Feb 13, 2019
Operator
Greetings, and welcome to the Black Knight Fourth Quarter 2018 Earnings 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.
I would now like to turn the conference over to host, Ed [indiscernible], Investor Relations for Black Knight. Thank you.
You may begin.
Unidentified Company Representative
Thank you. Good morning, everyone and thank you for joining us for the Black Knight fourth 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 are 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 is 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, Ed and good morning. Thank you for joining us for our fourth quarter earnings call.
I would like to take some time today to discuss highlights from 2018 and our plans for 2019. When I joined the company almost a year ago, I was excited about opportunities to leverage our many industry type points [indiscernible] and drive innovation for our clients and the industry.
A year later, I'm proud of the progress we made in 2018 and I'm equally excited about our plans for the future. Let me take the next few minutes to discuss what we're focused on in 2018 and how we delivered on our commitment.
In 2018, we're committed to achieving our financial target, working closely with our clients on implementation, adding top tier originators to our Empower platform, further penetrating the home equity loan market and launching innovative solutions to help our client. From a financial performance perspective 2018 was another solid year where we delivered on our target.
Adjusted revenue was $1,116 million just above the midpoint of our original guidance range and up 6% from last year. Adjusted EBITDA was $542 million towards the high end of our original guidance range and adjusted earnings per share was a $1.87 which was above the high end of our range due to efficient capital allocation and the lower tax rate.
From an implementation perspective, we successfully converted a long list of top lenders onto our Empower loan origination system including PNC, Fifth Third, Navy Federal Credit Union and Santander Bank. On the servicing side, we added more than million loans to MSP through implementation for servicers of all sizes including KeyBank, FirstBank, Old National and Lake Michigan Credit Union.
We make significant progress signing new top tier lenders to our Empower platform. About a year ago, we announced the signing of JPMorgan Chase and CitiMortgage on Empower.
I'm thrilled to say that we completed the implementation for both JPMorgan Chase and CitiMortgage onto Empower in less than a year. We were closed to with our clients to achieve these expedited timeline and are continually focused on improving our implementation process.
Regarding home equity expansion in 2018, we increased our home equity market share on MSP from 13% to 19%. Commerce Bank a client for more than 30 years extended its use of MSP and is adding its home equity loans and line and will be implementing KeyBank and Regions home equity loans to MSP in the future.
We also added home equity loans to Empower for JPMorgan Chase, Union Bank and Santander. We have a strong pipeline of implementations for both Empower and MSP.
Other highlights from the year include a multi-year renewal for Quicken Loans and adding ServiceMac to our growing list of MSP client. Quicken Loans which is ranked Number 1 by JD Power for client satisfaction had a multi-year renewal for MSP.
As part of the renewal Quicken's CEO, Jay Farner said that in order to continue to meet the needs to their service to customers. It is imperative that they work with the best technology companies out there and they have that with Black Knight.
ServiceMac, a new entrant in the mortgage servicing market led by industry veteran Bob Caruso select MSP because of Black Knight's reputation for successful conversion, superior client support and dedication to helping clients achieve their goals. And lastly, let me summarize the progress we made on innovation.
In 2018, we launched Servicing, Digital, Ava; our artificial intelligence virtual assistant, our Actionable Intelligence Platform or AIP and enhanced expedite close solution and our Rapid Analytics Platform. We've signed eight clients since the launch of Servicing Digital last summer including two of our top five clients.
Interest in our Servicing Digital offering continues to grow and we look forward to announcing additional clients taking advantage of this capability in the near future. We've discussed Ava and AIP throughout the year and I'm excited about the momentum we're seeing with these innovative solutions.
We also enhanced our expedite close solution to include advanced intelligence where expedited close process can be determined the way that we close a loan based on lender preferences and county requirements. Whether that means the closing requires what ink signatures can be signed digitally or is a combination of both?
And our last innovation our steady stream for transformative solution is a Rapid Analytics Platform or RAP. RAP provides a virtual analytics lab where they can leverage Black Knight's data assets and in conjunction with their own data to create models and analytics to help them drive additional revenue and efficiencies within their company.
We have a strong pipeline for RAP in both mortgage and secondary market. We believe that our growing collection of innovative solutions will help us expand our market share because they help our clients grow revenue and reduce the overall cost to originate and service loan.
As we move to 2019, our strategic initiatives remain the same and we continue to be focused on delivering value for our client through innovative solutions, integration and acting with urgency. I'm excited about the opportunities we have ahead of us and I'm energized by the excitement, the commitment and the dedication my colleagues continue to demonstrate as we deliver transformative new solutions delight our client and set our course for the future.
Thank you for your time today and I would 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 fourth quarter and full year 2018 financial results and our financial plan for 2019.
Turning to Slide 3, on a GAAP basis full year 2018 revenues were $1.114 million an increase of 6% compared to 2017. Net earnings attributable to Black Knight Inc., were $168.5 million or $1.14 per diluted share compared to $182.3 million or $1.47 per diluted share.
For the fourth quarter revenues were $285.4 million an increase of 7% compared to the prior year quarter. Net earnings attributable to Black Knight Inc., were $42.8 million or $0.29 per diluted share compared to $147.2 million or $0.97 per diluted share.
The fourth quarter and full year GAAP results for 2017 include a tax benefit of $111 million related to the revaluation of our net deferred income tax liabilities to reflect a lower tax rate resulting from a tax form legislation passed in December 2017. Turning to Slide 4, I will now discuss our adjusted results for the full year and fourth quarter.
Full year 2018 adjusted revenues were $1.116.5 million, an increase of 6% compared to 2017. Adjusted EBITDA was $542.5 million, an increase of 7%.
Adjusted margin was 48.6% an increase of 70 basis points. Adjusted net earnings was $277.9 million, an increase of 33%.
Adjusted net earnings per share was $1.87 an increase of 36%. And finally 2018 CapEx was $103.1 million.
For the fourth quarter adjusted revenues were $285.6 million, an increase of 6% compared to the prior year quarter. Adjusted EBITDA increased 6%, to $140 million compared to $131.9 million.
Adjusted EBITDA margin was 49% compared to 49.1%. Adjusted net earnings was $74.1 million an increase of 31%.
Adjusted net earnings per share was $0.50 an increase of 35%. Adjusted net earnings and adjusted net earnings per share for the fourth quarter and full year 2017 do not include the one-time tax benefit resulting from the tax reform legislation that I mentioned earlier.
Capital expenditures in the fourth quarter totaled $29.4 million. Turning now to Slide 5, I'll discuss our software solutions segment results.
In the fourth quarter adjusted revenues for the software solutions segment increased 6% to $245.8 million. our servicing software solutions had adjusted revenue growth of 7% driven primarily by strong loan growth on our core servicing software platform from new and existing clients, higher average revenue per loan and new clients win.
In origination software solution, adjusted revenue increased 4% driven by 35% growth in our loan origination system solution partially offset by lower volumes on our exchange and eLending platforms primarily as a result of the 40% decline in refinancing origination as afforded by the Mortgage Bankers Association. Adjusted EBITDA increased 7% to $144 million and adjusted EBITDA margin was 58.6% an increase of 60 basis points.
Full year 2018 adjusted revenue increased 6% to $962 million and adjusted EBITDA increased to 10% to $567.2 million. Adjusted EBITDA margin was 59% an increase of 190 basis points.
Turning to Slide 6, in the fourth quarter adjusted revenues for the data and analytics segments increased 7% to $39.8 million primarily driven by growth in our portfolio analytics and multiple listing service businesses. Adjusted EBITDA increased 13% to $11.3 million and adjusted EBITDA margin was 28.4% an increase of 150 basis point.
Full year 2018 adjusted revenue increased 2% to $154.5 million and adjusted EBITDA increased 3% to $39.5 million. Adjusted EBITDA margin was 25.6% an increase of 30 basis points.
Adjusted EBITDA for the corporate segment in the fourth quarter was $3.1 million unfavorable compared to the prior year quarter and $15.1 million unfavorable for the full year 2018. Both the fourth quarter and full year reflected high incentive based compensation and incremental corporate following the spin-off from FNF last year.
Turning to Slide 7, I'll walk through our capital structure. At the end of December, we have cash and cash equivalents of $20 million.
Total debt principal as of December 31 was $1, 350 million. We had revolver borrowings outstanding of $82.5 million and $667.5 million for foreign capacity remaining under our revolver.
Our leverage ratio was 2.5 times on both the gross and net basis. Turning now to Slide 8, I'll walk through our outlook for full year 2019.
GAAP revenues are expected to be in the range of $1,177 million to $1,199 million. Adjusted revenues are expected to be in the range of $1,178 million to $1.2 billion.
Adjusted EBITDA is expected to be in the range of $581 million to $598 million and adjusted EPS is expected to be in the range of $1.90 to $2. Additional modeling details underlying our outlook are as follows; we currently expect interest expense approximately $68 million to $70 million reflecting the effect of higher interest rate, expiring interest rate swap and the borrowing related to our investment in Dun & Bradstreet.
Depreciation and amortization expense of approximately $135 million excluding the net incremental depreciation and amortization resulting from purchase accounting and adjusted effective tax rate of approximately 26% and finally CapEx of approximately $105 million. Although we do not provide quarterly guidance and wanted to provide you with some color as to how we expect to progress through the year.
We expect to grow first quarter adjusted revenues and adjusted EBITDA approximately 4% compared to the first quarter last year. The first quarter will also include higher interest expense for the reasons I mentioned earlier.
For the remainder of the year, we expect to see year-over-year growth accelerate from Q1 to Q2 and be more consistent for the third and fourth quarter growth rate compared to the prior year. Overall, we're pleased with our fourth quarter and full year results and look forward to another strong year for Black Knight in 2019.
With that operator please open the line for Q&A.
Operator
[Operator Instructions] Thank you. Our first question comes from the line of Jason Deleeuw with Piper Jaffray.
Please proceed with your question.
Jason Deleeuw
I was just wondering on the guidance, the contribution to the revenue guidance from complementary solutions. Just wondering how much you're expecting those solutions to add to the 2019 revenue and then also can you just talk about sales cycle?
And just how that's going into the much shorter sales cycle than the other products, if you can just give us some color on that?
Anthony Jabbour
Sure. Maybe I'll start with sales cycle Jason.
It's progressing well, we're seeing a lot of excitement in the market for what we're bringing to market with our new solutions and in some cases, it's a very, very short sales cycle such as in the digital space where with our first client that we had mentioned with Amerifirst we've signed them and they're live in 2018 on our servicing digital capability. And with our others, there are broader changes as we said they'd be.
In terms of changing more of the infrastructure how our clients run in leveraging the analytics etc. but I'm very excited about it, they're smaller and easier implementations as well so that's going well.
Kirk Larsen
Jason from a perspective how much they're - the innovative solutions are contributing to revenue in 2019 relatively small as we talked about AIVA, when we bought it, we bought that business, we bought HeavyWater it was pre-revenue. We certainly are expecting, we've signed few clients and we expect to see revenue from them in 2019.
But I'll say in relatively small basis. Digital; we have the eight clients that Anthony mentioned.
They'll each contribute to revenue in 2019 but I would say it's still on a relatively small basis, but we'll grow overtime and then the other are also in the earlier stages. So we see each of those solutions as terrific opportunity as Anthony mentioned to grow revenue and we see it building overtime.
We're starting with 2019 and ramping from there.
Jason Deleeuw
Thanks, that's helpful and then just wondering on the revenue guidance range. What are the drivers that we should be thinking about from that would factor in for the low versus the high end of the range?
Kirk Larsen
Sure, great question Jason. Thanks for asking.
Our philosophy on guidance is that, we planned around the midpoint and the things that, if all the stars aligned then we could end up at the higher end and conversely if things don't go as we expect, we could end up at the lower end. Things that will drive us from above or below the midpoint really are consistent with what they've been in prior is, which is implementation timing, the nature of timing of professional services and then our success with [indiscernible] as I refer to it go get revenue.
So it's really the same factors that they're always are moving around the midpoint.
Jason Deleeuw
Great. Thank you very much.
Operator
Thank you. Our next question comes from the line of Tien-Tsin Huang with JPMorgan.
Please proceed with your question.
Tien-Tsin Huang
Just a follow-up to the last question. Just on the timing of backlog conversion maybe a cadence for the year or is there anything kind of specific that we should consider quarter-to-quarter year as the year plays out?
Kirk Larsen
Sure as far as the aggregate amount, we see what's coming for the year consistent what we talked about at Investor Day which is 20% to 25% of the backlog number that we set - I've discussed as $160 million as far as the cadence through the year. It builds through the year.
so when I talked about the quarterly cadence of revenue growth being about 4% in the first quarter and then accelerating in Q2 and staying steady for the rest of the year, that's really based on implementation timing.
Tien-Tsin Huang
Okay. And just maybe big picture question just with Ellie Mae, going private here.
Any implications for Black Knight and how that might change the go-to-market in anyway?
Anthony Jabbour
Good morning, Tien-Tsin, it's Anthony. As I've said before, our success is really based on how we perform.
It's not dictated by our competitors and I really believe that. We feel very good about competitive position.
Our loan origination system. The business is performing at a very high level.
We continue to see opportunities both at the high end and the mid-tier space. So we feel very good about –where we are right now.
Tien-Tsin Huang
Okay, appreciated. Thanks for the update.
Operator
Thank you. Our next question comes from the line of Bill Warmington with Wells Fargo.
Please proceed with your question.
Bill Warmington
Shout out to Bryan Hipsher and his new job as CFO of Dun & Bradstreet, joining the Short Hills gang. So first question on I wanted to ask about the negative revenue impact in 2019 guidance from coming from the mortgage volume headwinds.
MBA is looking at total unit volume is down about 7% in 2019 versus down about 13% in 2018, so a little better but still a headwind.
Kirk Larsen
Sure. It's certainly compared to 2018 and 2017 in particular.
It is much less of headwind as the volumes are declining revised specifically. The percentages still can look a little daunting, but it's a lot of large numbers working in reverse, so it's on a smaller base.
So the effect of that is, it's less than half a point. Its two-three tenths of a percentage point of a headwind in 2019.
Bill Warmington
Good. And then on the Ernst Publishing acquisition just going to ask, if you could comment how it fits in strategically and how much is contributing to 2019 revenue and EBITDA, if anything?
Kirk Larsen
Sure. With Ernst part of our strategy on the loan origination side is bringing more and more capability to our solution set and in integrating tighter and tighter.
The more that we integrate the greater functionality that we can provide for our clients and greater functionality that they can provide to their customers. So with Ernst it's really tightened down the fee calculations upfront which is continuing to be very important from a customer satisfaction perspective as well as financial perspective for our client.
So that was the reason there and again, as we continue to look at building out more capabilities in the loan origination space that was driving that.
Anthony Jabbour
And Bill from a contribution perspective it's a very small business, so it's just like adding another product into the solution set, so it's a very small contribution from a revenue and EBITDA perspective.
Bill Warmington
Got it. Thank you very much.
Operator
Thank you. Our next question comes from the line of John Campbell with Stephens Inc.
please proceed with your question.
John Campbell
So I know Ditech is - they're going through some challenges right now. I know you guys really can't comment on that, but any sense for what their plan is, for their loan service and then maybe, if you could talk to just kind of broadly, how you're accounting for that within 2019 guidance.
Anthony Jabbour
Well I'll start. Obviously we're still operating as business as usual with Ditech right now, as you can imagine we're critical vendor and want to make sure we do everything to support them along the journey.
But what I would say, maybe at a high level, is with our market share as loan lose, we have a high likelihood of the loans remaining on them as peak [ph].
Kirk Larsen
And John I would add for that reason, we haven't factored anything into our 2019 guidance just because the uncertainty around what the ultimate outcome would be. So we're letting it running its course supporting them as we always will support our clients and we'll see what happens from a financial perspective.
John Campbell
Okay, that makes sense. And then two quick kind of housekeeping questions we can wait on the 10-Q for this.
But if you got it handy, what was the ending loan count for first and second lien on MSP.
Kirk Larsen
The ending loan count was - [indiscernible] as we speak it was on MSP it was $34.6 million.
John Campbell
That was total.
Kirk Larsen
That's total. First is about 32 and second is about 2.5.
John Campbell
Okay and then on D&B, are you guys going to run with equity method [ph] accounting, have you really worked through all that?
Kirk Larsen
That's our expectation.
John Campbell
Okay, great. Thanks guys.
Operator
Thank you. Our next question comes from the line of Ashish Sabadra with Deutsche Bank.
Please proceed with your question.
Ashish Sabadra
Just a quick question on the announced BB&T and SunTrust merger. Can you just give us any information on whether these are your existing customers and how should we think about any kind of benefits from those mergers?
Anthony Jabbour
Sure. Yes they're both clients of ours today.
We're looking forward to continuing to work with them and do more with them in the future. First of all I'm very happy and excited for them.
I mean they're making a real pivot in their strategies and by coming together with a lot of energy and a lot of focus on technology in general. So we're excited, we think it fits well with our innovations that we brought to market and we're going to continue to bring to market and I think directionally where we're heading is in the same line of direction as they're as well.
So we're very excited for them.
Ashish Sabadra
Okay, thanks. And maybe a quick question on CoreLogic they made a decision in December to exact the loan origination system, the Dorado business.
Does that open up opportunity and particularly did JPMorgan first lien origination because you already do the second lien origination as well as the servicing for both first and second lien, any thoughts there? Any color?
Anthony Jabbour
Sure I'd say anytime a competitor presents us a product, it creates opportunity for others that are in the industry and we're certainly aware of it and certainly focused on it. And I'd also say with JPMorgan Chase and more generically can't talk specifically in terms where things are, but what I say, the second lien is gone very well and we're going to continue to work hard with them as we do with all of our clients to expand what we do and show them the value that we can deliver to them.
Ashish Sabadra
Thanks and congrats.
Operator
[Operator Instructions] our next question comes from the line of Bose George with KBW. Please proceed with your question.
Unidentified Analyst
This is Tommy Mick [ph] joining on for Bose. Just wanted to ask on the origination side, how many of your clients were operating at the contractual floors in the fourth quarter?
Kirk Larsen
A significant majority, within that business if you look at just the processing revenue than loan origination system, 94% of the revenue was at or below the minimum and 6% would be the revenue, the processing revenue that's above. As you think about that as part of the revenue base, there's that component and then we professional services and then we have the implementation revenue that we amortized over the life of the deal, so the processing is a significant component and that piece 94% is at or below minimum.
Unidentified Analyst
Thanks and then just the other one. In the data and analytics segment, it looks like the EBITDA margin got a nice bump to it, this quarter.
Was there anything to call out there?
Kirk Larsen
No I mean with stronger revenue growth, it has in previous quarter and so was driving that. Frankly with a higher margin businesses which are portfolio analytics business as well as our multiple listing service business, so higher growth in businesses that have higher contribution margin.
Unidentified Analyst
Got it. Thanks guys.
Operator
Thank you. Our next question comes from the line of Stephen Sheldon with William Blair.
Please proceed with your question.
Stephen Sheldon
I'm just curios with the JPMorgan and Chase implementation out, kind of windows are completed and how the success of those implementations maybe impacting conversations with other big things because that's driven more in that conversations with other potential big clients about switching onto Empower?
Anthony Jabbour
Sure, thank you Stephen. Yes they went live in the fourth quarter and it's a real testament to both our teams, working exceptionally well together to bring it live so quickly.
But like I said, I do believe that there is opportunity. I believe that large clients had built proprietary systems in the past and as everyone looks at, how do they pivot the relative businesses, where should they be spending their capital and their energy it's shifting from loan origination to other areas.
And we've got such a strong proven scalable feature function right capability that I do believe that's of interest really for the largest lenders in the country.
Stephen Sheldon
Okay, that's helpful. And then I appreciate the commentary on the first order growth expectations.
But just as we think about the full year, can you maybe talk about high level growth expectations between servicing originations D&A and especially if you're expecting any significantly I guess different [indiscernible] relative to what we've seen [indiscernible].
Kirk Larsen
Sure, thinking of it at one level below. I would say that servicing would continue to grow about a level and it has been, maybe a little bit lighter than that, so kind of in the mid to high-single in origination, I would look at that in the high singles to low double kind of range and the D&A I would say continuing in that low-to-mid single-digit area.
Stephen Sheldon
Great. Thank you.
Operator
Thank you. Our next question comes from the line of Chris Gamaitoni with Compass Point.
Please proceed with your question.
Chris Gamaitoni
To follow-up on the large lender proprietary system opportunity, do you have an estimate not through the client but in the aggregate of the potential market, that it's still out there for you to go after, either in the market size or loans or [indiscernible].
Anthony Jabbour
I mean it's significant and it's something obviously that we could see it off for many years to come. I say that at very high level that way.
So it's - we don't see a shortage of opportunity and the [indiscernible] as you think about loan origination that you pivot from that to other areas, right? Such as robotic process automation or artificial intelligence with Ava and our actionable intelligence platforms where there's an opportunity to sell additional capability to our clients running our loan origination software.
So I'd say as you look at it, I want to see it the way we're seeing it which is you can get the actual origination software, but there's a whole lot more that goes around it, that candidly is what's really, it's one of the key areas that's generating a lot of excitement. It's the add on capability and innovation that we brought to market in 2018 has given us little more wind in our sails.
Kirk Larsen
And Chris just to give you a sense of magnitude, if you go back to our Investor Day deck when Anthony talked about the opportunity and origination, it showed at our market share and how much we could add, as we grew in certain segments of the market. So I don't have it front of me, but I ask you to go back and look at that, to help get a sense.
Chris Gamaitoni
Okay, perfect. And could you provide an update on Empower now and kind of where your sales focus is, on that product focusing on the market?
Anthony Jabbour
Sure we continue to be very pleased with the progress that we're making with Empower now and not just on the sales effort, but on the implementation results that we're seeing and the support, right which like you said it's important as you look at scale and how you scale for the mid market. But it continues to go out with hired additional sales resources for that and it is a big focus for us.
Chris Gamaitoni
Perfect. That's all I have.
Thank you.
Operator
Thank you. Our next question comes from the line of Jim Schneider with Goldman Sachs.
Please proceed with your question.
Jim Schneider
Can you just give us a little bit more color, appreciated on the [indiscernible] of revenue through 2019. But anymore color on the client environment with respect to the implementations.
It is everything you kind of thought, you thought 20%, 25% for this year still hold in terms of when most of those clients finally implementing, [indiscernible] what you thought about three months ago or so?
Anthony Jabbour
Sure Jim. Things are very still on track as we looked to 2018.
We're very pleased with the cadence we had on our implementation. There is great focus by the teams and great results are very much in line and we expect that as well so far going into 2019.
Jim Schneider
Okay. And then relative to the revenue commentary you gave Kirk on data and analytics.
Still relatively sluggish, maybe you can talk about, if you look at the overall strategic priorities for the company. Does that really rank in terms of the top three in terms of kind of accelerating that revenue growth, you're getting to that segment more focused around all the core initiatives at this point?
Kirk Larsen
I would say Jim that is, we're focused on growing all of our businesses and so we have very specific strategies in how we will grow the data and analytics business and certainly, we have higher expectations than low-to-mid single-digit business for that business and so we do strategy - we'll execute again under the leadership of that business. And we also have a continued focus on improving margins in that business.
so I mean, if one of our initiatives, we don't narrowly think of two of three of our initiatives and focus on those, it's broader than that, it's really across each of them, across each of the segment. So we have strategies, we're focused on them and we certainly will work to improve the performance to that business.
Jim Schneider
Thank you.
Operator
[Operator Instructions] our next question comes from the line of Henry Coffey with Wedbush Securities. Please proceed with your question.
Henry Coffey
First, I know you did make some comment about the mortgage headwind. If you focus that just on your loan origination systems, how does that sort of translate into a likely impact?
Kirk Larsen
That impact actually is is virtually zero on our loan origination system because of the nature of our contract, long-term in nature, subject to minimums' and as I talked about before 6% of that, the processing revenue in loan origination system is above the minimum. If there's a negligible, there's not a measurable effect in 2019.
Where we will see the effect is really on our lending solutions or exchanged platform. That is refi-centric platform that really has caused the majority of the headwind related to lower refi volumes and also on our eLending platform.
We also see a component of that, but it's most on the exchanged platform that we see it. It's really not measurable LOF [ph].
Henry Coffey
This a very general question and would appreciate a layman's answer. Everyone we talked to, complaints about their mortgage system and talks about the next generation.
Maybe you could put some color on that for me, in terms of where you think Black Knight is in providing that “next generation”. What is it that they're looking for?
What is that you think you can provide? And besides Ellie, if you could identify two or three large competitors in this space, that would be helpful as well?
Anthony Jabbour
Well I think generically and we've seen it through the cycle. You see it in the general banking cycle, you see it on the mortgage cycle and reverse.
But when everyone's more critical when times are tougher and so right now in the mortgage especially for originators, it is a tough time for them and they're looking for help and that's really what we wake up every day to try and answer the call, how can we help them? And it really was the impetus for the direction we took the company last year and as I joined I met with the majority of our clients immediately, spent time really understanding what their needs were and it was obvious where the industry was heading, where interest rates were heading and so we pivoted a focus on automation, on leveraging artificial intelligence and adding capabilities that would impress their customers as well as lower their internal cost such as our digital solution.
So I think from a perspective of what clients are faced with right now and what we can do for them. I think there's a great opportunity.
I mean very few of them are leveraging our artificial intelli - any of our new products really. I mean it's a very, very small percentage of them are leveraging them and there's a great ability for us to step in, lean in and help and that's what they're seeing.
So we've got an incredibly functionally rich strong compliant solution with our servicing platform, our origination platform has really shown that it's got the chops to handle the largest lenders in the country, from a feature functionality perspective, space perspective, a configuration perspective and we've also brought analytics to leverage our tremendous data assets as well as just our overall view of our client. There's no one else that really has the total view of our clients like we do because we're covering it really from the servicing side all the way to the origination side and leveraging everything and anything we can to help them.
Henry Coffey
Who's competing? I'm assuming it's not one set of products by someone, obviously except for Ellie Mae and maybe Cadence.
But - are there modules where you're competing with “better products” someone has a better POS system, someone has more share there. And if you think of what the mortgage technology chain looks like.
Are there names that pop up that are really worth watching to try to understand what's going on here?
Anthony Jabbour
Well I think on any given day, someone's message may resonate with a prospect of theirs. So it maybe a new feature that they just launched that could be in incredibly low price they're willing to offer, it could be a range of things.
But there are players in that space, you asked me to name few names. Blue Sage is there in that space.
Cadence is there. Blend.
On the point of sale side Rucafy [ph], Digital Risk there's a number of them. And they're solving a piece of the solution.
And like I said I think what's really important is, how do we help drive the broader relationship and help solve broader business dynamics for our clients. So and that's certainly how we're trying to approach, we're trying to take our solutioning [ph] to the next level.
Henry Coffey
Great. Thank you very much.
Operator
Thank you. Our next question comes from the line of Kevin Kaczmarek with Zelman & Associates.
Please proceed with your question.
Kevin Kaczmarek
Can I get your latest off [ph] on capital allocation going forward and how you're thinking about incremental share repurchases versus maybe some debt pay down and more acquisitions or other investments?
Kirk Larsen
Sure. Kevin the strategy really hasn't changed.
Been consistent for the last three or four years now. Where we're going to focus on investing and growth with a pivot strongly towards innovation while also maintaining strong balance sheet and ample liquidity.
So we're focused on investing and growth with activity internal that could be tuck in acquisitions or other external investments and beyond those investments and growth. We'll balance debt repayment and share repurchase, so as we think about 2019 what we've assumed is that.
We'll partially pay down the revolver in the first course, so use excess cash flow for that and then in the second, third and fourth quarter. We would balance between share repurchase and paying down the revolver.
Thinking of it as, if you look over the last couple of years our share repurchase volumes both in shares and dollars was relatively consistent and that's really what we would look to do this year as well.
Kevin Kaczmarek
Okay, thanks that's very helpful. And on the D&B investment, can you give us a sense of what contribution that makes to your EPS guidance kind of outright or net of the incremental debt?
And how will you report that investment going forward? Are you going to give us perhaps a mark-to-market or some measure of earnings outside of what shows up in the income statement?
Kirk Larsen
We will so we'll report on equity methods. We'll report our share of their GAAP earnings, which will reflect purchase accounting and initially will reflect cost related to transaction and cost to achieve the savings that are targeted there.
So it's going to be relatively noisy I think for some amount of time. Don't plan on providing a mark-to-market because that would I think the activity potentially misleading.
So as far as other updates on that I think the more detailed update just so there's [indiscernible] consistency largely come from [indiscernible] as it's a material investment to them, it's 5% of our market cap investment to us. And so we'll provide some updates on progress but focus on the core Black Knight business.
And as far as what's assumed, there's nothing assumed in the guidance related to the earnings of Dun & Bradstreet. My plan is to, that it won't be included in adjusted earnings because it will be non-cash and so a monetization to them.
Kevin Kaczmarek
Okay, so forward I would just include the incremental interest expense with no income assumed from D&B.
Kirk Larsen
That's correct. Kevin.
Kevin Kaczmarek
All right. Thank you.
That's all I had.
Operator
Thank you. Our next question comes from the line of Oscar Turner with Suntrust Robinson Humphrey.
Please proceed with your question.
Oscar Turner
Just had a question on the margin outlook. So it looks like next year's guide implies expansion of 100 basis points which is at the high end of your long-term guidance.
Can you give some color on the key drivers underlying that 100 basis points? And then how should we think about longer term drivers of margin expansion.
I assume the D&A segment scaling is one.
Kirk Larsen
What I would summarize it as each of our businesses have high incremental margins on revenue growth and that's going to be the fundamental driver of margin expansion both in 2019 and going forward. What you could see from time-to-time a little bit of noise around corporate cost like this, we had higher incentive compensation costs and incremental corporate cost following the spin-off from FNF.
There could be some noise like that going forward just from year-to-year not necessarily spin off related cost. But corporate can move around a little bit, but I would say just that noise aside it's really all about the incremental margins on revenue growth.
So if we grow in the midpoint of that range, we would expect to be able to expand margins in the midpoints of our long-term range or towards the higher end. Just due to the upward pressure from the contribution margins.
Oscar Turner
Okay, thanks. And then how should we think about the margin potential for data and analytics.
Kirk Larsen
We're absolutely committed to getting that business to 30%, that timeline of course as we talked about is a journey that's a business that had pretty weak margins, you go back to few years. We're getting it now to the mid-to-high 20s.
And so we continue to target that 30%. As I've said before, we don't plan to stop there.
That business certainly can go above 30% as well, so we're focused on that. We're pushing that business to not only grow rapidly as it can and it's a work in progress, but also to increase efficiency.
So we can drive margins up beyond just pure contribution margin on revenue growth.
Oscar Turner
Okay, thanks. That's helpful.
Operator
Thank you. Ladies and gentlemen this concludes our question-and-answer session.
I'll turn the floor back to Anthony for any final 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 partnership.
Thank you for joining us on the call today and for your interest in our great company. Enjoy the rest of your day.
Thank you.
Operator
Thank you. This concludes today's teleconference.
You may disconnect your lines at this time. Thank you for your participation.