Black Knight, Inc. - Annual Report: 2022 (Form 10-K)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

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Commission File No. 001-37394

Black Knight, Inc.

(Exact name of registrant as specified in its charter)

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(904) 854-5100

(Registrant’s telephone number, including area code)

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

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Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑     No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐     No ☑

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.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☑

The aggregate market value of the shares of Black Knight, Inc. common stock held by non-affiliates of the registrant as of June 30, 2022 was $9,847,744,920 based on the closing price of $65.39 as reported by the New York Stock Exchange.

As of February 24, 2023, there were 155,923,950 shares of Black Knight, Inc. common stock outstanding.

The information in Part III hereof is incorporated by reference to certain information from the registrant’s definitive proxy statement for the 2022 annual meeting of shareholders. The registrant intends to file the proxy statement within 120 days after the close of the fiscal year that is the subject of this Report.

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Table of Contents

BLACK KNIGHT, INC.

FORM 10-K

TABLE OF CONTENTS

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Statement Regarding Forward-Looking Information

The statements contained in this Annual Report on Form 10-K or in our other documents or in oral presentations or other statements made by our management 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 our expectations, hopes, intentions or strategies regarding the future. These statements relate to, among other things, future financial and operating results of Black Knight. In many cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "could," "potential" or "continue," or the negative of these terms and other comparable terminology. Actual results could differ materially from those anticipated in these statements as a result of a number of factors, including, but not limited to the following:

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See "Risk Factors" for a further description of these and other factors. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this Annual Report on Form 10-K. Any forward-looking statement made by us in this Annual Report on Form 10-K speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We are not under any obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise. You should carefully consider the possibility that actual results may differ materially from our forward-looking statements.

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Part I

Item 1.           Business

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

Overview

Black Knight is a premier provider of integrated, innovative, mission-critical, high-performance software solutions, data and analytics to the U.S. mortgage and real estate markets. Our mission is to transform the markets we serve by delivering innovative solutions that are integrated across the homeownership lifecycle and that result in realized efficiencies, reduced risk and new opportunities for our clients to help them achieve greater levels of success.

We believe our clients leverage our robust, integrated solutions across the entire homeownership lifecycle to help retain existing customers, gain new customers, mitigate risk and operate more efficiently. Our clients rely on our proven, comprehensive and scalable solutions and our unwavering commitment to delivering exceptional client support to achieve their strategic goals and better serve their customers.

We have a focused strategy of continuous innovation across our business, which is supported by acquisitions, and even more importantly, the integration of those acquisitions and our innovations into our broader ecosystem. Our ability to effectively manage our business and maintain a strong client base allows us to continually invest in our business, both to meet ever-changing industry requirements and to maintain our position as a leading provider of platforms for the mortgage and real estate markets.

Deep business and regulatory expertise along with a holistic view of the markets we serve allow us the privilege of being a trusted advisor to our clients, who range from the nation’s largest lenders and mortgage servicers to institutional portfolio managers and government entities, to individual real estate agents and mortgage brokers. Clients leverage our software ecosystem across a range of real estate and housing finance verticals through multiple digital channels, using our offerings to drive more business, reduce risk and deliver a best-in-class customer experience, all while operating more efficiently and cost-effectively.

We have long-standing relationships with our clients, a majority of whom enter into long-term contracts that include multiple, integrated products embedded into mission-critical processes. This speaks to the confidence our clients have in our solutions and our commitment to serve them. The contractual nature of our revenues and our client relationships make our revenues both highly visible and recurring in nature. Our scale and integrated ecosystem of solutions drive significant operating leverage and cross-sell opportunities, enabling our clients to continually benefit from new and greater operational efficiencies.

Overview of the Markets We Serve

The Black Knight ecosystem stretches across four core “pillar” verticals: mortgage loan servicing, mortgage loan origination, real estate and capital markets; with our data and analytics flowing throughout the interconnected ecosystem of solutions. As we integrate our innovations and acquired technologies, we are committed to continually improving the end consumer experience, driving further efficiencies for our clients and helping them to win new customers and retain existing customers.

Mortgage Loan Servicing

Once mortgage loans have been originated, the loans are onboarded to a servicing platform where servicers manage the loan and can provide borrowers and investors with information about those loans. Mortgage servicers (and sub-servicers) operate within a highly regulated industry segment and are responsible for overseeing the ongoing loan maintenance, payment collection, application process, escrow management, investor management, tax and insurance payments, etc. for approximately 66 million active first and second lien mortgage loans and lines of credit in the U.S.

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Mortgage servicing is typically a long-term relationship between the customer and the servicer; and, the customer’s servicing experience can have a direct impact on the servicer’s ability to retain loans in its portfolios.

The number of first lien mortgage loans being serviced in the U.S. remains relatively consistent even through housing and economic downturns and changes in interest rates. The number of second lien mortgage loans being serviced can fluctuate according to factors such as available, or “tappable,” equity levels, interest rates and individual portfolio appetite for such loans. Refer to the Business Trends and Conditions section of Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations for market data estimates for active first and second lien mortgage loans.

In times of economic stress, a servicer’s ability to manage their workload is often tested by distressed mortgages, defaults, foreclosure and bankruptcy actions. In such periods, loss mitigation, default processing, bankruptcy and more must be contended with, along with an ever-changing slate of regulatory requirements. The mortgage default process is long and complex and involves multiple parties, a significant exchange of data and documentation and extensive regulatory requirements. Innovative and trusted technology is essential in navigating this process efficiently and effectively.

Mortgage Origination

Mortgage origination is a complex process with multiple stages involving various parties, all of which are under high levels of regulatory scrutiny. Historically, many aspects of this process have been managed manually by lenders and other parties involved in the process, increasing the cost and complexity to originate a loan. The shift of consumer expectations and demands in recent years, which was accelerated by the pandemic, has created an increased demand for innovative solutions and the acceptance of digital technologies to meet the needs of market participants.

The U.S. mortgage origination market consists of both purchase and refinance loans, including cash-out refinances, and, to a lesser extent, second lien, equity-centric products such as home equity lines of credit (“HELOCs”). Participants in this market range from the largest U.S. banks, nonbanks and credit-union lenders; to independent and mid-sized banks; to wholesale and correspondent lenders; to mortgage brokerages and even the individual mortgage broker. Refer to the Business Trends and Conditions section of Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations for market data estimates for the number of mortgage loans originated.

Real Estate

The consumer journey to homeownership starts with identifying a property to purchase. The marketing, sales and purchase of real estate in the U.S. involves many participants. Needs exist for digital workflow, seamless data transfer between multiple sources and parties, and marketing and communication tools at the agent, broker and multiple listing service (“MLS”) levels.

Black Knight supports all participants in this process with technology to increase efficiencies, create new opportunities and manage complex workflows for all involved.

Capital Markets

The mortgage capital markets, both primary and secondary, play a critical role as providers of funding and liquidity that enable lenders to make home loans to borrowers. Mortgage loans are made possible in large part by market participants buying, selling or holding mortgage-backed securities (“MBS”) and loan portfolios.

Preeminent among capital market participants are the government-sponsored enterprises (“GSEs”), the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), who, along with the Government National Mortgage Association (“GNMA” or “Ginnie Mae”), the Federal Housing Administration (“FHA”) and the Veterans Administration (“VA”), provide back-stop guarantees to support market stability and help minimize systemic risk.

Market oversight is performed by federal and state regulators with the Federal Reserve, the Securities and Exchange Commission (“SEC”), the Federal Finance Housing Agency (“FHFA”), the Office of the Comptroller of the Currency

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(“OCC”) and the Consumer Financial Protection Board (“CFPB”) all playing major roles in ensuring market transparency, financial institution safety and soundness and consumer protection.

The informed investment in and trading of mortgage loans and MBS is dependent upon reliable, quality data at both the pool and loan level, plus robust analytics and the tools to use them effectively. An incredible amount of information gathering and assessing goes into making these investment decisions. Dealing with pools or portfolios of real estate or mortgage-related assets requires even more information. Loan-level mortgage performance, real estate price trends and credit-risk data are valuable and necessary insights needed by capital market participants to make informed decisions.

In the age of “big data,” this level of detailed information equates to many terabytes of data points, which can be an overwhelming amount of data to sift through and analyze without the right tools and solutions; however, that data can provide critical insights for those who can effectively decipher it.

Market Trends

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

Lenders increasingly focused on core operations. As a result of a decline in origination volumes and the increasing cost to originate a mortgage loan, we believe lenders have become more focused on their core operations, including ways to reduce or eliminate certain costs. According to the MBA Quarterly Performance Report as of November 21, 2022, the cost to originate a loan has more than doubled since 2008 and increased 22% in 2022 compared to 2021. We believe lenders are increasingly shifting from in-house solutions to third-party solutions that provide a more comprehensive and efficient solution. Lenders require these providers to deliver best-in-class solutions and deep domain expertise and to assist them in maintaining regulatory compliance.

Integral role of technology in the U.S. mortgage market. Over the past decade, homebuyers’ processes have become more digital, and 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. 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 and servicers. This includes an enhanced digital experience along with the application of artificial intelligence, robotic process automation and adaptive learning.

Heightened demand for enhanced transparency and analytic insight. As the U.S. mortgage loan market participants work to minimize 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 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 and servicers have become more focused on minimizing the risk of non-compliance with regulatory requirements and look for solutions that assist them in complying with their regulatory requirements. We expect this trend to continue as additional governmental programs and regulations have been 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 in light of an increased level of cybersecurity incidents. We expect the industry focus on privacy and data security to continue to increase.

Solutions for the Markets We Serve

Our business is organized into two segments: Software Solutions and Data and Analytics. Together they represent an integrated ecosystem that spans the entirety of the real estate and mortgage continuum, from homebuying and selling to loan origination, through loan servicing and capital markets and back again.

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The Black Knight ecosystem lets clients access a comprehensive, integrated software and workflow management solution set via multiple segment-specific digital channels. Enhanced by large mortgage-specific datasets and robust proprietary analytics, our ecosystem helps our clients achieve greater levels of success from a trusted provider that continually delivers innovative technologies across our ecosystem.

Software Solutions

Our Software Solutions segment includes proven and trusted platforms that facilitate, automate and enhance many mission-critical business processes across the mortgage loan lifecycle continuum. Our offerings help clients in this segment, primarily mortgage lenders, servicers and investors, reduce costs, improve operations and provide an exceptional customer experience. Our software solutions are developed to meet the current and future needs of the markets we serve. In developing and delivering our products and solutions, we leverage a combination of private cloud, public cloud, application programming interfaces (“APIs”) and a host of other technology-forward approaches to best meet the needs of our vast and strong client base.

As a result of our leadership, combined with our extensive knowledge of the mortgage industry and technology, we are uniquely positioned to drive innovation in this space and bring the digital revolution to mortgage servicing for both borrowers and servicers alike. While we relentlessly pursue the enhancement of the consumer experience throughout the real estate and mortgage continuum, we are equally focused on innovating on the back end for servicers as well.

Servicing Software Solutions

MSP^® is a SaaS solution that supports first lien mortgages and home equity loans and lines of credit, on a single platform. This complete, scalable, end-to-end system is used by servicers and sub-servicers to manage all servicing processes, including loan setup and maintenance, escrow administration, investor reporting, regulatory requirements and more. MSP^® helps servicers increase efficiency, reduce operating costs and improve risk mitigation for approximately 36 million active loans currently serviced on the system.

MSP^® serves as the core system of record and is enhanced with innovative digital solutions, all of which were developed using the most appropriate, forward-leaning technologies and are seamlessly integrated into the system of record. Servicing Digital^SM has seen tremendous adoption since its launch in 2018, with the majority of MSP^® clients now offering the white-labeled, consumer facing application to their customers.

Servicing Digital^SM is an interactive, user-friendly web and mobile solution for consumers that provides easy access to customized, timely information about their mortgages. This powerful application supports deeper customer relationships for our clients and engagement by enabling their customers to make mortgage payments and explore opportunities for refinancing and more, all from the convenience of the web or a mobile device. By providing value-added services and information to borrowers, Servicing Digital^SM helps improve customer retention and serves as a direct communication channel between servicer and borrower.

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Servicing Digital^SM is integrated with our Customer Service^SM solution, which allows our clients’ customer service representatives to have access to the same information and layout a customer sees to better facilitate successful interactions and outcomes, which is key to increasing borrower retention. We launched Developer Portal^SM in January 2023, which provides clients, third-party providers and their developers access to our growing catalog of APIs across the mortgage life cycle. APIs expose business functionality and data that are packaged into reusable services that follow industry standard protocols and conventions to allow ease of integration. Clients can use our APIs to rapidly embed additional functionality within their applications, driving intuitive and frictionless experiences.

Our default servicing solutions help simplify the complex process for loans that move into default, while supporting servicers with their compliance requirements. As part of this suite, we offer an advanced Loss Mitigation^SM solution to facilitate more efficient loss mitigation processes. This feature-rich, web-based solution supports industry-standard retention and liquidation workouts to streamline the loss mitigation process and reduce risk. It is also available to consumers through Servicing Digital^SM and uses advanced rules and logic to guide users through processes step-by-step, including validation points throughout the workflow, to reduce missed steps and overlooked information. When loans move through the loss-mitigation process and become non-performing loans, our suite of innovative default servicing solutions help servicers reduce cycle times, decrease operating costs and improve efficiencies throughout the bankruptcy, foreclosure and claims stages.

We also offer advanced technology to support the bankruptcy and foreclosure process, and more efficiently manage claims related to properties in foreclosure, as well as tools to support loss analysis, helping servicers make the right decisions at the right time.

Origination Software Solutions

Our Empower^® loan origination system (“LOS”) was developed to be hosted in a public or private cloud. The platform’s advanced automation capabilities, lights-out processing and seamless integrations with our other and third-party services help fulfill, streamline and improve upon the many pieces of the origination process. Integrated pipeline analytics, AI-powered underwriter efficiency tools, fee services, settlement services fulfillment, an advanced eClosing platform and more all combine to create a frictionless process that benefits both borrower and lender alike. In recognition of the dynamic nature of mortgage markets, Empower^® offers maximum flexibility by giving lenders the ability to originate first lien mortgages, second lien mortgage loans and home equity lines of credit, and supporting retail, consumer‐direct, home equity, correspondent, wholesale and assumption channels on a single, unified platform.

We also offer product, pricing and eligibility (PPE) engines for brokers and lenders that allow lenders and brokers to provide borrowers with loan product and pricing options to meet the consumer’s needs. Our Optimal Blue PPE serves the retail market by providing lenders with access to hundreds of investors and the mortgage products they offer.

Our Borrower Digital^SM solution enables lenders to offer our AI-enhanced digital point of sale to walk their loan applicants through a friendly and intuitive prequalification/qualification Q&A, with seamless data transfer to lender systems. Customer engagement is active, immediate and targeted, and presents a smooth front end to a process that will carry the loan applicant, and a single source/repository of their data, all the way through to closing and beyond. We also drive the full origination and underwriting workflow for lenders of all sizes via our Empower^® LOS.

Additionally, our digital loan officer technology makes the day-to-day lives of loan officers more productive through vastly simplified workflows while also helping them provide an exceptional level of service to loan applicants. With the same anytime, anywhere convenience provided by all of our consumer-facing digital products, Loan Officer Digital^SM facilitates seamless interaction between the loan officer and loan applicant throughout the entire process, from application to close. With the loan applicant engaged via the Borrower Digital^SM interface, Loan Officer Digital^SM enables loan officers to remain connected with their customers, providing timely updates and assistance when needed. Again, all data is captured and can be shared with our Empower^® LOS.

After loan approval, loan applicants can view their loan status, review their closing package and eSign documents using our Expedite^® Close solution. Loan applicants can also leverage our DocVerify^® remote online notarization solution, making fully digital closings possible where legally permissible, with all activity tracked and logged for audit purposes.

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Recent trends show that consumers have been turning to mortgage brokers more often than before. Our LoanCatcher^® cloud-based LOS, designed specifically for the needs of brokers, is both innovative and easy-to-use. It gives brokers affordable access to a robust software solution, integrated with the data and customer support solutions they need to provide exceptional levels of service to their customers.

In support of our focus on integration, LoanCatcher^® is integrated with our LoanSifter^® PPE and is also designed to meet the very specific needs of the broker community by providing access to hundreds of investors and thousands of loan products. All of this combined with system-agnostic delivery to whatever LOS their wholesale lender partners are using provides brokers with a truly end-to-end solution to manage and grow their businesses.

Generating and fostering new leads is critical to growing a lender’s business. Creating customers for life is equally as important and becomes increasingly more important as interest rates rise. To help create long-term customers and earn repeat business, we offer lenders the Surefire^SM solution, which helps lenders close more loans by providing communications the lenders can send through an automated system to their customers throughout the mortgage process. The Surefire^SM system distributes leads, nurtures them to application, educates and informs borrowers throughout the application and funding process, and provides omni-channel outreach post-close designed to capture repeat business. We believe the key to cultivating lifelong clients is keeping in touch, and Surefire^SM’s milestone tracking allows users to reach customers with personalized, relevant content.

Our CompassEdge hedging and trading platform supports originators of every size by providing sophisticated pipeline risk management tools and analytics, as well as dynamic loan sale and mortgage servicing rights valuation functionality.

Data and Analytics

Our Data and Analytics segment is comprised of our extensive data offerings, proven credit and prepayment models, custom and proprietary analytics, valuation and MLS solutions and much more. In addition, the integration of data and insights from solutions in this segment informs, supports and enhances our other software solutions to help lenders and servicers make more informed decisions, improve performance, identify and predict risk and generate more qualified leads.

We have aggregated one of the largest residential real estate data sets currently available in the U.S. This data set is derived from both proprietary and public record sources. From nationwide MLS listings to our industry-leading McDash^® loan-level mortgage loan performance data, to public property records covering more than 99.9% of the U.S. population, our datasets are indispensable for those working with housing assets.

Leveraging this data, subject to any applicable restrictions, alongside our long history and deep understanding of the housing market, we have created detailed data solutions that assist in portfolio management, valuations, property records, lead generation and improved risk analysis for all aspects of servicing, origination, real estate and capital markets. In addition, we deliver data and analytics to clients in real estate, title insurance, MLS and other verticals that rely on property data-centric solutions to make informed decisions and run their businesses.

We also offer a highly accurate behavioral model built on our datasets and other third-party sources that forecasts prepayments, default, delinquencies and losses on residential mortgage loans and securities. Used for portfolio analysis, our AFT^SM solution can serve as a powerful risk mitigation tool as well as a key component of any data-driven retention efforts.

Accurate valuations are critical to any real-estate transaction. Our automated valuation models (“AVMs”) are built on the foundation of our property data, proprietary information, proven methodologies and advanced user and performance testing and deliver exceptionally reliable automated property valuations.

To better understand the housing market, we also leverage MLS and property data to provide near-real-time daily data views of the housing market, looking at home prices, inventory levels, days on market and other key indicators at the state, core based statistical areas and zip code levels.

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We also provide data solutions that enable our clients to analyze big data sets through the synergistic convenience of a single data science workspace. Our cloud-based enterprise data and analytics solution, RAP^®, is an interactive data science platform that allows clients to quickly aggregate data from our extensive mortgage and housing data marketplace with their own data sources to execute both custom and proprietary queries.

Our real estate focused clients leverage our market-leading software solution for regional MLS associations to manage property listings. The platform also enables membership management, provides tools for collaboration with loan officers and other affiliates and marketing tools to effectively meet dynamic market challenges.

Focus on Value-Driven Innovation

The value our clients place on innovation can be seen in the adoption rates of the next-gen products we have delivered. When developing and delivering our products, we leverage a combination of private cloud, public cloud, APIs and a host of other technology-forward options that allow us to deliver innovative solutions to market quickly in response to address our clients’ biggest challenges.

Our solutions are designed to be scalable, secure, flexible, standards-based and web-connected for easy use. Further, we have a proven history of bringing solutions to market quickly due to investments we have made in integrating and streamlining our software and development processes.

Our Competitive Strengths

We believe our competitive strengths include the following:

Market leadership with comprehensive and integrated solutions. We are a leading provider of comprehensive and integrated solutions for the markets we serve. This leadership position is the result of strong client relationships, our knowledgeable employees who are focused on delivering superior solutions and support and delivering innovative solutions.

We have used this insight to develop a comprehensive, integrated ecosystem of proprietary software, data and analytics solutions to automate many of the mortgage and real estate markets’ mission-critical business processes. These integrated solutions reduce manual processes, help improve organizational compliance and mitigate risk, and ultimately deliver significant cost savings to our clients.

Broad and deep client relationships with significant recurring revenues. We have long-standing, relationships with many of our clients. We frequently enter into long-term contracts with our software solutions clients that contain a base subscription fee with additional fees that are activity-based. Our products are typically embedded within our clients’ mission-critical workflow and decision-making processes across various parts of their organizations.

Extensive data assets and analytics capabilities. We develop and maintain large, accurate and comprehensive data sets on the real estate and mortgage markets that we believe are competitively differentiated. Our unique data sets provide a combination of public and proprietary data, and each of our data records features many attributes. Our data scientists bring comprehensive analytical capabilities to bear against these data sets, subject to any applicable use restrictions, to create highly customized reports. These reports include models of customer behavior for originators and servicers, portfolio analytics for capital markets and government agencies and proprietary market insights for real estate market participants. As mentioned, our data and analytics capabilities are also embedded into our software solutions and workflow products to provide actionable insights.

Scalable and cost-effective operating model. Our market position, hosted software solutions and large client base have allowed us to develop a highly attractive and scalable operating model that provides us with significant benefits. Our scale and operating leverage allow us to add clients to our existing platforms with limited incremental cost. By leveraging our scale and market position, we can make cost-effective investments in our software solutions to assist with complex regulatory and compliance requirements, which we believe increases our value proposition to clients.

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Our Strategy

Our comprehensive integrated solutions ecosystem; unique, robust data and analytic capabilities; differentiated business model; broad and deep client relationships; and other competitive strengths put us in a very strong position to pursue multiple avenues for growth opportunities. We intend to continue to expand and grow our business through the following key strategies:

Win new clients. We intend to attract new clients by demonstrating the value proposition provided by our software and comprehensive solutions offering. In addition to top tier mortgage loan originators and servicers, where we have had and continue to have success, we believe there continues to be a significant opportunity to penetrate the mid-tier mortgage loan originators and servicers, as well as mortgage broker, markets. We believe these institutions can benefit from our proven solutions suite to address complex regulatory requirements and compete more effectively in the evolving mortgage loan market. We intend to continue to pursue all of these channels and benefit from the low incremental cost of adding new clients to our scalable applications and infrastructure.

Cross-sell existing products. The Black Knight ecosystem offers a wide variety of opportunities for existing clients to reap further benefits when they increase their use of our solutions across the real estate and mortgage continuum through integrations and seamless data sharing. It therefore also represents a substantial opportunity for growth as we seek to assist our clients in realizing the value of additional offerings and the benefits they provide. We intend to broaden and deepen existing client relationships through cross sales of solutions, data and analytics that reveal opportunity for client-side improvement of one form or another. We aim to help our clients see the true benefit of our fully integrated solutions ecosystem and the compound value of leveraging multiple solutions simultaneously. Helping our clients better focus on their core businesses and customers will put us in a better position to expand those existing relationships while adding value.

Solution development and innovation. Our long-term vision is to continue to lead through innovation and to maintain our leadership role in providing software, data and analytics to the mortgage and real estate markets. We intend to continue to innovate with urgency and integrate new solutions with our platforms in ways that bring the most value to our clients and their customers. We have a strong track record of introducing and developing new solutions that are tailored to specific industry trends and enhance our clients’ core operating functions. By working in partnership with key clients, we have been able to develop and market new and advanced solutions that meet the evolving demands of the mortgage and consumer loan, real estate and capital markets verticals. In addition, we will continue to develop and leverage insights from our large public and proprietary data assets to further improve our client value proposition.

Selectively pursue acquisitions. The core focus of our strategy is to grow organically. However, we may selectively evaluate acquisition opportunities that would allow us to expand our footprint, broaden our client base and deepen our product and service offerings. We believe there are meaningful benefits that result from acquiring companies that provide best-in-class single point solutions. Integrating and cross selling these point solutions into our broader client base and integrating acquisitions into our efficient operating environment would potentially result in revenues and cost synergies. Additionally, new directions for product development often materialize when acquired companies are integrated into the wider ecosystem.

Our Clients

We provide solutions to financial institutions, mortgage lenders and servicers, mortgage brokers, investors, attorneys, trustees and real estate professionals.

The U.S. mortgage loan industry is concentrated among the top 25 institutions, and our most significant and long-term relationships tend to follow the industry landscape. The number of solutions being used by each client in this category continues to grow, as the compounded value of multiple of our products becomes clearer over time. Because of the depth of these relationships, we derive a significant portion of our revenues from our largest clients.

For the year ended December 31, 2022, our five largest clients accounted for approximately 23% of our consolidated revenues and approximately 25% of our Software Solutions segment revenues. However, the revenues in each case are

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spread across a range of services and are subject to multiple, separate contracts. Although the diversity of the services we provide to each of these clients reduces the risk that we would lose all of the revenues associated with any of these clients, a significant deterioration in our relationships with or the loss of any one or more of these clients could have a material effect on our results of operations or financial condition. See Item 1A. Risk Factors of Part I of this Report.

Sales and Marketing

Our sales and marketing efforts are focused on generating new leads to both securing new clients in our target markets, as well as cross sell our integrated solutions ecosystem to existing clients.

Regardless of the market we are serving, our sales and marketing strategy remains the same: communicate how our solutions address the challenges facing a specific market and deliver those messages where the companies we serve are engaging. We establish relationships, deliver proven solutions and continually build trust. Our experienced sales personnel are subject matter experts in our services, the needs of our clients and the markets we serve.

We are able to effectively communicate the value of our ecosystem by developing and delivering solutions that move the needle by helping our clients achieve greater levels of success. We know that references from colleagues in the industry are one of the top reasons a provider is selected, so we remain committed to delivering powerful solutions that cultivate those references.

Our relationships with so many different companies across the real estate and mortgage sectors provide us with a unique opportunity to gain insight into trends and challenges facing the industry. We couple that with thoughtful analysis of our vast data assets to develop solutions and provide industry insights others cannot. We are also focused on sharing that thought leadership with our clients, the media, the public and our entire industry.

To understand what will help our various and disparate market segments succeed, we also conduct market research through conversations with clients and prospects, market surveys, industry reports and discussions with other industry leaders. Likewise, we also host client user groups and participate in user forums to understand the needs and concerns of the everyday users of our solutions.

We deliver our messages where the companies we serve are congregating, through tradeshows, events, publications, digital channels, etc., and engage them in conversations that highlight the many differentiators/competitive advantages we provide through our continual innovations. We engage with existing clients on a regular basis and continually focus on engaging with prospective clients. Given the broad range of solutions we offer, we have significant opportunity to expand our sales to our existing client base through cross-selling efforts.

We have a core team of account managers who cross-sell solutions to existing clients at the top-tier and mid-tier U.S. mortgage loan originators and servicers, as well as a number of other financial institutions, investors and real estate professionals. We engage in strategic account reviews, during which our executives share their knowledge of clients and the market to determine the best sales approach on a client-by-client basis. As a result, we believe we have created an effective cross-selling culture within our organization.

Research and Development

Our research and development activities are core to our corporate mission of transforming the industry through innovation. As such, they relate to the design, development, integration and enhancement of the software applications that make up our solution ecosystem. We expect to continue our practice of investing an appropriate level of resources to maintain, enhance and extend the functionality of our existing proprietary systems and software applications; to develop new and innovative systems and software applications in response to the needs of our clients as well as market and regulatory conditions and to enhance the capabilities of the ecosystem infrastructure. We work with our clients to determine the appropriate timing and approach to introducing technology or infrastructure changes to our applications and services.

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Patents, Trademarks and Other Intellectual Property

We rely on a combination of contractual restrictions, internal security practices and copyright and trade secret laws to establish and protect our software, technology, data and expertise. Further, we have developed strong brand recognition, which has helped us accumulate goodwill in the marketplace, and we rely on the above to protect our rights in that area. We intend to continue our policy of taking all measures we deem necessary to protect our copyright, trade secret and trademark rights.

Competition

The multiple business verticals in which we engage are highly competitive. We believe that compounded benefits of our integrated ecosystem of software and data and analytics solutions represent a value proposition that is strong and wholly unique to us. Our economies of scale in the mortgage loan origination and servicing markets also provide us with a distinct competitive advantage in each of these categories. Based on our knowledge of the industry and competitors, we believe that no single competitor is capable of delivering the depth and breadth of solutions we are able to offer.

Competitive factors in processing businesses include the quality of the technology-based application or service, application features and functions, ease of delivery and integration, ability of the provider to maintain, enhance and support the applications or services and pricing.

Software Solutions. Our Software Solutions segment competes with our clients’ internal technology departments and other third-party providers of similar systems. Competitive factors include the quality of the technology-based application or service, application features and functions, ease of delivery and integration, ability of the provider to maintain, enhance and support the applications or services, client support and pricing. We believe that our ability to deliver proven and integrated software solutions, the adoption rate of our solutions, our focus on supporting our clients on a daily basis and the economies of scale we offer in the mortgage loan processing business provide us with a competitive advantage in each of these categories.

Data and Analytics. In our Data and Analytics segment, we compete primarily with third-party providers of similar data assets, including certain niche providers, and in-house capabilities. We compete based on the breadth and depth of our data; the exclusive nature of some of our key data sets; robust proprietary analytics and the capabilities to produce highly customized reports. We believe that the quality of the data we offer is distinguished by the broad range of our data sources, including non-public sources; the volume of records we maintain; our ability to integrate our data and analytics across our ecosystem; and the ability to leverage our market leading position in the mortgage loan origination and servicing industries.

Government Regulations

Various aspects of our businesses are subject to federal and state regulations. Our failure to comply with any applicable laws and regulations could result in restrictions on our ability to provide certain services, as well as the possible imposition of civil fines and criminal penalties.

As a provider of electronic data processing to financial institutions, such as banks and credit unions, we are subject to regulatory oversight and examination by the Federal Financial Institutions Examination Council ("FFIEC"), an interagency body of the Federal Reserve Board ("FRB"), the CFPB, the federal banking agencies and various other federal and state regulatory authorities. We also may be subject to possible review by state agencies that regulate banks in each state in which we conduct our electronic processing activities.

Our financial institution clients are required to comply with various privacy laws and regulations under state and federal law, including the Gramm-Leach-Bliley Act. These laws and regulations place restrictions on the use of non-public personal information. All financial institutions must disclose detailed privacy policies to their customers and offer them the opportunity to direct the financial institution not to share information with third parties. The regulations, however, permit financial institutions to share information with non-affiliated parties who perform services for the financial institutions. As a provider of services to financial institutions, we are required to comply with the same privacy regulations

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and are generally bound by the same limitations on disclosure of the information received from our clients as those that apply to the financial institutions themselves.

Many consumer advocates, privacy advocates and government regulators believe that existing laws and regulations do not adequately protect privacy or ensure the accuracy of consumer-related data. As a result, multiple consumer privacy laws have been implemented at the state level which regulate the acquisition, dissemination, and commercial use of personal information. These consumer privacy laws include the California Consumer Privacy Act (“CCPA”), as modified by the California Privacy Rights Act (“CPRA”) which was effective January 1, 2023; the Virginia Consumer Data Protection Act (“VCDPA”) which was effective January 1, 2023; the Colorado Privacy Act (“CPA”) which will be effective July 1, 2023; the Connecticut Data Privacy Act (“CTDPA”) which will be effective July 1, 2023; and the Utah Consumer Privacy Act (“UCPA”) which will be effective December 31, 2023. Generally, these laws seek to implement further restrictions on the acquisition, dissemination, and commercial use of personal information and also contemplate requirements relative to data accuracy, the ability of consumers to opt out of certain processing of personal information, the right to access personal information and to obtain a copy, and the right to delete personal information in certain circumstances. These laws are directly applicable to our clients as well as to us in certain circumstances and are applicable to us in a reduced capacity when we act as service providers to our clients.  

Laws such as the Vermont Act Relating to Data Brokers and Consumer Protection (the “Vermont Data Broker Law”) also place restrictions and requirements on the use of publicly available data, and laws such as the New York Department of Financial Services Cybersecurity Requirements for Financial Services Companies (“NY DFS Cybersecurity Regulation”) provide for certain security requirements surrounding the collection and maintenance of certain business and consumer nonpublic personal information.

Increased scrutiny of all parties involved in the mortgage loan industry by governmental authorities has included federal and state government review of all aspects of the mortgage lending business, including an increased legislative and regulatory focus on consumer protection practices. Future legislative or regulatory changes are difficult to predict and new laws or regulations that may be implemented by the CFPB or other regulatory bodies may require us to change our business practices or cause us to incur increased costs to comply.

Information Technology and Security

We are highly dependent on information technology networks and systems to securely process, transmit and store electronic information. Attacks on information technology systems continue to grow in frequency, complexity and sophistication and we expect this trend to continue. Such attacks have become a point of focus for individuals, businesses and governmental entities. These attacks can create system disruptions, shutdowns or unauthorized disclosure of confidential information, including non-public personal information of consumers and proprietary business information. Refer to the "Risks Related to Information Security" section of Item 1A. Risk Factors for additional information.

We protect our data assets by providing centralized security solutions and enforcing a defense-in-depth, centralized model that includes deterring, detecting, preventing, analyzing and containing security incidents. We focus on all areas of cybersecurity including threat and vulnerability management, security monitoring, identity and access management, phishing awareness, risk oversight, third-party risk management, disaster recovery and continuity management. We make strategic investments in information security to protect our clients and our information systems. This includes both capital expenditures and operating expenses for hardware, software, personnel and consulting services.

As our primary solutions and services evolve, we apply a comprehensive approach to the mitigation of identified security risks. We have established policies, including those related to privacy, information security and cybersecurity, and we employ a broad and diversified set of risk monitoring and risk mitigation techniques.

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Human Capital Management

We power the markets we serve by delivering innovative, mission-critical solutions. Our employees are a key factor in our success. Our most important priorities are the health and safety of our employees and helping the communities where we work and live.

We are passionate about giving our employees the tools to equip them for success in their careers, providing the health and wellness benefits and other online resources needed for physical, mental and social well-being, and delivering on diversity and inclusion initiatives to let every employee know they are valued and respected.

We realize our individual differences are what strengthen us collectively. We are committed to supporting a culture that is representative of the unique values, opinions, cultures and needs of our employees, clients and communities. Through internal programs, including employee training and leadership development, affinity groups, comprehensive benefits and a hands-on leadership team, we support our employees throughout their career.

We strive to attract and retain the most talented employees in the industry by offering competitive compensation and investing in our employees to help them achieve goals inside and outside of the office.

As of December 31, 2022, we had approximately 6,100 employees. None of our workforce is unionized. We have not experienced any work stoppages, and we consider our relations with employees to be good.

Recent Developments

Refer to the Recent Developments section in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information on the proposed ICE Transaction as well as the February 2022 Optimal Blue transaction and the January 2023 TitlePoint transaction.

Additional Information

Our website address is www.blackknightinc.com. We make available free of charge on or through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission ("SEC"). However, the information found on our website is not part of this or any other report.

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Item 1A.           Risk Factors

In addition to the normal risks of business, we are subject to significant risks and uncertainties, including those listed below and others described elsewhere in this Annual Report on Form 10-K. Any of the risks described herein could result in a significant or material adverse effect on our results of operations or financial condition.

Summary

The following summarizes some of the key risks and uncertainties that could materially adversely affect us. You should read this summary together with the more detailed description of each risk factor contained below.

Risk Related to the Proposed Merger with Intercontinental Exchange, Inc. (“ICE”)

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Business and Industry

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Risks Related to Our Investment in DNB

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Risks Related to Cybersecurity and Data Privacy

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Risk Related to Our Structure

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General Risk Factors

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Risks Related to the Proposed Merger with ICE

Because the market price of ICE common stock may fluctuate, holders of our common stock cannot be certain of the market value of the consideration they will receive in the Merger.

Pursuant to and subject to the terms of the Agreement and Plan of Merger dated as of May 4, 2022 (the “Merger Agreement”) with ICE, a wholly-owned subsidiary of ICE (“Sub”) will merge with and into Black Knight with Black Knight surviving as a wholly-owned subsidiary of ICE (the “Merger”). At the effective time of the Merger (the “Effective Time”), each share of our common stock issued and outstanding immediately prior to the Effective Time (other than shares of our common stock held by us as treasury stock, any of our subsidiaries (other than with respect to the Black Knight Employee Stock Purchase Plan), by ICE or any of ICE’s subsidiaries (including Sub), or by any holder who has properly exercised and perfected such holder’s demand for appraisal rights under Section 262 of the General Corporation Law of the State of Delaware and not effectively withdrawn or lost such holder’s rights to appraisal (collectively, “Excluded Shares”)) will be converted into the right to receive, at the election of the holder thereof, the following consideration (the “Merger Consideration”):

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The election right for the holders of shares of our common stock will be subject to proration in accordance with the terms of the Merger Agreement such that (a) the total number of shares of our common stock to be converted into the right to receive the Per Share Cash Consideration will be equal to the quotient, rounded down to the nearest whole share, of $10,505,000,000 divided by the Per Share Cash Consideration and (b) all shares of our common stock not receiving the Per Share Cash Consideration (other than Excluded Shares) will be converted into the right to receive the Per Share Stock Consideration.

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This Share Ratio is fixed and will not be adjusted for changes in the market price of either ICE common stock or our common stock. Changes in the price of ICE common stock prior to the Merger will affect the value that holders of our common stock will receive in the Merger. We and ICE are not permitted to terminate the Merger Agreement as a result, in and of itself, of any increase or decrease in the market price of ICE common stock or our common stock.

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There is a time lapse between the date on which our stockholders voted to approve the Merger Agreement at the special meeting and the date on which our stockholders entitled to receive the Merger Consideration actually receive such consideration. The market value of ICE common stock may fluctuate during this period as a result of a variety of factors, including general market and economic conditions, regulatory considerations, including changes in U.S. monetary policy and its effect on global financial markets and on interest rates, changes in ICE’s or our business, operations and prospects, the global coronavirus pandemic and the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on ICE, us or the customers or other constituencies of ICE or us, many of which factors are beyond ICE’s or our control. Therefore, at the time our stockholders approved the Merger Agreement at the special meeting, they did not know the market value of the consideration to be received by holders of our common stock at the Effective Time of the Merger.

The Merger will not be completed unless important conditions are satisfied or waived.

Specified conditions set forth in the Merger Agreement must be satisfied or waived to complete the Merger. If the conditions are not satisfied or, to the extent permitted by law, waived, the Merger will not occur or will be delayed, and we and ICE may lose some or all of the intended benefits of the Merger. The following conditions must be satisfied or, to the extent permitted by law, waived before we and ICE are obligated to complete the Merger: (i) the adoption of the Merger Agreement by the affirmative vote of holders of a majority of the outstanding shares of our common stock entitled to vote thereon at the special meeting (this vote was obtained at the special meeting on September 21, 2022), (ii) the expiration or early termination of the waiting period applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”), (iii) the absence of any law, injunction, order or other judgment, in each case whether temporary, preliminary or permanent, that is in effect and restrains, enjoins or otherwise prohibits the consummation of the Merger, (iv) the effectiveness of the registration statement on Form S-4 filed by ICE to register the shares of ICE common stock to be issued in the Merger (the registration statement was declared effective by the SEC on August 19, 2022), (v) approval for listing on the NYSE of the shares of ICE common stock to be issued in the Merger, (vi) compliance by ICE and us in all material respects with their respective obligations under the Merger Agreement that are required to be performed or complied with by the time of the closing and (vii) subject in most cases to exceptions that do not rise to the level of a Material Adverse Effect or a Parent Material Adverse Effect (each as defined in the Merger

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Agreement), the accuracy of representations and warranties made by us, respectively, in the Merger Agreement. The respective obligations of ICE and us to consummate the Merger are also subject to there not having occurred since the date of the Merger Agreement an event that has had or would reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect or a Material Adverse Effect, respectively.

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If the Merger is not completed, each of ICE’s and our ongoing businesses, financial condition, financial results and stock price may be materially and adversely affected and, without realizing any of the benefits of having completed the Merger, ICE and we will be subject to a number of risks, including the following:

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Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated, that could have an adverse effect on ICE following the Merger or that are otherwise unacceptable to ICE.

Completion of the Merger is conditioned on, among other things, the expiration or early termination of the waiting period applicable to the consummation of the Merger under the HSR Act. There can be no assurance that this condition to the completion of the Merger will be satisfied on a timely basis or at all and there can be no assurance that, if regulatory approvals are granted, they will not result in the imposition of conditions, limitations, obligations or restrictions that have the effect of preventing the completion of any of the transactions contemplated by the Merger Agreement, imposing additional material costs on or materially limiting the revenues of ICE following the Merger or otherwise reducing the anticipated benefits of the Merger, or result in the delay or abandonment of the Merger.

Under the Merger Agreement, ICE and we have agreed to use our respective reasonable best efforts to cause the transactions contemplated by the Merger Agreement to be consummated as soon as practicable and to obtain all approvals from any governmental entity or third party that are necessary, proper or advisable to consummate the Merger. In particular, each party has agreed to use its reasonable best efforts to take promptly any and all steps necessary to avoid, eliminate or resolve each and every impediment and obtain all clearances, consents, approvals and waivers under U.S. antitrust laws so as to enable the parties to close the Merger as soon as practicable.

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 The Merger Agreement limits our ability to pursue alternatives to the Merger and may discourage other companies from trying to acquire us.

The Merger Agreement contains covenants that restrict our ability to, directly or indirectly, solicit, initiate, knowingly facilitate, knowingly encourage or knowingly induce any acquisition proposal, engage in any discussions or negotiations with any person relating to any takeover proposal, or provide any confidential or nonpublic information or data to any person relating to any takeover proposal, subject to certain exceptions. In addition, subject to certain exceptions, our Board of Directors was required to recommend that our stockholders adopt the Merger Agreement.

If the Merger Agreement is terminated under certain circumstances, we may be required to pay a termination fee of $398 million to ICE.

These provisions could discourage a potential third-party acquiror or merger partner that might have an interest in acquiring all or a significant portion of us or pursuing an alternative transaction from considering or proposing such a transaction.

If the Merger Agreement is terminated and we determine to seek another business combination, we may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Merger Agreement.

The Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed, which could negatively affect us.

The Merger Agreement is subject to a number of conditions that must be satisfied or waived in order to complete the Merger. These conditions to the closing of the Merger may not be satisfied in a timely manner or at all, and, accordingly, the Merger may be delayed or may not be completed. In addition, if the Merger is not completed by the outside date, either ICE or we may choose not to proceed with the Merger, and the parties can mutually decide to terminate the Merger Agreement at any time. In addition, ICE or we may elect to terminate the Merger Agreement in certain other circumstances as set forth in the Merger Agreement.

If the Merger Agreement is terminated, there may be various consequences. For example, our business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the Merger. Additionally, if the Merger Agreement is terminated, the market price of our common stock could decline to the extent that the current market prices reflect a market assumption that the Merger will be completed. If the Merger Agreement is terminated under certain circumstances, we may be required to pay a termination fee of $398 million to ICE.

We are subject to business uncertainties and contractual restrictions while the Merger is pending, which could adversely affect our business and operations.

In connection with the pendency of the Merger, we have seen that some customers, suppliers and other persons with whom we and/or ICE have a business relationship have delayed or deferred certain business decisions or may decide to seek to terminate, change or renegotiate their relationships with ICE or us, as the case may be, as a result of the pending Merger or otherwise, which could negatively affect ICE’s or our respective revenues, earnings and/or cash flows, as well as the market price of ICE’s or our common stock, regardless of whether the Merger is completed.

Under the terms of the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Merger which may adversely affect our ability to execute certain of our business strategies, including the ability in certain cases to enter into or amend contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures. Such limitations could adversely affect our business and operations and our ability to respond to changes in our business, the mortgage industry or broader economic conditions prior to the completion of the Merger.

Each of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the Merger.

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In addition, subject to certain exceptions, we have agreed to use reasonable best efforts to carry on our business in the ordinary course and, to the extent consistent therewith, to use reasonable best efforts to preserve substantially intact our current business organizations, to keep available the services of our current officers and employees and to preserve our relationships with significant customers, suppliers, licensors, licensees, distributors, lessors and others having significant business dealings with us, in each case, during the period between the date of the Merger Agreement and the closing of the Merger.

Uncertainties associated with the Merger may cause a loss of our management personnel and other key employees, which could adversely affect our business and operations.

ICE and we are dependent on the experience and industry knowledge of our officers and other key employees to execute our business plans. Prior to completion of the Merger, current and prospective employees of ours and ICE may experience uncertainty about their roles within ICE following the completion of the Merger, which may have an adverse effect on ICE’s and our ability to attract or retain key management and other key personnel and could adversely affect our business and operations.

Litigation related to the Merger could prevent or delay completion of the Merger or otherwise negatively affect ICE’s and our businesses and operations.

ICE and we may incur costs in connection with the defense or settlement of any stockholder or other lawsuits filed in connection with the Merger. Such litigation could have an adverse effect on ICE’s and our financial condition and results of operations and could prevent or delay the completion of the Merger.

ICE and we are expected to incur significant costs related to the Merger and integration.

ICE and we have incurred and expect to incur substantial expenses in connection with the completion of the Merger. The substantial majority of these costs will be non-recurring expenses related to the Merger, including investment banking fees, legal fees and costs associated with financing the Merger, accounting, consulting and other advisory fees, severance/employee benefit-related costs, and other regulatory fees. ICE and we will also incur transaction fees and costs related to formulating integration plans for our combined mortgage services businesses. Some of these costs are payable regardless of whether the Merger is completed.

Risks Related to Our Business

We rely on our top clients for a significant portion of our revenues and profits, which makes us susceptible to the same macro-economic and regulatory factors that affect our clients. If these clients are negatively affected by economic or regulatory conditions or otherwise experience financial hardship or stress, or if we are unable to renew existing agreements or the terms of our relationships with these clients change, it could have a material adverse effect on us.

Our clients are in a relatively consolidated industry and, as a result, a small number of our clients have accounted for a significant portion of our revenues. We expect that a limited number of our clients will continue to represent a significant portion of our revenues for the foreseeable future. The significant portion of our revenues that a limited number of our clients currently represent may increase in the future. During the year ended December 31, 2022, our five largest clients accounted for approximately 23% of our consolidated revenues.

Many of our relationships with these clients are long-standing and are important to our business and results of operations, but there is no guarantee that we will be able to retain or renew existing agreements or maintain our relationships on acceptable terms or at all. Additionally, we rely on cross-selling our products and services to our existing clients as a source of growth. The deterioration in or termination of any of these relationships could significantly reduce our revenues and could have a material adverse effect on our business, financial condition and results of operations. As a result, we may be disproportionately affected by declining revenues from, or loss of, a significant client. In addition, by virtue of their significant relationships with us, these clients may be able to exert pressure on us with respect to the pricing of our services.

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The time and expense associated with switching from our competitors’ software and services to ours may limit our growth.

The costs for a mortgage lender or servicer to switch providers of software, data and analytics solutions and services can be significant and the process can take 12 to 18 months, or longer, to complete. As a result, potential clients may decide that it is not worth the time and expense to begin using our solutions and services, even if we offer competitive and economic advantages. If we are unable to convince these prospective clients to switch to our software and services, our ability to increase market share will be limited, which could have a material adverse effect on our growth.

We typically provide service level commitments under our client contracts, including commitments to provide high-quality technical support services. If we fail to meet these contractual commitments, it may adversely affect our reputation and relationship with our clients or we could face contract terminations, which could have a material adverse effect on us.

Our client agreements typically provide service level commitments measured on a daily and monthly basis. If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our applications, we may be contractually obligated to provide these clients with service credits or refunds or we could face contract terminations. If we suffer unscheduled downtime that exceeds the allowed downtimes under our agreements with our clients or if we experience any extended service outages, it could have a material adverse effect on our business, financial condition and results of operations.

In addition, our sales process is highly dependent on our applications and business reputation and on positive recommendations from our existing clients. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation and our ability to sell our applications to existing and prospective clients, any of which could have a material adverse effect on our business, financial condition and results of operations.

Our clients and we are subject to various governmental regulations, and a failure to comply with governmental regulations or changes in these regulations, including changes that may result from changes in the political landscape, could result in penalties, restrict or limit our or our clients’ operations or make it more burdensome to conduct such operations.

Many of our clients’ and our businesses are subject to various federal, state, local and foreign laws and regulations. Our failure to comply with applicable laws and regulations could restrict our ability to provide certain services or result in imposition of civil fines and criminal penalties, substantial regulatory and compliance costs, litigation expense, adverse publicity and loss of revenues.

As a provider of electronic data processing to financial institutions, such as banks and credit unions, we are subject to regulatory oversight and examination by the FFIEC, the CFPB, the federal banking agencies and various other federal and state regulatory authorities. We also may be subject to possible review by state agencies that regulate banks in each state in which we conduct our electronic processing activities.

In addition, our businesses are subject to an increased degree of compliance oversight by regulators and by our clients. Specifically, the CFPB has authority to write rules affecting the business of, supervise, conduct examinations of and enforce compliance with federal consumer financial laws and regulations with respect to certain "non-depository covered persons" determined by the CFPB to be "larger participants" that offer consumer financial products and services. The CFPB and the prudential financial institution regulators, such as the OCC, also have the authority to examine us in our role as a service provider to large financial institutions. In addition, we believe some of our largest bank clients’ regulators are requiring the banks to exercise greater oversight and perform more rigorous audits of their key service providers such as us.

The Real Estate Settlement Procedures Act ("RESPA") and related regulations generally prohibit the payment or receipt of fees or any other item of value for the referral of real estate-related settlement services. RESPA also prohibits fee shares or splits or unearned fees in connection with the provision of residential real estate settlement services, such as

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mortgage brokerage and real estate brokerage. Notwithstanding these prohibitions, RESPA permits payments for goods furnished or for services actually performed, so long as those payments bear a reasonable relationship to the market value of the goods or services provided. RESPA and related regulations may to some extent restrict our real estate-related businesses from entering into certain preferred alliance arrangements. The CFPB is responsible for enforcing RESPA.

Changes to laws and regulations and regulatory oversight of our clients and us, including those that may result from changes in the political landscape, may cause us to increase our prices in certain situations or decrease our prices in other situations, may restrict our ability to implement price increases or otherwise limit the manner in which we conduct our business. We may also incur additional expense in keeping our software solutions services up to date as laws and regulations change, and we may not be able to pass those additional costs on to our clients. In addition, in response to increased regulatory oversight, participants in the mortgage lending industry may develop policies pursuant to which they limit the extent to which they can rely on any one vendor or service provider. Conversely, in an environment with less stringent regulatory oversight, prospective clients may choose to retain their in-house platforms, or current service providers, or seek alternative service providers who provide services that are less compliance and quality oriented at a lower price point. If we are unable to adapt our products and services to conform to increased or evolving laws and regulations, or if these laws and regulations have a negative effect on our clients, we may experience client losses or increased operating costs, which could have a material adverse effect on our business, financial condition and results of operations.

There may be consolidation in our end client market, which could reduce the use of our services by our clients.

Consolidation among existing or potential clients could reduce the number of our clients and potential clients. If our clients merge with, are acquired by or sell their servicing portfolios to other entities that are not our clients, or that use fewer of our services, they may discontinue or reduce their use of our services. In addition, if potential clients merge, our ability to increase our client base may be adversely affected and the ability of our clients to exert pressure on our pricing may increase. Any of these developments could have a material adverse effect on our business, financial condition and results of operations.

Participants in the mortgage loan industry are subject to efforts by the government to regulate the mortgage loan industry or address the mortgage loan market and current economic environment.

The mortgage loan industry is heavily regulated and continues to be subject to review by governmental authorities. Inquiries may include federal and state governmental review of all aspects of the mortgage lending business. Such efforts may include actions to address the housing market and the economy in general and to maintain rigorous mortgage loan servicing standards.

Additional state and federal government actions directed at housing and the mortgage loan industry may occur and could have a material adverse effect on our business, financial condition and results of operations.

Our clients’ relationships with government-sponsored enterprises ("GSEs") are subject to change.

Our clients have significant relationships with Fannie Mae and Freddie Mac, which are GSEs tasked with working with financial institutions to provide liquidity to the mortgage loan market. The GSEs do this by purchasing loans from the lenders either for cash or in exchange for mortgage-backed securities that are backed by those loans and that, for a fee, carry the GSEs’ guarantee of timely payment of interest and principal to investors of those mortgage-backed securities. Because our clients service the loans owned by GSEs, we provide solutions and services for many of those loans. As a result of these relationships, GSEs have been able to implement changes to our pricing structure on certain products and services we provide. GSEs or other governmental agencies may be able to exert similar pressure on the pricing of our solutions and services in the future, which could have a material adverse effect on our business, financial condition and results of operations.

If we fail to adapt our solutions to technological changes or evolving industry standards and regulations, or if our ongoing efforts to upgrade, modernize or innovate our technology are not successful, we may not be able to achieve our growth strategies and we could lose clients and have difficulty attracting new clients for our solutions.

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The markets for our solutions are characterized by constant technological changes, frequent introductions of new products and services and evolving industry standards and regulations. Our growth strategies and future success will be significantly affected by our ability to successfully enhance our current solutions, and to develop and introduce new solutions and services that address the increasingly sophisticated needs of our clients and their customers. These initiatives carry the risks associated with any new product or service development effort, including cost overruns, delays in delivery and performance issues. There can be no assurance that we will be successful in developing, marketing and selling new solutions and services that meet these changing demands, that we will not experience difficulties that could delay or prevent the successful development, introduction and marketing of these solutions and services or that our new solutions and services and their enhancements will adequately meet the demands of the marketplace and achieve market acceptance. If our efforts are unsuccessful, it could have a material adverse effect on our business, financial condition and results of operations.

We operate in a competitive business environment and, if we are unable to compete effectively, it could have a material adverse effect on us.

The markets for our solutions are intensely competitive. Our competitors vary in size and in the scope and breadth of the services they offer. Some of our competitors have substantial resources. In addition, we expect that the markets in which we compete will continue to attract new competitors and new technologies. There can be no assurance that we will be able to compete successfully against current or future competitors or that competitive pressures we face in the markets in which we operate will not have a material adverse effect on our business, financial condition and results of operations.

Further, because many of our larger existing or potential clients have historically developed their key processing applications in-house, and therefore, view their system requirements from a make-versus-buy perspective, we often compete against our existing or potential clients’ in-house capabilities. As a result, gaining new clients in our servicing and origination software businesses can be difficult. For banks and other potential clients, switching from an internally-designed system to an outside vendor, or from one vendor of servicing and origination software services to a new vendor, is a significant undertaking. These potential clients worry about possible disadvantages such as loss of custom functionality, increased costs and business disruption. As a result, these potential clients often resist change. There can be no assurance that our strategies for overcoming potential clients’ reluctance to change will be successful, and if we are unsuccessful, it could have a material adverse effect on our business, financial condition and results of operations.

To the extent the availability of free or relatively inexpensive information increases, the demand for some of our data and information solutions may decrease.

Public sources of free or relatively inexpensive information have become increasingly available, particularly through the Internet, and this trend is expected to continue. Governmental agencies in particular have increased the amount of information to which they provide free public access. Public sources of free or relatively inexpensive information may reduce demand for, or the price that clients are willing to pay for, our data and information solutions. To the extent that clients choose not to obtain data and information from us and instead rely on information obtained at little or no cost from these public sources, it could have a material adverse effect on our business, financial condition and results of operations.

We rely upon proprietary technology and information rights, and if we are unable to protect our rights, it could have a material adverse effect on us.

Our success depends, in part, upon our intellectual property rights. We rely primarily on a combination of patents, copyrights, trade secrets, trademark laws, nondisclosure and other contractual restrictions on copying, distribution and creation of derivative products to protect our proprietary technology and information. This protection is limited, and our intellectual property could be used by others without our consent. In addition, patents may not be issued with respect to our pending or future patent applications, and our patents may not be upheld as valid or may not prevent the development of competitive products. Any infringement, disclosure, loss, invalidity of or failure to protect our intellectual property could have a material adverse effect on our business, financial condition and results of operations. Moreover, litigation may be necessary to enforce or protect our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Such litigation could be time-consuming, result in substantial costs

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and diversion of resources and could have a material adverse effect on our business, financial condition and results of operations.

If our applications, solutions, including those that contain "open source" software, or services are found to infringe the proprietary rights of others or fail to comply with the terms of one or more of these open source licenses, we may be required to change our business practices and may also become subject to significant costs and monetary penalties.

We use a limited amount of software licensed by its authors or other third parties under so-called “open source” licenses and may continue to use such software in the future. Some of these licenses contain requirements that we make available source code for modifications or derivative works we create based upon the open source software, and that we license such modifications or derivative works under the terms of a particular open source license or other license granting third parties certain rights of further use. By the terms of certain open source licenses, we could be required to release the source code of our proprietary software if we combine our proprietary software with open source software in a certain manner. Additionally, the terms of many open source licenses have not been interpreted by the United States or other courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on origin of the software. We cannot be sure that all open source software is submitted for approval prior to use in our solutions. In addition, many of the risks associated with using open source software cannot be eliminated, and could, if not properly addressed, have a material adverse effect on our business, financial condition and results of operations.

As our information technology applications and services develop, we may become increasingly subject to infringement claims. Any such claims, whether with or without merit, could:

Any one or more of the foregoing outcomes could have a material adverse effect on our business, financial condition and results of operations. Additionally, we may be liable for damages for past infringement if a court determines that our software or technologies infringe upon a third party’s patent or other proprietary rights.

We depend on our ability to access data from external sources to maintain and grow our businesses. If we are unable to access needed data from these sources or if the prices charged for these services increase, the quality, pricing and availability of our solutions may be adversely affected.

We rely extensively upon data from a variety of external sources to maintain our proprietary and non-proprietary databases, including data from third-party suppliers, various government and public record sources and data contributed by our clients. Our data sources could cease providing or reduce the availability of their data to us, increase the price we pay for their data or limit our use of their data for a variety of reasons, including legislatively or judicially imposed restrictions on use. If a number of suppliers are no longer able or are unwilling to provide us with certain data, or if our public record sources of data become unavailable or too expensive, we may need to find alternative sources. If we are unable to identify and contract with suitable alternative data suppliers and efficiently and effectively integrate these data sources into our service offerings, we could experience service disruptions, increased costs and reduced quality of our services. Moreover, some of our data suppliers compete with us in certain product offerings, which may make us vulnerable to unpredictable price increases from them. Significant price increases could require us to seek other sources of data on more favorable economic terms, which may not be available at all. Loss of such access or the availability of data in the future on commercially reasonable terms or at all may reduce the quality and availability of our services and solutions, which could have a material adverse effect on our business, financial condition and results of operations.

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Our international operations and third-party service providers subject us to additional risks.

We have sought to reduce our costs by utilizing lower-cost labor outside the United States. Our international operations are based solely in India with approximately 1,800 employees. In addition, we have limited engagements with off-shore third-party service providers. Other countries may be subject to higher degrees of political and social instability than the United States and may lack the infrastructure to withstand political unrest, natural disasters or pandemics. Such disruptions, including supply chain disruptions, can affect our ability to deliver our solutions on a timely basis, if at all, and to a lesser extent can decrease efficiency and increase our costs. Weakness of the U.S. dollar in relation to the currency used and higher inflation rates experienced in other countries may also reduce anticipated savings. Furthermore, the practice of utilizing labor based in foreign countries has come under increased scrutiny in the United States and, as a result, many of our clients may require us to use labor based in the United States. We may not be able to pass on the increased costs of higher-priced United States-based labor to our clients, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, other countries could adopt new legislation or regulations that could make it difficult, more costly or impossible for us to continue our foreign activities as currently being conducted. In addition, in many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act ("FCPA") or other local anti-corruption laws. Any violations of FCPA or local anti-corruption laws by us or our subsidiaries, could result in substantial financial and other penalties, which could have a material adverse effect on our business, financial condition and results of operations.

We may experience system failures or service interruptions that could harm our business and reputation and expose us to potential liability.

We depend heavily upon the computer systems and our existing technology infrastructure located in our data centers. Certain system interruptions or events beyond our control could interrupt or terminate the delivery of our solutions and services to our clients and may interfere with our suppliers’ ability to provide necessary data to us and our employees’ ability to perform their responsibilities.

These potential interruptions include, but are not limited to, damage or interruption from hurricanes, floods, fires, power losses, telecommunications outages, cyber-based attacks, ransomware attacks, terrorist attacks, acts of war, human errors and similar events. Our corporate offices and one of our data centers are located in Jacksonville, Florida, which is an area that is at high risk of hurricane and flood damage. Climate change is believed to be linked to severe weather events across the country and the potential for increases in the frequency or intensity of such events. In addition, acts of terrorism, which may be targeted at metropolitan areas that have higher population density than rural areas, could cause disruptions in our business or the economy as a whole. The servers that we use through various third-party service providers may also be vulnerable to similar disruptions, which could lead to interruptions, delays and loss of critical data. Such service providers may not have sufficient protection or recovery plans in certain circumstances, and our insurance may not be sufficient to compensate us for losses that may occur.

Defects in our software solutions, errors or delays in the processing of electronic transactions, or other difficulties could result in:

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Any one or more of the foregoing occurrences could have a material adverse effect on our business, financial condition and results of operations. Although we attempt to limit our potential liability through disclaimers and limitation-of-liability provisions in our client agreements, we cannot be certain that these measures will be successful in limiting our liability.

We may experience delays or difficulty in developing or implementing new, enhanced or existing software, data or hosting solutions, which may negatively affect our relationships with existing and potential clients, reduce or delay the generation of revenues or increase development and implementation costs.

Our future financial performance depends upon the successful development, implementation and client acceptance of new, existing and enhanced versions of our software and hosting solutions. We continually seek to develop enhancements to our solutions, including updates in response to changes in applicable laws, as well as new offerings to supplement our existing solutions. As a result, we are subject to the risks inherent in the development and integration of new technologies, including defects or undetected errors in our software solutions, difficulties in installing or integrating our technologies on platforms used by our clients or other unanticipated performance, stability and compatibility problems. Any of these problems could result in material delays in the introduction or acceptance of our solutions, increased costs, decreased client satisfaction, breach of contract claims, harm to our industry reputation and reduced or delayed revenues. If we are unable to implement existing solutions or deliver new solutions or upgrades or other enhancements to our existing solutions on a timely and cost-effective basis, it could have a material adverse effect on our business, financial condition and results of operations.

In addition, as a significant focus of our sales efforts is on the top U.S. mortgage loan originators and servicers, larger clients may demand more complex integration, implementation services and features, which may result in implementations that take longer than we forecast or delays in these clients using our solutions. Furthermore, if implementations take longer than planned or these clients delay their use of our solutions, we may be required to delay revenue recognition on some of these transactions until the technical or implementation requirements have been met, and we may not generate revenues from these clients as quickly as we had forecast.

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 effect of interest rates, levels of inflation and the volume of real estate transactions, a change in any of these conditions could have a material adverse effect on us.

Our revenues are primarily generated from software and hosting solutions, professional services and data solutions we provide to the mortgage loan industry and, as a result, a weak economy or housing market may have a material adverse effect on our business, financial condition and results of operations. The volume of mortgage loan origination and residential real estate transactions is highly variable and reductions in these transaction volumes could have a direct effect on the revenues we generate from our software solutions business and some of our data and analytics businesses.

The revenues we generate from our servicing software solutions primarily depend upon the total number of mortgage loans processed on MSP^®, which tends to be comparatively consistent regardless of economic conditions. However, in the event that a difficult economy or other factors lead to a decline in levels of home ownership and a reduction in the number of mortgage loans outstanding and we are not able to counter the effect of those events with increased market share or higher fees, our MSP^® revenues could be adversely affected.

In addition, 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. Our data and analytics solutions that are more sensitive to fluctuations in home buying activity and origination volumes primarily relate to services where we provide data necessary for tax data and other settlement service activities. Given the current interest rate environment and high levels of inflation, we have seen lower origination volumes as well as certain adverse effects on the performance and financial condition of some of our clients, which have had an adverse effect on our business and results of operations. The recent sharp decline in origination volumes has led some clients to reduce the size of their mortgage loan workforce, exit certain mortgage operations or go out of business. Such conditions may continue and result in increased negative economic conditions, increased unemployment or a prolonged downturn in other general economic factors, which could have a material adverse effect on our business, financial condition or results of operations.

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A weaker economy and housing market tend to increase the volume of consumer mortgage loan defaults, which can increase revenues from our applications focused on supporting default management functions. However, government regulation of the mortgage loan industry in general, and the default and foreclosure process in particular, has greatly slowed the processing of defaulted mortgage loans and has changed the way many of our clients address mortgage loans in default. A downturn in the origination market and a concurrent slowdown or change in the way mortgage loans in default are addressed could have a material adverse effect on our business, financial condition and results of operations.

We may fail to attract and retain enough qualified employees, including those with client relationships or support our technology and operations, which could have an adverse effect on our ability to expand our business and service our clients.

Our business relies on large numbers of skilled employees, and our success depends on our ability to attract, train and retain a sufficient number of qualified employees. There has been more competition for talent, wage inflation, benefit offerings and higher levels of workforce mobility. If our attrition rate increases, our operating efficiency and productivity may decrease. We will need to increase our hiring and will incur additional expenses related to retention if we are not able to maintain our attrition rate through our current recruiting and retention policies. We compete for employees not only with other companies in our industry but also with companies in other industries, such as software services, engineering services and financial services companies, and there is a limited pool of employees who have the client relationships, skills and training needed to do our work. If our business continues to grow, the number of people we will need to hire may increase. Increased competition for employees could have a material adverse effect on our ability to expand our business and service our clients, as well as cause us to incur greater personnel expenses and training costs.

The extent to which health epidemics affect our business, results of operations, liquidity and financial condition 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 impacting the industries and communities in which we and our clients, suppliers and business partners operate. Such epidemics may result in authorities taking various steps to mitigate anticipated health and/or economic effects, but there can be no assurance that such steps will be effective or achieve their desired results in a timely fashion. We may experience financial impacts that are difficult to foresee or measure.

The spread of epidemics may cause us to modify our business practices, including restricting employee travel, developing social distancing plans for our employees and limiting 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. We will be unable to predict the extent to which we will need to continue these practices or further modify our business practices to address future surges and variants. There is no certainty that such measures will be sufficient to mitigate the risks posed by the epidemic or will otherwise be satisfactory to government authorities. The effects could have a material adverse effect on our business, financial condition and results of operations even after the epidemic has subsided.

Risks Related to Our Investment in DNB

Our investment in DNB may expose us to certain risks, which could have a material adverse effect on our financial condition and results of operations.

As of December 31, 2022, we owned approximately 18.5 million shares of DNB common stock for an ownership interest of approximately 4% of DNB’s common stock and the after-tax fair value of our investment was $211.0 million based on DNB’s closing stock price of $12.26 on December 31, 2022 and assuming a statutory tax rate of 25.5%. Market volatility or further decline in DNB’s stock price may result in us not realizing our expected return on investment, or a negative return on investment. Refer to Note 4 to the Notes to Consolidated Financial Statements for additional information about our investment in DNB.

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Risks Related to Cybersecurity and Data Privacy

If we are unable to protect our information systems against data corruption, cyber-based attacks or network security breaches, including breaches involving third-party vendors, or if we are unable to provide adequate security in the electronic transmission of sensitive data, it could have a material adverse effect on us.

We are highly dependent on information technology networks and systems, including the Internet, to securely process, transmit and store electronic information. Security breaches of this infrastructure, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, and the evolving threat landscape can create system disruptions, shutdowns or unauthorized disclosure of confidential information, including non-public personal information, consumer data and proprietary business information. Cyber-based attacks, including ransomware attacks to extort payment in return for the release of sensitive information, are increasing in frequency and sophistication. Unauthorized access, including through use of fraudulent schemes such as "phishing" schemes, could jeopardize the security of information stored in our systems. In addition, malware or viruses could jeopardize the security of information stored or used in a user’s computer and other personal devices. If we are unable to prevent or detect such security or privacy breaches or our third-party vendors are unable to prevent or detect such breaches, our operations could be disrupted, or we may suffer loss of reputation, financial loss, lawsuits and regulatory-imposed restrictions and penalties because of lost or misappropriated information, including sensitive consumer data, which could have a material adverse effect on our business, financial condition and results of operations. Likewise, our clients are increasingly imposing more stringent contractual obligations on us relating to our information security protections. If we are unable to maintain protections and processes at a level commensurate with that required by our large clients, it could negatively affect our relationships with those clients, increase our operating or litigation costs or subject us to liability under those contractual obligations, which could have a material adverse effect on our business, financial condition and results of operations.

Our policies and procedures, including those related to cybersecurity, may prove inadequate for the risks we face.

We have devoted significant resources to develop our policies and procedures, including those related to cybersecurity, and expect to continue to do so in the future. Nonetheless, our strategies may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated. If our solutions change and as the markets in which we operate evolve, our strategies may not always adapt to such changes. Some of our methods of managing risk are based upon our use of observed historical market behavior and management’s judgment. Other of our methods of managing risk depend on the evaluation of information regarding markets, customers, catastrophe occurrence or other matters that are publicly available or otherwise accessible to us. This information may not always be accurate, complete, up-to-date or properly evaluated. As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures or available information indicate. In addition, management of operational, legal and regulatory risks requires, among other things, policies and procedures to record and verify large numbers of transactions and events, which may not be fully effective. While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application cannot anticipate every economic and financial outcome or the timing of such outcomes. If our efforts are ineffective, we could suffer losses that could have a material adverse effect on our business, financial condition and results of operations. In addition, we could be subject to litigation, particularly from our clients, and sanctions or fines from regulators.

Regulatory developments with respect to use of consumer data and public records could have a material adverse effect on us.

Because our databases include certain public and non-public personal information concerning consumers, we are subject to government regulation and potential adverse publicity concerning our use of consumer data. We acquire, store, use and provide many types of consumer data and related services that are subject to regulation under the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Driver’s Privacy Protection Act and, to a lesser extent, various other federal, state and local laws and regulations. These laws and regulations are designed to protect the privacy of consumers and to prevent security breaches, cyber-based attacks, other unauthorized access and misuse of personal information in the marketplace. Our failure to comply with these laws, or any future laws or regulations of a similar nature, could result in

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substantial regulatory penalties, litigation expense and loss of revenues, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, some of our data suppliers face similar regulatory requirements and, consequently, they may cease to be able to provide data to us or may substantially increase the fees they charge us for this data, which may make it financially burdensome or impossible for us to acquire data that is necessary to offer our products and services. Further, many consumer advocates, privacy advocates and government regulators believe that existing laws and regulations do not adequately protect privacy or ensure the accuracy of consumer-related data.

As a result, multiple consumer privacy laws have been implemented at the state level which regulate the acquisition, dissemination, and commercial use of personal information. These consumer privacy laws include the CCPA, as modified by the CPRA; the VCDPA; the CPA; the CTDPA; and the UCPA.  Generally, these laws seek to implement further regulations on the acquisition, dissemination, and commercial use of personal information and also contemplate requirements relative to data accuracy, the ability of consumers to opt out of certain processing of personal information, the right to access personal information and to obtain a copy, and the right to delete personal information in certain circumstances. These laws are directly applicable to our clients as well as to us in certain circumstances and are applicable to us in a reduced capacity when we act as service providers to our clients.  

Laws such as the Vermont Data Broker Law also place restrictions and requirements on the use of publicly available data, and laws such as the NY DFS Cybersecurity Regulation provide for certain security requirements surrounding the collection and maintenance of certain business and consumer nonpublic personal information. Complying with varying jurisdictional requirements could increase the cost and complexity of compliance. Any future laws, regulations or other restrictions limiting the dissemination or use of personal information may reduce the quality and availability of our solutions and services, which could have a material adverse effect on our business, financial condition and results of operations. Further, violations of privacy laws can result in significant penalties and damage to our brand and business.

Our reliance on third parties subjects us to risk and may disrupt or adversely affect our operations. In addition, we may not realize the full benefit of our third-party arrangements, which may result in increased costs, or may adversely affect the service levels we are able to provide our clients.

We rely upon third parties for various business process and technology-related products and services, including cloud providers and cloud hosted software solutions. Although we have contractual provisions with our providers that specify performance requirements, we do not ultimately control their performance, which may make our operations vulnerable to their performance failures and supply chain constraints. In addition, our failure to adequately monitor and regulate the performance of our third-party vendors could subject us to additional risk. Reliance on third parties also makes us vulnerable to changes in our vendors’ businesses, including price increases related to the current levels of inflation, financial condition and other matters outside of our control, including their violations of laws or regulations, which could increase our exposure to liability or otherwise increase the costs associated with the operation of our business. If for any reason our relationship with any of these third parties, including cloud-based providers, were to end unexpectedly, it could require a significant amount of cost and time to transition to new third-party service providers. The failure of our providers to perform as expected or as contractually required could result in significant disruptions and costs to our operations and to the services we provide to our clients, or could result in loss of revenues, which could have a material adverse effect on our business, financial condition and results of operations.

Risk Related to Our Structure

Certain executive officers and members of our Board of Directors have interests and positions that could present potential conflicts.

Certain executive officers and members of our Board of Directors serve on the Board of Directors of other entities or are employed by other entities. As a result of the foregoing, there may be circumstances where such persons may be subject to conflicts of interest with respect to matters potentially or actually involving or affecting us.

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We have in place a code of business conduct and ethics prescribing procedures for managing conflicts of interest and our chief compliance officer and audit committee are responsible for the review, approval or ratification of any potential conflicts of interest transactions. Additionally, we expect that interested directors will abstain from decisions with respect to conflicts of interest as a matter of practice. However, there can be no assurance that such measures will be effective, that we will be able to resolve all potential conflicts or that the resolution of any such conflicts will be no less favorable to us than if we were dealing with an unaffiliated third party.

Refer to Note 6 to the Notes to Consolidated Financial Statements for more information related to our related party relationships and transactions.

We are restricted from pursuing certain potential business opportunities under a non-competition agreement.

In connection with the Distribution, we entered into a non-competition agreement with FNF pursuant to which we agreed to certain restrictions on the scope of the business that we may conduct for the 10-year period following the Distribution, including that we are prohibited from (i) engaging in title generation/escrow services, appraisal or default and field services work (other than technology solutions for such settlement services) without the prior written consent of FNF (subject to an exception allowing us to acquire a business engaged in such restricted services if at least 90% of such business’ revenues is contributed by activities other than such restricted services) and (ii) engaging in certain transactions, such as a merger, sale of assets or sale of greater than 5% of its equity interests, with a buyer that derives 10% or more of its revenues from such restricted services. Although we do not presently engage in any of these restricted services and our current business is not restricted, as a result of these restrictions, we may have to forgo certain transactions that might have otherwise been advantageous in compliance with our obligations under the non-competition agreement.

In particular, the restriction on engaging in a merger, sale of assets or sale of greater than 5% of its equity interests with a buyer that derives 10% or more of its revenues from restricted services may discourage a third party engaged in such restricted services from pursuing such a transaction with us during the 10-year period following the Distribution.

General Risk Factors

If we are unable to successfully consummate acquisitions or experience delays in integrating acquisitions, it could have a material adverse effect on us.

One of our strategies to grow our business is to opportunistically acquire complementary businesses, technologies and services. This strategy will depend on our ability to find suitable acquisitions and may depend on financing them on acceptable terms. We may require additional debt or equity financing for future acquisitions and doing so may be made more difficult by our indebtedness. Raising additional capital for acquisitions through debt financing could result in increased interest expense and may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional capital for acquisitions through equity financing, the ownership interests of existing shareholders will be diluted.

If we are unable to acquire suitable acquisition candidates, we may experience slower growth. Further, we may face challenges in integrating any acquired business. These challenges may include eliminating redundant operations, facilities and systems, coordinating management and personnel, retaining key employees, managing different corporate cultures, integrating relationships with clients, vendors and business partners while achieving revenue synergies, cost reductions and cross-selling opportunities. Acquisitions involve numerous operational, strategic, financial, accounting, legal, tax and other risks, including potential liabilities associated with acquired businesses. Difficulties in integrating acquisitions and our ability to manage the combined company may result in the combined company performing differently than expected, in operational challenges or in the delay or failure to realize anticipated revenue synergies and cost-related efficiencies and could have an adverse effect on our financial condition, results of operations or cash flows.

Additionally, the acquisition and integration processes may disrupt our business and divert management attention and our resources. If we fail to successfully integrate acquired businesses, products, technologies and personnel, it could impair relationships with employees, clients and strategic partners, distract management attention from our core businesses, result in control failures and otherwise disrupt our ongoing business, any of which could have a material adverse effect on our

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business, financial condition and results of operations. The anticipated benefits and cost savings of an acquisition may not be realized fully or at all, may take longer to realize than expected or could have other adverse effects that we do not currently foresee. In addition, we may be required to record future charges for impairment of goodwill and other intangible assets resulting from such acquisitions.

We have substantial investments in recorded goodwill and other intangible assets, and an extended economic downturn or troubled mortgage market could cause these investments to become impaired.

Goodwill and other intangible assets are assessed for impairment annually or whenever changes in circumstances indicate that the carrying amount may not be recoverable. Factors that may indicate the carrying value of our intangible assets, including goodwill, may not be recoverable include, but are not limited to, significant underperformance relative to historical or projected future results of operations, a significant decline in our stock price and market capitalization, and negative industry or economic trends. However, if there is an extended economic downturn in the future, the carrying amount of our goodwill or other intangible assets may no longer be recoverable, and we may be required to record an impairment charge, which could have a material adverse effect on our results of operations.

Our indebtedness could have a negative effect on our financing options and liquidity position, and certain of our financing arrangements subject us to various restrictions that could limit our operating flexibility.

As of December 31, 2022, we had approximately $2.7 billion of total debt outstanding.

Our indebtedness could have important consequences to us, including:

Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and results of operations, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could have a material adverse effect on our business, financial condition and results of operations. If we cannot make scheduled payments on our debt, we will be in default and holders of our outstanding debt could declare all outstanding principal and interest to be due and payable, and we could be forced into bankruptcy or liquidation. Risks associated with our indebtedness could have a material adverse effect on our business, financial condition and results of operations.

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Our senior leadership team is critical to our continued success, and the loss of such personnel could have a material adverse effect on us.

Our future success substantially depends on the continued service and performance of the members of our senior leadership team. These personnel possess business and technical capabilities that are difficult to replace. We have attempted to mitigate this risk by entering into long-term (two to three year) employment contracts with the members of our senior leadership team and providing long-term incentive compensation with multi-year vesting provisions. If we lose key members of our senior leadership team, we may not be able to effectively manage our current operations or meet ongoing and future business challenges, and this could have a material adverse effect on our business, financial condition and results of operations.

Current and future litigation, investigations or other actions against us could be costly and time consuming to defend.

We are from time to time subject to legal proceedings and claims that arise in the ordinary course of business, such as claims brought by our clients in connection with commercial disputes and employment claims made by our current or former employees.

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”). Shortly after the filing of the Black Knight Complaint, on November 6, 2019, PennyMac filed an Antitrust Complaint (the “PennyMac Complaint”) against Black Knight. Refer to Note 13 to the Notes to Consolidated Financial Statements for more information related to the PennyMac litigation matter.

Litigation can result in substantial costs and may divert management’s attention and resources, which may seriously harm our business, financial condition and results of operations. 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.

There can be no assurance that we will not incur additional material costs and expenses in connection with any potential future investigations or claims, including but not limited to fines or penalties and legal costs, or be subject to other remedies, any of which could have a material adverse effect on our business, financial condition and results of operations. Insurance may not cover or be sufficient for such investigations and claims and may not continue to be available on terms acceptable to us. An investigation or claim brought against us that is uninsured or underinsured could result in unanticipated costs, management distraction or reputational harm, which could have a material adverse effect on our business, financial condition and results of operations.

Our charter and bylaws and provisions of Delaware law may discourage or prevent strategic transactions, including a takeover of our company, even if such a transaction would be beneficial to our shareholders.

Provisions contained in our charter and bylaws and provisions of the Delaware General Corporation Law ("DGCL") could delay or prevent us from entering into a strategic transaction with a third party, as applicable, even if such a transaction would benefit our shareholders. For example, our charter and bylaws:

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By virtue of not opting out of Section 203 of the DGCL in our amended and restated certificate of incorporation, we are subject to Section 203 of the DGCL, which prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the time the shareholder became an interested stockholder, subject to certain exceptions, including if, prior to such time, the board of directors approved the business combination or the transaction which resulted in the shareholder becoming an interested stockholder. "Business combinations" include mergers, asset sales and other transactions resulting in a financial benefit to the "interested stockholder." Subject to various exceptions, an "interested stockholder" is a person who, together with his or her affiliates and associates, owns or within three years did own 15% or more of the corporation’s outstanding voting stock. These restrictions generally prohibit or delay the accomplishment of mergers or other takeover or change of control attempts that are not approved by a company’s Board of Directors.

These restrictions and provisions could keep us from pursuing relationships with strategic partners and from raising additional capital, which could impede our ability to expand our business and strengthen our competitive position. These restrictions could also limit shareholder value by impeding a sale of us.

The market price of our common stock may be volatile, and you may lose all or part of your investment.

The market price of our common stock could fluctuate significantly, and you may not be able to resell your shares at or above the price at which your shares were acquired. Those fluctuations could be based on various factors, including those described above and the following:

In addition, in recent years the stock market has experienced significant price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. These broad market fluctuations, as well as general economic, political and market conditions such as recessions or interest rate changes, may cause declines in the market price of our common stock, and you may not realize any return on your investment in us and may lose some or all of your investment.

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As we primarily operate in a single industry, we are especially vulnerable to these factors to the extent that they affect our industry or our products. In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources and could also require us to make substantial payments to satisfy judgments or to settle litigation.

We do not intend to pay dividends for the foreseeable future.

We may retain future earnings, if any, for future operations, expansion and debt repayment. We have not paid cash dividends to date and have no current plans to pay any cash dividends for the foreseeable future. As a result of our current dividend policy, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it. Any future determination to declare and pay cash dividends will be at the discretion of our Board of Directors and will depend on, among other things, our financial condition, results of operations, cash requirements, contractual restrictions and such other factors as our Board of Directors deems relevant.

Item 1B.           Unresolved Staff Comments

None.

Item 2.           Properties

Our corporate headquarters is located in Jacksonville, Florida in an office building that we own. In addition, we own or lease other office space, data centers and other facilities in the United States and India.

Item 3.           Legal Proceedings

For a description of our legal proceedings, see Note 13 to the Notes to Consolidated Financial Statements included in Part II Item 8 of this Report, which is incorporated by reference into this Part I, Item 3.

Item 4.           Mine Safety Disclosures

Not applicable.

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PART II

Item 5.           Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Shares of our common stock are listed on the New York Stock Exchange ("NYSE") and trade under the symbol "BKI".

On January 31, 2023, the closing price of our common stock on the NYSE was $60.59 per share. We had 5,877 holders of record of our common stock as of January 31, 2023. The actual number of shareholders is greater than this number of record holders, and includes shareholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.

There were no unregistered sales of equity securities during the years ended December 31, 2022, 2021 and 2020.

Within 120 days after the close of our fiscal year, we intend to file with the SEC a definitive proxy statement pursuant to Regulation 14A of the Exchange Act, which will include information concerning securities authorized for issuance under our equity compensation plans and other matters required by Items 10 through 14 of Part III of this Report.

Performance Graph

The following graph shows a comparison of the cumulative total return for our common stock, the S&P 500 Index and the S&P North American Technology Sector Index from December 31, 2017 through December 31, 2022. The data for the S&P 500 Index and the S&P North American Technology Sector Index assumes reinvestment of dividends. The graph assumes an initial investment of $100, and the cumulative returns are based on the market price as of each year-end. Note that historic stock price performance is not necessarily indicative of future stock price performance.

*$100 invested on December 31, 2017 in Black Knight or each respective index, including reinvestment of dividends.

Copyright^© 2022 Standard & Poor’s, a division of S&P Global. All rights reserved.

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Item 6.            [Reserved]

Item 7.            Management’s Discussion and Analysis of Financial Condition and Results of Operations

The statements in the discussion and analysis regarding industry outlook, our expectations regarding the performance of our business, our liquidity and capital resources and the other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in "Risk Factors" and "Statement Regarding Forward-Looking Information." Our actual results may differ materially from those contained in or implied by the forward-looking statements. You should read the following discussion together with the sections entitled "Risk Factors," "Selected Historical Financial Data," "Liquidity and Capital Resources" and the consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K.

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

Overview

Black Knight is a premier provider of integrated, innovative, mission-critical, high-performance software solutions, data and analytics to the U.S. mortgage and real estate markets. Our mission is to transform the markets we serve by delivering innovative solutions that are integrated across the homeownership lifecycle and that result in realized efficiencies, reduced risk and new opportunities for our clients to help them achieve greater levels of success.

We believe our clients leverage our robust, integrated solutions across the entire homeownership lifecycle to help retain existing customers, gain new customers, mitigate risk and operate more efficiently. Our clients rely on our proven, comprehensive and scalable solutions and our unwavering commitment to delivering exceptional client support to achieve their strategic goals and better serve their customers.

We have a focused strategy of continuous innovation across our business, which is supported by acquisitions, and even more importantly, the integration of those acquisitions and our innovations into our broader ecosystem. Our ability to effectively manage our business and maintain a strong client base allows us to continually invest in our business, both to meet ever-changing industry requirements and to maintain our position as a leading provider of platforms for the mortgage and real estate markets.

Deep business and regulatory expertise along with a holistic view of the markets we serve allow us the privilege of being a trusted advisor to our clients, who range from the nation’s largest lenders and mortgage servicers to institutional portfolio managers and government entities, to individual real estate agents and mortgage brokers. Clients leverage our software ecosystem across a range of real estate and housing finance verticals through multiple digital channels, using our offerings to drive more business, reduce risk and deliver a best-in-class customer experience, all while operating more efficiently and cost-effectively.

We have long-standing relationships with our clients, a majority of whom enter into long-term contracts that include multiple, integrated products embedded into mission-critical processes. This speaks to the confidence our clients have in our solutions and our commitment to serve them. The contractual nature of our revenues and our client relationships make our revenues both highly visible and recurring in nature. Our scale and integrated ecosystem of solutions drive significant operating leverage and cross-sell opportunities, enabling our clients to continually benefit from new and greater operational efficiencies.

Our Markets

The Black Knight ecosystem stretches across four core “pillar” verticals: mortgage loan servicing, mortgage loan origination, real estate and capital markets; with our data and analytics flowing throughout the interconnected ecosystem of solutions. As we integrate our innovations and acquired technologies, we are committed to continually improving the

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end consumer experience, driving further efficiencies for our clients and helping them to win new customers and retain existing customers.

Recent Developments

Optimal Blue Transaction

On February 15, 2022, we entered into a purchase agreement with Cannae Holdings, LLC (“Cannae”) and Thomas H. Lee Partners, L.P. (“THL”) and acquired all of their Class A units of Optimal Blue Holdco, LLC (“Optimal Blue Holdco”), in exchange for aggregate consideration of 36.4 million shares of Dun & Bradstreet Holdings, Inc. (“DNB”) common stock valued at $722.5 million and $433.5 million in cash. The cash portion of the consideration was funded with borrowings under our revolving credit facility. The aggregate consideration of $1.156 billion and number of shares of DNB common stock paid to Cannae and THL was based on the 20-day volume-weighted average trading price of DNB for the period ended on February 14, 2022. Since February 15, 2022, we own 100% of the Class A units of Optimal Blue Holdco. Refer to Note 2 to the Notes to Consolidated Financial Statements for additional information.

Merger Agreement

On May 4, 2022, we entered into a definitive agreement to be acquired by Intercontinental Exchange, Inc. (“ICE”), a leading global provider of data, technology, and market infrastructure, in a transaction valued at approximately $13.1 billion, or $85 per share, with consideration in the form of a mix of cash (80%) and stock (20%) (the “ICE Transaction”). The aggregate cash consideration in the ICE Transaction consists of approximately $10.5 billion and the aggregate stock consideration was valued at approximately $2.6 billion based on ICE’s 10-day volume weighted average price as of May 2, 2022 of $118.09. The ICE Transaction is expected to close in the first half of 2023, subject to the receipt of regulatory approvals and the satisfaction of customary closing conditions. The ICE Transaction has been approved by the Boards of Directors of Black Knight and ICE, and Black Knight shareholders. Refer to Note 1 to the Notes to Consolidated Financial Statements for additional information.

TitlePoint Transaction

On November 18, 2022, we entered into a definitive agreement to sell our TitlePoint line of business (“TitlePoint”) within our Data and Analytics reporting segment to an affiliate of Fidelity National Financial, Inc. (“FNF”) for $225 million in cash, subject to a customary working capital adjustment. The TitlePoint transaction closed on January 1, 2023. Refer to Note 2 to the Notes of Consolidated Financial Statements for additional information.

For the year ended December 31, 2022, Revenues, Earnings before interest, tax, depreciation and amortization (“EBITDA”) and Operating income related to our TitlePoint line of business before intercompany allocated revenue and expenses were approximately $39 million, $24 million and $22 million, respectively.

Business Trends and Conditions

Market Trends

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

Lenders increasingly focused on core operations. As a result of a decline in origination volumes and the increasing cost to originate a mortgage loan, we believe lenders have become more focused on their core operations, including ways to reduce or eliminate certain costs. According to the MBA Quarterly Performance Report as of November 21, 2022, the cost to originate a loan has more than doubled since 2008 and increased 22% in 2022 compared to 2021. We believe lenders are increasingly shifting from in-house solutions to third-party solutions that provide a more comprehensive and efficient solution. Lenders require these providers to deliver best-in-class solutions and deep domain expertise and to assist them in maintaining regulatory compliance.

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Integral role of technology in the U.S. mortgage market. Over the past decade, homebuyers’ processes have become more digital, and 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. 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 and servicers. This includes an enhanced digital experience along with the application of artificial intelligence, robotic process automation and adaptive learning.

Heightened demand for enhanced transparency and analytic insight. As the U.S. mortgage loan market participants work to minimize 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 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 and servicers have become more focused on minimizing the risk of non-compliance with regulatory requirements and look for solutions that assist them in complying with their regulatory requirements. We expect this trend to continue as additional governmental programs and regulations have been 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 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 solutions that support loan servicing, loan origination and settlement services. Our software solutions revenues were 86%, 85% and 84% of our consolidated revenues for the years ended December 31, 2022, 2021 and 2020, respectively.

The following table summarizes our software solutions revenues (in millions):

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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 also generate revenues from foreclosure and bankruptcy volumes, which can fluctuate based on economic cycles and other factors.

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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):

Note: Amounts above may not recalculate due to rounding.

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 other measures that were in effect from 2020 through 2021. Additionally, low unemployment and historically low interest rates drove high home price appreciation, which also contributed to historically low foreclosure starts. In 2022, we had higher foreclosure-related transactional revenues compared to 2021 as a result of the expiration of the federal foreclosure moratorium.

Although foreclosure starts were higher in 2022 compared to 2021, they were still below levels prior to the pandemic. The table below shows pre-pandemic to post-pandemic industry volumes for foreclosure starts according to the Black Knight First Look press release dated February 24, 2023 (in thousands):

In addition to lower foreclosure-related transactional revenues, we also have seen increases in inactive loans in the prior year period due to the higher mortgage loan origination volumes, particularly refinance volumes. Elevated origination refinance volumes in prior years increased the number of inactive loans above historical levels. A mortgage loan becomes inactive on MSP^® once it is paid off and a servicer continues to keep the loan on MSP^® for reporting purposes. In 2022, the number of inactive loans declined due to prior year originations, which resulted in lower usage-based revenues related to inactive loans on MSP^®. 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.

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The table below summarizes the estimates of the number of loans in mortgage origination market (in millions):

Note: Amounts may not recalculate due to rounding.

Our direct exposure to origination volumes is limited as our loan origination system revenues are based on closed loan volumes subject to minimum base software subscription fees that are contractually obligated. Although we have revenues that are driven primarily from refinance loan applications, these revenues were approximately 2% of our consolidated revenues for the year ended December 31, 2022. Most of our secondary marketing technologies’ revenues are primarily subscription-based; however, some platforms are based on the number of loan officer seats. In 2022, we have seen a reduction in loan officer seats due to cost reduction actions from clients, including clients downsizing their mortgage origination workforce or exiting the origination market due to the current interest rate environment. According to the Q3 2022 Nationwide Multistate Licensing System (“NMLS”) Mortgage Industry Report, the number of active individual licensed mortgage loan officers has decreased from 123,622 as of December 31, 2021 to 102,251 as of September 30, 2022. The reduction in seat counts during 2022 caused a reduction in usage-based revenues for our clients with licenses that are seat-based and were previously above their contractual minimums.

Some of our origination software solutions are directly exposed to variances in origination volumes, primarily related to refinance volumes, due to the nature of the services provided. We have seen lower origination volumes in 2022 due to higher interest rates and record volumes in prior years. According to the February 2023 Mortgage Bankers Association Mortgage Finance Forecast, mortgage loan originations have declined 56% for the year ended December 31, 2022 compared to 2021. The portion of our origination software solutions revenues that are more sensitive to origination volumes were approximately 3% of our consolidated revenues for the year ended December 31, 2022, and revenues related to these origination software solutions declined approximately 34% compared to 2021, representing a headwind of approximately $22.7 million.

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 primarily based on longer-term strategic data licenses, other data licenses and subscription-based revenues. Our data and analytics revenues were 14%, 15% and 16% of our consolidated revenues for the years ended December 31, 2022, 2021 and 2020, respectively. The portion of our data and analytics solutions revenues that are more sensitive to fluctuations in home buying activity and origination volumes primarily relate to services where we provide software and data necessary for tax data and other settlement service activities. Revenues from these solutions were approximately 2% of our consolidated revenues for the year ended December 31, 2022 and declined approximately 31% compared to 2021,

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representing a headwind of approximately $16.5 million. TitlePoint revenues that were more sensitive to fluctuations in home buying and origination volumes were approximately 1.8% of our consolidated revenues for the year ended December 31, 2022 and declined 22% compared to 2021, representing approximately $7.8 million of the headwind.

Regulatory Requirements

There continues to be a high level of legislative and regulatory focus on consumer protection practices. As a result, federal and state governments have enacted various new laws, rules and regulations. This has led banks and other lenders to seek software solutions that assist them in satisfying their regulatory compliance obligations in the face of a changing regulatory environment. We have developed solutions that target this need, which has resulted in additional revenues.

The CFPB has issued guidance that applies to "supervised service providers," which the CFPB has defined to include service providers, like us, to CFPB-supervised banks and non-banks. In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") contains the Mortgage Reform and Anti-Predatory Lending Act that imposes additional requirements on lenders and servicers of residential mortgage loans. Future legislative or regulatory changes are difficult to predict, and new laws or regulations that may be implemented by the CFPB or other regulatory bodies may require us to change our business practices or incur increased costs to comply.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon audited consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of these consolidated financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures with respect to contingent liabilities and assets at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Certain of our accounting policies and estimates require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. Our actual results may differ from those estimates. See Note 2 to the Notes to Consolidated Financial Statements for additional description of the significant accounting policies that have been followed in preparing our consolidated financial statements.

The accounting policies described below are those we consider to be the most critical to an understanding of our financial condition and results of operations and that require the most complex and subjective management judgment.

Revenue Recognition

At times, revenue recognition requires significant judgment, especially for our complex arrangements that include multiple performance obligations, or deliverables, such as arrangements that include the implementation of several software solutions over a period of time as well as post-implementation subscription fees and support for those solutions. The amount of revenues we recognize in a particular period depends on the value we allocate to the products and services delivered during that period. Our critical judgments for revenue recognition relate to (i) identifying performance obligations within the arrangement, including whether those obligations are distinct or should be combined; (ii) determining the standalone selling price ("SSP") for each performance obligation; and (iii) determining the effect of contract modifications.  

Delivery of our primary software solutions is often considered a distinct performance obligation; however, certain agreements that include complex, proprietary implementation-related professional services require judgment to determine if the software solution and related implementation professional services should be combined into one performance obligation.

The SSP for many of our solutions and services is based on observable selling prices. However, when observable selling prices are not available, judgment and analysis is required to establish an estimated SSP through consideration of all reasonably available information, including market conditions, demands, trends, our specific factors and information

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about the client or class of client. The adjusted market approach is generally used when observable inputs are not available or limited.

Contract modifications require judgment to determine if the modification should be accounted for as (i) a separate contract, (ii) the termination of the original contract and creation of a new contract or (iii) a cumulative catch-up adjustment to the original contract. When evaluating contract modifications, we must identify the performance obligations of the modified contract and determine both the allocation of revenues to the remaining performance obligations and the period of recognition for each identified performance obligation.

Purchase Accounting

We are required to allocate the purchase price of acquired businesses to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values, with the excess recorded as goodwill. We generally engage third-party valuation specialists to assist us in making fair value determinations. The third-party valuation specialists generally use discounted cash flow models, which require internally-developed assumptions, to determine the acquisition fair value of client relationship intangible assets and developed technology software assets. Assumptions for client relationship asset valuations generally include forecasted revenue attributable to existing customer contracts and relationships, estimated annual attrition, forecasted earnings before interest, taxes, depreciation and amortization margin and estimated weighted average cost of capital and discount rates. Assumptions for software asset valuations generally include forecasted revenue attributable to the software assets, obsolescence rates, estimated royalty rates and estimated weighted average cost of capital and discount rates. The forecasted financial performance used in the discounted cash flow models are critical accounting estimates in determining the fair value of customer relationships and software asset valuations as these estimates are influenced by many factors, including historical financial information and management’s expectation for future operating results as a combined company.

If the initial accounting for a business combination is incomplete by the end of the reporting period during which the combination took place, we are required to record provisional amounts in our consolidated financial statements for items for which the accounting has not been completed. 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. Any new assets or liabilities identified during the measurement period are recognized as of the acquisition date. The measurement period ends the sooner of one year from the acquisition date or when we receive the information we were seeking about facts and circumstances that existed as of the acquisition date or learn that more information is not obtainable.

Goodwill

Goodwill is tested for impairment annually or more frequently if circumstances indicate potential impairment, through a comparison of a reporting unit’s fair value to its carrying value. Goodwill impairment assessments require a significant amount of management judgement, and a meaningful change in one or more of the underlying forecasts, estimates or assumptions used in testing goodwill for impairment could have a material impact on our results of operations and financial position. Our impairment test may first consider qualitative factors to determine whether it is more likely than not that a reporting unit's carrying amount exceeds its fair value. Qualitative factors include macroeconomic conditions, industry and market changes, our overall financial performance, changes in share price and other events or changes in circumstances that could negatively affect us. If the results of a qualitative assessment indicate a potential for impairment, a quantitative goodwill impairment test is performed. The quantitative process of determining whether or not an asset, such as goodwill, is impaired or recoverable relies on a weighted average of multiple valuation methods, primarily a combination of an income approach and a market approach. The income approach includes the present value of estimated future cash flows, while the market approach uses earnings multiples of similar guideline public companies or of similar guideline transactions. The income approach used to assess goodwill for impairment is a critical estimate because the forecasted growth rate assumptions underlying the estimated future cash flows is subject to management's judgement based upon the best available market information, internal forecasts and operating plans. A deterioration in this assumption could adversely impact our results of operations and financial position.

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For the years ended December 31, 2022, 2021 and 2020, we performed a qualitative assessment for our annual goodwill impairment test, and we concluded that it is more likely than not that the fair value of each of our reporting units continued to exceed its respective carrying values.

Results of Operations

See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission ("SEC") on February 25, 2022, for a discussion of our consolidated and segment results of operations for 2021 compared to 2020.

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 tables present certain financial data for the periods indicated (dollars in millions):

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Segment Financial Results

Revenues

We generate revenues through contractual arrangements we enter into with our clients to provide products or services either individually or in combination with one another as part of an integrated offering of multiple services. These arrangements occasionally include offerings from more than one segment to the same client.

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

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Software Solutions

Our Software Solutions segment revenues are primarily derived from software solutions and professional services. Revenues from software solutions are typically volume-based agreements driven by factors such as the number of accounts processed, transactions processed and system resources utilized. The agreements typically have minimum volumes that results in high levels of recurring revenue. Professional services consist 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 solutions clients.

Revenues were $1,333.9 million in 2022 compared to $1,250.0 million in 2021, an increase of $83.9 million, or 7%. Our servicing software solutions revenues increased $44.9 million, or 5%, primarily driven by incremental revenues from new and existing clients, an increase of $21.6 million in foreclosure-related revenues and contract termination fees of $3.9 million, partially offset by headwinds from lower transactional revenues, including a decline in inactive loans, and attrition. Our origination software solutions revenues increased $39.0 million, or 9%, primarily driven by revenues from new and existing clients, revenues of $14.0 million related to an acquired business, an increase of $9.1 million in contract termination fees and an increase of $5.3 million in license fees, partially offset by a decrease of $22.7 million in revenues due to lower origination volumes and attrition.

Data and Analytics

Our Data and Analytics segment revenues are primarily derived from 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.

Revenues were $218.0 million in 2022 compared to $225.2 million in 2021, a decrease of $7.2 million, or 3%. The decrease was primarily driven by new sales that were more than offset by a decrease of $16.5 million related to the effect of lower origination volumes, lower revenues related to a reduction in scope for two long-term strategic data deal renewals and attrition.

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EBITDA and EBITDA margin

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

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Software Solutions

EBITDA was $736.5 million in 2022 compared to $713.7 million in 2021, an increase of $22.8 million, or 3%, with an EBITDA margin of 55.2% compared to 57.1% in 2021. The EBITDA margin decrease was driven by revenue mix along with higher personnel costs, technology-related costs, including cloud costs and other software subscriptions, an increase in client credit loss expense primarily related to a client that is no longer in business, and sales and marketing costs.

Data and Analytics

EBITDA was $69.3 million in 2022 compared to $80.2 million in 2021, a decrease of $10.9 million, or 14%, with an EBITDA margin of 31.8% compared to 35.6% in 2021. The EBITDA margin decrease was primarily driven by revenue mix along with higher personnel costs, technology-related costs and sales and marketing costs.

Consolidated Financial Results

Operating Expenses

Operating expenses primarily include compensation costs, including equity-based compensation and benefits, hardware and software maintenance costs, software subscription costs, cloud computing costs, occupancy costs and professional services.

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

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The increase in Operating Expenses in 2022 compared to 2021 was primarily driven by $37.5 million in higher net personnel expenses, including the effect of wage inflation above our typical annual increases, $13.7 million in higher technology-related costs, $8.4 million in higher sales and marketing costs, including higher costs related to travel, and an increase of $8.2 million in client credit loss expense primarily related to a client that is no longer in business.

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Depreciation and Amortization

Depreciation and amortization expense consists of our depreciation related to investments in property and equipment, including hardware, as well as amortization of purchased and developed software and other intangible assets, primarily client relationship assets recorded in connection with acquisitions. It also includes the amortization of deferred contract costs.

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

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The increase in Depreciation and amortization in 2022 compared to 2021 is primarily related to higher software amortization of $11.8 million related to investments in internally developed software, primarily related to our origination software solutions, higher deferred contract costs amortization of $10.8 million, including $5.9 million of accelerated amortization, partially offset by lower other intangibles assets amortization of $16.0 million, primarily related to acquired client relationship assets that are amortized using an accelerated method.

Transition and Integration Costs

Transition and integration costs were $31.8 million in 2022 compared to $13.3 million in 2021. Transition and integration costs in 2022 primarily consisted of costs related to the ICE Transaction. Transition and integration costs in 2022 and 2021 also consisted of costs associated with acquisitions, including costs pursuant to purchase agreements and expense reduction initiatives.

Interest Expense, Net

Interest expense, net consists primarily of interest expense on our borrowings, payments on our interest rate swaps, amortization of our debt issuance costs and original issue discount, commitment fees on our revolving credit facility and administrative agent fees net of capitalized interest and interest income.

Interest expense, net was $100.6 million in 2022 compared to $83.6 million in 2021, an increase of $17.0 million, or 20%. The increase was driven by higher interest rates and higher average outstanding debt balances.

Other Expense, Net

Other expense, net was $11.9 million in 2022 compared to $6.4 million in 2021. The 2022 amount is primarily related to legal fees. The 2021 amount is primarily related to legal fees and the debt refinancing.

Income Tax Expense

Income tax expense was $22.4 million in 2022 compared to $35.7 million in 2021. Our effective tax rate was 13.5% in 2022 compared to 16.8% in 2021. Refer to Note 18 to the Notes to Consolidated Financial Statements for additional information.

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Equity in Earnings of Unconsolidated Affiliates, Net of Tax

Equity in earnings of unconsolidated affiliates, net of tax primarily represents the effect of our investment in DNB, which is accounted for as an equity-method investment. Equity in earnings of unconsolidated affiliates, net of tax consists of the following (in millions):

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Refer to Note 4 to the Notes to Consolidated Financial Statements for more information related to our investment in DNB.

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 December 31, 2022, we had cash and cash equivalents of $12.2 million, outstanding debt principal of $2,671.2 million and available capacity of $455.0 million on our revolving credit facility.

As of December 31, 2022, we owned 18.5 million shares of DNB common stock for an ownership interest in DNB of approximately 4% of DNB’s outstanding common stock. As of December 31, 2022, DNB’s closing share price was $12.26 and the fair value of our investment in DNB was $226.5 million before tax. Assuming a statutory tax rate of 25.5%, the estimated after-tax value of our investment in DNB was $211.0 million. Refer to Note 4 to the Notes to Consolidated Financial Statements for additional information.

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

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 that we require additional liquidity, it will be funded through borrowings on our revolving credit facility, the incurrence of other indebtedness, the sale of DNB common stock, equity issuance or a combination thereof. The loss of the largest lender on our revolving credit facility would reduce our borrowing capacity by $90.0 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 sell additional equity to finance such acquisitions.

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Cash Flows

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

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Operating Activities

The $198.2 million decrease in cash provided by operating activities in 2022 compared to 2021 is primarily related to higher income tax payments of $112.4 million, including approximately $75 million of income tax payments related to the DNB gain we recognized as part of the February 2022 Optimal Blue transaction and approximately $32 million related to the effect of the change in timing of deducting certain software development costs under Internal Revenue Code Section 174, as well as payments of approximately $43 million made in connection with certain tax-planning actions to mitigate the potential impact of Internal Revenue Code Section 280G related to the proposed ICE Transaction.

Investing Activities

The $305.5 million decrease in cash used in investing activities in 2022 compared to 2021 is primarily related to business acquisitions in 2021.

Financing Activities

The $214.6 million increase in cash used in financing activities in 2022 compared to 2021 is primarily related to the cash paid in February 2022 as part of the aggregate purchase consideration for acquiring the remaining outstanding Class A Units of Optimal Blue from Cannae and THL, partially offset by share repurchases in 2021.

Financing

For a description of our financing arrangements, see Note 11 to the Notes to Consolidated Financial Statements.

Contractual Obligations

Our long-term contractual obligations generally include our debt and related interest payments, software subscription, cloud computing and hardware and software maintenance commitments and operating and finance lease payments for our offices, data centers, property and equipment. These long-term contractual obligations extend through 2028.

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Our interest rate swaps represent our material off-balance sheet arrangements. Refer to Note 11 to Consolidated Financial Statements for additional information.

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.

Recent Accounting Pronouncements

See Note 2 to the Notes to Consolidated Financial Statements for a description of recent accounting pronouncements.

Item 7A.           Quantitative and Qualitative Disclosure about Market Risk

In the normal course of business, we are routinely subject to a variety of risks, as described in Item 1A. Risk Factors of Part I of this Report and in our other filings with the SEC.

The risks related to our business also include certain market risks that may affect our debt and other financial instruments. At present, we face the market risks primarily associated with interest rate movements on our outstanding debt.

Market Risk

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

Interest Rate Risk

In addition to existing cash balances and cash provided by operating activities, we use fixed and variable rate debt to finance our operations.

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Our Senior Notes represent our fixed-rate long-term debt. Refer to Note 11 to the Notes to Consolidated Financial Statements. The carrying value of our Senior Notes was $991.1 million, net of original issue discount and debt issuance costs, as of December 31, 2022. The fair value of our Senior Notes was approximately $870.0 million as of December 31, 2022. The potential reduction in fair value of the Senior Notes from a hypothetical 10 percent increase in market interest rates would not be material to the overall fair value of debt.

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 December 31, 2022, we had $1,666.2 million in long-term debt principal outstanding from our Facilities, all of which is variable rate debt, as described in Note 11 to the Notes to Consolidated Financial Statements.

As of December 31, 2022, the Facilities represent our long-term debt obligations exposed to interest rate risk. We performed a sensitivity analysis based on the principal amount of debt as of December 31, 2022, 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 or decrease of 100 basis points in the applicable interest rate would cause an increase or decrease in interest expense of $16.7 million on an annual basis ($15.6 million including the effect of our current interest rate swaps) as the 1-week and 1-month LIBOR were approximately 4.32% and 4.38%, respectively, as of December 31, 2022.

As of December 31, 2022, we have the following interest rate swaps agreements (collectively, the "Swap Agreements") (in millions):

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Under the terms of the Swap Agreements, we receive payments based on the 1-month LIBOR (approximately 4.38% as of December 31, 2022).

During the year ended December 31, 2022, the following interest rate swap agreement expired (in millions):

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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 payments are made on the hedged debt. The inputs used to determine the estimated fair value of our interest rate swaps are Level 2 inputs. We considered our own credit risk and the credit risk of the counterparties when determining the fair value of our Swap Agreements.

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Item 8.          Financial Statements and Supplementary Data

BLACK KNIGHT, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
Black Knight, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Black Knight, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of earnings and comprehensive earnings, equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 28, 2023 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Jacksonville, Florida
February 28, 2023

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
Black Knight, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Black Knight, Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of earnings and comprehensive earnings, equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Acquisition of Optimal Blue, LLC

As discussed in Note 3 to the consolidated financial statements, the Company acquired Optimal Blue, LLC on September 15, 2020.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of revenue recognition for contracts with multiple performance obligations

As discussed in Notes 2 and 15 to the consolidated financial statements, the Company is often party to multiple concurrent contracts or contracts in which a customer may purchase a combination of products and services. For contracts with customers that contain various combinations of products and services, the Company must evaluate

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whether the promises within the contract are capable of being distinct and are distinct in the context of the contract. Distinct products or services are accounted for as separate performance obligations, while non-distinct products or services are combined with others to form a single performance obligation. Given the nature of the Company’s product and service offerings, there is complexity in determining whether the promises are separate performance obligations or a combined performance obligation. The identification of performance obligations, specifically for revenue contracts with professional services, influence the amount and timing of revenue recognition.

We identified the assessment of revenue recognition for contracts with multiple performance obligations as a critical audit matter. Specifically, the critical audit matter related to the Company’s identification of performance obligations for revenue contracts with professional services and the resulting accounting treatment. This was due to the extensive audit effort and complex auditor judgment required to evaluate the Company’s contracts in these circumstances.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the revenue recognition process. This included controls over the Company’s review of customer contracts for the identification of performance obligations. For selected new and modified revenue arrangements, we assessed the Company’s identification of performance obligations by evaluating the Company’s analysis of the revenue arrangements as compared to the revenue recognition standard and the underlying contracts and/or statements of work. In addition, for a sample of professional services revenue transactions, we assessed the Company’s identification of distinct and non-distinct performance obligations by evaluating the Company’s analysis through comparison to contract source documents and correspondence or through involvement of information technology professionals with specialized skills and knowledge in discussions with the Company’s product and service technicians.

/s/ KPMG LLP

We have served as the Company’s auditor since 2007.

Jacksonville, Florida

February 28, 2023

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BLACK KNIGHT, INC.

Consolidated Balance Sheets

(In millions, except share data)