Black Knight Reports Third Quarter 2020 Financial Results

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Nov 09, 2020, 07:00 ET

JACKSONVILLE, Fla., Nov. 9, 2020 /PRNewswire/ -- Black Knight, Inc. (NYSE: BKI), a leading provider of software, data and analytics solutions to the mortgage and consumer loan, real estate and capital markets verticals, today announced unaudited financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Financial Highlights:

Revenues of $312.6 million, an increase of 4.5% compared to the prior year quarter.
Net earnings attributable to Black Knight of $127.8 million, an increase of 243% compared to the prior year quarter. Diluted EPS of $0.82, an increase of 228% compared to the prior year quarter. Net earnings margin of 36.7% compared to 12.5% in the prior year quarter. The effect of our investment in Dun & Bradstreet Holdings, Inc. ("DNB") was an increase in Net earnings attributable to Black Knight of $86.6 million, or $0.55 per diluted share, primarily related to a non-cash gain recognized as a result of DNB's initial public offering and concurrent private placement.
Adjusted Revenues of $312.6 million, an increase of 4.5% compared to the prior year quarter.
Adjusted Net Earnings of $81.1 million, an increase of 7% compared to the prior year quarter. Adjusted EPS of $0.52 per diluted share, an increase of 2% compared to the prior year quarter.
Adjusted EBITDA of $154.7 million, an increase of 3% year-over-year. Adjusted EBITDA Margin was 49.5% compared to 50.1% in the prior year quarter.
As of September 30, 2020, we had cash of $31.2 million, debt of $2,303.2 million and available capacity of $612.0 million on our revolving credit facility.

Third Quarter 2020 Segment Highlights:

Software Solutions Revenues of $259.5 million, an increase of 1% year-over-year.
Software Solutions EBITDA of $151.6 million, a decrease of 1% year-over-year. Software Solutions EBITDA margin of 58.4% compared to 59.5% in the prior year quarter.
Data and Analytics Revenues of $53.1 million, an increase of 27% year-over-year.
Data and Analytics EBITDA of $18.3 million, an increase of 74% year-over-year. Data and Analytics EBITDA margin of 34.5%, an increase of 940 basis points compared to the prior year quarter.

Commentary:

"Our third quarter results highlight the ongoing strength of our core business as we continue to execute on our strategic growth initiatives," said Black Knight Chairman Bill Foley.

"We are pleased with our third quarter financial performance, which exceeded our expectations due to favorable origination market conditions," added Black Knight Chief Executive Officer Anthony Jabbour. "We delivered Adjusted Revenues growth of 4.5% and Adjusted EBITDA growth of 3%, driven by solid execution across the enterprise. The acquisition of Optimal Blue and sharp focus on delivering innovative solutions to transform the industry gives us confidence that we can continue to create superior shareholder value over the long-term."

Recent Highlights:

On September 15, 2020, we completed the acquisition of Optimal Blue.
On August 27, 2020, we completed the acquisition of DocVerify, Inc.
On August 26, 2020, we issued $1.0 billion aggregate principal amount of 3.625% senior unsecured notes due 2028 to partially fund the Optimal Blue acquisition.
DNB Investment: We own approximately 54.8 million shares of DNB common stock, which has a fair value of approximately $1.4 billion based on DNB's closing share price as of September 30, 2020.
In early August we completed the conversion of Bank of America's first mortgage and home equity loans to MSP.
We extended and expanded our origination software relationship with Truist. The conversion of BB&T's new volume to Empower and LendingSpace is ongoing.
We signed Caliber Home Loans, Inc., a top 25 servicer, to MSP.

Business Outlook

Following the closing of the Optimal Blue acquisition, Black Knight's updated full year 2020 outlook is as follows:

Revenues and Adjusted Revenues are expected to be in the range of $1,229 million to $1,235 million.
Adjusted EBITDA is expected to be in the range of $603 million to $608 million.
Adjusted EPS is expected to be in the range of $2.03 to $2.07.

The foregoing forward-looking statements reflect Black Knight's expectations as of today's date. Given the number of risk factors, uncertainties and assumptions discussed below, actual results may differ materially. Black Knight does not intend to update its forward-looking statements until its next quarterly results announcement, other than in publicly available statements.

Earnings Conference Call and Audio Webcast

Black Knight will host a conference call to discuss the third quarter 2020 financial results on November 9, 2020, at 8:30 a.m. ET. The conference call can be accessed live over the phone by dialing (877) 407-4018, or for international callers (201) 689-8471. A replay will be available from 11:30 a.m. ET on November 9, 2020, through November 16, 2020, by dialing (844) 512-2921, or for international callers (412) 317-6671. The replay passcode will be 13712102.

The call will also be webcast live from Black Knight's investor relations website at https://investor.blackknightinc.com. Following completion of the call, a recorded replay of the webcast will be available on the website.

About Black Knight

Black Knight, Inc. (NYSE:BKI) is an award-winning software, data and analytics company that drives innovation in the mortgage lending and servicing and real estate industries, as well as the capital and secondary markets. Businesses leverage our robust, integrated solutions across the entire homeownership life cycle to help retain existing customers, gain new customers, mitigate risk and operate more effectively.

Our clients rely on our proven, comprehensive, scalable products and our unwavering commitment to delivering superior client support to achieve their strategic goals and better serve their customers. For more information on Black Knight, please visit www.blackknightinc.com.

Non-GAAP Financial Measures

This earnings release contains non-GAAP financial measures, including Adjusted Revenues, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Earnings and Adjusted EPS. These are important financial measures for us, but are not financial measures as defined by generally accepted accounting principles ("GAAP"). The presentation of this financial information is not intended to be considered in isolation of or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making, including determining a portion of executive compensation. We also present these non-GAAP financial measures because we believe investors, analysts and rating agencies consider them useful in measuring our ability to meet our debt service obligations. By disclosing these non-GAAP financial measures, we believe we offer investors a greater understanding of, and an enhanced level of transparency into, the means by which our management operates the company.

These non-GAAP financial measures are not measures presented in accordance with GAAP, and our use of these terms may vary from that of others in our industry. These non-GAAP financial measures should not be considered as an alternative to revenues, net earnings, net earnings per share, net earnings margin or any other measures derived in accordance with GAAP as measures of operating performance or liquidity. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the attached schedules.

Revenues, EBITDA and EBITDA margin for the Software Solutions and Data and Analytics segments are presented in conformity with Accounting Standards Codification Topic 280, Segment Reporting. These measures are reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For these reasons, these measures are excluded from the definition of non-GAAP financial measures under the Securities and Exchange Commission's ("SEC") Regulation G and Item 10(e) of Regulation S-K.

Adjusted Revenues - We define Adjusted Revenues as Revenues adjusted to include the revenues that were not recorded by Black Knight during the periods presented due to the deferred revenue purchase accounting adjustment recorded in accordance with GAAP. These adjustments are reflected in Corporate and Other.

Adjusted EBITDA - We define Adjusted EBITDA as Net earnings attributable to Black Knight, with adjustments to reflect the addition or elimination of certain statement of earnings items including, but not limited to:

Depreciation and amortization;
Impairment charges;
Interest expense, net;
Income tax expense;
Other expense (income), net;
Equity in (earnings) losses of unconsolidated affiliates, net of tax;
(Gains) losses on sale of investments in unconsolidated affiliate, net of tax;
Net earnings (losses) attributable to redeemable noncontrolling interests;
deferred revenue purchase accounting adjustment;
equity-based compensation, including certain related payroll taxes;
costs associated with debt and/or equity offerings;
acquisition-related costs, including costs pursuant to purchase agreements; and
costs associated with expense reduction initiatives.

These adjustments are reflected in Corporate and Other.

Adjusted EBITDA Margin - Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by Adjusted Revenues.

Adjusted Net Earnings - We define Adjusted Net Earnings as Net earnings attributable to Black Knight with adjustments to reflect the addition or elimination of certain statement of earnings items including, but not limited to:

equity in (earnings) losses of unconsolidated affiliates, net of tax;
(gains) losses on sale of investments in unconsolidated affiliate, net of tax;
the net incremental depreciation and amortization adjustments associated with the application of purchase accounting, primarily related to the Fidelity National Financial, Inc. acquisition of a predecessor of Black Knight in January 2014;
deferred revenue purchase accounting adjustment;
equity-based compensation, including certain related payroll taxes;
costs associated with debt and/or equity offerings;
acquisition-related costs, including costs pursuant to purchase agreements;
costs associated with expense reduction initiatives;
costs and settlement (gains) losses associated with significant legal matters;
adjustment for income tax expense primarily related to the tax effect of the non-GAAP adjustments; and
adjustment for redeemable noncontrolling interests primarily related to the effect of the non-GAAP adjustments.

Adjusted EPS - Adjusted EPS is calculated by dividing Adjusted Net Earnings by the diluted weighted average shares of common stock outstanding.

Forward-Looking Statements

This press release contains forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements regarding expectations, hopes, intentions or strategies regarding the future are forward-looking statements. Forward-looking statements are based on Black Knight management's beliefs, as well as assumptions made by, and information currently available to, them. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. Black Knight undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

The risks and uncertainties that forward-looking statements are subject to include, but are not limited to:

changes in general economic, business, regulatory and political conditions, including those resulting from pandemics such as COVID-19, particularly as they affect foreclosures and the mortgage industry;
the outbreak of COVID-19 and measures to reduce its spread, including the effect of governmental or voluntary actions such as business shutdowns and stay-at-home orders;
security breaches against our information systems;
our ability to maintain and grow our relationships with our clients;
changes to the laws, rules and regulations that affect our and our clients' businesses;
our ability to adapt our services to changes in technology or the marketplace or to achieve our growth strategies;
our ability to protect our proprietary software and information rights;
the effect of any potential defects, development delays, installation difficulties or system failures on our business and reputation;
risks associated with the availability of data;
the effects of our existing leverage on our ability to make acquisitions and invest in our business;
our ability to successfully integrate strategic acquisitions, including the acquisition of Optimal Blue;
risks associated with the achievement of the intended benefits related to the acquisition of Optimal Blue;
risks associated with our investment in DNB; and
other risks and uncertainties detailed in the "Statement Regarding Forward-Looking Information," "Risk Factors" and other sections of our Annual Report on Form 10-K for the year ended December 31, 2019 and other filings with the SEC.

BLACK KNIGHT, INC. Condensed Consolidated Balance Sheets (In millions) (Unaudited)


	September 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	31.2	$	15.4
Trade receivables, net	192.8		175.1
Prepaid expenses and other current assets	81.2		64.8
Receivables from related parties	—		0.2
Total current assets	305.2		255.5
Property and equipment, net	168.9		176.9
Computer software, net	503.0		406.0
Other intangible assets, net	733.8		150.0
Goodwill	3,617.6		2,361.4
Investments in unconsolidated affiliates	481.6		294.9
Deferred contract costs, net	169.8		159.3
Other non-current assets	174.4		158.8
Total assets	$	6,154.3	$	3,962.8
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable and other accrued liabilities	$	72.1	$	65.3
Accrued compensation and benefits	69.0		65.5
Current portion of debt	76.5		79.1
Deferred revenues	49.6		50.9
Total current liabilities	267.2		260.8
Deferred revenues	97.2		98.0
Deferred income taxes	310.2		185.3
Long-term debt, net of current portion	2,226.7		1,465.1
Other non-current liabilities	92.7		55.1
Total liabilities	2,994.0		2,064.3

Redeemable noncontrolling interests	578.0		—

Equity:
Additional paid-in capital	2,049.6		1,586.8
Retained earnings	709.7		490.6
Accumulated other comprehensive loss	(33.1)		(20.2)
Treasury stock, at cost	(143.9)		(158.7)
Total shareholders' equity	2,582.3		1,898.5
Total liabilities, redeemable noncontrolling interests and shareholders' equity	$	6,154.3	$	3,962.8

BLACK KNIGHT, INC. Condensed Consolidated Statements of Earnings (In millions, except per share data) (Unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Revenues	$	312.6	$	299.1	$	896.4	$	877.1
Expenses:
Operating expenses	167.2		163.9		485.1		483.3
Depreciation and amortization	64.0		59.6		180.3		174.0
Transition and integration costs	21.9		0.4		26.8		2.3
Total expenses	253.1		223.9		692.2		659.6
Operating income	59.5		75.2		204.2		217.5
Other income and expense:
Interest expense, net	(14.7)		(16.5)		(42.4)		(48.2)
Other (expense) income, net	(0.9)		(0.1)		17.1		(0.9)
Total other expense, net	(15.6)		(16.6)		(25.3)		(49.1)
Earnings before income taxes and equity in earnings (losses) of unconsolidated affiliates	43.9		58.6		178.9		168.4
Income tax expense	15.9		9.4		41.3		34.6
Earnings before equity in earnings (losses) of unconsolidated affiliates	28.0		49.2		137.6		133.8
Equity in earnings (losses) of unconsolidated affiliates, net of tax	86.6		(11.9)		66.2		(37.9)
Net earnings	114.6		37.3		203.8		95.9
Net losses attributable to redeemable noncontrolling interests	13.2		—		13.2		—
Net earnings attributable to Black Knight	$	127.8	$	37.3	$	217.0	$	95.9

Net earnings per share attributable to Black Knight shareholders:
Basic	$	0.82	$	0.25	$	1.44	$	0.65
Diluted ⁽¹⁾	$	0.82	$	0.25	$	1.43	$	0.65
Weighted average shares of common stock outstanding:
Basic	155.4		147.7		150.9		147.6
Diluted ⁽¹⁾	156.3		148.5		151.7		148.4

______________

(1) For the periods presented, potentially dilutive securities include unvested restricted stock awards.

BLACK KNIGHT, INC. Condensed Consolidated Statements of Cash Flows (In millions) (Unaudited)

	Nine months ended September 30,
	2020		2019
Cash flows from operating activities:
Net earnings	$	203.8	$	95.9
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	180.3		174.0
Amortization of debt issuance costs and original issue discount	2.4		2.1
Deferred income taxes, net	(0.9)		5.9
Equity in (earnings) losses of unconsolidated affiliates, net of tax	(66.2)		37.9
Equity-based compensation	29.4		39.8
Changes in assets and liabilities, net of acquired assets and liabilities:
Trade and other receivables, including receivables from related parties	(7.9)		(7.9)
Prepaid expenses and other assets	(7.9)		1.8
Deferred contract costs	(36.9)		(28.8)
Deferred revenues	(17.0)		(16.0)
Trade accounts payable and other liabilities	(13.2)		(83.3)
Net cash provided by operating activities	265.9		221.4
Cash flows from investing activities:
Additions to property and equipment	(19.5)		(11.3)
Additions to computer software	(63.2)		(57.2)
Business acquisitions, net of cash acquired	(1,869.2)		(52.8)
Investments in unconsolidated affiliate	(100.0)		(392.6)
Proceeds from sale of investment in unconsolidated affiliate	8.4		—
Asset acquisition	(15.0)		—
Net cash used in investing activities	(2,058.5)		(513.9)
Cash flows from financing activities:
Net proceeds from issuance of common stock, before offering expenses	484.6		—
Costs directly associated with issuance of common stock	(0.4)		—
Issuance of senior unsecured notes, net of original issue discount	990.0		—
Debt issuance costs paid	(2.4)		—
Revolver borrowings	574.6		842.8
Revolver payments	(746.6)		(509.0)
Term loan payments	(39.1)		(23.4)
Contributions received for redeemable noncontrolling interests	578.0		—
Purchases of treasury stock	—		(11.9)
Finance lease payments	(9.4)		—
Tax withholding payments for restricted share vesting	(20.9)		(15.9)
Other financing activities	—		(0.6)
Net cash provided by financing activities	1,808.4		282.0
Net increase (decrease) in cash and cash equivalents	15.8		(10.5)
Cash and cash equivalents, beginning of period	15.4		20.3
Cash and cash equivalents, end of period	$	31.2	$	9.8
Supplemental cash flow information:
Interest paid, net	$	(36.4)	$	(45.3)
Income taxes paid, net	$	(48.1)	$	(41.9)

BLACK KNIGHT, INC. Segment Information (In millions) (Unaudited)

	Three months ended September 30, 2020
	Software Solutions		Data and Analytics		Corporate and Other			Total
Revenues	$	259.5	$	53.1	$	—	(1)	$	312.6
Expenses:
Operating expenses	107.9		34.8		24.5		(2)	167.2
Transition and integration costs	—		—		21.9		(3)	21.9
EBITDA	151.6		18.3		(46.4)			123.5
Depreciation and amortization	30.6		3.6		29.8		(4)	64.0
Operating income (loss)	121.0		14.7		(76.2)			59.5
Interest expense, net								(14.7)
Other expense, net								(0.9)
Earnings before income taxes and equity in earnings of unconsolidated affiliates								43.9
Income tax expense								15.9
Earnings before equity in earnings of unconsolidated affiliates								28.0
Equity in earnings of unconsolidated affiliates, net of tax								86.6
Net earnings								114.6
Net losses attributable to redeemable noncontrolling interests								13.2
Net earnings attributable to Black Knight								$	127.8


	Three months ended September 30, 2019
	Software Solutions		Data and Analytics		Corporate and Other			Total
Revenues	$	257.3	$	41.9	$	(0.1)	(1)	$	299.1
Expenses:
Operating expenses	104.1		31.4		28.4		(2)	163.9
Transition and integration costs	—		—		0.4		(5)	0.4
EBITDA	153.2		10.5		(28.9)			134.8
Depreciation and amortization	31.4		3.9		24.3		(4)	59.6
Operating income (loss)	121.8		6.6		(53.2)			75.2
Interest expense, net								(16.5)
Other expense, net								(0.1)
Earnings before income taxes and equity in losses of unconsolidated affiliates								58.6
Income tax expense								9.4
Earnings before equity in losses of unconsolidated affiliates								49.2
Equity in losses of unconsolidated affiliates, net of tax								(11.9)
Net earnings								$	37.3

BLACK KNIGHT, INC. Segment Information (In millions) (Unaudited)

	Nine months ended September 30, 2020
	Software Solutions		Data and Analytics		Corporate and Other			Total
Revenues	$	749.3	$	147.4	$	(0.3)	(1)	$	896.4
Expenses:
Operating expenses	312.1		98.4		74.6		(2)	485.1
Transition and integration costs	—		—		26.8		(3)	26.8
EBITDA	437.2		49.0		(101.7)			384.5
Depreciation and amortization	91.1		11.4		77.8		(4)	180.3
Operating income (loss)	346.1		37.6		(179.5)			204.2
Interest expense, net								(42.4)
Other income, net								17.1
Earnings before income taxes and equity in earnings of unconsolidated affiliates								178.9
Income tax expense								41.3
Earnings before equity in earnings of unconsolidated affiliates								137.6
Equity in earnings of unconsolidated affiliates, net of tax								66.2
Net earnings								203.8
Net losses attributable to redeemable noncontrolling interests								13.2
Net earnings attributable to Black Knight								$	217.0

	Nine months ended September 30, 2019
	Software Solutions		Data and Analytics		Corporate and Other			Total
Revenues	$	756.2	$	121.3	$	(0.4)	(1)	$	877.1
Expenses:
Operating expenses	308.4		91.5		83.4		(2)	483.3
Transition and integration costs	—		—		2.3		(5)	2.3
EBITDA	447.8		29.8		(86.1)			391.5
Depreciation and amortization	91.4		11.6		71.0		(4)	174.0
Operating income (loss)	356.4		18.2		(157.1)			217.5
Interest expense, net								(48.2)
Other expense, net								(0.9)
Earnings before income taxes and equity in losses of unconsolidated affiliates								168.4
Income tax expense								34.6
Earnings before equity in losses of unconsolidated affiliates								133.8
Equity in losses of unconsolidated affiliates, net of tax								(37.9)
Net earnings								$	95.9

________________________

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

(2) Operating expenses for Corporate and Other includes equity-based compensation, including certain related payroll taxes, of $9.3 million and $14.5 million for the three months ended September 30, 2020 and 2019, respectively, and $30.5 million and $40.6 million for the nine months ended September 30, 2020 and 2019, respectively.

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

(4) Depreciation and amortization for Corporate and Other primarily represents net incremental depreciation and amortization adjustments associated with the application of purchase accounting recorded in accordance with GAAP.

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

BLACK KNIGHT, INC. Reconciliation of GAAP to Non-GAAP Financial Measures (In millions) (Unaudited)

Reconciliation of Revenues to Adjusted Revenues

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Revenues	$	312.6	$	299.1	$	896.4	$	877.1
Deferred revenue purchase accounting adjustment	—		0.1		0.3		0.4
Adjusted Revenues	$	312.6	$	299.2	$	896.7	$	877.5

Reconciliation of Net earnings to Adjusted EBITDA

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Net earnings attributable to Black Knight	$	127.8	$	37.3	$	217.0	$	95.9
Depreciation and amortization	64.0		59.6		180.3		174.0
Interest expense, net	14.7		16.5		42.4		48.2
Income tax expense	15.9		9.4		41.3		34.6
Other expense (income), net	0.9		0.1		(17.1)		0.9
Equity in (earnings) losses of unconsolidated affiliates, net of tax	(86.6)		11.9		(61.2)		37.9
Gain on sale of investment in unconsolidated affiliate, net of tax	—		—		(5.0)		—
Net losses attributable to redeemable noncontrolling interests	(13.2)		—		(13.2)		—
EBITDA	123.5		134.8		384.5		391.5
Deferred revenue purchase accounting adjustment	—		0.1		0.3		0.4
Equity-based compensation⁽¹⁾	9.3		14.5		30.5		40.6
Debt and/or equity offering expenses	(0.1)		—		0.1		—
Acquisition-related costs	18.5		0.4		22.4		2.3
Expense reduction initiatives	3.5		—		4.3		—
Adjusted EBITDA	$	154.7	$	149.8	$	442.1	$	434.8

Net earnings margin	36.7%		12.5%		22.7%		10.9%
Adjusted EBITDA Margin	49.5%		50.1%		49.3%		49.5%

________________________

(1) Includes accelerated recognition of equity-based compensation expense of $0.2 million and $1.0 million for the three months ended September 30, 2020 and 2019, respectively, and $0.4 million and $2.9 million for the nine months ended September 30, 2020 and 2019, respectively.

BLACK KNIGHT, INC. Reconciliation of GAAP to Non-GAAP Financial Measures (In millions, except per share data) (Unaudited)

Reconciliation of Net earnings to Adjusted Net Earnings

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Net earnings attributable to Black Knight	$	127.8	$	37.3	$	217.0	$	95.9
Equity in (earnings) losses of unconsolidated affiliates, net of tax	(86.6)		11.9		(61.2)		37.9
Gain on sale of investment in unconsolidated affiliate, net of tax	—		—		(5.0)		—
Depreciation and amortization purchase accounting adjustment ⁽¹⁾	30.0		24.4		78.3		71.6
Deferred revenue purchase accounting adjustment	—		0.1		0.3		0.4
Equity-based compensation ⁽²⁾	9.3		14.5		30.5		40.6
Debt and/or equity offering expenses	(0.1)		—		0.1		—
Acquisition-related costs	18.5		0.4		22.4		2.3
Expense reduction initiatives	3.5		—		4.3		—
Legal matters	0.9		0.1		(17.0)		0.8
Income tax expense adjustment	(8.5)		(12.6)		(27.2)		(34.4)
Redeemable noncontrolling interests adjustment ⁽³⁾	(13.7)		—		(13.7)		—
Adjusted Net Earnings	$	81.1	$	76.1	$	228.8	$	215.1

Adjusted EPS	$	0.52	$	0.51	$	1.51	$	1.45
Weighted average shares outstanding, diluted	156.3		148.5		151.7		148.4

________________________
(1) Components of the depreciation and amortization purchase accounting adjustment are as follows:

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Other intangible assets	$	17.9	$	14.7	$	44.3	$	43.8
Computer software	12.1		9.9		34.1		28.4
Property and equipment	0.2		0.2		0.6		0.5
Deferred contract costs	(0.2)		(0.4)		(0.7)		(1.1)
Depreciation and amortization purchase accounting adjustment	$	30.0	$	24.4	$	78.3	$	71.6

(2) Includes accelerated recognition of equity-based compensation expense of $0.2 million and $1.0 million for the three months ended September 30, 2020 and 2019, respectively, and $0.4 million and $2.9 million for the nine months ended September 30, 2020 and 2019, respectively.
(3) For the periods presented, the redeemable noncontrolling interests adjustment primarily includes the effect of the net incremental depreciation and amortization adjustments associated with the application of purchase accounting and acquisition-related costs.

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Steve Eagerton		Michelle Kersch
Black Knight		Black Knight
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