—		—		(24.5		)	—			—			(0.5	)	24.5			—
Forfeitures of restricted shares of common stock	—		—		0.2			—			—			—		(0.2		)	—
Tax withholding payments for restricted share vesting	(0.1	)	—		(18.2		)	—			—			—		—			(18.2		)
Vesting of restricted shares granted from treasury stock	—		—		7.7			—			—			0.1		(7.7		)	—
Equity-based compensation expense	—		—		10.7			—			—			—		—			10.7
Net earnings	—		—		—			50.1			—			—		—			50.1
Equity-based compensation expense of unconsolidated affiliates	—		—		—			0.4			—			—		—			0.4
Foreign currency translation adjustment	—		—		—			—			(0.2		)	—		—			(0.2		)
Unrealized losses on interest rate swaps, net	—		—		—			—			(20.4		)	—		—			(20.4		)
Other comprehensive loss on investments in unconsolidated affiliates	—		—		—			—			(0.2		)	—		—			(0.2		)
Balance, March 31, 2020	153.0		$	—	$	1,562.7		$	540.0		$	(41.0	)	3.0		$	(142.1	)	$	1,919.6



	Three months ended March 31, 2019
	Common stock				Additional paid-in capital			Retained earnings			Accumulated other comprehensive earnings			Treasury stock
	Shares		$		Additional paid-in capital			Retained earnings			Accumulated other comprehensive earnings			Shares		$			Total equity
Balance December 31, 2018	153.2		$	—	$	1,585.8		$	381.1		$	0.3		3.9		$	(180.7	)	$	1,786.5
Effect of ASU 2018-02 adoption (Note 1)	—		—		—			(1.0		)	1.0			—		—			—
Adjusted balance at January 1, 2019	153.2		—		1,585.8			380.1			1.3			3.9		(180.7		)	1,786.5
Grant of restricted shares of common stock	—		—		(37.2		)	—			—			(0.8	)	37.2			—
Tax withholding payments for restricted share vesting	(0.1	)	—		(10.9		)	—			—			—		—			(10.9		)
Vesting of restricted shares granted from treasury stock	—		—		3.6			—			—			0.1		(3.6		)	—
Equity-based compensation expense	—		—		13.3			—			—			—		—			13.3
Net earnings	—		—		—			26.0			—			—		—			26.0
Unrealized losses on interest rate swaps, net	—		—		—			—			(6.9		)	—		—			(6.9		)
Other comprehensive loss on investments in unconsolidated affiliates	—		—		—			—			(0.2		)	—		—			(0.2		)
Balance, March 31, 2019	153.1		$	—	$	1,554.6		$	406.1		$	(5.8	)	3.2		$	(147.1	)	$	1,807.8

See Notes to Condensed Consolidated Financial Statements (Unaudited).

BLACK KNIGHT, INC.

Condensed Consolidated Statements of Cash Flows

(In millions)

(Unaudited)



	Three months ended March 31,
	2020			2019
Cash flows from operating activities:
Net earnings	$	50.1		$	26.0
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	57.7			56.9
Amortization of debt issuance costs and original issue discount	0.7			0.7
Deferred income taxes, net	1.1			3.0
Equity in (earnings) losses of unconsolidated affiliates, net of tax	(5.6		)	13.3
Equity-based compensation	10.7			13.3
Changes in assets and liabilities, net of acquired assets and liabilities:
Trade and other receivables, including receivables from related parties	(1.4		)	3.1
Prepaid expenses and other assets	(5.3		)	0.1
Deferred contract costs	(12.8		)	(8.0		)
Deferred revenues	(0.4		)	(1.0		)
Trade accounts payable and other liabilities	(34.3		)	(43.3		)
Net cash provided by operating activities	60.5			64.1
Cash flows from investing activities:
Additions to property and equipment	(3.5		)	(3.8		)
Additions to computer software	(18.2		)	(18.9		)
Business acquisition, net of cash acquired	(50.4		)	—
Investments in unconsolidated affiliate	—			(375.0		)
Asset acquisition	(15.0		)	—
Net cash used in investing activities	(87.1		)	(397.7		)
Cash flows from financing activities:
Revolver borrowings	246.6			542.4
Revolver payments	(140.6		)	(198.4		)
Term loan payments	(7.8		)	(7.8		)
Finance lease payments	(2.3		)	—
Tax withholding payments for restricted share vesting	(18.2		)	(10.9		)
Net cash provided by financing activities	77.7			325.3
Net increase (decrease) in cash and cash equivalents	51.1			(8.3		)
Cash and cash equivalents, beginning of period	15.4			20.3
Cash and cash equivalents, end of period	$	66.5		$	12.0

Supplemental cash flow information:
Interest paid, net	$	(13.9	)	$	(13.6	)
Income taxes (paid) refunded, net	$	(0.4	)	$	1.0

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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BLACK KNIGHT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(1)	Basis of Presentation

The accompanying Condensed Consolidated Financial Statements (Unaudited) of Black Knight, Inc. and its subsidiaries ("Black Knight," the "Company," "we," "us" or "our") 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, 2019 filed with the Securities and Exchange Commission ("SEC") on February 28, 2020 and other filings with the SEC.

Description of Business

We are a leading provider of integrated software, data and analytics solutions to the mortgage and consumer loan, real estate and capital markets verticals. Our solutions facilitate and automate many of the mission-critical business processes across the homeownership lifecycle. We are committed to being a premier business partner that clients rely on to achieve their strategic goals, realize greater success and better serve their customers by delivering best-in-class software, services and insights with a relentless commitment to excellence, innovation, integrity and leadership.

Reporting Segments

We conduct our operations through two reporting segments: (1) Software Solutions and (2) Data and Analytics. See further discussion in Note 16 — Segment Information.

Share Repurchase Program

On February 12, 2020, our Board of Directors approved a three-year share repurchase program authorizing us to repurchase up to 10.0 million shares of our outstanding common stock through February 12, 2023, through open market purchases, negotiated transactions or other means, in accordance with applicable securities laws and other restrictions. This share repurchase program replaces our previous share repurchase program that expired on February 2, 2020.

There were no share repurchases during the first quarters of 2020 and 2019.

Cash and Cash Equivalents

Highly liquid instruments purchased with original maturities of three months or less are considered cash equivalents. Cash equivalents are invested with high credit quality financial institutions and consist of short-term investments, such as demand deposit accounts, money market accounts, money market funds and time deposits. The carrying amounts of these instruments reported in the Condensed Consolidated Balance Sheets (Unaudited) approximate their fair value because of their immediate or short-term maturities.

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



	March 31, 2020		December 31, 2019
Cash	$	66.5	$	8.2
Cash equivalents	—		7.2
Cash and cash equivalents	$	66.5	$	15.4

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BLACK KNIGHT, INC.

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

Trade Receivables, Net

The carrying amounts reported in the Condensed Consolidated Balance Sheets (Unaudited) for Trade receivables, net approximate their fair value because of their short-term nature.

A summary of Trade receivables, net of allowance for credit losses is as follows (in millions):



	March 31, 2020			December 31, 2019
Trade receivables — billed	$	138.8		$	136.6
Trade receivables — unbilled	44.1			39.8
Trade receivables	182.9			176.4
Allowance for credit losses	(2.1		)	(1.3		)
Trade receivables, net	$	180.8		$	175.1

In addition to the amounts above, we have unbilled receivables that we do not expect to collect within the next year included in Other non-current assets in our Condensed Consolidated Balance Sheets (Unaudited). Billings for these receivables are based on contractual terms. Refer to Note 9 — Other Non-Current Assets.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in millions):



	March 31, 2020		December 31, 2019
Prepaid expenses	$	46.7	$	37.1
Contract assets, net	19.7		19.5
Other current assets	6.8		8.2
Prepaid expenses and other current assets	$	73.2	$	64.8

Contract Assets

Our short-term contract assets are included in Prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets (Unaudited). Our long-term contract assets are included in Other non-current assets in our Condensed Consolidated Balance Sheets (Unaudited). Refer to Note 9 — Other Non-Current Assets.

Allowance for Credit Losses

We record our billed and unbilled trade receivables and contract assets at their amortized cost less an allowance for expected credit losses that are not expected to be recovered. We recognize an allowance for the remaining lifetime expected credit losses based on management’s expectation of collectability. We base our estimate on multiple factors including historical experience with bad debts, our relationship with our clients and their credit quality, the aging of respective asset balances, current macroeconomic conditions and management’s expectations of conditions in the future. Our allowance for expected credit losses is based on management’s assessment of the collectability of assets with similar risk characteristics. We pool our respective asset balances based on risk characteristics primarily related to financial asset type, extent of client relationship, product/solution, business division and delinquency status.

Subsequent changes are recorded as an adjustment in Operating expenses. We write off trade receivables in the period when the likelihood of collection of a trade receivable balance is considered remote.

Investments in Unconsolidated Affiliates

We account for our investments in unconsolidated affiliates using the equity method of accounting. We record our share of equity-based compensation expense of unconsolidated affiliates as an adjustment to our investment with a related adjustment to our equity.

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BLACK KNIGHT, INC.

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

Deferred Revenues

Deferred revenues represent our obligations to transfer solutions or services to our clients for which we have received consideration, or an amount of consideration is due, from the client. During the three months ended March 31, 2020 and 2019, revenues recognized related to the amount included in the Deferred revenues balance at the beginning of each year were $15.6 million and $19.3 million, respectively.

Equity-Based Compensation

We expense employee equity-based payments in accordance with Accounting Standards Codification ("ASC") Topic 718, Compensation—Stock Compensation, which requires compensation cost measured using the grant date fair value of equity-based payments to be recognized over the requisite service period, which generally equals the vesting period. For awards with a performance condition, we recognize compensation cost under the graded vesting method over the requisite service period of the award, which at times results in accelerated recognition of the cost. We do not recognize compensation costs if the performance condition is not considered probable of achievement. If at any point we determine that the performance condition is improbable of achievement, we reverse any previously recognized compensation cost for that award.

The fair value of our restricted stock awards is measured based on the closing market price of our stock on the grant date. Income tax effects of awards are recorded in our Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) when the awards vest or are settled. We account for forfeitures as they occur.

Depreciation and Amortization

Depreciation and amortization includes the following (in millions):



	Three months ended March 31,
	2020		2019
Computer software	$	25.8	$	23.7
Other intangible assets	13.0		14.5
Deferred contract costs	8.9		10.2
Property and equipment	10.0		8.5
Total	$	57.7	$	56.9

Deferred contract costs amortization for the three months ended March 31, 2019 includes accelerated amortization of $1.7 million.

Transition and Integration Costs

Transition and integration costs for the three months ended March 31, 2020 primarily consisted of costs associated with acquisitions and expense reduction initiatives. Transition and integration costs for the three months ended March 31, 2019 primarily consisted of costs associated with acquisitions.

Recent Accounting Pronouncements

Current Expected Credit Losses ("CECL") (ASC Topic 326, Financial Instruments - Credit Losses ("ASC 326"))

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses, as well as several other related updates, which were codified as ASC 326. This update changes how companies measure and recognize credit losses for many financial assets. The new standard requires companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets included in the scope of this standard.

Our financial assets that are included in the scope of ASC 326 are primarily receivables and contract assets. We applied an integrated approach to analyzing the effects of adopting ASC 326, including developing accounting policies and positions, evaluating differences from applying the requirements of the new standard to our previous business practices and assessing the need for any changes in our processes and design of internal controls.

The primary effect of adopting the new standard relates to the changes in our estimated credit losses and providing additional disclosures about our financial assets that are included in the scope of this new standard. Based on our assessment, we did not identify a material change in our financial condition, results of operation or business practices.

We adopted ASC 326 on January 1, 2020 using a modified retrospective approach. The effect of adoption was an adjustment of $1.1 million, net of tax to opening Retained earnings on our Condensed Consolidated Statements of Equity (Unaudited).

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BLACK KNIGHT, INC.

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

Other Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides for optional financial reporting alternatives to reduce the cost and complexity associated with the accounting for contracts and hedging relationships affected by reference rate reform. The accommodations are effective for all entities through December 31, 2022. They may be applied from the beginning of the interim period that includes the issuance of this update. We do not expect the adoption of this update to have a material effect on our Condensed Consolidated Financial Statements (Unaudited) and related disclosures.

In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). This update addresses accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. This update is effective prospectively for fiscal years beginning after December 15, 2020. We do not expect the adoption of this update to have a material effect on our Condensed Consolidated Financial Statements (Unaudited) and related disclosures.

(2) Business Acquisition

We include the results of operations of acquired businesses beginning on the respective acquisition dates. The purchase price is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values, with the excess recorded as goodwill. Measurement period adjustments to provisional purchase price allocations are recognized in the period in which they are determined, with the effect on earnings of changes in depreciation, amortization or other income resulting from such changes calculated as if the accounting had been completed on the acquisition date. Acquisition-related costs are expensed as incurred.

On March 3, 2020, we completed the acquisition of Collateral Analytics, LLC ("Collateral Analytics"), a provider of real estate products and tools to support appraisers, appraisal management companies, lenders, investors and government agencies. Collateral Analytics is reported within our Data and Analytics segment as it enhances our real estate solutions and automated valuation model offerings. This acquisition does not meet the definition of "significant" pursuant to Article 3 of Regulation S-X (§210.3-05). The results of operations of Collateral Analytics are not material to our Condensed Consolidated Financial Statements (Unaudited) and related disclosures.

Allocation of purchase price

The purchase price of the Collateral Analytics acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair value at the acquisition date. The fair value of the acquired Computer software and Other intangible assets was primarily determined using a third-party valuation based on significant estimates and assumptions, including Level 3 inputs, which are judgmental in nature. These estimates and assumptions include the projected timing and amount of future cash flows, discount rates reflecting the risk inherent in the future cash flows and future market prices. These estimates are preliminary and subject to adjustments as we complete our valuation process with respect to Computer software, Other intangible assets, Goodwill and contingent consideration.

Total consideration, net of cash received, was $51.0 million for 100% of the equity interests in Collateral Analytics. The total consideration was as follows (in millions):



Cash paid	$	54.1
Contingent consideration	0.6
Less: cash acquired	(3.7		)
Total consideration, net	$	51.0

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BLACK KNIGHT, INC.

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

The following table summarizes the total purchase price consideration and the preliminary fair value amounts recognized for the assets acquired and liabilities assumed as of the acquisition date (in millions):



Total purchase price consideration	$	51.0

Computer software	$	6.4
Other intangible assets	17.9
Goodwill	25.5
Other current and non-current assets	3.3
Total assets acquired	53.1
Total liabilities assumed	2.1
Net assets acquired	$	51.0

The purchase agreement requires us to pay additional cash consideration based on EBITDA over a three-year period beginning April 1, 2020. In accordance with ASC Topic 805, Business Combinations, we will recognize the majority of this consideration as compensation cost over the three-year period due to an ongoing employment requirement.

Estimated Useful Lives of Computer Software and Other Intangible Assets Acquired

As of the acquisition date, the gross carrying value and weighted average estimated useful lives of Computer software and Other intangible assets acquired consisted of the following (dollars in millions):



	Gross carrying value		Weighted average estimated life (in years)
Computer software	$	6.4	5
Other intangible assets:
Client relationships	16.7		10
Trade names	0.3		3
Non-compete agreements	0.9		3
Other intangible assets	17.9
Total gross carrying value	$	24.3

(3) Investments in Unconsolidated Affiliates

In 2019, we invested an aggregate of $392.6 million (the "D&B Investment") in Star Parent, L.P., a Delaware limited partnership ("Star Parent"), related to its acquisition of The Dun & Bradstreet Corporation, a Delaware corporation ("D&B"). D&B is a global leader in commercial data and analytics that provides various services helping companies improve their operational performance. In connection with this investment, we were issued certain limited partner interests in Star Parent, representing approximately 18.1% of the outstanding common equity of Star Parent. We account for our D&B Investment as an equity method investment.

Our maximum exposure related to our variable interests in Star Parent is limited to our investment and commitments we may enter into from time to time to maintain our pro-rata share of limited partner interests. The table below summarizes the carrying amount of our D&B Investment and our maximum exposure related to our variable interests in Star Parent (in millions):



	March 31, 2020
	Total assets		Maximum exposure
Investment in Star Parent	$	299.1	$	299.1

During the third quarter of 2019, we had a change in accounting principle to eliminate the one-quarter lag related to our investment in Star Parent. We determined eliminating the one-quarter lag was preferable as it enables us to provide investors, lenders and other users of our consolidated financial statements with the most recently available financial information related to our investment in Star Parent. We applied the effects of this change in accounting principle retrospectively. There was no change to Operating income, Earnings before equity in losses of unconsolidated affiliates or Cash flows from operating activities for any of the prior periods as a result of this change in accounting principle.

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BLACK KNIGHT, INC.

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

The following tables summarize the effect of this change in accounting principle on the primary financial statement line items on our Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) for the first quarter of 2019:



	Three months ended March 31, 2019
	As reported		Adjusted
Equity in losses of unconsolidated affiliates, net of tax	$	—	$	(13.3	)
Net earnings	$	39.3	$	26.0

Other comprehensive (loss) earnings:
Unrealized losses on investments in unconsolidated affiliates	$	—	$	(0.2	)

Net earnings per share:
Basic	$	0.27	$	0.18
Diluted	$	0.27	$	0.18

Our Net earnings for the three months ended March 31, 2020 and 2019 in our Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) include our equity in earnings (losses) of Star Parent for the three months ended March 31, 2020 and for the period from February 8, 2019 to March 31, 2019, respectively.

Summarized consolidated financial information for Star Parent is presented below (in millions):



	March 31, 2020		December 31, 2019
Current assets	$	570.1	$	417.9
Non-current assets	8,602.3		8,694.9
Total assets	$	9,172.4	$	9,112.8

Current liabilities, including short-term debt	$	927.7	$	1,090.4
Non-current liabilities	5,592.4		5,412.9
Total liabilities	6,520.1		6,503.3
Cumulative preferred series A stock	1,032.8		1,030.6
Total capital	1,619.5		1,578.9
Total liabilities and partners' capital	$	9,172.4	$	9,112.8



	Three months ended March 31, 2020			For the period February 8 to March 31, 2019
Revenues	$	395.3		$	174.1
Loss before provision for income taxes and equity in net income of affiliates	(1.0		)	(111.6		)
Net earnings (loss)	73.9			(81.1		)
Net earnings (loss) attributable to Star Parent	41.5			(99.4		)

The summarized consolidated financial information for Star Parent was obtained from the audited consolidated financial statements of Star Parent as of December 31, 2019 that were filed with the SEC on March 25, 2020 as Exhibit 99.1 to our Form 10-K/A.

During the three months ended March 31, 2020 and 2019, we recorded equity in earnings related to our D&B Investment of $5.6 million, net of income tax expense of $1.9 million, and equity in losses of $13.3 million, net of income tax benefit of $4.7 million, respectively.

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BLACK KNIGHT, INC.

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

(4) Earnings Per Share

Diluted net earnings per share includes the effect of unvested restricted stock awards. The following table sets forth the computation of basic and diluted net earnings per share (in millions, except per share amounts):



	Three months ended March 31,
	2020		2019
Basic:
Net earnings	$	50.1	$	26.0
Shares used for basic net earnings per share:
Weighted average shares of common stock outstanding	148.0		147.5
Basic net earnings per share	$	0.34	$	0.18

Diluted:
Net earnings	$	50.1	$	26.0
Shares used for diluted net earnings per share:
Weighted average shares of common stock outstanding	148.0		147.5
Dilutive effect of unvested restricted shares of common stock	0.7		0.7
Weighted average shares of common stock, diluted	148.7		148.2
Diluted net earnings per share	$	0.34	$	0.18

(5) Related Party Transactions

D&B

As of February 8, 2019, D&B is considered to be a related party primarily due to the combination of certain shared board members, members of executive management and our D&B Investment. Refer to Note 3 — Investments in Unconsolidated Affiliates. As of March 31, 2020 and December 31, 2019, we had a related party receivable of $0.4 million and $0.2 million, respectively, from D&B.

FNF

We are party to certain agreements with Fidelity National Financial, Inc. ("FNF"), including agreements that were entered into when we were related parties, to provide software, 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. As a result of our spin-off from FNF and its subsidiaries, FNF and Black Knight are separate independent companies. FNF no longer has an ownership interest in us, but was still considered a related party until December 1, 2019 due to the combination of certain shared board members, members of senior management and various agreements. As of December 1, 2019, the Chairman of our Board of Directors, who also serves as Chairman of FNF's Board of Directors, no longer serves as one of our executive officers, and FNF is no longer considered a related party.

A summary of the revenues and expenses, net from FNF for the period we were related parties is as follows (in millions):



	Three months ended March 31, 2019
Revenues	$	14.0
Operating expenses	2.8

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



	Three months ended March 31, 2019
Software services	$	8.7
Data and analytics services	5.3
Total related party revenues	$	14.0

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BLACK KNIGHT, INC.

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

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



	Three months ended March 31, 2019
Data entry, indexing services and other operating expenses	$	1.8
Corporate services	1.0
Total related party expenses, net	$	2.8

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

(6) Computer Software

Computer software, net consists of the following (in millions):



	March 31, 2020			December 31, 2019
Internally developed software	$	852.3		$	808.2
Purchased software	84.5			78.9
Computer software	936.8			887.1
Accumulated amortization	(506.5		)	(481.1		)
Computer software, net	$	430.3		$	406.0

In the fourth quarter of 2019, we entered into agreements to acquire software in exchange for a combination of cash consideration and certain of our products and services. The software was acquired for $32.0 million, of which software valued at $25.5 million was received in the first quarter of 2020 and resulted in non-cash investing activity of $10.5 million.

Internally developed software and purchased software include assets acquired through our acquisition of Collateral Analytics. Refer to Note 2 — Business Acquisition for further discussion.

(7) Other Intangible Assets

Other intangible assets consist of the following (in millions):



	March 31, 2020							December 31, 2019
	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Client relationships	$	603.8	$	(454.1	)	$	149.7	$	587.1	$	(441.4	)	$	145.7
Other	10.3		(5.1		)	5.2		9.1		(4.8		)	4.3
Total other intangible assets	$	614.1	$	(459.2	)	$	154.9	$	596.2	$	(446.2	)	$	150.0

Client relationships and other intangible assets include assets acquired through our acquisition of Collateral Analytics. Refer to Note 2 — Business Acquisition for further discussion.

(8) Goodwill

Goodwill consists of the following (in millions):



	Software Solutions		Data and Analytics		Corporate and Other		Total
Balance, December 31, 2019	$	2,189.3	$	172.1	$	—	$	2,361.4
Collateral Analytics acquisition (Note 2)	—		25.5		—		25.5
Balance, March 31, 2020	$	2,189.3	$	197.6	$	—	$	2,386.9

The increase in Goodwill related to our Collateral Analytics acquisition is deductible for tax purposes.

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

(9) Other Non-Current Assets

Other non-current assets consist of the following (in millions):



	March 31, 2020		December 31, 2019
Property records database	$	60.1	$	60.1
Contract assets, net	39.5		37.8
Right-of-use assets⁽¹⁾	26.0		26.4
Deferred compensation plan related assets	11.7		15.2
Prepaid expenses	4.1		8.1
Unbilled receivables, net	2.6		3.5
Other	7.4		7.7
Other non-current assets	$	151.4	$	158.8

_______________________________________________________

(1) Includes non-cash additions for right-of-use assets obtained in exchange for lease liabilities of $2.6 million and $0.7 million for the three months ended March 31, 2020 and 2019, respectively.

(10) Long-Term Debt

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



	March 31, 2020										December 31, 2019
	Principal		Debt issuance costs			Discount			Total		Principal		Debt issuance costs			Discount			Total
Term A Loan	$	1,195.3	$	(4.7	)	$	—		$	1,190.6	$	1,203.1	$	(5.2	)	$	—		$	1,197.9
Revolving Credit Facility	416.0		(3.8		)	—			412.2		310.0		(4.1		)	—			305.9
Other	33.8		—			(1.0		)	32.8		41.7		—			(1.3		)	40.4
Total long-term debt	1,645.1		(8.5		)	(1.0		)	1,635.6		1,554.8		(9.3		)	(1.3		)	1,544.2
Less: Current portion of debt	84.9		(0.2		)	(0.6		)	84.1		80.0		(0.2		)	(0.7		)	79.1
Long-term debt, net of current portion	$	1,560.2	$	(8.3	)	$	(0.4	)	$	1,551.5	$	1,474.8	$	(9.1	)	$	(0.6	)	$	1,465.1

As of March 31, 2020, principal maturities, including payments related to our finance leases, are as follows (in millions):



2020 (remaining)	$	64.3
2021	72.3
2022	111.8
2023	1,396.7
Total	$	1,645.1

Credit Agreement

On April 30, 2018, our indirect subsidiary, Black Knight InfoServ, LLC ("BKIS") entered into an amended and restated credit and guaranty agreement (the “Credit Agreement”) with 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 provides for (i) a $1,250.0 million term loan A facility (the “Term A Loan”) and (ii) a $750.0 million revolving credit facility (the “Revolving Credit Facility” and, together with the Term A Loan, collectively, the “Facilities”), the proceeds of which were used to repay in full the previous term loan A facility, term loan B facility and revolving credit facility.

As of March 31, 2020, the interest rates on the Term A Loan and the Revolving Credit Facility were based on the Eurodollar rate plus a margin of 150 basis points and were approximately 2.49% and 2.18%, respectively. As of March 31, 2020, we had $334.0 million capacity on the Revolving Credit Facility and paid an unused commitment fee of 20 basis points.

The Facilities are guaranteed by all of BKIS’s wholly-owned domestic restricted subsidiaries and Black Knight Financial Services, LLC, a Delaware limited liability company and the direct parent company of BKIS, and are secured by associated

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BLACK KNIGHT, INC.

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

collateral agreements that pledge a lien on substantially all of BKIS’s assets, including fixed assets and intangibles, and the assets of the guarantors, in each case, subject to customary exceptions.

Other Debt

On April 1, 2018, we entered into a financing agreement for $32.9 million, with a stated interest rate of 0% and an imputed interest rate of 3.4%, primarily related to certain data processing and maintenance services. On December 31, 2019, we entered into an amendment to the financing agreement for an additional $16.3 million, with a stated interest rate of 0% and an imputed interest rate of 3.3%. Under the terms of the amendment, quarterly payments are due beginning January 2, 2020 through January 2, 2023. As of March 31, 2020, $10.0 million is included in the Current portion of debt and $11.0 million is included in Long-term debt, net of current portion in our Condensed Consolidated Balance Sheets (Unaudited).

Finance Leases

On December 31, 2019, we entered into one-year finance lease agreements, with a stated interest rate of 0%, an imputed interest rate of 3.3% and bargain purchase options for certain computer equipment. The leased equipment has a useful life of five years and is depreciated on a straight-line basis. The finance lease liabilities of $11.8 million as of March 31, 2020 are included in the Current portion of debt on our Condensed Consolidated Balance Sheets (Unaudited). For the three months ended March 31, 2020, non-cash investing and financing activity was $12.0 million related to the unpaid portion of our finance lease agreements.

Fair Value of Long-Term Debt

The fair value of our Facilities approximates their carrying value at March 31, 2020. The fair value of our Facilities is based upon established market prices for the securities using Level 2 inputs.

Interest Rate Swaps

We enter into interest rate swap agreements to hedge forecasted monthly interest rate payments on our floating rate debt. As of March 31, 2020, we had the following interest rate swap agreements (collectively, the "Swap Agreements") (in millions):



Effective dates	Notional amount		Fixed rates
March 31, 2017 through March 31, 2022	$	200.0	2.08%
September 29, 2017 through September 30, 2021	$	200.0	1.69%
April 30, 2018 through April 30, 2023	$	250.0	2.61%
January 31, 2019 through January 31, 2023	$	300.0	2.65%

Under the terms of the Swap Agreements, we receive payments based on the 1-month London Interbank Offered Rate ("LIBOR") (approximately 0.99% as of March 31, 2020).

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 loss is reclassified into Interest expense, net as a yield adjustment as interest is either paid or received on the hedged debt. The fair value of our Swap Agreements is based upon 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.

It is our policy to execute such instruments with creditworthy banks and not to enter into derivative financial instruments for speculative purposes. 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.

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



Balance sheet accounts	March 31, 2020		December 31, 2019
Other non-current liabilities	$	49.3	$	21.9

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

A cumulative loss of $49.3 million ($36.9 million net of tax) and cumulative loss of $21.9 million ($16.4 million net of tax) is reflected in Accumulated other comprehensive loss as of March 31, 2020 and December 31, 2019, respectively. Below is a summary of the effect of derivative instruments on amounts recognized in Other comprehensive (loss) earnings ("OCE") on the accompanying Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) (in millions):



	Three months ended March 31, 2020					Three months ended March 31, 2019
	Amount of loss recognized in OCE			Amount of loss reclassified from Accumulated OCE into Net earnings		Amount of loss recognized in OCE			Amount of gain reclassified from Accumulated OCE into Net earnings
Swap agreements	$	(21.6	)	$	1.2	$	(6.2	)	$	(0.7	)

Approximately $18.6 million ($13.9 million net of tax) of the balance in Accumulated other comprehensive loss as of March 31, 2020 is expected to be reclassified into Interest expense, net over the next 12 months.


(11)	Fair Value Measurements

Fair Value of Financial Assets and Liabilities

Fair value represents the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of financial assets and liabilities are determined using the following fair value hierarchy:


•	Level 1 inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access.


•	Level 2 inputs to the valuation methodology include:


◦	quoted prices for similar assets or liabilities in active markets;


◦	quoted prices for identical or similar assets or liabilities in inactive markets;


◦	inputs other than quoted prices that are observable for the asset or liability; and


◦	inputs that are derived principally from or corroborated by observable market data by correlation or other means.


•	Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis (in millions):



	March 31, 2020								December 31, 2019
	Carrying amount		Fair value						Carrying amount		Fair value
	Carrying amount		Level 1		Level 2		Level 3		Carrying amount		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents (Note 1)	$	66.5	$	66.5	$	—	$	—	$	15.4	$	15.4	$	—	$	—

Liabilities:
Interest rate swaps (Note 10)	49.3		—		49.3		—		21.9		—		21.9		—
Contingent consideration	9.6		—		—		9.6		9.0		—		—		9.0

The fair value of contingent consideration was primarily determined using a third-party valuation based on significant estimates and assumptions, including Level 3 inputs. The estimates and assumptions include the projected timing and amount of future cash flows and discount rates reflecting the rate inherent in the future cash flows.

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

The following table presents a summary of the change in fair value of our contingent consideration (in millions):



Beginning balance, December 31, 2019	$	9.0
Collateral Analytics acquisition (Note 2)	0.6
Ending balance, March 31, 2020	$	9.6

(12) Income Taxes

Our effective tax rate for the three months ended March 31, 2020 and 2019 was 15.6% and 21.4%, respectively. Our effective tax rate for the three months ended March 31, 2020 and 2019 differs from our statutory rate primarily due to the effect of excess tax benefits related to the vesting of restricted shares of our common stock.

(13) 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 may include 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 the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on our financial condition.

PennyMac Litigation

On November 5, 2019, Black Knight Servicing Technologies, LLC (“BKST”), a wholly-owned indirect subsidiary of Black Knight, filed a Complaint and Demand for Jury Trial (the “Black Knight Complaint”) against PennyMac Loan Services, LLC (“PennyMac”) in the Circuit Court for the Fourth Judicial Circuit in and for Duval County, Florida. The Black Knight Complaint includes causes of action for breach of contract and misappropriation of MSP^® System trade secrets in order to develop an imitation mortgage processing system intended to replace the MSP^® System. The Black Knight Complaint seeks damages for breach of contract and misappropriation of trade secrets, injunctive relief under the Florida Uniform Trade Secrets Act and declaratory judgment that BKST owns all intellectual property and software developed by or on behalf of PennyMac as a result of its wrongful use of and access to the MSP^® System and related trade secret and confidential information. PennyMac filed a motion to compel arbitration of the action and the Court granted the motion on April 6, 2020. On April 21, 2020, BKST filed a Motion for Reconsideration of the Court’s order compelling arbitration and, on April 27, 2020, PennyMac filed its opposition to BKST's Motion for Reconsideration.

Shortly after the filing of the Black Knight Complaint, on November 6, 2019, PennyMac filed an Antitrust Complaint (the “PennyMac Complaint”) against Black Knight in the United States District Court for the Central District of California. The PennyMac Complaint included causes of action for alleged monopolization and attempted monopolization under Section 2 of the Sherman Antitrust Act, violation of California’s Cartwright Act, violation of California’s Unfair Competition Law and common law unfair competition under California law. The PennyMac Complaint sought equitable remedies, damages and other monetary relief, including treble and punitive damages. Generally, PennyMac alleged that Black Knight relies on various anticompetitive, unfair, and discriminatory practices to maintain and to enhance its dominance in the mortgage servicing platform market and in an attempt to monopolize the platform software applications market. Black Knight moved to dismiss the PennyMac Complaint or have the action transferred to Florida based upon a forum selection clause in the agreement with BKST. On February 13, 2020, the judge granted Black Knight's motion to transfer the case to Florida and denied as moot the motion to dismiss. On April 17, 2020, PennyMac filed a Notice of Dismissal of this action without prejudice and indicated that they intended to bring the claims

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

raised in the dismissed PennyMac Complaint as defenses, third party claims and/or counterclaims in arbitration. On April 23, 2020, the Court entered an order dismissing the action without prejudice and directing that the clerk close the case.

As these cases continue to evolve, it is not possible to reasonably estimate the probability that we will ultimately prevail on our lawsuit or be held liable for the violations alleged in the PennyMac Complaint, nor is it possible to reasonably estimate the ultimate gain or loss, if any, or range of gain or loss that could result from these cases.

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.

(14) Revenues

Disaggregation of Revenues

The following tables summarize revenues from contracts with clients (in millions):



	Three months ended March 31, 2020
	Servicing Software		Origination Software		Software Solutions		Data and Analytics		Corporate and Other				Total
Software and hosting solutions	$	177.0	$	36.3	$	213.3	$	8.4	$	—			$	221.7
Professional services	18.7		9.5		28.2		0.3		(0.1		)	(1)	28.4
Data solutions	—		—		—		36.8		—				36.8
Other	—		3.2		3.2		0.6		—				3.8
Revenues	$	195.7	$	49.0	$	244.7	$	46.1	$	(0.1	)		$	290.7



	Three months ended March 31, 2019
	Servicing Software		Origination Software		Software Solutions		Data and Analytics		Corporate and Other				Total
Software and hosting solutions	$	179.7	$	28.2	$	207.9	$	7.9	$	—			$	215.8
Professional services	21.8		10.7		32.5		0.4		(0.1		)	(1)	32.8
Data solutions	—		—		—		30.8		—				30.8
Other	0.3		2.8		3.1		0.6		—				3.7
Revenues	$	201.8	$	41.7	$	243.5	$	39.7	$	(0.1	)		$	283.1

______________________________________________________


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

Our Software Solutions segment offers leading software and hosting solutions that facilitate and automate many of the mission-critical business processes across the homeownership lifecycle. These solutions primarily consist of processing and workflow management software applications. Our servicing software solutions primarily include our core servicing software solution that automates loan servicing, including loan setup and ongoing processing, customer service, accounting, reporting to the secondary mortgage market and investors and web-based workflow information systems. Our origination software solutions primarily include our solutions that automate and facilitate the origination of mortgage loans and provide an interconnected network allowing the various parties and systems associated with lending transactions to exchange data quickly and efficiently. Professional services

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

consists of pre-implementation and post-implementation support and services and are primarily billed on a time and materials basis. Professional services may also include dedicated teams provided as part of agreements with software and hosting solutions clients.

Transaction Price Allocated to Future Performance Obligation

Our disclosure of transaction price allocated to these future performance obligations excludes the following:


•	Volume-based fees in excess of contractual minimums and other usage-based fees to the extent they are part of a single performance obligation and meet certain variable allocation criteria;


•	Performance obligations that are part of a contract with an original expected duration of one year or less; and


•	Transactional fees based on a fixed fee per transaction when we have the right to invoice once we have completed the performance obligation.

As of March 31, 2020, the aggregate amount of the transaction price that is allocated to our future performance obligations was approximately $2.2 billion and is expected to be recognized as follows: 17% by December 31, 2020, 59% by December 31, 2022, 88% by December 31, 2024 and the rest thereafter.

(15) Equity-Based Compensation

A summary of restricted shares granted in 2020 is as follows:



Date	Number of shares granted	Grant date fair value per share		Vesting period (in years)	Vesting criteria
February 18, 2020	16,689	$	74.91	1.0	Service
February 18, 2020⁽¹⁾	487,096	$	74.91	3.0	Service and Performance
March 11, 2020	11,865	$	63.26	3.0	Service
March 18, 2020	3,366	$	59.45	2.0	Service

______________________________________________________


(1)	This award is subject to an independent performance target for each of three consecutive 12-month measurement periods. Vesting of each tranche is independent of the satisfaction of the annual performance target for other tranches.

Restricted stock transactions in 2020 are as follows:



	Shares		Weighted average grant date fair value
Balance, December 31, 2019	2,014,983		$	46.99
Granted	519,016		$	74.54
Forfeited	(3,386	)	$	61.53
Vested	(827,587	)	$	43.25
Balance, March 31, 2020	1,703,026		$	57.18

Equity-based compensation expense was $10.7 million and $13.3 million for the three months ended March 31, 2020 and 2019, respectively. Equity-based compensation includes accelerated recognition of $0.2 million and $1.9 million for the three months ended March 31, 2020 and 2019, respectively. These expenses are included in Operating expenses in the Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited).

Total unrecognized compensation cost was $64.0 million as of March 31, 2020 and is expected to be recognized over a weighted average period of approximately 2.2 years.

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

(16) 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. Our 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. Refer to Note 14 — Revenues for a description of our Software Solutions and Data and Analytics segments.

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, net, Income tax expense and Depreciation and amortization. It also excludes Equity in earnings (losses) of unconsolidated affiliates. We do not allocate Interest expense, net, 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.

Segment asset information is not included below because we do not use it to evaluate performance or allocate resources. Summarized financial information concerning our segments is shown in the tables below (in millions):

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



	Three months ended March 31, 2020
	Software Solutions		Data and Analytics		Corporate and Other				Total
Revenues	$	244.7	$	46.1	$	(0.1	)	(1)	$	290.7
Expenses:
Operating expenses	105.3		31.5		25.6			(2)	162.4
Transition and integration costs	—		—		2.4			(3)	2.4
EBITDA	139.4		14.6		(28.1		)		125.9
Depreciation and amortization	30.3		4.0		23.4			(4)	57.7
Operating income (loss)	109.1		10.6		(51.5		)		68.2
Interest expense, net									(14.7		)
Other expense, net									(0.8		)
Earnings before income taxes and equity in earnings of unconsolidated affiliates									52.7
Income tax expense									8.2
Earnings before equity in earnings of unconsolidated affiliates									44.5
Equity in earnings of unconsolidated affiliates, net of tax									5.6
Net earnings									$	50.1



	Three months ended March 31, 2019
	Software Solutions		Data and Analytics		Corporate and Other				Total
Revenues	$	243.5	$	39.7	$	(0.1	)	(1)	$	283.1
Expenses:
Operating expenses	102.8		29.8		27.4			(2)	160.0
Transition and integration costs	—		—		0.9			(5)	0.9
EBITDA	140.7		9.9		(28.4		)		122.2
Depreciation and amortization	29.9		3.8		23.2			(4)	56.9
Operating income (loss)	110.8		6.1		(51.6		)		65.3
Interest expense, net									(15.0		)
Other expense, net									(0.3		)
Earnings before income taxes and equity in losses of unconsolidated affiliates									50.0
Income tax expense									10.7
Earnings before equity in losses of unconsolidated affiliates									39.3
Equity in losses of unconsolidated affiliates, net of tax									(13.3		)
Net earnings									$	26.0

_______________________________________________________


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


(2)	Operating expenses for Corporate and Other includes equity-based compensation, including certain related payroll taxes, of $11.7 million and $13.9 million for the three months ended March 31, 2020 and 2019, respectively .

(3) Transition and integration costs primarily consisted of costs associated with acquisitions and expense reduction initiatives.


(4)	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.


(5)	Transition and integration costs primarily consisted of costs associated with acquisitions.

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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 of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including statements regarding expectations, hopes, intentions or strategies regarding the future. Forward-looking statements are based on Black Knight, Inc. and its subsidiaries ("Black Knight," the "Company," "we," "us" or "our") 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. We undertake 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:


•	changes in general economic, business, regulatory and political conditions, including those resulting from pandemics such as COVID-19, particularly as they affect foreclosures and the mortgage industry;


•	the outbreak of COVID-19 and measures to reduce its spread, including the effect of governmental or voluntary actions such as business shutdowns and stay-at-home orders;


•	security breaches against our information systems;


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


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


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


•	our ability to protect our proprietary software and information rights;


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


•	risks associated with the availability of data;


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


•	our ability to successfully integrate strategic acquisitions;


•	risks associated with our investment in Star Parent, L.P. ("Star Parent") and the operation of its indirect subsidiary The Dun & Bradstreet Corporation ("D&B"); 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, 2019 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, 2019 filed with the SEC on February 28, 2020 and other filings with the SEC.

Overview

We have market-leading software solutions combined with comprehensive real estate data and extensive analytic capabilities. Our solutions are utilized by U.S. mortgage loan originators and 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.

We believe the breadth and depth of our comprehensive end-to-end, integrated solutions and the insight we provide to our clients differentiate us from other software providers and position us particularly well for emerging opportunities. We have served the mortgage and real estate industries for over 55 years and utilize this experience to design and develop solutions that fit our clients' ever-evolving needs. Our proprietary software solutions 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 industry requirements and maintain our position as an industry-standard platform for mortgage market participants.

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The table below summarizes active first and second lien mortgage loans on our mortgage loan servicing software solution and the related market data, reflecting our leadership in the mortgage loan servicing software solutions market (in millions):



	First lien						Second lien						Total first and second lien
	as of March 31,						as of March 31,						as of March 31,
	2020			2019			2020			2019			2020	2019
Active loans	30.8			32.1			2.6			2.6			33.4	34.7
Market size	53.0	(1	)	52.0	(1	)	13.4	(2	)	13.1	(2	)	66.4	65.1
Market share	58%			62%			19%			20%			50%	53%

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Note: Percentages above may not recalculate due to rounding.


(1)	According to the Black Knight Mortgage Monitor Report as of February 29, 2020 and February 28, 2019 for U.S. first lien mortgage loans.


(2)	According to the February 2020 and 2019 Equifax National Consumer Credit Trends Report as of December 31, 2019 and 2018, respectively, for U.S. second lien mortgage loans.

We offer our solutions to a wide range of clients across the mortgage and consumer loan, real estate and capital markets verticals. 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, particularly in the Software Solutions segment. 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, 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 flows.

Our Markets

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

Underlying the three major stages of the mortgage loan lifecycle are the software, data and analytics support behind each process, which have become increasingly critical to industry participants. 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 lifecycle.

Business Trends and Conditions

COVID-19 Pandemic

On March 11, 2020, the World Health Organization ("WHO") declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries have issued policies intended to stop or slow the further spread of the disease.

COVID-19 and the U.S.’s response to the pandemic are significantly affecting the mortgage and real estate industries. On March 18, 2020, the U.S. Department of Housing and Urban Development ("HUD") and the Federal Housing Finance Agency ("FHFA") announced a 60-day moratorium on mortgage loan foreclosures and evictions. Likewise, the FHFA also announced mortgage loan forbearance programs for certain borrowers that allow mortgage loan payments to be suspended for up to 12 months. On March 27, 2020 the Coronavirus, Aid, Relief and Economic Security Act (the "CARES Act") was signed into law in an effort to provide economic assistance to workers, families and businesses and codified the actions of HUD and the FHFA.

There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business or our operations.

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Black Knight Response and the Effect on Our Business

In the first quarter of 2020, we executed on our business continuity plans to address the challenges related to the ongoing COVID-19 pandemic. Since March 2020, substantially all of our employees have been working from home. We are following the requirements and protocols published by the U.S. Centers for Disease Control, the WHO and country, state and local governments. Our most important priorities are the health and safety of our employees and helping the communities where we work and live. We cannot predict when or how we will begin to lift the actions put in place as part of our business continuity plans, including working from home and travel restrictions, but we continue to offer our clients the high level of service they have come to expect from us. We believe our transition to working from home has been successful and has not significantly affected our results of operations, financial condition, cash flows or control environment as of and for the three months ended March 31, 2020.

The extraordinary effects of the broad-based response to the COVID-19 pandemic have delayed the timing of certain revenues. Specifically, the current mortgage loan foreclosure moratorium and forbearance plans offered as part of the CARES Act are reducing the number of foreclosures being processed on our Bankruptcy^SM/Foreclosure^SM and Invoicing^SM software solutions for which revenue is recognized as transactions occur. We currently estimate approximately $39 million in revenues may be delayed beyond 2020. Many of our clients are also adjusting to working from home while experiencing refinance origination volume increases as well as an extremely elevated number of customer service calls. As a result, we have seen delays to some of our implementation timelines. Our teams are focused on supporting our clients in this shifting landscape and stand ready to deliver our solutions. We are also monitoring the effects of the pandemic on our sales cycles.

In response to the foregoing revenue delays, we continue to tightly manage our expenses, including minimizing discretionary spend and disciplined management of personnel costs. To the extent the revenue delays continue for an extended period of time, additional cost management actions will be considered and will be dependent on the severity and duration of the revenue delays.

Our clients have realized there will be significant changes in how their customers want to, or are able to, interact with them throughout the pandemic and beyond. In reaction to these changes, our clients are prioritizing automated technology solutions that enable them to remotely engage with their customers and provide streamlined ways of performing the core functions of their businesses, all while maintaining regulatory compliance in an environment that is rapidly changing. We believe our solutions are well-positioned to help our clients address these needs.

We partner with many of the industry’s best lenders and servicers and believe it is our duty to serve in a leadership role as we manage through this crisis and beyond. From the start of the COVID-19 crisis, we have worked to provide leadership on behalf of our clients and to provide them with actionable intelligence, including our monthly Mortgage Monitor report and our new McDash Flash Forbearance Tracker. We have also published in-depth white papers, held town hall meetings with our clients and have had frequent meetings with senior executives at our clients, government agencies and industry associations. We believe the in-depth data and insights we offer are essential for both mortgage market participants and government entities as we work together to address the economic ramifications of the crisis.

Our investment and innovation in digital mortgage loan solutions have made it possible for a majority of the mortgage application, underwriting and closing processes to happen online and remotely. Our industry-leading servicing system and a mortgage loan contributory data set represents a majority of the U.S. market and is modeled to represent the entire U.S. market. Our robust analytics and seamless integration ties them all together and allows for real-time visibility into the majority of active mortgage loans and a holistic view of the homeownership lifecycle. The depth of our integrated software, data and analytics enables clients to see what the effects of the pandemic mean for their business and industry. Our clients use these robust solutions for modeling, forecasting and reserve setting, which is critical, especially in this current environment.

Market Trends

Market trends that have spurred lenders and servicers to seek software, data and analytics solutions are as follows:

Integral role of technology in the U.S. mortgage loan industry. Over the past few years, banks and other lenders and servicers have become increasingly focused on automation and workflow management to operate more efficiently and meet their regulatory requirements as well as using technology to enhance the consumer experience during the mortgage loan origination, closing and servicing processes. Since the start of the pandemic, our clients have become increasing aware that digital solutions are integral to their ability to stay connected with their customer base in times when face-to-face interactions are not possible. We believe technology providers must be able to support the complexity and dynamic nature of the market, display extensive industry knowledge and possess the financial resources to make the necessary investments in technology and software to support lenders. This includes an enhanced digital experience along with the application of artificial intelligence, robotic process automation and adaptive learning.

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Heightened demand for enhanced transparency and analytic insight. As U.S. mortgage loan market participants work to minimize the risk in lending, servicing and capital markets, they rely on the integration of data and analytics with solutions that enhance the decision-making process. These industry participants rely on large comprehensive third-party databases coupled with enhanced analytics to achieve these goals. The pandemic is putting pressure on the U.S. economy, affecting tens of millions of American jobs and creating a high-level of uncertainty in the volume of work that our clients are facing with possible delinquent mortgage loans. Mortgage loan market participants are eager for timely data and insights to help them plan and react to the changing environment.

Regulatory changes and oversight. Most U.S. mortgage loan market participants are subject to a high level of regulatory oversight and regulatory requirements as federal and state governments have enacted various new laws, rules and regulations. It is our experience that mortgage lenders have become more focused on minimizing the risk of non-compliance with regulatory requirements and are looking toward solutions that assist them in complying with their regulatory requirements. We expect this trend to continue as additional governmental programs and regulations have been recently enacted to address the economic concerns resulting from the pandemic, and our clients have had to adapt their systems and processes in record time to the shifting landscape. In addition, our clients and our clients' regulators have elevated their focus on privacy and data security while many of our clients’ employees are working from home and in light of an increased level of cybersecurity incidents. We expect the industry focus on privacy and data security to continue to increase.

Our Business Segments

Our business is organized into two segments: Software Solutions and Data and Analytics.

Software Solutions

Our Software Solutions segment offers software and hosting solutions that support loan servicing, loan origination and settlement services. The following table summarizes our software solutions revenues (in millions):



	Three months ended March 31,				% of segment revenues
	2020		2019		2020	2019
Servicing software solutions	$	195.7	$	201.8	80%	83%
Origination software solutions	49.0		41.7		20%	17%
Software Solutions	$	244.7	$	243.5	100%	100%

Our servicing software solutions primarily include our core servicing software solution that automates loan servicing, including loan setup and ongoing processing, customer service, accounting, reporting to the secondary mortgage market and investors and web-based workflow information systems. Our servicing software solutions primarily generate revenues based on the number of active loans outstanding on our system, which has been very stable; however, we have some exposure to foreclosure and bankruptcy loan volumes, which can fluctuate based on economic cycles and other factors.

Before the pandemic, foreclosure start volumes were already at historic lows. Our servicing software solutions that are more sensitive to foreclosure volumes were approximately 4% of our consolidated revenues for the three months ended March 31, 2020. As a result of the effects of the broad-based response to the COVID-19 pandemic, we have seen lower foreclosure-related transactional revenues due to the mortgage loan foreclosure moratorium and expect this to continue given the mortgage loan forbearance plans offered as part of the CARES Act. As of April 30, 2020, Black Knight’s McDash Flash Forbearance Tracker estimated more than 3.8 million homeowners, or 7.3% of all U.S. mortgage loans, have entered into COVID-19 mortgage loan forbearance plans.

Our origination software solutions primarily include our solutions that automate and facilitate the origination of mortgage loans and provide an interconnected network allowing the various parties and systems associated with lending transactions to exchange data quickly and efficiently. For our origination software solutions, our loan origination system revenues are based on closed loan volumes subject to minimum base software fees that are contractually obligated, which limits our exposure to origination volumes. Some of our origination software solutions are exposed to variances in origination volumes, primarily related to refinance volumes due to the nature of the services provided. Given the near record low level of mortgage loan rates, we have seen elevated volumes related to refinance originations and expect this to continue throughout 2020. However, with stay-at-home orders and similar restrictive mitigation measures issued in various parts of the country for an unknown duration, we have also seen a recent decline in purchase origination volumes, and we expect this trend to continue throughout 2020. Our origination software solutions that are more sensitive to origination volumes, primarily refinance origination volumes, were approximately 5% of our consolidated revenues for the three months ended March 31, 2020.

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Data and Analytics

Our Data and Analytics segment offers data and analytics solutions to the mortgage, real estate and capital markets verticals. These solutions include property ownership data, lien data, servicing data, automated valuation models, collateral risk scores, behavioral models, a multiple listing service software solution and other data solutions. Our data and analytics business is predominantly based on longer-term strategic data licenses, other data licenses and subscription-based revenues. For the three months ended March 31, 2020 and 2019, our data and analytics revenues were 16% and 14%, respectively, of our consolidated revenues. Our data and analytics business has limited exposure to fluctuations in home buying activity and origination volumes where we provide data related to title insurance and other settlement service activities.

Acquisition

On March 3, 2020, we completed the acquisition of Collateral Analytics, LLC ("Collateral Analytics"), a provider of real estate product and tools to support appraisers, appraisal management companies, lenders, investors and government agencies. The acquisition is integrated into our Data and Analytics segment and enhances our real estate solutions and automated valuation model offerings. Refer to Note 2 — Business Acquisition in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information.

Results of Operations

Key Performance Metrics

Revenues, EBITDA and EBITDA margin for the Software Solutions and Data and Analytics segments are presented in conformity with ASC Topic 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 SEC's Regulation G and Item 10(e) of Regulation S-K.



Consolidated Results of Operations
The following table presents certain financial data for the periods indicated (in millions, except per share data):
	Three months ended March 31,
	2020			2019
Revenues	$	290.7		$	283.1
Expenses:
Operating expenses	162.4			160.0
Depreciation and amortization	57.7			56.9
Transition and integration costs	2.4			0.9
Total expenses	222.5			217.8
Operating income	68.2			65.3
Operating margin	23.5		%	23.1		%
Interest expense, net	(14.7		)	(15.0		)
Other expense, net	(0.8		)	(0.3		)
Earnings before income taxes and equity in earnings (losses) of unconsolidated affiliates	52.7			50.0
Income tax expense	8.2			10.7
Earnings before equity in earnings (losses) of unconsolidated affiliates	44.5			39.3
Equity in earnings (losses) of unconsolidated affiliates, net of tax	5.6			(13.3		)
Net earnings	$	50.1		$	26.0

Net earnings per share:
Diluted	$	0.34		$	0.18
Weighted average shares of common stock outstanding:
Diluted	148.7			148.2

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Segment Financial Results

Revenues

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



	Three months ended March 31,						Variance
	2020			2019			$		%
Software Solutions	$	244.7		$	243.5		$	1.2	—	%
Data and Analytics	46.1			39.7			6.4		16	%
Corporate and Other⁽¹⁾	(0.1		)	(0.1		)	—		NM
Total	$	290.7		$	283.1		$	7.6	3	%

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

Software Solutions

Revenues were $244.7 million in the three months ended March 31, 2020 compared to $243.5 million in the 2019 period, an increase of $1.2 million. Our servicing software solutions decreased 3%, or $6.1 million, as increased revenues from new and existing clients on MSP^® and an increase in our average revenue per loan were more than offset by the effect of client deconversions and the effect of lower foreclosure-related volumes due to the foreclosure moratorium as part of the CARES Act. Our origination software solutions increased 18%, or $7.3 million, primarily driven by new clients, higher refinance origination volumes and revenues from an acquired business.

Data and Analytics

Revenues were $46.1 million in the three months ended March 31, 2020 compared to $39.7 million in the 2019 period, an increase of $6.4 million, or 16%. The increase was primarily driven by strong sales execution across nearly all business lines, higher refinance origination volumes and revenues from an acquired business.

EBITDA and EBITDA margin

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



	Three months ended March 31,				Variance
	2020		2019		$			%
Software Solutions	$	139.4	$	140.7	$	(1.3	)	(1	)%
Data and Analytics	14.6		9.9		4.7			47	%



	Three months ended March 31,				Variance
	2020		2019		Basis points
Software Solutions	57.0	%	57.8	%	(80	)
Data and Analytics	31.7	%	24.9	%	680

Software Solutions

EBITDA was $139.4 million in the three months ended March 31, 2020 compared to $140.7 million in the 2019 period, a decrease of $1.3 million, or 1%, with an EBITDA margin of 57.0%, a decrease of 80 basis points from the 2019 period. The EBITDA margin decrease was primarily driven by revenue mix.

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Data and Analytics

EBITDA was $14.6 million in the three months ended March 31, 2020 compared to $9.9 million in the 2019 period, an increase of $4.7 million, or 47%, with an EBITDA margin of 31.7%, an increase of 680 basis points from the 2019 period. The EBITDA margin increase was primarily driven by incremental margins on revenue growth.

Consolidated Financial Results

Operating Expenses

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



	Three months ended March 31,				Variance
	2020		2019		$			%
Software Solutions	$	105.3	$	102.8	$	2.5		2	%
Data and Analytics	31.5		29.8		1.7			6	%
Corporate and Other⁽¹⁾	25.6		27.4		(1.8		)	(7	)%
Total	$	162.4	$	160.0	$	2.4		2	%

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(1)	Operating expenses for Corporate and Other include equity-based compensation, including certain related payroll taxes, of $11.7 million and $13.9 million for the three months ended March 31, 2020 and 2019, respectively.

The increase in Operating expenses in our Software Solutions segment in the three months ended March 31, 2020 compared to the 2019 period was primarily driven by higher personnel costs related to a prior year acquisition and higher costs related to information technology, partially offset by the effect of expense reduction initiatives implemented at the end of 2019. The increase in our Data and Analytics segment in the three months ended March 31, 2020 compared to the 2019 period was primarily driven by higher costs of goods sold related to revenue growth. The decrease in Corporate and Other in the three months ended March 31, 2020 compared to the 2019 period was primarily driven by lower equity-based compensation.

Depreciation and Amortization

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



	Three months ended March 31,				Variance
	2020		2019		$		%
Software Solutions	$	30.3	$	29.9	$	0.4	1	%
Data and Analytics	4.0		3.8		0.2		5	%
Corporate and Other⁽¹⁾	23.4		23.2		0.2		1	%
Total	$	57.7	$	56.9	$	0.8	1	%

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(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.

The increase in Depreciation and amortization in the three months ended March 31, 2020 compared to the 2019 period is primarily driven by new hardware and software placed in service as a result of prior year acquisitions and new client wins.

Transition and Integration Costs

Transition and integration costs were $2.4 million in the three months ended March 31, 2020 compared to $0.9 million in the 2019 period. Transition and integration costs in the 2020 period primarily consisted of costs associated with acquisitions and expense reduction initiatives. Transition and integration costs in the 2019 period primarily consisted of costs associated with acquisitions.

Interest Expense, Net

Interest expense, net was $14.7 million in the three months ended March 31, 2020 compared to $15.0 million in the 2019 period, a decrease of $0.3 million, or 2%.

Other Expense, Net

Other expense, net was $0.8 million in the three months ended March 31, 2020 compared to $0.3 million in the 2019 period, an increase of $0.5 million. The 2020 and 2019 amounts are primarily related to legal fees.

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Income Tax Expense

Income tax expense was $8.2 million in the three months ended March 31, 2020 compared to $10.7 million in the 2019 period. Our effective tax rate was 15.6% in 2020 compared to 21.4% in 2019. Our effective tax rate for the three months ended March 31, 2020 and 2019 includes the effect of tax benefits related to the vesting of restricted shares of our common stock.

Equity in Earnings (Losses) of Unconsolidated Affiliates, Net of Tax

Equity in earnings (losses) of unconsolidated affiliates, net of tax was $5.6 million, net of income tax expense of $1.9 million, in the three months ended March 31, 2020, compared to a loss of $13.3 million, net of income tax benefit of $4.7 million in the 2019 period. Substantially all of our equity in earnings (losses) of unconsolidated affiliates relates to our D&B Investment.

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. As of March 31, 2020, we had cash of $66.5 million, debt principal of $1,645.1 million and available capacity of $334.0 million on our revolving credit facility. Our existing credit facility matures on April 30, 2023.

Our primary cash requirements include operating expenses, debt service payments (principal and interest), capital expenditures (including property, equipment and computer software expenditures) and tax-related payments and may include share repurchases and business acquisitions.

We believe that our cash flows 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 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. The recent COVID-19 pandemic has caused disruption in the capital markets. It could make financing more difficult and/or expensive and 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 $102.5 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 flows 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 issue 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):



	Three months ended March 31,
	2020			2019			Variance
Cash flows provided by operating activities	$	60.5		$	64.1		$	(3.6	)
Cash flows used in investing activities	(87.1		)	(397.7		)	310.6
Cash flows provided by financing activities	77.7			325.3			(247.6		)
Net increase (decrease) in cash and cash equivalents	$	51.1		$	(8.3	)	$	59.4

Operating Activities

The $3.6 million decrease in cash provided by operating activities in the three months ended March 31, 2020 compared to the 2019 period is primarily related to an increase in earnings and the timing and amount of cash receipts for Trade receivables, net.

Investing Activities

The $310.6 million decrease in cash used in investing activities in the three months ended March 31, 2020 compared to the 2019 period is primarily related to our investment in D&B in 2019, partially offset by our acquisition of Collateral Analytics in 2020.

Financing Activities

The $247.6 million decrease in cash provided by financing activities in the three months ended March 31, 2020 compared to the 2019 period is primarily related to an incremental borrowing in 2019 related to our investment in D&B.

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Financing

For a description of our financing arrangements, see Note 10 — Long-Term Debt in Item 1 of Part I of this Quarterly Report on Form 10-Q, 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 and operating and finance lease payments for our offices, data centers, property and equipment. There were no significant changes to our contractual obligations from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2019.

Share Repurchase Program

There were no share repurchases during the first quarter of 2020 and 2019.

Indemnifications and Warranties

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

There have been no material changes to our critical accounting policies and estimates described in our Annual Report on Form 10-K for the year ended December 31, 2019.

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 variable rate debt to finance our operations. We enter into interest rate swap agreements to hedge forecasted monthly interest rate payments on our variable rate debt. We are exposed to interest rate risk on our debt obligations and related interest rate swaps. As of March 31, 2020, we had $1,611.3 million in long-term debt principal outstanding from our Facilities, as described in Note 10 — Long-Term Debt in Item 1 of Part I of this Quarterly Report on Form 10-Q, all of which is variable rate debt.

As of March 31, 2020, the Facilities represent our long-term debt obligations exposed to interest rate risk. We performed a sensitivity analysis on the principal amount of debt as of March 31, 2020, as well as the effect of our 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 $16.1 million on an annual basis ($6.6 million including the effect of our current interest rate swaps). A decrease of 100 basis points in the applicable interest rate would cause a decrease in interest expense of $14.7 million on an annual basis ($5.3 million including the effect of our current interest rate swaps) as the 1-week and 1-month LIBOR were approximately 0.68% and 0.99%, respectively, as of March 31, 2020.

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As of March 31, 2020, we have the following interest rate swap agreements (collectively, the "Swap Agreements") (in millions):



Effective dates	Notional amount		Fixed rates
March 31, 2017 through March 31, 2022	$	200.0	2.08%
September 29, 2017 through September 30, 2021	$	200.0	1.69%
April 30, 2018 through April 30, 2023	$	250.0	2.61%
January 31, 2019 through January 31, 2023	$	300.0	2.65%

Under the terms of the Swap Agreements, we receive payments based on the 1-month LIBOR rate (approximately 0.99% as of March 31, 2020).

The Swap Agreements were designated as cash flow hedging instruments. A portion of the amount included in Accumulated other comprehensive loss is reclassified into Interest expense, net as a yield adjustment as interest is either paid or received on the hedged debt. 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 March 31, 2020, 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 March 31, 2020, 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 were no changes 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 quarter ended March 31, 2020 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. As of March 31, 2020, we have not identified any material effect to our internal control over financial reporting despite the fact that substantially all of our employees are working remotely due to the COVID-19 pandemic.

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Part II: OTHER INFORMATION

Item 1. Legal Proceedings

See discussion of legal proceedings in Note 13 — Commitments and Contingencies in Item 1 of 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

In addition to the significant risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2019, we identified the following additional risk during the first quarter of 2020. There have been no other material changes in our risk factors since the filing of our Annual Report on Form 10-K for the year ended December 31, 2019.

The extent to which health epidemics, including the current COVID-19 pandemic and measures taken in response thereto affect our business, results of operations, liquidity and financial conditions will depend on future developments, which are highly uncertain and are difficult to predict.

Our business and operations could be adversely affected by health epidemics, including the current COVID-19 pandemic, impacting the industries and communities in which we and our clients, suppliers and business partners operate.

Global health concerns relating to the COVID-19 pandemic and related government actions taken to reduce the spread of the virus have been weighing on the macroeconomic environment, and the pandemic has significantly increased economic uncertainty and reduced economic activity. Risks related to economic activity and the housing market are described in our risk factor titled “Because our revenues from clients in the mortgage lending industry are affected by the strength of the economy and the housing market generally, including the volume of real estate transactions, a change in any of these conditions could have a material adverse effect on us” in our Annual Report on Form 10-K for the year ended December 31, 2019.

The pandemic has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place or total lock-down orders and business limitations and shutdowns. Governments around the globe have taken steps to mitigate some of the more severe anticipated economic effects of the virus, but there can be no assurance that such steps will be effective or achieve their desired results in a timely fashion.

The pandemic has adversely affected and is likely to further adversely affect the operations of our clients, suppliers and business partners. On March 18, 2020, the U.S. Department of Housing and Urban Development ("HUD") and the Federal Housing Finance Agency ("FHFA") announced a 60-day moratorium on foreclosures and evictions. Likewise, the FHFA also announced forbearance programs for impacted borrowers, allowing mortgage payments to be suspended for up to 12 months. Managing the many aspects of forbearance programs mandated by the FHFA, HUD and the newly signed CARES Act may present operational challenges for many servicers of mortgage loans.

We may experience financial impacts due to a number of heightened risks, including:


•	lower foreclosure-related transactional revenues due to the mortgage loan foreclosure moratorium and mortgage loan forbearance plans offered as part of the CARES Act, which may have a negative effect on revenue growth;


•	clients' slow-down of implementations, which may have a negative effect on revenue growth;


•	increased risk of not meeting service level commitments under our client contracts due to government lock-down or other orders where it is not possible to provide certain client facing services from home or promptly transfer them to other locations, causing potential loss of revenues or increase in contractual penalties;


•	challenges to the availability and reliability of our data, solutions and services due to changes to normal operations, including the possibility of COVID-19 cases affecting our employees or affecting the employees of our clients or other third parties on which we depend;


•	an increased volume of unanticipated client, regulatory and other third party requests for information and support, or additional regulatory requirements, which could require additional resources and costs to address; and


•	increased risk of data corruption, cyber-based attacks or network security breaches as opportunistic threat actors continue to identify innovative methods of stealing sensitive information by relying on the urgency associated with a COVID-19 pandemic scenario.

These risks may remain prevalent for a significant period of time and may adversely affect our business, results of operations and financial condition even after the COVID-19 pandemic has subsided.

The spread of COVID-19 has caused us to modify our business practices, including restricting employee travel, developing social distancing plans for our employees and canceling physical participation in meetings, events and conferences, and we may take further actions as may be required by government authorities or as we determine are in the best interests of our employees, clients and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or will otherwise be satisfactory to government authorities.

The extent to which the COVID-19 pandemic affects our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its effect, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, we may continue to experience materially adverse effects to our business as a result of the virus’s economic effect, including the availability of credit, adverse effects on our liquidity and any recession that has occurred or may occur in the future.

There are no comparable events that provide guidance as to the effect the spread of COVID-19 may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on our business, our operations or the economy. However, the effects could have a material adverse effect on our business, financial condition and results of operations and heighten many of our known risks described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits



Exhibit
No.		Description
10.1		Form of Notice of Restricted Stock and Restricted Stock Award Agreement (Directors) (2020) under Black Knight, Inc. Amended and Restated 2015 Omnibus Incentive Plan (1)

10.2		Form of Notice of Restricted Stock and Restricted Stock Award Agreement (2020) under Black Knight, Inc. Amended and Restated 2015 Omnibus Incentive Plan (1)

10.3		Employment Agreement by and between LPS Management LLC and Shelley Leonard effective as of April 8, 2013 (1)

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.INS		Inline XBRL Instance Document*

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

104		Cover Page Interactive Data File formatted in Inline XBRL and contained in Exhibit 101

_________________________________________________

* The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

(1) A management or compensatory plan or arrangement required to be filed as an exhibit to this report pursuant to Item 601(b)(10)(ii) of Regulation S-K.

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.



		BLACK KNIGHT, INC. (registrant)
Date:	May 5, 2020	By:	/s/ Kirk T. Larsen
			Kirk T. Larsen
			Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date:	May 5, 2020	By:	/s/ Michele M. Meyers
			Michele M. Meyers
			Chief Accounting Officer and Treasurer (Principal Accounting Officer)

Exhibit 10.3

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (the “Agreement”) is effective as of April 8, 2013, (the “Effective Date”), by and between LPS MANAGEMENT LLC, a Delaware limited liability company (the “Company”), and SHELLEY LEONARD (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 (i) except as otherwise specifically provided in this Agreement, to terminate all prior agreements between the Company, and any of its affiliates, and Employee relating to the subject matter of this Agreement, (ii) to recognize Employee's significant contributions to the overall financial performance and success of the Company, (iii) to protect the Company's business interests through the addition of restrictive covenants, and (iv) to provide a single, integrated document which shall provide the basis for Employee's continued employment by the Company. In consideration of the execution of this Agreement and the termination of all such prior agreements (except to the extent otherwise specifically provided in this Agreement), the parties each release all rights and claims that she has or may have had arising under such prior agreements.

2.Employment and Duties. Subject to the terms and conditions of this Agreement, the Company employs Employee to serve as its Senior Vice President, Business Strategy. 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 Executive Vice President and Chief Information Officer (the “Designated Officer”). Employee shall devote substantially all of her business time, attention and effort to the performance of her duties hereunder and shall not engage in any business, profession or occupation, for compensation or otherwise without the express written consent of the Designated Officer, other than personal investment, charitable, or civic activities or other matters that do not conflict with Employee's duties.

3.Term. This Agreement shall commence on the Effective Date and, unless terminated as set forth in Section 9, continue through December 31, 2015. This Agreement shall be extended automatically for successive one (1) year periods (the initial period and any extensions being collectively referred to as the “Employment Term”), unless either party terminates this Agreement as of the end of the then-current period by giving written notice at least ninety (90) days prior to the end of that period, Notwithstanding any termination of this Agreement or Employee's employment, in addition to provisions of this Agreement to which Section 17 refers, Sections 9 and 10 shall remain in effect until all obligations and benefits that accrued prior to termination are satisfied.

4.Salary. During the Employment Term, Company shall pay Employee an annual base salary, before deducting all applicable withholdings, of no less than $300,000 per year, payable at the time and in the manner dictated by 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) at the discretion of the Designated Officer to reflect, among other matters, cost of living increases and performance results (such annual base salary, including any increases pursuant to this Section 4, the “Annual Base Salary”).

5.Other Compensation and Fringe Benefits. In addition to any executive bonus, pension, deferred compensation and long-term incentive plans which Company or an affiliate of Company may from time to time make available to Employee, Employee shall be entitled to the following during the Employment Term:


(a)	the standard Company benefits enjoyed by Company's other similarly situated executives as a group;


(b)	medical and other insurance coverage (for Employee and any covered dependents) provided by Company to its other similarly situated executives;

(c)

an annual incentive bonus opportunity under Company's annual incentive plan (“Annual Bonus Plan”) with such opportunity to be earned based upon attainment of performance objectives established by the Designated Officer (“Annual Bonus”). Employee's target and maximum Annual Bonus shall be designated on an annual basis by the Company (collectively, the target and maximum are referred to as the “Annual Bonus Opportunity”). In the event of the Company's failure to designate an Annual Bonus Opportunity by March 15th of the calendar year to which the Annual Bonus Opportunity relates, the target Annual Bonus for such year shall be not less than the target Annual Bonus for the preceding calendar year. The Annual Bonus, if any, shall be paid no later than the March 15th first following the calendar year to which the Annual Bonus relates. For all years during the Employment Term, the extent to which Employee has earned the Annual Bonus at any level shall be determined by the Designated Officer in his sole and absolute discretion; and


(d)	subject to approval by the Compensation Committee of the Board of Directors, Company shall grant to Employee from time to time restricted stock, restricted stock units, stock options, stock appreciation rights and/or other long-term incentive compensation under the Company's equity incentive plans.

6.Vacation. For and during each calendar year within the Employment Term, Employee shall be entitled to reasonable paid vacation periods consistent with Employee's position and in accordance with Company's standard policies, or as the Designated Officer may approve. In addition, Employee shall be entitled to such holidays consistent with Company's standard policies or as the Designated Officer may approve.

7.Expense Reimbursement. In addition to the compensation and benefits provided herein, Company shall, upon receipt of appropriate documentation, reimburse Employee each month for her reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses to the extent such reimbursement is permitted under Company’s expense reimbursement policy.

8.Indemnification. To the maximum extent permitted under applicable law, and in addition to any other indemnification to which Employee may be entitled under state statute or any articles of incorporation, bylaws, resolution, or agreement (but without duplication of payments with respect to indemnified amounts), Company hereby agrees to hold harmless and indemnify Employee to the full extent allowed under applicable law, including, but not limited to, holding harmless and indemnifying Employee against any and all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the Employee in connection with any threatened, pending, or completed action, lawsuit, or proceeding, whether civil, criminal, administrative, or investigative (including an action by or in the right of Company), to which the Employee is, was, or at any time becomes a party, or is threatened to be made a party, by reason of the fact that the Employee is, was, or at any time becomes a director, officer, employee or agent of Company, or is or was serving or at any time serves at the request of Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise. For purposes of clarity, under no circumstances shall the indemnification provided for in this Section 8 obligate Company to indemnify Employee against any expenses (including attorneys' fees), judgments, fines and/or amounts paid in settlement which relate to actions taken by Employee which were outside of or beyond the scope of her employment with Company or her position as a director of Company [or with respect to conduct by the Employee that is determined by a court of competent jurisdiction to be willful misconduct or grossly negligent].

9.Termination of Employment. Company or Employee may terminate Employee's employment at any time and for any reason in accordance with Subsection 9(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 Section 26. For purposes of this Agreement, a “Notice of Termination” shall mean a notice that indicates the Date of Termination (as that term is defined in Subsection 9(b)) and, with respect to a termination due to Cause (as that term is defined in Subsection 9(d)), Disability (as that term is defined in Subsection 9(e)) or Good Reason (as that term is defined in Subsection 9(f)), sets forth in reasonable detail the facts and circumstances that are alleged to provide a basis for such termination. A Notice of Termination from Company shall specify whether the termination is with or without Cause or due to Employee's Disability. A Notice of Termination from Employee for Good Reason must expressly specify that the termination is with 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 thirtieth (30th) day following the date the Notice of Termination is given for reasons other than Cause) or the date of Employee's death.


(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 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 Company that would otherwise constitute Good Reason), whether prior to or after the effective date of this Agreement; (ii) willful neglect of duties (other than due to a physical or mental impairment or due to an action or inaction directed by Company that would otherwise constitute Good Reason), whether prior to or after the effective date of this Agreement; (iii) conviction of, or pleading nolo contendere to, criminal or other illegal activities involving dishonesty; (iv) material breach of this Agreement; or (v) failure to materially cooperate with or impeding an investigation authorized by the Board. If the Company seeks to terminate Employee for Cause under Subsections 9(d)(i), (ii) or (v), the Notice of Termination shall provide for a period of sixty (60) days to cure the Cause detailed in the Notice of Termination under Subsection 9(d)(i) or (ii), or for a period of five (5) days to cure the Cause detailed in the Notice of Termination under Subsection 9(d)(v). In the event such Cause as stated in the Notice of Termination is not cured within the applicable cure period (which may be extended at the discretion of the Board), then the termination for Cause shall be effective at the end of the cure period.


(e)	Disability. For purposes of this Agreement, a termination based upon “Disability” means a termination by Company based upon Employee being determined disabled for purposes of long-term disability benefits under 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 during the Employment Term based upon the occurrence (without Employee's express written consent) of any of the following:


i.	a material diminution in Employee's Annual Base Salary or Annual Bonus Opportunity, except when replaced with another form of compensation of reasonable replacement value or as the result of an across the board reduction for similarly situated executives;


ii.	a material change in the geographic location of Employee's principal place of employment, which is currently Jacksonville, Florida (e.g., the Company has determined that a relocation of more than thirty-five (35) miles would constitute such a material change; or


iii.	a material breach by the Company of any of its obligations under this Agreement.

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 Company specifying the condition or event relied upon for such termination either within ninety (90) days of the initial existence of such event; and (2) Company fails to cure the condition or event constituting Good Reason within thirty (30) days following receipt of Employee's Notice of Termination.

10.Obligations of Company Upon Termination.


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

Company shall pay Employee the following (for the avoidance of doubt, the amounts payable under this Section 10(a)(i) shall be referred to collectively as 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.

Company shall pay Employee no later than March 15th 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 (based upon the target Annual Bonus Opportunity in the year in which the Date of Termination occurred, or the prior year if no target Annual Bonus Opportunity has yet been determined, and the actual satisfaction of the applicable performance measures, but ignoring any requirement under the Annual Bonus plan that Employee must be employed on the payment date), multiplied by the percentage of the calendar year completed before the Date of Termination;

iii.

Company shall pay Employee, beginning on the 60th day following the Date of Termination for a period of twelve (12) months and payable in accordance with the Company's standard payroll policies, an amount equal to 200% of Employee's 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); provided however, that in the event the Employee violates the Employee's obligations under Section 13 or 14 hereof at any point during such twelve (12) month period, the Employee shall forfeit any unpaid amounts under this Section l0(a)(iii);

iv.

All stock options, restricted stock and other equity-based incentive awards granted by Company that were outstanding but not vested as of the Date of Termination shall become immediately vested and/or payable, as the case may be, unless the equity incentive awards are based upon satisfaction of performance criteria, in which case they will vest or their restrictions shall lapse only pursuant to their express terms

(which may include the ability to meet the performance criteria following the termination of Employee's employment); and


v.	Company shall pay Employee on the sixtieth (60th) day following the Date of Termination a lump sum equal to twelve (12) times the full monthly premiums for COBRA coverage as in effect on the Employee's Date of Termination.


(b)	Termination by Company for Cause and by Employee without Good Reason. If Employee's employment is terminated by Company for Cause or by Employee without Good Reason, 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 due to death or Disability, Company shall pay Employee (or to Employee's estate or personal representative in the case of death), within thirty (30) days following termination of employment, a lump-sum payment equal to the sum of: (i) any Accrued Obligations; plus (ii) a prorated Annual Bonus based upon the target Annual Bonus opportunity in the year in which the Date of Termination occurred (or the prior year if no target Annual Bonus opportunity has yet been determined) multiplied by the percentage of the calendar year completed before the Date of Termination.

(d)

Six-Month Delay. To the extent Employee is a “specified employee,” as defined in Section 409A(a)(2)(B)(i)of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and other guidance promulgated thereunder and any elections made by the Company in accordance therewith, notwithstanding the timing of payment provided in any other Section of this Agreement, no payment, distribution or benefit under this Agreement that constitutes a distribution of deferred compensation (within the meaning of Treasury Regulation Section l.409A-1(b)) upon separation from service (within the meaning of Treasury Regulation Section l.409A-l(h)), after taking into account all available exemptions, that would otherwise be payable during the six month period after separation from service, will be made during such six month period, and any such payment, distribution or benefit will instead be paid on the first business day after such six-month period.

11.Change in Control.


(a)	Definition of Change in Control. For purposes of this Agreement, the term “Change in Control” shall mean any one of the following:

the acquisition, directly or indirectly, by any “person” (within the meaning of Section 3(a)(9) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and used in Sections 13(d) and 14(d) thereof) of “beneficial ownership” (within the meaning of Rule 13d-3 of the Exchange Act) of securities of Company possessing more than 50% of the total combined voting power of all outstanding securities of Company;

ii.

a merger or consolidation in which Company is not the surviving entity, except for a transaction in which the holders of the outstanding voting securities of Company immediately prior to such merger or consolidation hold, in the aggregate, securities possessing more than 50% of the total combined voting power of all outstanding voting securities of the surviving entity immediately after such merger or consolidation;


iii.	a reverse merger in which Company is the surviving entity but in which securities possessing more than 50% of the total combined voting power of all outstanding

voting securities of Company are transferred to or acquired by a person or persons different from the persons holding those securities immediately prior to such merger;

iv.

during any period of two (2) consecutive years during the Employment Term or any extensions thereof, individuals, who, at the beginning of such period, constitute the Board, cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period;

the sale, transfer or other disposition (in one transaction or a series of related transactions) of assets of Company that have a total fair market value equal to or more than one third of the total fair market value of all of the assets of Company immediately prior to such sale, transfer or other disposition, other than a sale, transfer or other disposition to an entity (x) which immediately following such sale, transfer or other disposition, owns, directly or indirectly, at least 50% of Company's outstanding voting securities or (y) 50% or more of whose outstanding voting securities is immediately following such sale, transfer or other disposition owned, directly or indirectly, by Company. For purposes of the foregoing clause, the sale of stock of a subsidiary of Company (or the assets of such subsidiary) shall be treated as a sale of assets of Company; or


vi.	Shareholder approval of the liquidation or dissolution of Company.

12.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.

13.Confidential Information. Employee acknowledges that she will occupy a position of trust and confidence and will have access to and learn substantial information about Company and its affiliates and their 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 Company and its affiliates. Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of Company and/or its affiliates, as the case may be. Employee will keep confidential, and will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to 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 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 13. Accordingly, Employee agrees that during the Employment Term and at all times thereafter she will not disclose, or permit or encourage anyone else to disclose, any such information, nor will he utilize any such information, either alone or with others, outside the scope of her duties and responsibilities with Company and its affiliates.

14.Non-Competition.

(a)

During Employment Term. Employee agrees that, during the Employment Term, she will devote such business time, attention and energies reasonably necessary to the diligent and faithful performance of the services to Company and its affiliates, and she will not engage in any way whatsoever, directly or indirectly, in any business that is a direct competitor with Company's or its affiliates principal business, nor solicit customers, suppliers or employees of Company or affiliates on behalf of, or in any other manner work for or assist any business which is a direct competitor with 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 she performs as an employee of Company, and Employee will not combine or conspire with any other employee of 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 Company and its affiliates as a result of her employment. The parties further acknowledge that the scope of business in which Company and its affiliates are engaged as of the Effective Date 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 Company and its affiliates. Accordingly, for a period of one (1) year after Employee's employment terminates for any reason whatsoever Employee agrees: (1) not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that directly competes with Company or its affiliates in their principal products and markets; 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 Company or an affiliate.

15.Return of Company Documents. Upon termination of the Employment Term, Employee shall return immediately to Company all records and documents of or pertaining to Company or its affiliates and shall not make or retain any copy or extract or any such record or document, or any other property of Company or its affiliates.

16.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 Company and its affiliates and not produced within the scope of Employee's employment hereunder, shall be the sole and exclusive property of Company. Employee shall, whenever requested by Company, execute and deliver any and all documents that 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 Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents, copyrights or applications.

17.Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that 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, it is agreed between and hereby acknowledged by the parties that, in the event of a breach by Employee of any of the obligations of this Agreement, Company shall have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel Employee to perform as agreed herein. Employee hereby acknowledges that obligations under Sections and Subsections 13, 14(b), 15, 16, 17 and 18 shall survive the termination of employment and be binding by their terms at all times subsequent to the termination of employment for the periods specified therein. Nothing herein shall in any way limit or exclude any other right granted by law or equity to Company.

18.Release. Notwithstanding any provision herein to the contrary, Company may require that, prior to payment of any amount or provision of any benefit under Section 10(a) (other than due to Employee's death), Employee shall have executed a complete release of Company and its affiliates and related parties in such form as is reasonably required by Company, and any waiting periods contained in such release shall have expired. With respect to any release required to receive payments owed pursuant to Section l0(a): (i) Company must provide Employee with the form of release no later than seven (7) days after the Date of Termination; (ii) the release must be signed by Employee and returned to Company effective and irrevocable, no later than fifty (50) days after the Date of Termination as applicable; and (iii) payments owed under Section 10(a) shall be paid on the sixtieth (60th) day following the Date of Termination, unless Section 10(a) provides that such payments shall be made on a later date. The Company shall not be required to make these termination payments in the absence of the execution by Employee of the release provided under this Section 18.

19.No Mitigation. 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 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.

20.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, except as expressly provided otherwise in this Agreement) 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 both parties to this Agreement.

21.Governing Law. The Employee acknowledges and agrees that the Company's headquarters is located in Jacksonville, Florida and that 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.

22.Successors. This Agreement may not be assigned by Employee. In addition to any obligations imposed by law upon any successor to Company, 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 Company, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Company would be required to perform it if no such succession had taken place. Failure of 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 Company, as well as any assignment of this Agreement by Company for that purpose. As used in this Agreement, “Company” shall mean 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.

23.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.

24.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, and the matter is litigated, the party prevailing on the majority of the significant issues as determined by the court and not a jury shall be promptly paid by the other party its reasonable legal fees, court costs, litigation expenses, all as determined by the court and not a jury, and such payment shall be made by the non-prevailing party no later than the end of the Employee's tax year following the Employee's tax year in which the payment amount becomes known and payable; provided, however, that on or after a Change in Control, and 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, 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 her behalf (such amounts collectively referred to as the “Reimbursed Amounts”); provided, further, that Employee shall reimburse 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 Company no later than ninety (90) days after the expense was incurred. The Reimbursed Amounts shall be paid by Company within ninety (90) days after receiving the request and all substantiating documents requested from Employee. The payment of Reimbursed Amounts during Employee's tax year will not impact the Reimbursed Amounts for any other taxable year. The rights under this Section 24 shall survive the termination of employment and this Agreement until the expiration of the applicable statute of limitations.

25.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 Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Company of the covenants in this Agreement.

26.Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered, when delivered by a reputable overnight courier, 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 Company:

Lender Processing Services, Inc.

601 Riverside Avenue

Jacksonville, Florida 32204

Attention: General Counsel

To Employee:

Shelley Leonard

27.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.

28.Tax Withholding. Company or an affiliate may deduct from all compensation and benefits payable under this Agreement any taxes or withholdings Company is required to deduct, pursuant to state, federal or local laws.

29.Code Section 409A. To the extent applicable, it is intended that this Agreement and any payment made hereunder shall comply with the requirements of Section 409A of the Code, and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service (“Code Section 409A”). For purposes of this Agreement, a termination of employment will be determined consistent with the rules relating to a “separation from service” as defined in Code Section 409A. To the extent any provision of this Agreement is ambiguous as to its compliance with Code Section 409A, the provision will be read in such a manner so that all payments hereunder comply with Code Section 409A. To the extent any payment under this Agreement may be classified as a “short-term deferral” within the meaning of Code Section 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Code Section 409A under another provision of Section 409A. Payments pursuant to Sections 5 and 10 hereof are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. Any reimbursement of expenses shall be paid no later that the last day of the calendar year following the year in which the expense was incurred and is not in exchange for another benefit. Any provision that would cause the Agreement or any payment hereof to fail to satisfy Code Section 409A shall have no force or effect until amended to comply with Code Section 409A, which amendment may be retroactive to the extent permitted by Code Section 409A.

[Signature page follows.]

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



	LPS MANAGEMENT LLC
	By:	/s/ Joseph M. Nackashi
	Name:	Joseph M. Nackashi
	Title:	EVP, CIO

	/s/ Shelley Leonard
	SHELLEY LEONARD



Name of Grantee:
Number of Shares of Restricted Stock Granted:
Effective Date of Grant:	February 18, 2020
Vesting and Period of Restriction:	Subject to the terms of the Plan and the Restricted Stock Award Agreement attached hereto, the Period of Restriction shall lapse, and the Shares shall vest and become free of the forfeiture provisions contained in the Restricted Stock Award Agreement, with respect to 100% of the shares on the first anniversary of the Effective Date of Grant.



Anniversary Date	% of Restricted Stock	Performance Restriction	Measurement Period	Vesting Date
First (1^st) anniversary of the Effective Date of Grant.	33.33%	Adjusted EBITDA equal to or greater than $583.4 million	January 1, 2020 through December 31, 2020	The later of the first (1st) Anniversary Date or the date the Compensation Committee determines the applicable Performance Restriction has been achieved.*
Second (2nd) anniversary of the Effective Date of Grant.	33.33%	Adjusted EBITDA equal to or greater than 2020 fiscal year Adjusted EBITDA	January 1, 2021 through December 31, 2021	The later of the second (2nd) Anniversary Date or the date the Compensation Committee determines the applicable Performance Restriction has been achieved.*
Third (3rd) anniversary of the Effective Date of Grant	33.34%	Adjusted EBITDA equal to or greater than 2021 fiscal year Adjusted EBITDA	January 1, 2022 through December 31, 2022	The later of the third (3rd) Anniversary Date or the date the Compensation Committee determines the applicable Performance Restriction has been achieved.*


*	The date the Committee determines the applicable Performance Restriction has been achieved shall be the date the Committee approves the achievement of the applicable Performance Restriction based upon a report from the Company’s Chief Financial Officer based upon the Company’s audited financial statements for the Measurement Period.


(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.



By:		/s/ Anthony M. Jabbour
		Anthony M. Jabbour Chief Executive Officer



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


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.



By:	/s/ Anthony M. Jabbour
	Anthony M. Jabbour
	Chief Executive Officer