May 7, 2018
Executives
Bryan Hipsher - SVP of Finance William Foley - Executive Chairman Anthony Jabbour - CEO Kirk Larsen - Executive VP & CFO
Analysts
John Campbell - Stephens Inc Oscar Turner - SunTrust Jason Deleeuw - Piper Jaffray Tien-tsin Huang - JPMorgan David Ridley Lane - Bank of America Merrill Lynch Bill Warmington - Wells Fargo Chris Gamaitoni - Compass Point James Schneider - Goldman Sachs Glenn Greene - Oppenheimer Ashish Sabadra - Deutsche Bank Stephen Sheldon - William Blair Kevin Kaczmarek - Zelman & Associates
Operator
Greetings, and welcome to the Black Knight First Quarter 2018 Conference Call. At this time, all participants are in a listen-only mode.
A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to turn the call over to your host, Bryan Hipsher, Senior Vice President of Finance. Please go ahead, sir.
Bryan Hipsher
Thanks. Good afternoon, everyone, and thank you for joining us for the Black Knight First Quarter 2018 Earnings Conference Call.
Joining me today are Executive Chairman, Bill Foley; CEO, Anthony Jabbour; and Chief Financial Officer, Kirk Larsen. Our results were released this afternoon, and the press release and supplemental slide presentation have been posted to our website.
This conference call will include statements related to the expected future results of our company and are, therefore, forward-looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties.
The risks and uncertainties that forward-looking statements are subject to are described in our earnings release and our Form 10-K and other SEC filings. Today's remarks will also include references to non-GAAP financial measures.
Additional information, including reconciliations between non-GAAP financial information to the GAAP financial information, are provided in the press release and supplemental slide presentation. This conference call will be available for replay via webcast through Black Knight's Investor Relations website at investor.blackknightinc.com.
I'll now turn the call over to Bill.
William Foley
Thank you, Bryan. We had a solid start to 2018 as we delivered adjusted revenue growth of 5% and adjusted EBITDA growth of 9%, which drove margin expansion of 190 basis points to 47.9%.
Our first quarter results reflect our continued focus on driving organic growth through cross-sell, adding new clients and the delivery of innovative solutions. In addition to our solid operational performance, we further demonstrated a commitment to create shareholder value by repurchasing 3 million shares of our common stock.
The underlying fundamentals of our business remained strong, and we are on course to achieve the financial targets we have set for 2018. Finally, on behalf of the Board of Directors, we want to thank Tom Sanzone for his leadership with the company and his hard work over the last few years.
Tom will continue to be involved with Black Knight as a member of the Board of Directors. Also, we are excited to welcome Anthony Jabbour to Black Knight as our Chief Executive Officer.
I've known Anthony for more than 15 years, and I am extremely confident that the extensive experience and skills he brings to the company will drive our future success, and we look forward to his leadership. I'll now turn the call over to Anthony, who will provide us with an update on the first quarter.
Anthony Jabbour
Thank you, Bill. And good afternoon, everyone.
Thank you for joining us for our first quarter earnings call. I'd like to start off by saying how excited I am to be with Black Knight and how excited I am about where this company is today and where I believe it can be in the years to come.
The unique blend of industry-leading solutions, exceptional client partnerships and an employee base with deep industry knowledge lead me to believe that Black Knight is well positioned to continue its successes on all fronts. I spent most of my first month at Black Knight on the road, meeting with our clients to get a deeper feel for how our company is performing from the front lines.
I also spent considerable time with our employees to better understand our operations and culture. It's clear to me that Black Knight has a client-first mentality, and I'm very impressed with the commitment our employees have to earning our clients' business each and every day.
And under my watch, this will only intensify. It is also evident that our client interactions are more strategic partnerships versus under relationships.
As good partners, we are focused on their primary challenges of revenue retention and generation, improved operational efficiency as well as risk and regulatory compliance. Our aim is to replace manual processes, internal wrap applications and one-off point solutions with our growing suite of integrated Black Knight products.
At the end of April, I had the opportunity to participate in our annual client conference. We had nearly 1,200 attendees, including a record number of new prospects in attendance.
It is exciting to see the energy and engagement of our clients, our prospects and our employees. Over the next few months, I plan to continue meeting with clients and employees, evaluating our offerings and operations, interacting with the investment community and analyzing our overall opportunity set.
Based on what I have so far, our strategy is sound, and we look to refine our go-to-market approach and accelerate our integration and innovation efforts. From an overall perspective, I'm happy to report, as Bill mentioned, that we're off to a solid start to the year and are on target with our operational and sales initiatives.
Operationally, we completed the implementation of a significant home equity portfolio onto the MSP servicing system. This adds another 700,000 loans to our platform, increasing our market share to 17% of home equity lines and loans, and we are implementing our way to approximately 30% market share when the remainder of the ongoing implementations are complete.
In origination software, we're very excited to announce the implementation of the nation's largest credit union, Navy Federal Credit Union, onto Empower. Navy Federal has been a long-time servicing client, and we are pleased to add them to our growing list of enterprise clients.
Finally, from a sales perspective, we continue to add to our strong implementation pipeline. We recently announced that JPMorgan Chase will be implementing Empower to originate their home equity loans.
This significant announcement speaks to Black Knight's reputation and capability to meet the expectations of the largest financial services organizations in the world. Outside the scalability and systems integration, we believe one of the primary reasons JPMorgan Chase selected Empower was our robotics capability that drives a highly automated process.
With large complex lenders that are originating loans across the United States, it is critical that they gain efficiencies through the software platforms. Once implemented, the combined power of originating and servicing home equity loans by an integrated Black Knight platform will drive exponential value to the organization.
Success begets success, and our ability to successfully implement their home equity servicing portfolio certainly put us in a position to deepen our partnership. We will continue to focus on premier products, successful implementations and innovative solutions with the goal of creating more and more partnerships like the one we have with JPMorgan Chase.
Along with our success in originations, we also recently signed Pennsylvania Housing Authority to a multiyear software services and data and analytics contract. Along with utilizing MSP for first and seconds, the organization will be using several other products, including our foreclosure and bankruptcy, invoicing, expedite close and several data and analytics offerings.
In closing, this is a great company with a solid strategy, a strong solution set and a strong ability to deliver. Thank you for your time today.
I would like to now turn the call over to Kirk for an in-depth financial update.
Kirk Larsen
Thanks, Anthony, and good afternoon, everyone. Today, I'm going to discuss our first quarter results and our outlook for 2018.
Unless otherwise noted, comparisons are to the first quarter of 2017. Turning to slide 3.
On a GAAP basis, first quarter revenues increased 5% to $270.3 million compared to $258.1 million in the prior year quarter. Net earnings attributable to Black Knight, Inc.
were $42.7 million or $0.29 per diluted share compared to $12.2 million or $0.18 per diluted share. Turning to slide 4.
During the first quarter, adjusted revenues were $271.2 million, an increase of 5% compared to the prior year quarter. Adjusted EBITDA increased 9% to $129.9 million compared to $119.4 million.
Adjusted EBITDA margin was 47.9%, an increase of 190 basis points. Adjusted net earnings was $64.1 million, an increase of 42%.
Adjusted net earnings per share for the first quarter was $0.43, an increase of 43%. Capital expenditures in the first quarter totaled $24.7 million.
Turning now to slide 5. I'll discuss our Software Solutions segment results.
In the first quarter, adjusted revenues for the Software Solutions segment increased 5% to $233.6 million. Our servicing software business had adjusted revenue growth of 7% driven by strong loan growth on our core servicing and software solution from new and existing clients, price increases and new client wins.
In our origination software business, adjusted revenues declined 4% as increased professional services and new client wins were offset by lower exchange volumes as a result of a 14% decline in refinancing originations as reported by the Mortgage Bankers Association and client contract termination fees in the prior year quarter. Adjusted EBITDA increased 9% to $136.8 million while adjusted EBITDA margin was 58.6%, an increase of 240 basis points.
Turning to slide 6. In the first quarter, adjusted revenues for the data and analytics segment increased 3% to $37.6 million, primarily driven by growth in our multiple listing service business and increased volumes in our tax and title data businesses.
Adjusted EBITDA was $8.6 million compared to $6.9 million in the prior year quarter as increased revenues came on at high incremental margins, and we demonstrated disciplined cost management. Adjusted EBITDA margin was 22.9%, an increase of 390 basis points.
Adjusted expenses for the corporate segment in the first quarter were $2.6 million higher compared to the prior quarter, reflecting higher incentive compensation expense and incremental costs following the spinoff from FNF. Turning to slide 7, I'll walk through our debt structure.
At the end of March, we had cash and cash equivalents of $9.9 million. Total debt principal as of March 31 was $1,516.9 million.
We had revolver borrowings outstanding of $136.5 million and $363.5 million of borrowing capacity remaining under our revolver. Our leverage ratio was 2.9 times in both a gross and net basis.
On April 30, we completed the refinancing of our senior secured credit facility. We replaced our Term Loan A, Term Loan B and revolving credit facilities with a new $1.25 billion Term Loan A facility and a new $750 million revolving credit facility, of which $255 million was drawn at closing.
Both facilities have a 5-year tenure. In connection with the refinancing, we entered into a 5-year interest rate swap with a notional value of $250 million and an effective date of April 30, 2018.
The fixed rate under the swap is approximately 2.6%. By entering into the swap, we increased our fixed floating mix to approximately 70% fixed and 30% floating.
During the first quarter, we repurchased 3 million shares of our common stock for $141.5 million or an average of $47.15 per share. As of March 31, 2018, we had approximately 3.8 million shares remaining under our share repurchase authorization.
Turning now to Slide 8, I'll walk through our outlook for full year 2018, which remains consistent with what we provided on our fourth quarter earnings call. Revenues are expected to be in the range of $1,102,000,000 to $1,122,000,000.
Adjusted revenues are expected to be in the range of $1,105,000,000 to $1,125,000,000. Adjusted EBITDA is expected to be in the range of $530 million to $545 million.
Adjusted EPS is expected to be in the range of $1.73 to $1.81. Additional modeling details underlying our outlook are as follows.
We currently expect interest expense of approximately $56 million, which reflects revolver borrowings in connection with the first quarter share repurchases, the April refinancing and the new interest rate swap. Depreciation and amortization expense is expected to be approximately $125 million, excluding the net incremental depreciation and amortization resulting from purchase accounting.
We're expecting an adjusted effective tax rate of approximately 27%, share count of approximately 148 million shares and, finally, CapEx of approximately $100 million. Overall, we are pleased with our first quarter and look forward to another strong year for Black Knight in 2018.
With that, I'd like to turn the call over to the operator for questions.
Operator
Thank you. [Operator Instructions] Our first question today is coming from John Campbell from Stephens Inc.
Your line is now live.
John Campbell
Hey, guys. Congrats on a great quarter.
Anthony Jabbour
Thank you, John.
John Campbell
In origination, you guys - you clearly had some in-market headwinds in the quarter. I think you came in a little bit better than we expected.
Just curious, as best you can, how much did new client or just kind of go-live rev help in the quarter relative to last year? Can you just kind of broadly talk to that or maybe quantify it?
Kirk Larsen
Yes, that was -- John, this is Kirk. If you think about the -- what happened in the quarter really was a tale of you have the new client revenues that related to implementations as well as some professional services in the quarter related to the client that went live.
That was then offset by the termination fee that we had last year and the effect of the market. If we somewhat size the effect of the market, most of that would have been in the origination solutions business.
So without quantifying the amount specifically, it really was the balancing of the new client revenues, both processing and professional services, and then offset by the termination fee and the effect of the market.
John Campbell
Okay. That makes sense.
And then for the balance of the year, I mean, clearly, comps get a little bit more difficult, refi is rolling off a little bit harder. It sounds like you had a lot of contracted minimums.
Last year, I guess, out of your origination base. Just curious, any kind of thoughts around how to expect -- what you guys are expecting for the rest of the year?
Is it going to be modestly better than the market? Can you hold it flattish, just any thoughts there?
Anthony Jabbour
Sure, John. We expect performance to improve sequentially throughout the remainder of the year.
So as some of the clients come on, it offsets the headwinds that we're facing and the market conditions.
John Campbell
Okay, great. Thanks, guys.
Operator
Thank you. Our next question today is coming from Oscar Turner from SunTrust.
Your line is now live.
Oscar Turner
Hi, good afternoon. My question is on Empower Now!
I was wondering if you can provide an update on the pipeline for that product and also if you could give any color on how discussions with those clients that are down market had been going.
Anthony Jabbour
Well, Oscar, I'll start and Kirk can chime in. It's a growing pipeline for sure.
We signed Washington Trust in the quarter, the most recent signing to Empower Now! So we're excited about the origination business in general.
So as you know, we've got a great focus for the top 50, and we've got great momentum in some of the premier clients that we just signed in recent times, has created a lot of excitement, really, in the industry. I feel we can get a meeting with anyone because of that excitement.
And really with Empower Now!, it was a parallel strategy, so how could we leverage the capability that we have to the market segment below the one that we naturally focused on. And I'd say the interest level is strong.
We got to balance it, obviously, with resources that we're focusing on at the high end but, overall, we're very pleased with what we're seeing so far.
Oscar Turner
Okay. And then a second question is a general question on the regulatory environment.
Just based on recent discussions with customers, have you noticed any changes in demand driven by the regulatory environment?
Anthony Jabbour
Well, that's an interesting one, Oscar, because I went on a crazy road trip and visited virtually a majority of our clients. And what was interesting when I came back and reported to the team was that regulatory and compliance never came up once.
And we all know how important it is to our clients, how important it is to the industry. And really my takeaway was that there's just extreme confidence in our ability to deliver them a secure and compliant solution.
So I think that's why it was absent from our conversations. We just got a good history of delivering in that capacity.
Oscar Turner
Okay, thanks.
Operator
Thank you. Our next question is coming from Jason Deleeuw from Piper Jaffray.
Your line is now live.
Jason Deleeuw
Thanks and good to see very solid results. And Anthony, I just want to say congrats and welcome aboard.
Anthony Jabbour
Thanks, Jason.
Jason Deleeuw
The -- and also, I just -- Anthony, I would just like to get your thoughts on kind of what surprised you so far since you've joined Black Knight and where will your initial focus be.
Anthony Jabbour
That's a great question, Jason. It was -- I thought I had a very clear picture of what I was walking into.
And I was pleased, really, with what I discovered. We're all part of the same company going back maybe a decade or so, and I knew the business peripheries.
But for a company that has such strong industry-leading presence, my initial concern was that there's going to be a lethargic approach to day-to-day business and to clients, and that absolutely wasn't the case. I really came in guns blazing assuming that's what I would need to focus on.
And I was very pleased that, that wasn't the case. It is very, very much strong client partnerships across the board.
And I'm pleased with that because candidly, that would have taken probably a good 2 to 3 years for me to change the culture here. And instead, I can jump into really looking at our offerings and what we can do on the innovation front and, candidly, what are some broader opportunities for us and for the industry.
I look at -- we've got a premier roster of clients, we've got tremendous scale. I'm interested in seeing what we can do in terms of helping transform the industry for the benefit of all.
But that's early days, but that is something that's top of mind. And I'd say the last maybe two areas on digital and actionable analytics, there has been a lot of focus on digital from an origination point of view, but we demoed at our conference servicing capability from the digital platform, and that was very well received, I was excited to see that, and as well as our actionable analytics.
So those are really the areas that, I think I'll focus on to make sure we're out in front of some of the new trends that are coming. But like I said, I'm walking into -- Tom did a great job here, and the team here did a great job.
Very, very excited to come and work for Bill and the board again. It really is a great company.
It's really about taking it to the next level.
Jason Deleeuw
Great. Thanks.
And then I was just wondering on the implementation pipeline, it was $160 million update last quarter. I'm wondering if there's an update on that number now or at least directionally.
I'm not sure if you want to keep updating the number each quarter but, at least directionally, it would seem like you have gone up since we've had some wins here recently. Just any color you can give us on that pipeline.
Kirk Larsen
Yes, Jason, it's Kirk. Directionally, it has gone up, particularly as it relates to -- we had a good sales quarter in the first quarter.
And certainly, we're thrilled to have added JPMorgan Chase to the origination solutions pipeline. So it did go up, which we're pleased with.
I don't want to be specific about it because then I don't make a -- as we talked about in the last call, I don't want to put a quarterly cadence to this, but it's working in that direction, so building the pipe for the growth for the next several years.
Jason Deleeuw
Great. Thank you.
Operator
Thank you. [Operator Instructions] Our next question is coming from Tien-tsin Huang from JPMorgan.
Your line is now live.
Tien-tsin Huang
Thanks so much. Anthony, welcome to the call.
I appreciate your early impressions of the company. I thought I'd ask you what you might do differently.
And thinking about the M&A, could that be a bigger focus for you?
Anthony Jabbour
Thank you, Tien-tsin, looking forward to working with you again. What I'd say is, clearly, the thing I'm most focused on in my role, obviously, is capital allocation and making sure we're putting our capital against what we see as the biggest and best priorities for the company.
And obviously, M&A is one of them. But I'd just say -- I got that question a lot, as you can imagine, with my history of acquisitions that, that was for sure what I was going to do.
And I wouldn't say I'm coming in with a recipe that I think needs to be followed. We had a lot of success with my previous colleagues.
But certainly, as we look for opportunities, I think there's -- that is one vector. But I just want to be clear.
I didn't come in to do acquisitions. It's one of the things that we'll look at.
As some opportunities come up, there's small ones which would be nice tuck-in ones that would -- that could accelerate as on some of the highly innovative fronts, and then there's some larger ones with either a product or market share. But I think there's a difference between accelerating integration and innovation and buying more traditional types of companies, so...
Tien-tsin Huang
Yes, that makes sense and good to know. I'll ask just my follow-up, maybe for Kirk, just on the margin front, very high incremental margins in the quarter.
It looks like the highest in the first quarter that we've seen in some time, anything unusual in there? Was cost management a stepped up focus for the company maybe in the quarter, just curious?
Kirk Larsen
Tsin-tsen, there are couple of things that were going on in the first quarter. So if you recall, I think we spoke last year about some cost actions that we took in the second quarter that we benefited starting in the second quarter of last year, and we had tremendous margin performance -- or at the back half of last year coming into the first quarter.
So that anniversaries now so that has run its course from an annualization perspective in the first quarter. The other thing I would say is we continue to be supremely focused on how we allocate resources and making sure that we're allocating them to value-added activities like product development and implementations as opposed to sort of maintenance and expense type of activities, which also improves margins as well the EBITDA level.
And so really, there is that continued focus. I think where the -- a couple of things which were significant enough that they offset the higher corporate costs and incentive comp that we had talked about being a headwind for the year.
So as I said, those cost actions from last year have not annualized, so won't see that year-over-year benefit going Q2 through Q4 but, certainly, we benefited from it in the first quarter.
Tien-tsin Huang
All right. That’s great.
Thanks.
Operator
Thank you. Our next question today is coming from David Ridley Lane from Bank of America Merrill Lynch.
Please proceed with your question.
David Ridley Lane
Morning. So when you're listening to or among customers, what are the sort of two or three most mentioned pain points?
Definitely heard it wasn't regulatory, so was it more on the cost side or competition from non-traditional lenders?
Anthony Jabbour
Yes, David. Thanks for the question.
It really was. It was -- it's funny, I was trying to simplify things and I go back to what does every company want to do.
They want to grow revenues, get operating leverage and stay within the risk and regulatory compliance and then there may be a fourth that you weave into the top three, which is leveraging innovation to help achieve the revenue, the efficiency or the regulatory and also to future-proof the business. So a lot of the conversation on the revenue side, I would say, focused around retention and ways to enhance the retention because, as you know, it's 5 times the cost of getting a new client versus retaining one.
So as you can imagine, there's a heightened focus there. The other one was on operating efficiency.
As you look from a -- from an ongoing increase of cost to originate a loan, it was mid-5,000s at the bottom of the recession. And currently, it's about $8,100.
And so it's gone up. The profitability against those loans is projected to cut in half versus what it was last year.
So there really is an intense focus on that, and that is one of the areas that we're keenly focused on, trying to find ways to optimize their expense base, automate processes, the things that you can automate, how can you take a process, a manual process, from 20 minutes down to 5 minutes, right, what are the tools that we can bring to the client so the total cost of ownership is lower. But that's what -- and I think maybe the last one was really around innovation.
They -- around the digital channels, that was one where -- mobile is not a new thing, right? But to a larger extent, it had been leveraged on the origination side for mortgage.
It hadn't been leveraged on the servicing side. And so we're starting to see some interest there and really, for our clients, trying to enable anything that can be done in the physical location to be performed on the digital channel.
So that's probably the high-level feedback from what's top of mind.
David Ridley Lane
All right. Thank you for that.
And then a quick question for Kirk. I know that the adjusted EPS range was maintained.
They did have higher interest expense. I'm wondering if there was two or three things that helped to offset that?
Kirk Larsen
Yes, the primary offset to that was the share count going down from where -- what we originally guided to because we did buy those shares in the first quarter. And so actually, there's a natural offset or a direct correlation between higher interest expense and the share count because we borrowed money to buy the shares.
David Ridley Lane
Got it. Okay.
Thank you.
Operator
Thank you. Our next question is coming from Bill Warmington from Wells Fargo.
Your line is now live.
Bill Warmington
Good afternoon, everyone. And welcome to Anthony.
Anthony Jabbour
Thank you, Bill. Great to be here.
Bill Warmington
So first question for you on Empower. You guys have talked in the past about the opportunity for the top 10 lenders.
I wanted to ask how the pipeline there was shaping up and some color, if you have it, on how those client discussions are going.
Anthony Jabbour
Well, Bill, what I can share is that the -- there is meaningful interest. Some of the recent signings that we had, had sure given us a lot of credibility with, I'll say, non-Empower clients today, and so we're excited about that.
These things take a while, right, to move a large organization over a top 10. But we have a few in the pipeline we're working with seriously.
We're working hard. I want to get on the road and visit with them and really explain all the things that we've got going on and why it can make tremendous sense for them and for us to partner.
Bill Warmington
Okay. And then for my follow-up, I had a couple of housekeeping items.
Just wanted to ask on the balance sheet, with the current deferred revenue going down quarter-to-quarter and the longer-term deferred revenue going up, I just wanted to ask if there was anything going on there.
Kirk Larsen
One thing, Bill, that should be evident from -- when we file our 10-Q will be that there was an effect on deferred revenue related to the adoption of ASC 606, the new rev rec rules. That played a part in it.
But then, frankly, I'd have to go back and dig further, and we can certainly follow up.
Bill Warmington
Okay. And then just on the -- you had mentioned the first quarter client contract termination fee.
What was that dollar amount?
Kirk Larsen
$2 million.
Bill Warmington
All right. Thank you very much.
Kirk Larsen
Thank you, William.
Operator
Thank you. Our next question is coming from Chris Gamaitoni from Compass Point.
Your line is now live.
Chris Gamaitoni
Hi, everyone. Thanks for taking my call.
What was the impact of ASC 606 in the quarter from a revenue perspective?
Kirk Larsen
It was relatively minor. It was about $3 million.
Chris Gamaitoni
And we've heard some other companies, is that just like a shifting from the time period? Or how do you think about the full impact -- the impact for the full year?
Kirk Larsen
The full year, so from a -- everything related to 606 is effectively timing, so it's just a matter of whether you recognize it in period or over time. And so for us it was related to some professional services that were of a nature that were recognized in period versus something that would be deferred and recognized over the life of the client relationship -- or over the contract, I should say.
And then the other component related to -- or the major component related to how you recognize when you have a contract with escalating minimums which you then straight line as opposed to recognize based upon the actual billings. And so that was absolutely all timing.
As far as the full year, the hard part of that question is we would have to know what the professional services would be, what statements of work would we sign and then what -- then determine how they would be treated. And so I think that Q1 is likely the high-water mark for what the effect will be because of some very specific implementations that went live that sort of have a difference.
So I would expect it to be quite a bit more muted over the rest of the year, but part of that will, like I said, ultimately depend on the nature of professional services that we perform over the course of the year that is not signed at this time.
Chris Gamaitoni
Okay. And then in your conversations with large organizations considering Empower, are they generally going from internal solutions or replacing other solutions?
And if they're replacing other solutions, how does the sales conversation start? What's -- how do you can convince them to switch to your solution from something that might already be implemented?
Anthony Jabbour
Right. It's a good question, Chris.
I'd say the -- for the most part, it's mix. I mean for the largest -- even if it started out as a packaged solution, it doesn't look like that packaged solution today and, over the years, would be heavily customized.
And I'd say, to a large degree, the organization is on an island. And what they're looking at is really getting on an industry-leading platform where -- I'll tell you, the other theme that was loud and clear that I got was our clients wanting to minimize customization.
So more and more, they're looking for products that, out of the gates, can be configured to meet their needs. And so the beauty of that is it fits in nicely with what we have to offer.
And I think our capabilities around robotics and our road map into where we're heading into true machine learning is going to really resonate with them. And I think financially, we'll see the operational efficiencies from that.
And again, we're fortunate to have such a strong reputation on the regulatory and compliance side. So that's really what I'm hearing and seeing, Chris.
Chris Gamaitoni
Got it. And just pure housekeeping, the Navy Federal Credit Union, was that implemented?
Or is that a new contract signing that's not implemented? I think I missed it.
Kirk Larsen
They went live in the first quarter.
Chris Gamaitoni
Okay. Thank you.
Kirk Larsen
Thank you.
Operator
Thank you. [Operator Instructions] Our next question is coming from Bose George from KBW.
Your line is now live.
Unidentified Analyst
Hey, guys. This is Tommy on for Bose.
Just wanted to ask about some of the recently announced first and second lien servicing wins. Have you guys found that implementing those has gone according to schedule or gone faster maybe as you've gone better at doing it or any sort of headwinds there?
Just kind of get some general color on that.
Anthony Jabbour
Well, what I'd say, Tommy, is that the implementations are -- large clients are complex, right? But for the most part, I wouldn't -- and I'd say they're slightly complex than a first.
But for the most part, they're going as expected. So nothing really to call out specifically on that.
Unidentified Analyst
Got it. And I think you reiterated your expectation for reaching 30% market share on the second side.
Is that a by 2020 kind of estimate with just the announced wins so far?
Kirk Larsen
Yes, that would be.
Unidentified Analyst
Got it. Thank you.
Kirk Larsen
Thanks, Tommy.
Operator
Thank you. Our next question is coming from James Schneider from Goldman Sachs.
Your line is now live.
James Schneider
Good morning, good afternoon. Thanks for taking my questions and welcome, Anthony.
Maybe just to start off and ask a follow-on to a previous question. Anthony, in your conversations with clients, what was it in terms of technology capability that they really were interested in seeing from Black Knight?
Specifically, I just wanted to ask whether there was any interest on the front-end consumer-facing kind of origination types of platforms of the sort we've seen evolve in the market over the past couple of years. Or is there a focus more for Black Knight to do more on the servicing side?
Anthony Jabbour
First of all, thank you, Jim, for the welcome. I'd say a mix.
I mean there are some of the absolute largest things in the country were very focused on controlling the consumer interface, and we get that. And our software even on the digital side, it can be consumer-facing or it can be leveraged by the mortgage entity.
So it was -- I'm just trying to see how to add color on that. It was really -- it's hard to add so many color [ph], and so I sit back and kind of phrase them, but the demand really was not so much about the technology, I think that's where we can kind of get lost, it is more around how do you just help.
And to my point in terms of where the -- we've got great client partnerships is they're looking for us to help, they're not coming to us saying, develop such a language or do this or do that, they're really looking for us to say how can you help. And many of them are, I think, excited about our end-to-end solutions.
They look at what we can offer. And from front to back end, it really is unparalleled.
So to the extent we can bring that to them -- and many of them have said, "You're working with all the providers in the industry, what do you think we should do?" So again, the tone has really changed.
What I was impressed with was the J.D. Power client satisfaction surveys around servicing, we have -- 5 of the top 5 clients are clients of ours, and we have 8 of the top 10, soon to be 9 of the top 10.
So we're working with really the best at it, and our clients are expecting us to help them and lead them in terms of what they should do. And that's one of the things that I've got a real focus on as well as here, it's making sure we're not prescriptive in a negative way but really guiding our clients.
We've got a tremendous amount of industry knowledge in this space, we've seen a lot, and our clients are really asking us how we can help. So to a large extent, I feel like I bounced around on you, Jim, I apologize, but our clients are really open to us in terms of how we can come in and how we can help them with their revenue, their operating leveraged or staying within risk and regulatory compliance.
James Schneider
That's fair, that's helpful color. And then maybe, Kirk, one for you.
Relative to the pipeline that you see and the visibility you have for this year or next year, can you maybe give us an update on where you see clients in terms of their conversion rates and whether you still have confidence that things are going to kind of take you on as you explained back in February? And specifically, any update to the 30% of pipeline this year and 22% of pipeline for 2019 you expressed earlier?
Kirk Larsen
Yes, I would say, without getting overly specific because things can move from quarter-to-quarter, I will say that things are progressing the way that we expected. There are some things that moved around a little bit, and we continue to sign deals which can move the percentages, of course, as well.
But I'd say things are progressing, and we're happy that the pipeline is continuing to grow. But overall, I'd say things are going as we expect.
James Schneider
Great to hear. Thank you.
Kirk Larsen
Thanks, Jim.
Operator
Thank you. Our next question is coming from Glenn Greene from Oppenheimer.
Your line is now live.
Glenn Greene
Thanks. Good afternoon.
Anthony, I'll try another one, kind of a segue from Jim's question. But in either, I guess, your observations or the conversations with clients, are there any obvious sort of strategic product holes or areas that you feel like you could kind of like easily be bolstered and really move the needle?
Anthony Jabbour
I'd say nothing enormous, right? So first of all, there is not an enormous gap that's out there.
But I'd say a couple. On the data side, there's, I think, an opportunity on leveraging, what I'm calling, actionable analytics.
So we can leverage our data hub and leverage our analytics to get insight on the business. It's really evolving and going to the next level and coming up with actionable items for our clients to be more efficient at or to help on the revenue side.
I had some clients ask about other asset types, and we get into other asset types for them to consolidate. And that's one of the things that we'll explore, but nothing major.
Like I said, what I was happy with was I think we can be in a position where we can lead them to what it is that would benefit their business, such as digital and such as the advanced analytics.
Glenn Greene
Okay. And then we're hearing mixed in terms of the bank technology spending environment.
Actually, most of the companies that reported seemed pretty bullish. Have you seen any change?
Or what's the tone of decision-making easier to get deals over the goal line? It sounded like you had a good sales quarter, not really quantified, but maybe just a little color on the environment and deal activity.
Anthony Jabbour
Yes. I'd say it's never easy with large organizations because there's a lot of hurdles that you've got to get over, but the tone is there.
And like I said, I think we're at the stage in the groove, so to speak, with our clients where they're seeing the spend with us can result in a better return for them, and they've got the wherewithal to make that investment.
Glenn Greene
Okay. And Kirk, real quickly, any quarterly cadence this year that we should be aware of?
Kirk Larsen
As I think about it, Glenn, I would say looking at each of the quarters, we came in a little bit better than we expected in the first quarter. When I think about growth in the second quarter, I'd say it will -- could look a lot like the first quarter growth, if not, maybe slightly better than that but pretty much in that area.
And we'd expect, as we talked about in the last call, that Q3 and Q4 revenue growth we expect to be higher due to implementations so, really, sequential increases from the first quarter all the way up through the fourth quarter based upon implementations. From an expense perspective, we always have that Q1 to Q2 ramp in expenses because of -- we do merit increases in April, so we see a little uptick in expense.
And then -- but then we think it could be relatively flat Q3 and Q4, which then means -- you can infer what that would do from an EBITDA perspective, so a little sequential increase to Q2 but then go up more as we go through three and four with the revenue growth.
Glenn Greene
Helpful color. Thank you.
Kirk Larsen
Thanks, Glenn.
Operator
Thank you. Our next question today is coming from Ashish Sabadra from Deutsche Bank.
Your line is now live.
Ashish Sabadra
Solid results. And welcome, Anthony.
Just a quick question, Anthony; did you talk about refining the go-to-market approach? And if yes, can you just talk about what you're planning to do on that front?
Anthony Jabbour
First of all, thank you, Ashish, I appreciate your welcome. Really, on that, I look at org structures as there's not a right structure or a wrong structure, obviously, right?
It's kind of a living and breathing thing, and you need to look at what the organization need right now. As I look at it, so I think any of the changes would be minor like -- and it's more of a refinement versus a wholesale change.
The team was heading down the path of more integration, more cross-sells which, as we all know, the right focus for us to have, and I'm pleased with that. I imagine, as I kind of get in the details, there'll be smaller opportunities here and there, and we'll focus on those.
But again, I think they'll be minor, Ashish.
Ashish Sabadra
That's helpful. And a question on data and analytics.
So you definitely have great product sets on the data and analytics front, and it looks like there is definitely a demand there. But that has -- the revenue growth there has been a bit choppy.
So how do you think about, given the big -- the revenue potential, how should we think about a more midterm growth profile in the D&A business?
Kirk Larsen
Yes, Ashish, this is Kirk. I'll address the first part of it, which is the growth aspect of it.
Historically, if you go all back to -- all the way back to 2014, some of the choppiness in the growth was really driven by the long-term strategic license deals that we did to monetize our investment in the public records database that -- for that investment that we had made, and very successful at that and it drove very good performance. We had Motivity in the mix for a bit there, but that was now moved over to Software Solutions segment.
And really now, it's really sort of on the fringes that you could see some variability in that growth. So we did 3% growth this quarter.
We did have some revenues in the data business to grow over from the first quarter last year. So absent that, the growth would have been mid-single-digit, maybe a touch higher, absent that, which -- as we talked about in the beginning of the year, with the collection of assets that we have currently in the data and analytics business, it really is a sort of low to -- for this year, with those grow overs, a low to mid-single-digit grower that, with actionable analytics, we think we can, in time, accelerate when we gain traction there -- so I would expect it would be sort of in this area, maybe a little bit better, but that's still pretty in line with what we're expecting.
Ashish Sabadra
That's helpful. Thanks.
And maybe second, I'll ask one more final question. So congrats on winning the JPMorgan Empower liens for HELOC business.
My question was on the origination software, the implementation process for HELOC versus first lien mortgages, how different it is, how easy it is for customers to leverage once they have implemented for 1 product, leverage the same implementation for other mortgage products the same origination software.
Anthony Jabbour
Good question, Ashish. I ask the same question of the team, and the answer I got was that it was generally the same.
So it wasn't materially more difficult or simpler. It was about the same.
Ashish Sabadra
Okay. That's to say it's pretty much leverageable?
Sorry, sorry, sorry.
Anthony Jabbour
Go ahead.
Ashish Sabadra
Sorry. No, my only question was it's very much -- and this is a more generic question, but it's very leverageable once you've done the implementation to leverage for the same organization for a mortgage origination.
Thanks.
Anthony Jabbour
Yes, absolutely.
Kirk Larsen
Ashish, I just want to put a finer point on my comment on D&A growth. If you go back and look at the performance last year, we had a very strong second quarter in data and analytics.
Part of that was another one of those license deals, those data deals, that drove outsized growth in that quarter. And so it will be -- that's a grow over that we'll have in the second quarter, such that the performance we expect to be a bit weaker than where we were this quarter.
Ashish Sabadra
Thanks for the color and congrats once again.
Kirk Larsen
Thank you, Ashish.
Operator
Thank you. Our next question is coming from Stephen Sheldon from William Blair.
Your line is now live.
Stephen Sheldon
Yeah. Hi, guys.
Most of my questions have been asked, but I wanted to ask another question about margins, and you talked about lapping some of the cost actions taken last year during the quarter. But I'm just looking at the annual guidance, the midpoint would imply that adjusted EBITDA margins over the remaining three quarters are flat to down slightly year-over-year.
I guess is there anything else to point out there beyond lapping the cost actions, anything timing-related or ASC 606-related to point out?
Kirk Larsen
Not ASC 606-related. The single biggest driver there would be the things we talked about on our fourth quarter earnings call, which were the high incentive compensation this year as last year it was below target because we didn't meet our targets, our plan.
And so this year, we have that when we go back to target, assuming that we hit where we are, which is sort of in the middle of that range. And then the second piece would be the higher corporate costs following the spinoff from FNF.
So those really were the two biggest things that are the drivers of our at-the-midpoint margin expansion being below where our long-term guidance is, which is 50 to 100 basis points. So really, absent those two, it would be high end of the range, if not a little bit better, but those are the headwinds.
Stephen Sheldon
Okay, appreciate that. And then just a numbers question, I guess, with the enterprise business intelligence realignment.
It looks like that was about $2.5 million in the first quarter of 2017. Do you have the rough estimate for the remaining 3 quarters, what the realignment will look like?
Kirk Larsen
We can actually go back. It's in the data book that we filed earlier this quarter that shows the -- after, we can walk you through offline the difference between what was reported last year and then what was in the data book to show you exactly quarter-by-quarter what the difference was.
Stephen Sheldon
Okay. Thank you.
Operator
Thank you. Our next question today is coming from Kevin Kaczmarek from Zelman & Associates.
Your line is now live.
Kevin Kaczmarek
Hey, guys. Thanks for taking my call.
I just had a question on the second lien servicing market. With the 70% of second lien loans that are not effectively pending moving on the Black Knight platform, what have the conversations been like?
What's stopping them from moving right away to a solution that appears to be being adopted by some of the biggest players in the industry?
Anthony Jabbour
Kevin, I think that's a great question, and we should take you on the road with us talking to all the clients not on us. Look, I think we've got line of sight right now to 30%.
But I want to be clear, we're not at end of job. There's a good potential in the home equity market that's growing as you see rising home prices and that -- there's more smart tappable home equity that's out there.
And I think as clients or prospects, I should say, see more and more what we are achieving and the efficiencies, I just think it really makes sense and it will be a compelling offer for them. So I guess what I would just say is, it is -- we're not at the end of job right now at 30%.
Kevin Kaczmarek
All right, great. All my other questions have been asked and answered.
Thanks a lot.
Anthony Jabbour
Thank you, Kevin.
Operator
Thank you. We have reached the end of our question-and-answer session.
I do turn the floor back over to management for any further or closing comments.
Anthony Jabbour
Thank you. I'd like to thank you for joining our call and for your interest in our great company.
I'd like to thank our clients for their partnership and my Black Knight colleagues for their dedication to our clients and to our growth. I hope you have a great rest of the day.
Thank you for your time today.
Operator
Thank you. That does conclude today's teleconference.
You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.