Oct 30, 2018
Executives
Bryan Hipsher – Senior Vice President of Finance Anthony Jabbour – Chief Executive Officer Kirk Larsen – Chief Financial Officer
Analysts
John Campbell – Stephens Jason Deleeuw – Piper Jaffray Jennifer Dugan – SunTrust Robinson Humphrey Bill Warmington – Wells Fargo Ashish Sabadra – Deutsche Bank Bose George – KBW Chris Gamaitoni – Compass Point Stephen Sheldon – William Blair Kevin Kaczmarek – Zelman & Associates
Operator
Greetings, and welcome to the Black Knight Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode.
A brief 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 introduce your host, Bryan Hipsher, Senior Vice President of Finance. Thank you, Mr.
Hipsher. You may begin.
Bryan Hipsher
Thanks. Good morning, everyone, and thank you for joining us for the Black Knight third quarter 2018 earnings conference call.
Joining me today are Chief Executive Officer, Anthony Jabbour; and Chief Financial Officer, Kirk Larsen. Our results were released this morning, 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 for our company and are therefore forward-looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties.
The risks and uncertainties that forward-looking statements are subject to are described in our earnings release, Form 10-K and other SEC filings. Today’s remarks will also include references to non-GAAP financial measures.
Additional information including reconciliation between non-GAAP financial information to the GAAP financial information 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 Anthony.
Anthony Jabbour
Thank you, Bryan, and good morning, everyone. Thank you for joining us for our third quarter earnings call.
This was another solid, straightforward quarter for us and is a testament to the strength and predictability of our business model. With our upcoming Investor Day on the near horizon, I will keep my prepared remarks brief.
As you can see from our results, we continue to drive strong organic growth, excellent operating leverage and are deploying capital to drive strong shareholder returns. Our growth strategy remains focused on implementing our sold pipeline, winning new clients in existing market, cross-selling, continuing to develop innovative solutions and complementing our end-to-end solution set with acquisitions.
During the third quarter, we continue to make progress in implementing our significant sold pipeline. In our servicing software business, we successfully implemented Lake Michigan Credit Union, First Bank and KeyBank on to our core servicing platform.
These three implementations added around 150,000 new loans on to MSP. While we continue to gain market share with MSP, we’re also focused on selling complementary servicing software solutions to our MSP clients.
For example, we implemented our claims solution for two of our top 25 clients in the quarter, which allows us to increase our wallet share with existing clients and help them to ultimately drive down their overall cost of servicing. These are smaller deals compared to the larger platform sales, but they contribute to our long-term sustained growth.
Finally, the remainder of the servicing software implementation pipeline continues to progress in a positive manner and we look forward to driving those projects to completion with urgency. From a loan origination software standpoint, we had Cathay Bank who we previously announced on our first quarter earnings call go live with Empower Now!
in the quarter. As with servicing software sold pipeline, we continue to make significant progress in implementing our other ongoing origination software implementation, and we will provide additional color as they are completed.
From a new sales perspective, I’m excited about the progress we have made with both our existing product set and with the innovative solutions we have recently rolled out. We continue to sell complementary products throughout our robust client base: in servicing software, our home equity functionality and invoicing solutions; in origination software, our exchange and e-mortgage capabilities; and in Data and Analytics, our lean monitoring and HOA alerts.
From an innovation standpoint, I first shared with you the launch of our Servicing Digital capability back in our first quarter earnings call. As I said back then, there’s a lot of buzz around the launch of our digital solution at our client conference.
And I’m proud to announce that one of our top five servicing clients has already signed on to add our Servicing Digital capability to their Black Knight suite of solutions. This client decided to leverage our Servicing Digital capabilities to enhance their customer engagement, enable self-service capabilities and ultimately drive increased customer satisfaction and retention.
We believe that given our position in the market and the strength of our offering, we can assist our entire client base to achieve these same benefits. In addition, we’re also pleased with the progress we’re making with our machine learning capability, AIVA; and with our Actionable Intelligence Platform, AIP.
I look forward to giving you all a comprehensive download on these two early-stage products at our upcoming Investor Day. Finally, earlier this month, I attended the Mortgage Bankers Association Conference in Washington, D.C.
I met with clients, prospects and a few of the government entities and I remain confident in our ability to continue to grow and to help transform the industry. Overall, I’m excited about the positive momentum in the business, and we look forward to going into more detail at our Investor Day.
With that, I would now like to turn the call over to Kirk for an in-depth financial update.
Kirk Larsen
Thanks, Anthony, and good morning, everyone. Today, I’m going to discuss our third quarter results and our outlook for 2018.
Unless otherwise noted, comparisons are to the third quarter of 2017. Turning to Slide 3.
On a GAAP basis, third quarter revenues increased 7% to $281.7 million compared to $263.8 million in the prior year quarter. Net earnings attributable to Black Knight were $43 million or $0.29 per diluted share compared to $14.7 million or $0.21 per diluted share.
Year-to-date, revenues increased 6% to $828.6 million, and net earnings attributable to Black Knight were $125.7 million or $0.85 per diluted share. Turning to Slide 4.
During the third quarter, adjusted revenues were $282.3 million, an increase of 7% compared to the prior year quarter. Adjusted EBITDA increased 8% to $138.4 million compared to $128.2 million.
Adjusted EBITDA margin was 49%, an increase of 60 basis points. Adjusted net earnings were $71.3 million, an increase of 31%.
Adjusted net earnings per share for the third quarter was $0.48, an increase of 33%. Capital expenditures in the third quarter totaled $21.7 million.
Year-to-date adjusted revenues were $830.9 million, an increase of 5.5% compared to the prior year period. Adjusted EBITDA was $402.5 million, an increase of 8%.
Adjusted EBITDA margin was 48.4%, an increase of 90 basis points. Adjusted net earnings was $203.8 million, an increase of 33%.
Adjusted net earnings per share was $1.38, an increase of 38%. Adjusted net earnings for the third quarter and year-to-date period include the benefit of the lower federal statutory tax rate as well as a lower-than-planned blended state tax rate and higher-than-expected tax credit.
And finally, year-to-date capital expenditures were $7.37 million. Turning now to Slide 5, I’ll discuss our Software Solutions segment results.
In the third quarter, adjusted revenues for the Software Solutions segment increased 7% to $243.9 million. Our servicing software business had adjusted revenue growth of 7%, driven by loan growth on our core servicing software solutions from new and existing clients, an increase in our average revenue per loan and cross-sales to existing clients.
In our origination software business, adjusted revenues increased 8%, driven by 30% growth in our loan origination system business and a software license fee in our lending solutions business, partially offset by lower exchange revenues primarily as a result of the 28% decline in refinancing originations as reported by the Mortgage Bankers Association. Adjusted EBITDA increased 12% to $144.6 million, while adjusted EBITDA margin was 59.3%, an increase of 230 basis points due to revenue growth coming on at high incremental margins and disciplined cost management.
Year-to-date, adjusted revenues in the Software Solutions segment increased 6% to $716.2 million driven by our servicing software business that had adjusted revenue growth of 7%. Adjusted EBITDA increased 11% to $423.2 million, while adjusted EBITDA margin was 59.1%, an increase of 230 basis points.
Turning to Slide 6. In the third quarter, adjusted revenues for the Data and Analytics segment increased 2% to $38.4 million driven by growth in our property data and MLS businesses.
Adjusted EBITDA was $9.8 million compared to $9.6 million. Adjusted EBITDA margin was 25.5% in both periods.
Year-to-date, adjusted revenues in the Data and Analytics segment were $114.7 million compared to $114.4 million. Adjusted EBITDA was $28.2 million compared to $28.4 million, while adjusted EBITDA margin was 24.6% compared to 24.8%.
Adjusted EBITDA for the Corporate segment in the third quarter was $5.1 million lower compared to the prior quarter, reflecting higher incentive compensation and incremental costs following the spin-off. Year-to-date, adjusted EBITDA for the Corporate segment was $12 million lower compared to the prior year.
Turning to Slide 7, I’ll walk through our debt structure. At the end of September, we had cash and cash equivalents of $17 million.
Total debt principal as of September 30 was $1,412,000,000. We had revolver borrowings outstanding of $137 million and $613 million of borrowing capacity remaining under our revolver.
Our leverage ratio was 2.6 times. Turning now to Slide 8, I’ll walk through our updated outlook for full year 2018.
Revenues are expected to be in the range of $1,110,000,000 to $1,115,000,000. Adjusted revenues are expected to be in the range of $1,113,000,000 to $1,118,000,000.
Adjusted EBITDA is expected to be in the range of $538 million to $543 million, and adjusted earnings per share is expected to be in the range of $1.82 to $1.85. Additional modeling details underlying our outlook are as follows: we expect typical fourth quarter seasonality in professional services and lower capitalized expenses due to increased holiday and vacation time off, interest expense is approximately $53 million, depreciation and amortization expense of approximately $127 million excluding the net incremental depreciation and amortization resulting from purchase accounting, an adjusted effective tax rate of approximately 25%, share count of approximately $148 million, and finally, CapEx of approximately $105 million.
Overall, we are pleased with our third quarter results and look forward to finishing out 2018 strong and preparing for 2019. With that, I’d like to turn the call over to the operator for questions.
Operator
Thank you. We’ll now be conducting the question-and-answer session.
[Operator Instructions] Our first question comes from the line of John Campbell with Stephens. Please proceed with your question.
John Campbell
Hey guys, thanks for taking my questions and good morning.
Anthony Jabbour
Good morning, John.
Kirk Larsen
Good morning, John.
John Campbell
The incremental margins have been pretty impressive, good work there. Just wondering if you guys could walk through the puts and takes with the spend phasing this year relative to the last.
I think you’ve got the higher bonus accruals, you’ve got higher post-FNF spin corporate costs and then maybe a net positive benefit from ASC 606. I might be missing something there.
If you guys could maybe just walk through that and provide a little color there.
Kirk Larsen
John, this is Kirk. You have it right.
The biggest drivers, as you look at – on a year-over-year basis from an expense perspective, would be the increase in corporate costs and it’s exactly the drivers you talked about. Virtually all of that increase is related to incentive compensation cost and related to higher corporate costs post spin.
I would say broadly speaking, as we think about expenses, we continue to be focused on finding efficiencies and really trying to minimize the incremental expenses as the revenue grows. As you think about the quality of the revenue and where we’re growing, we’re growing on leverage platforms that – like MSP and Empower where, as revenue comes on, not a lot of incremental expense comes with it.
And so as you think about the expense growth that’s really in the areas that we talked about and then as you look forward to the fourth quarter, that’s where I mentioned in my remarks that the seasonality of how the fourth quarter looks different than the third quarter as an example on a sequential basis where there’s just less capitalized time, less people working on projects, both implementations and software development projects, that would go to the balance sheet because, frankly, just the number of holidays in the quarter as well as people using time off. So as you think about sequential Q3 to Q4, that’s one thing to look for in operating expenses.
John Campbell
Okay, that makes sense. And then a few quarters ago, you guys kind of outlined $160 million in, I guess, run rate one, but not yet live revenue.
I’m guessing you’ll provide an update of a new run rate at Analyst Day. But just if we went with the $160 million, you guys said maybe roughly 1/3 of it hits this year.
I’m just curious if that’s still the case, and I don’t know if you can provide this, but could you maybe quantify how much has come over thus far?
Kirk Larsen
That’s something we’ll talk about in the future, whether it’s at Investor Day or when we give guidance for 2019. We can give some context on how new revenues flow in and how we expect.
But I would say when we entered the year, as we put our plan together, we certainly look at things not as spot estimates but as a range of outcomes because nothing goes exactly on the day. Sometimes it’s a week early, sometimes it’s a week late, et cetera.
But as we look to – you can see from our guidance range, frankly, that from where we started the year to where we are now that things have come in, in line with the range of outcomes that we expected and so – and we feel good about the progress that we’re making.
John Campbell
Good stuff. Thanks, guys.
Kirk Larsen
Thank you.
Operator
Thank you. Our next question comes from the line of Jason Deleeuw with Piper Jaffray.
Please proceed with your question.
Jason Deleeuw
Thanks and good morning. Just a question on the full year guidance and what it implies for the fourth quarter.
Third quarter was a little stronger on the growth. Fourth quarter guidance at the midpoint implies a little bit of a slowdown.
I’m just wondering if there’s anything quarter-to-quarter to call out and just kind of help us think about momentum as we head into next year.
Kirk Larsen
Well, I think as you look at where the guidance is, first of all, again, it’s really where we were when we said – when we started off the year. The full year is right.
The midpoint is virtually the same. So things are coming in the way that we expected it.
If you look at one quarter to the next, at the midpoint of the guidance relative to where we were in Q3, it’s really a minor difference. And so there’s always some bit of timing as to when – for the items that are onetime in nature, which are very insignificant for us, the timing of those can affect one quarter versus the next.
But I’d say on a recurring basis, Q4, we expect to be very strong as well and look a lot like Q3.
Jason Deleeuw
Great. Thanks for that.
And then question on the complementary products. And with the exchange, e-mortgage, the digital servicing, the AI efforts, I’m just trying to get a sense for – could this be a new revenue growth vector for Black Knight?
Is it big enough potentially for that? Or should we still think of these complementary products as just helping the software businesses?
Anthony Jabbour
I’ll take that, Jason. We do think that they would be new growth vectors and some kicking in later, some kicking in more midterm.
So if I think at some of the capabilities such as the e-closer, the digital close processor, everyone’s got a different name for it, that takes, I’ll say, the industry to embrace it for it to take off, and we’re starting to see signs of that and some investors accepting e-mails, et cetera. So that will be more time-to-market acceptance of the technology.
As I look at some of the others such as digital, I see that impacting sooner because it’s a capability that they can embrace sooner. Other of the innovations such as AIVA or machine learning or AIP, those will take longer, as we said in the last call, because we’re starting to leverage the technology in our clients’ operations.
And for them to learn to adjust their operations based on that would take longer, certainly for AIP than AIVA. But we do see them as growth vectors.
We’re excited about with them and why we’ve been sharing the excitement around it. But overall, as we look to our long-term guidance that we’ve talked about a number of times, 6% to 8% revenue growth, we feel that is in the range of what we can do short-term, medium-term and long-term.
Jason Deleeuw
Sounds great. Thanks for that and good work on the quarter.
Anthony Jabbour
Thank you so much, Jason.
Operator
Thank you. Our next question comes from the line of Jennifer Dugan with SunTrust Robinson Humphrey.
Please proceed with your question.
Jennifer Dugan
Hi. This is Jenny Dugan on for Andrew Jeffrey at SunTrust.
I was wondering if you could talk a little bit about what exactly is driving the MSP revenue yield?
Kirk Larsen
Sure. Thanks, Jenny.
Great question. So we’re obviously very happy with the growth in our servicing software business.
It’s really the same things that have been driving us for the last several years, which is we continue to win new clients, which is driving more loans on the system. So loans on the system were up 3% in the quarter.
About three quarters of that was from new clients and a quarter of that was from existing clients. So as we’ve talked about how we’re going to grow the business 6% to 8% long term, part – an element to that is organic loan growth from existing clients and we continue to see that.
The average rate per loan was up as we would typically expect in the quarter, up 1.5%, 2%. And so that really would – and then the rest was selling the complementary solutions that we talked about to the existing client base.
So really it was a combination of those three things that drove the 7% growth in our servicing software business.
Jennifer Dugan
Great. Thank you so much.
Kirk Larsen
Thank you.
Operator
Thank you. Our next question comes from the line of Bill Warmington with Wells Fargo.
Please proceed with your question.
Bill Warmington
Good morning, everyone.
Anthony Jabbour
Good morning.
Bill Warmington
So I wanted to ask about mortgage. One question is a headwind, one question is a tailwind.
So on the headwind, just wanted to ask if you could quantify for us the impact of slower new mortgage originations on 3Q and 4Q.
Kirk Larsen
Sure, Bill. When we came into the year, we expected a little – right around 1% of headwind from market volumes and that’s what we saw in the quarter.
Now the fourth quarter is, frankly, the largest decline – at least according to the MBA’s forecast, we’ll have the largest decline, but I still would think it’ll be about 1% in the fourth quarter.
Bill Warmington
Got it. And then for the tailwind, I wanted to ask for an update on the – targeting the top 10 clients for the Empower LOS, loan origination system.
You would normally look at slower mortgage market as being a headwind for that, but are you seeing more receptivity from your clients in terms of their attitude towards looking at an outsourced system because of the weakness?
Anthony Jabbour
Yes, Bill. It’s Anthony, I’ll take that.
We certainly are and we’re engaging in many conversations. And in some of them, it’s coming in from the peripherals such as our AIVA capabilities around the machine learning.
That’s very interesting to virtually every client that – or prospect that we demoed the capabilities to. So whichever way we can help solve problems for our clients and establish a beachhead to then add capabilities.
As you know, when you get to the top 10, it takes a lot to get them over the line. And so having small wins along the way is one of the things that we believe will help us ultimately be successful.
The other thing that we think will help us be successful is when we paint our – the capabilities that we have with the integration that we have, it’s pretty impressive, I think, from a – our digital servicing capability, one of the functionality there is kicking off an origination itself, whether it’s refinancing or whatnot, loading a point-of-sale with prepopulated data that’s coming straight from our MSP core systems, taking it all the way through digitally, leveraging our machine learning through the process and ultimately having a digital close. I mean, when you paint that broad picture, there really isn’t anyone that can go to that full extreme front all the way to the end.
Both will start with the digital origination process, many times it falls back to a manual paper-based process somewhere along the way. And we’ve got an ability to take it literally front to back.
That’s what we’re excited about and that’s what we see the excitement in our client and prospects, Bill.
Bill Warmington
All right. Thank you very much.
Anthony Jabbour
Thank you, Bill.
Operator
Thank you. [Operator Instructions] our next question comes from the line of Ashish Sabadra with Deutsche Bank.
Please proceed with your question.
Ashish Sabadra
Thanks for taking my question. Congrats on a solid results.
I just wanted to follow up on the origination software question asked earlier and maybe more focused on the quarter. So we saw a pretty good acceleration from a 5% growth in the second quarter to 8% and this is despite the refinancing headwind worsening from 20% to 28%.
And actually, the loan origination system also slowed down modestly from 35% to 30%. So I just wanted to understand what’s driving this acceleration?
And how should we think about the resilience of the model, if origination headwinds sort of worsened further, how resilient? Can you just provide some more color on that front?
Kirk Larsen
Sure. What you saw in the quarter was – as you said, we saw continued strong growth in loan origination system growth, albeit very, very slightly below where it was last quarter.
We also had in our lending solutions business where we’re really focused on lending solutions being a combination of our exchanges as well as our e-mortgage capabilities is a business that we’re spending a lot of time and a lot of energy focusing on, and in that business, we had a license deal. That was something that we have in the third quarter, we didn’t have in the second quarter.
And so that was part of the performance as well. And then, of course, the third leg to that stool is what you referred to with the headwinds from the lower origination volume.
So I think, broadly speaking, in that business, we expect to continue to win in our loan origination system business. We expect continued strong performance in that business.
We think that we’re making good headway around e-mortgage, which really for us started with our eLynx acquisition in 2016. We see the future being digital or electronic as does everybody, it’s really just a matter of time.
And so we’re working with the leaders in the industry to help drive that. And so that’s something that I’m sure we’ll be talking about more in the future, but really that’s – it was the license deal that was something that was different in Q3 versus Q2.
Ashish Sabadra
That’s helpful, thanks. And then maybe just on the D&A or the Data and Analytics piece, is there any kind of – is that related to mortgage origination volume?
And how should we think about the growth going forward? Is low to mid-single digit still sustainable going forward even if the origination had been moderate?
Kirk Larsen
Sure, I’ll talk about the near-term then I’ll let Anthony talk about the longer-term view on our D&A business. But that business actually, and we’ll talk about this more at Investor Day, is really not that affected by origination volumes.
It’s much more real estate driven with things like multiple listing service platform and other things that are more tied to real estate as opposed to being tied to – and more recurring and less tied to origination volumes. And so that’s why there’s a little bit of volume effect on the fringes, but frankly, it’s not a material driver of that business.
So as you think about longer term with D&A, we talked about with existing assets and capabilities that, that business is sort of a low to mid-single-digit grower. But frankly, as we go to AIP, that really is what could change that growth trajectory.
So Anthony, you want to talk about that?
Anthony Jabbour
Yes. We just again see continued interest.
It’s a unique set of data that we have within Black Knight. And as we look within the Data and Analytics business, it is about a focus there and leveraging the assets that we have with the clients that we already have to solve solutions that they already have.
So we are excited about it. And like I said, that’s one of the longer-growth vectors that we see as we continue to build on with our clients.
Ashish Sabadra
Thanks, that’s very helpful. Congrats once again.
Anthony Jabbour
Thanks, Ashish.
Operator
Thank you. Our next question comes from the line of Bose George with KBW.
Please proceed with your question.
Bose George
Hi, guys. Good morning.
Anthony Jabbour
Good morning.
Bose George
Actually, one more on the origination side. Are there still any signed deals that are yet to come into – flow into the numbers?
And also can you remind me in that segment, when you sign a new client, does that volume come on fairly quickly.
Kirk Larsen
So there are implementations that we are continuing to work on and still we will – you’ll see those go live and see those volumes ramp up. The way that, that works is – so we do an implementation, but what’s typical on Empower implementation could be 12 months or so, in some cases a little bit longer.
In Empower Now!, cases quite a bit shorter. But what happens is as you go through the implementation and then volumes will ramp.
And so now under ASC 606, you don’t really see the effect of the ramp because they get averaged in, but practically speaking that’s what happens. And so that’s over the course of maybe 90 days or so, that they’ll ramp volumes.
They’ll start with the region and then they’ll go out to all regions, all branches, et cetera.
Bose George
Okay, great, thanks. That’s helpful.
And just can you provide just some commentary on technology spend at your customers just given the challenges in the mortgage and housing market. Do you see much deferral of technology spend?
Or just what’s the commentary there from your customers?
Anthony Jabbour
I think certainly what we see remaining top of mind is ways for them to be more efficient in their operations and to be more relevant with their client in terms of retention and spends that can help achieve that are meaningful. As I shared with you, I was doing a town hall in one of our locations, like I said, the small part of our company that is tied to the refinance space.
And in there, there’s a giant mandate we have on that group to focus on the digital close process because of what it can mean for our clients and the efficiencies that they can bring for them. So as I look at where our clients are spending, it really is primarily around those two areas.
And so although markets are tough, and I’ll say they’re tough really for the nonbank lenders. For the banks, a rising rate environment has been a positive outcome for them, generally speaking.
So the base, I’d kind of look at it in two different ways. But even within banks, as you can see, every company is always looking at three simple things I always talk about and we organize all of our solutions around it: how does it help them grow their revenue, get operating leverage and stay regulatory compliant.
And those of three things never go out of style with good operators. And that’s what they’re focused on: ways that they can spend money that helps grow revenue, improve their efficiencies or is it a spend they have to take to stay compliant.
Bose George
Okay, great. Thank you.
Anthony Jabbour
Thanks, Bose.
Operator
Thank you. Our next question comes from the line of Chris Gamaitoni with Compass Point.
Please proceed with your question.
Anthony Jabbour
Good morning, Chris.
Chris Gamaitoni
It’s not an easy one. I understand.
Going back to the origination business, can you give us a percentage of the volume-sensitive exchange relative to your total revenue or exchange – or origination revenue at this point?
Kirk Larsen
Well, it’s roughly – the lending solutions business of which the exchange is part is a little less than half of our revenue in our origination software business. So it’s less than 5% of total company revenue is specifically the exchange.
Chris Gamaitoni
Okay. And I think previously you had mentioned that most of your platform LOS revenue, the clients are operating at volumes below the – they’re kind of operating at the minimum contract levels.
Is that still broadly true?
Kirk Larsen
Yes. Yes, more than 90% of the revenue in that business is at or below the minimum, and frankly, there’s a couple of clients that are driving the bulk that is above the minimum.
Chris Gamaitoni
Okay. And could you give us an update on your marketing strategy for Empower Now!?
I know in the past you had stated you’re shifting focus in the near term to your top 10 opportunity, just if there’s any difference in there or is that still the case.
Anthony Jabbour
Sure, Chris. Empower Now!, as I mentioned with Cathay Bank, we’re excited, but we’ve been working on how to speed up the implementation.
One of the earlier questions is how long does it take from signing a client on Empower Now! to implementing them.
And with Empower Now!, it’s going more down-market. Speed of implementation, cost of implementation are critical factors to its long-term success.
So we’re pleased with Cathay Bank, I said being announced in Q1 and implemented by Q3. So we continue to make good progress in that regard.
We make good progress with the capabilities that I talked about more broadly around AIVA and just Empower improvements with our digital close, et cetera. All those new technology and capabilities apply to Empower Now!
as well. So as we’re pushing forward with Empower and focusing on the largest lenders, at the same time, there’s a derivative work there that benefits the Empower Now!
clients, which we’re excited about.
Chris Gamaitoni
Okay. And I know it’s early and you don’t want to say for competitive reasons, but can you us give any sense of the potential materiality if large servicer clients sign up for Servicing Digital?
Kirk Larsen
Yes, Chris, I don’t want to go into pricing, but with the way that specific pricing – with the way we think about it is it’s incremental price per loan when someone signs up to Servicing Digital, not on how many people use the app but really on the entire base. And so it’s an incremental cost.
It’s certainly nowhere near what the base processing fee is for – on MSP, but it’s meaningful.
Chris Gamaitoni
Okay, thank you so much.
Kirk Larsen
Thanks, Chris.
Operator
Thank you. [Operator Instructions] our next question comes from the line of Stephen Sheldon with William Blair.
Please proceed with your question.
Stephen Sheldon
Hi, good morning. I guess, first, within the origination business, you talked about a license deal that helped trends there.
Can you maybe quantify the impact of that in the quarter? And is that more of a onetime boost or something that should continue over the next few quarters?
Kirk Larsen
It was a little more than a point of growth to the company. And as far as – there is actually – it is still hosted and so there is ongoing recurring revenue related to that particular deal that just happened to be the way it’s structured, there’s a little bit of upfront revenue.
Stephen Sheldon
Okay. And then within Data and Analytics, there’s some fringe impact from lower origination volumes.
So I guess excluding that, if we’re thinking about the MLS and property business, is it fair to say that those businesses are growing closer to kind of mid-single digits right now?
Kirk Larsen
The MLS business certainly is actually a little bit better than that. That business is one that’s really performing well and has over the last several years, taking market share doing very well.
Property business, yes, low to mid-single-digit kind of area.
Stephen Sheldon
Great, thank you.
Kirk Larsen
Thanks, Stephen.
Operator
Thank you. Our next question comes from the line of Kevin Kaczmarek with Zelman & Associates.
Please proceed with your question.
Kevin Kaczmarek
Hey, guys. Thanks for taking the questions.
On the servicing side, we were you expecting some larger implementations toward the end of the fourth quarter. And I know you don’t want to mention specifics, but generally speaking, what is the updated guidance range to assume for this?
And how should we think about the ramp in the fourth quarter? And how much would be left in the first quarter of 2019?
Kirk Larsen
Kevin, we don’t – we haven’t provided specific guidance on any particular implementation. We’ve provided guidance on how we thought the pipeline would be coming in, and as I said before, it’s coming in within the range of outcomes that we talked about.
So that’s about as specific as we’re going to get, and certainly, we’ll provide guidance on 2019 when we announce our Q4 earnings.
Kevin Kaczmarek
Okay. And given this pullback in the share price, how do you guys think about buybacks versus M&A in the current environment?
Kirk Larsen
So the way we think about capital allocation, Kevin, really hasn’t changed. I mean, we’re focusing our capital allocation on growth while, of course, maintaining a strong balance sheet and ample liquidity.
We’ll look to – first and foremost, we’ll look to – for ways to invest internally and that’s product development and infrastructure, and you saw us do that this year in our CapEx spend that we’ve been talking about. But that being said, again, with a focus on growth, we’ll then also focus on external investment.
And our thought process on that is filling product gaps, bringing additional capabilities or domain expertise, but looking for ways that we think we can catalyze growth. And so to the extent we find those opportunities, we’ll capitalize on those opportunities.
And to the extent that beyond investments in growth, we would expect that at that point we’ll return cash to shareholders through share repurchase.
Kevin Kaczmarek
Okay, great. Thanks.
That’s all I had.
Kirk Larsen
Thank you.
Operator
Thank you. There are no further questions at this time.
I’d like to turn the floor back over to Anthony for closing comments.
Anthony Jabbour
Thank you. As always, I’d like to thank my Black Knight colleagues for their exceptional efforts and our clients for their strong partnerships.
Thank you for joining us on the call today and for your interest in our great company. I look forward to seeing many of you at our Investor Day on November 19.
Enjoy the rest of your day. Thank you.
Operator
This concludes today’s teleconference. You may disconnect your lines at this time.
Thank you for your participation.