PROXY STATEMENT
The
proxy is solicited by the board of directors of Black Knight, Inc. for use at the Annual Meeting of Shareholders to be held on July 12,
2023 at 11:00 a.m., Eastern Time, or at any postponement or adjournment thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. The annual meeting will be held virtually at www.virtualshareholdermeeting.com/BKI2023.
It
is anticipated that such proxy, together with this proxy statement, will first be mailed on or about May 26, 2023 to all shareholders
entitled to vote at the meeting.
The
Company’s principal executive offices are located at 601 Riverside Avenue, Jacksonville, Florida 32204, and its telephone number
at that address is (904) 854-5100.
Forward-Looking
Statements
This
proxy statement includes forward-looking statements. These statements are not historical facts, but instead represent only our beliefs
regarding future events, many of which, by their nature, are inherently uncertain and outside of our control. Forward-looking statements
include statements about our business and future performance, as well as ESG targets, goals, and commitments outlined in this proxy statement
or elsewhere. These statements can be identified by words such as “anticipates,” “intends,” “plans,”
“seeks,” “believes,” “estimates,” “expects” and similar references to future periods,
or by the inclusion of forecasts or projections. We expect that certain disclosures made in this proxy statement may be amended, updated
or revised in the future as the quality and completeness of our data and methodologies continue to improve. We caution readers not to
place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made, and we undertake
no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events
or other factors, except where we are expressly required to do so by law. For a discussion of some of the risks and important factors
that could affect our future results and financial condition, see “Risk Factors” in our Annual Report on Form 10-K for
the year ended December 31, 2022.
GENERAL
INFORMATION
ABOUT THE COMPANY
Black
Knight is a premier provider of integrated, innovative, mission-critical, high-performance software solutions, data and analytics to
the U.S. mortgage and real estate markets. Our mission is to transform the markets we serve by delivering innovative solutions that are
integrated across the homeownership lifecycle and that result in realized efficiencies, reduced risk and new opportunities for our clients
to help them achieve greater levels of success. All references in this proxy statement to Black Knight, the Company, we, us or
our are to Black Knight, Inc. and our subsidiaries.
Innovation. Integration.
Urgency.
Whether
developing new solutions, integrating new and acquired solutions or responding to our client’s requests – we do everything
with urgency. It is why we are a trusted partner and leading provider of software solutions, data and analytics to the mortgage and real
estate markets.
We
believe our clients leverage our robust, integrated solutions across the entire homeownership lifecycle to help retain existing customers,
gain new customers, mitigate risk and operate more efficiently. Our clients rely on our proven, comprehensive and scalable solutions
and our unwavering commitment to delivering exceptional client support to achieve their strategic goals and better serve their customers.
We
have a focused strategy of continuous innovation across our business, which is supported by acquisitions, and even more importantly,
the integration of those acquisitions and our innovations into our broader ecosystem. Our ability to effectively manage our business
and maintain a strong client base allows us to continually invest in our business to meet ever-changing industry requirements.
Deep
business and regulatory expertise along with a holistic view of the markets we serve allow us the privilege of being a trusted advisor
to our clients, who range from the nation’s largest lenders and mortgage servicers to institutional portfolio managers and government
entities, to individual real estate agents and mortgage brokers. Clients leverage our software ecosystem across a range of real estate
and housing finance verticals through multiple digital channels, using our offerings to drive more business, reduce risk and deliver
a best-in-class customer experience, all while operating more efficiently and cost-effectively.
We
have long-standing relationships with our clients, a majority of whom enter into long-term contracts that include multiple, integrated
products embedded into mission-critical processes. This speaks to the confidence our clients have in our solutions and our commitment
to serve them. The contractual nature of our revenues and our client relationships make our revenues both highly visible and recurring
in nature. Our scale and integrated ecosystem of solutions drive significant operating leverage and cross-sell opportunities, enabling
our clients to continually benefit from new and greater operational efficiencies.
2022 Highlights
Our
Company had a solid year in 2022, despite a very challenging time for the markets we serve. A rapid rise in interest rates contributed
to a dramatic decline in origination volumes causing operational challenges for our clients and prospects. The resulting heightened focus
on expenses by clients and prospects as well as the proposed ICE Merger have elongated the sales cycle in the short term. Market conditions
have also resulted in elevated originator consolidation and bankruptcies, resulting in associated client attrition. In the face of that
challenging market backdrop, our team remained focused and continued to execute against our strategic initiatives to deliver profitable
growth over the long term.
Our
financial results for 2022 demonstrated our high recurring revenue business model and resilience in a challenging market environment.
While the operating environment has created some near-term headwinds to our financial performance, we remain positive about our long-term
growth opportunities and are committed to creating value for all of our stakeholders.
Our
sales results for 2022 reflect the value that lenders, servicers and other market participants see in our solutions. To that end, we
signed 13 new MSP® loan servicing system clients, 29 new Empower® loan origination system (LOS)
clients or additional channels to existing clients, and 129 new Optimal BlueSM product, pricing and eligibility (PPE)
engine clients. We also had continued success in cross-selling solutions to our existing clients.
Recognizing
the strategic importance of our acquisition of Optimal Blue, we completed the acquisition of the minority interests of Optimal Blue that
were previously held by Cannae Holdings, Inc. (Cannae) and Thomas H. Lee Partners, L.P. (THL) on February 15,
2022. The transaction had a positive impact on our 2022 Adjusted earnings per share (EPS) and simplified our organizational structure
with Optimal Blue as a wholly-owned subsidiary of Black Knight.
Looking
ahead to 2023, we will continue to act with focus and urgency to execute on our long-term strategic initiatives to drive growth by signing
new clients, cross-selling to existing clients and delivering innovative solutions.
Merger
with ICE
On
May 4, 2022, we entered into a definitive agreement (the Original Merger Agreement) to be acquired by Intercontinental Exchange, Inc.
(ICE) a leading global provider of data, technology, and market infrastructure, in a transaction valued at approximately $13.1
billion, or $85 per share, with consideration in the form of a mix of cash (80%) and stock (20%). On March 7, 2023, we entered into
Amendment No. 1 to the Original Merger Agreement (which we refer to as the Amendment and, when referring to the Original
Merger Agreement as amended by the Amendment, the Merger Agreement), which provides for, among other things, a reduction in the
merger consideration, valuing Black Knight at $75.00 per share, or a market value of $11.7 billion, with consideration in the form of
a mix of approximately $68.00 per share in cash and stock with an exchange ratio of 0.0682 based on ICE’s 10-day volume weighted
average price as of March 3, 2023 of $102.62 (the ICE Merger). As under the Original Merger Agreement, Black Knight shareholders
can elect to receive either cash or stock, subject to proration, with the value of the cash election and the stock election
equalized
based on an average of ICE’s 10-day volume weighted average prices for the period ended three trading days prior to closing. The
ICE Merger is expected to close in the third or fourth quarter of 2023, subject to regulatory clearance and the satisfaction of customary
closing conditions. The ICE Merger has been approved by the boards of directors of Black Knight and ICE and by the shareholders of Black
Knight.
Completion
of the ICE Merger is subject to the expiration or earlier termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the HSR Act). On March 9, 2023, the United States Federal Trade Commission (the FTC) filed
an administrative complaint challenging the ICE Merger under the HSR Act and authorized the filing of a complaint in federal district
court to pursue a preliminary injunction to prevent the consummation of the ICE Merger pending an administrative trial, and ICE announced
that ICE strongly disagrees with, and intends to vigorously oppose the FTC’s decision to challenge the ICE Merger. On April 10,
2023, the FTC filed a parallel complaint in federal court seeking injunctive relief. The FTC seeks to block ICE and Black Knight from
completing the ICE Merger during the pendency of the administrative proceeding on the merits. On April 21, 2023, the United States
District Court for the Northern District of California entered a temporary restraining order that prevents ICE and Black Knight from
consummating the ICE Merger until 11:59 p.m. on the second business day after the Court rules on the FTC’s motion for
a preliminary injunction, or a date set by the Court, whichever is later. On April 25, 2023, Black Knight filed its response to
the FTC’s complaint generally denying the allegations and asserting several defenses. Black Knight also asserted a counterclaim
against the FTC seeking declaratory and injunctive relief alleging violations of Black Knight's constitutional rights. There can be no
assurance as to the outcome of litigation with the FTC or that this condition to the completion of the ICE Merger will be satisfied on
a timely basis or at all.
GENERAL
INFORMATION
ABOUT THE VIRTUAL
ANNUAL MEETING
Your
shares can be voted at the virtual annual meeting only if you vote by proxy or if you are present and vote at the meeting. Even if you
expect to attend the virtual annual meeting, please vote by proxy to assure that your shares will be represented.
Why did I receive
this proxy statement?
The
board is soliciting your proxy to vote at the virtual annual meeting because you were a holder of our common stock at the close of business
on May 19, 2023, which we refer to as the record date, and therefore you are entitled to vote at the annual meeting. This proxy
statement contains information about the matters to be voted on at the annual meeting, and the voting process, as well as information
about the Company’s directors and executive officers.
Who is entitled
to vote?
All
record holders of common stock as of the close of business on May 19, 2023 are entitled to vote. As of the close of business on
that day, 156,761,471 shares of common stock were outstanding and eligible to vote. Each share is entitled to one vote on each matter
presented at the virtual annual meeting.
If
you hold your shares of common stock through a broker, bank or other holder of record, you are considered a “beneficial owner,”
of shares held in street name. As the beneficial owner, you have the right to direct your broker, bank or other holder of record on how
to vote your shares by using the voting instruction form included in the mailing or by following their instructions for voting via the
Internet or by telephone.
What shares are
covered by the proxy card?
The
proxy card covers all shares of common stock held by you of record (i.e., shares registered in your name).
How do I vote?
You
may vote using any of the following methods:
| • | At
the virtual annual meeting. All shareholders may vote at the virtual annual meeting.
Please see “How do I access the virtual annual meeting? Who may attend?” for
additional information on how to vote at the annual meeting. |
| • | By
proxy. There are three ways to vote by proxy: |
| » | By
mail, using the enclosed proxy card and return envelope; |
| » | By
telephone, using the telephone number printed on the proxy card and following the instructions
on the proxy card; or |
| » | By
the Internet, using a unique password printed on your proxy card and following the instructions
on the proxy card. |
Even
if you expect to attend the annual meeting virtually, please vote by proxy to assure that your shares will be represented.
What does it mean
to vote by proxy?
It
means that you give someone else the right to vote your shares in accordance with your instructions. In this case, we are asking you
to give your proxy to our Chief Executive Officer, our President and Chief Financial Officer, and our Corporate Secretary, who are sometimes
referred to as the “proxy holders.” By giving your proxy to the proxy holders, you assure that your vote will be counted
even if you are unable to attend the annual meeting. If you give your proxy but do not include specific instructions on how to vote on
a particular proposal described in this proxy statement, the proxy holders will vote your shares in accordance with the recommendation
of the board for such proposal.
On what am I voting?
You will be asked
to consider three proposals at the annual meeting:
| • | Proposal
No. 1 asks you to elect seven
directors to serve until the 2024 Annual Meeting of Shareholders. |
| • | Proposal
No. 2 asks you to approve a
non-binding advisory resolution on the compensation paid to our named executive officers
(the Say-on-Pay Proposal). |
| • | Proposal
No. 3 asks you to ratify the
appointment of KPMG LLP as our independent registered public accounting firm for the 2023
fiscal year. |
How does the board
recommend that I vote on these proposals?
The
board recommends that you vote “FOR ALL” director nominees in Proposal 1, and “FOR” Proposals 2 and 3.
What happens if
other matters are raised at the meeting?
Although
we are not aware of any matters to be presented at the virtual annual meeting other than those contained in the Notice of Annual Meeting,
if other matters are properly raised at the virtual annual meeting in accordance with the procedures specified in Black Knight’s
certificate of incorporation and bylaws, or applicable law, all proxies given to the proxy holders will be voted in accordance with their
best judgment.
What if I submit
a proxy and later change my mind?
If you have submitted your proxy
and later wish to revoke it, you may do so by doing one of the following: giving written notice to the Corporate Secretary prior to the
virtual annual meeting; submitting another proxy bearing a later date (in any of the permitted forms) prior to the virtual annual meeting;
or casting a ballot at the virtual annual meeting.
Who will count
the votes?
Broadridge Investor Communications
Services will serve as proxy tabulator and count the votes, and the results will be certified by the inspector of election.
How many votes
must each proposal receive to be adopted?
The following votes must be received:
| • | For
Proposal No. 1 regarding
the election of directors, a majority of votes of our common stock cast is required to elect
a director. Abstentions and broker non-votes are not counted as a vote cast and will therefore
have no effect. |
| • | For
Proposal No. 2 regarding
a non-binding advisory vote on the compensation paid to our named executive officers, this
vote is advisory in nature. Our bylaws require that matters other than the election of directors
be approved by the affirmative vote of a majority of the shares of our common stock represented
and entitled to vote at |
the meeting,
in which case abstentions and broker non-votes have the effect of a vote against Proposal No. 2. Because the vote on Proposal No. 2
is advisory and therefore will not be binding on the Company, the board will review the voting result and take it into consideration
when making future decisions regarding the compensation paid to our named executive officers.
| • | For
Proposal No. 3 regarding
the ratification of the appointment of KPMG LLP, the affirmative vote of a majority of the
shares of our common stock represented and entitled to vote at the meeting is required to
approve this proposal. Abstentions will have the effect of a vote against this proposal.
Because this proposal is considered a “routine” matter under the rules of
the New York Stock Exchange, or NYSE, nominees may vote in their discretion on this proposal
on behalf of beneficial owners who have not furnished voting instructions, and, therefore,
there will be no broker non-votes on this proposal. |
What constitutes
a quorum?
A quorum is present if a majority of the outstanding
shares of our common stock entitled to vote at the annual meeting are present in person or represented by proxy. Broker non-votes and
abstentions will be counted for purposes of determining whether a quorum is present.
What are broker
non-votes? If I do not vote, will my broker vote for me?
Broker non-votes occur when nominees, such as banks
and brokers holding shares on behalf of beneficial owners, do not receive voting instructions from the beneficial owners at least 10
days before the meeting. If that happens, the nominees may vote those shares only on matters deemed “routine” by the SEC
and the rules promulgated by NYSE thereunder.
We believe that all the proposals to be voted on at
the annual meeting, except for the appointment of KPMG LLP as our independent registered public accounting firm, are not “routine”
matters. On non-routine matters, such as Proposals No. 1 and 2, nominees cannot vote unless they receive voting instructions from
beneficial owners. Please be sure to give specific voting instructions to your nominee so that your vote can be counted.
What effect does
an abstention have?
With respect to Proposal No. 1, abstentions or
directions to withhold authority will not be included in vote totals and will not affect the outcome of the vote. With respect to Proposals
No. 2 and 3, abstentions will have the effect of a vote against such proposals.
Who pays the cost
of soliciting proxies?
We pay the cost of the solicitation of proxies, including
preparing and mailing the Notice of Annual Meeting of Shareholders, this proxy statement and the proxy card. Following the mailing of
this proxy statement, directors, officers and employees of the Company may solicit proxies by telephone,
facsimile transmission or other personal contact. Such persons will receive no additional compensation for such services. Brokerage houses
and other nominees, fiduciaries and custodians who are holders of record of shares of our common stock will be requested to forward proxy
soliciting material to the beneficial owners of
such shares and will
be reimbursed by the Company for their charges and expenses in connection therewith at customary and reasonable rates. In addition, the
Company has retained Georgeson Inc. to assist in the solicitation of proxies for an estimated fee of $10,000 plus reimbursement of expenses.
What if I share
a household with another shareholder?
We have adopted a procedure approved by the SEC called
“householding.” Under this procedure, shareholders of record who have the same address and last name and do not participate
in electronic delivery of proxy materials will receive only one copy of our annual report and proxy statement unless one or more of these
shareholders notifies us that they wish to continue receiving individual copies. This procedure will reduce our printing costs and postage
fees. Shareholders who participate in householding will continue to receive separate proxy cards. If you are a shareholder who resides
in the same household with another shareholder, or if you hold more than one account registered in your name at the same address and
wish to receive a separate proxy statement and annual report or Notice of Internet Availability of Proxy Materials for each account,
please contact Broadridge toll free at 1.866.540.7095. You may also write to Broadridge, Householding Department, at 51 Mercedes Way,
Edgewood, New York 11717. Beneficial shareholders can request information about householding from their banks, brokers or other holders
of record. We hereby undertake to deliver promptly upon written or oral request, a separate copy of the annual report to shareholders,
or this proxy statement, as applicable, to a shareholder at a shared address to which a single copy of the document was delivered.
Why did I receive
a notice in the mail regarding the internet availability of the proxy materials instead of a paper copy of the proxy materials?
In accordance with the rules of
the Securities and Exchange Commission, we have elected to furnish to our shareholders this Proxy Statement and our Annual Report on
Form 10-K by providing access to these documents on the Internet rather than mailing printed copies. Accordingly,
the Notice of Internet Availability is being mailed to our shareholders of record and beneficial owners (other than those who previously
requested printed copies or electronic delivery of our proxy materials), which will direct shareholders to a website where they can access
our proxy materials and view instructions on how to vote online or by telephone. If you would prefer to receive a paper copy of our proxy
materials, please follow the instructions included in the Notice of Internet Availability. Our Proxy Statement and our Annual Report
on Form 10-K for the fiscal year ended December 31, 2022 are available for shareholders at www.proxyvote.com.
Instead of receiving future copies of our Proxy Statement and Annual Report on Form 10-K to shareholders
by mail, shareholders can access these materials online. Opting to receive your proxy materials online will save us the cost of producing
and mailing documents to you; an electronic link to the proxy voting site will be provided to you. Shareholders of record can enroll
at www.proxyvote.com for
online access to future proxy materials. If you hold your shares in a bank or brokerage account, you also may have the opportunity to
receive copies of these documents electronically. Please check the information provided in the proxy materials mailed to you by your
bank or broker regarding the availability of this service.
How do I access
the virtual annual meeting? Who may attend?
At the virtual annual meeting, shareholders
will be able to listen to the meeting live and vote. To be admitted to the virtual annual meeting at www.virtualshareholdermeeting.com/BKI2023,
you must enter the 16-digit control number available on your proxy card if you are a shareholder of record or included in your voting
instruction card and voting instructions you received from your broker, bank or other nominee. Although you may vote online during the
annual meeting, we encourage you to vote via the Internet, by telephone or by mail as outlined in the Notice of Internet Availability
of Proxy Materials or on your proxy card to ensure that your shares are represented and voted.
The meeting webcast will begin promptly at 11:00 a.m.,
Eastern Time, on July 12, 2023, and we encourage you to access the meeting prior to the start time.
Will I be able
to ask questions during the virtual annual meeting?
Shareholders will be able to ask questions
through the virtual meeting website during the meeting through www.virtualshareholdermeeting.com/BKI2023.
The Company will respond to as many appropriate questions during the annual meeting as time allows.
How
can I request technical assistance during the virtual annual meeting?
A
technical support line will be available on the meeting website for any questions on how to participate in the virtual annual meeting
or if you encounter any difficulties accessing the virtual meeting.
CORPORATE
GOVERNANCE
AND RELATED MATTERS
2022 Shareholder
Engagement
We are committed to hearing and responding to the views
of our shareholders. In 2022, our officers met with investors on various occasions, both in group and one-on-one settings. The investors
with whom we met in 2022 represented six of our top 15 shareholders, who collectively owned more than 27% of our shares as of December 31,
2022. At these meetings, our officers discuss a variety of topics, including our operational and stock performance, ESG, corporate governance
and executive compensation matters. We report and discuss these meetings with our board or applicable board committees, as appropriate.
Corporate Governance
Guidelines
Our corporate governance guidelines provide, along
with the charters of the committees of the board of directors, a framework for the functioning of the board of directors and its committees
and establish a common set of expectations as to how the board of directors should perform its functions. These guidelines cover a number
of areas including the size and composition of the board, board membership criteria and
director qualifications (including consideration of all aspects of diversity when considering new director nominees, including diversity
of age, gender, nationality, race, ethnicity and sexual orientation), director responsibilities, board agenda, roles of the Chairman
of the board of directors, Chief Executive Officer and Lead Independent Director, meetings of independent directors, committee responsibilities
and assignments, board member access to management and independent advisors, director communications with third parties, director compensation,
director orientation and continuing education, evaluation of senior management and management succession planning. The board reviewed
our corporate governance guidelines in February 2023 without material change. A copy of our corporate governance guidelines is posted
on the Investors page of our website which is located at www.BlackKnightInc.com.
Code of Ethics
and Business Conduct
Our board of directors has adopted
a Code of Ethics for Senior Financial Officers, which is applicable to our Chief Executive Officer, our President and Chief Financial
Officer and our principal accounting officer, and a Code of Business Conduct and Ethics, which is applicable
to all our directors, officers and employees. The purpose of these codes is to: (i) promote honest and ethical conduct, including
the ethical handling of conflicts of interest; (ii) promote full, fair, accurate, timely and understandable disclosure; (iii) promote
compliance with applicable laws and governmental rules and regulations; (iv) ensure the protection of our legitimate business
interests, including corporate opportunities, assets and confidential information; and (v) deter wrongdoing. Our codes of ethics
were adopted to reinvigorate and renew our commitment to our longstanding standards for ethical business practices. Our reputation for
integrity is one of our most important assets and each of our employees and directors is expected to contribute to the care and preservation
of that asset. Under our codes of ethics, an amendment to or a waiver or modification of any ethics policy applicable to our directors
or executive officers must be disclosed to the extent required under SEC and/or NYSE rules. We intend to disclose any such amendment
or waiver by posting it on the Investors page of our website at www.BlackKnightInc.com.
Copies of our Code of Business Conduct and Ethics and
our Code of Ethics for Senior Financial Officers are available for review on the Investors page of our website at
www.BlackKnightInc.com.
Corporate Responsibility
Our ESG strategy reflects Black Knight’s belief
that corporate responsibility drives long-term value for our business and our stakeholders. As we work to integrate ESG across our corporate
strategy and behavior, the risk committee of our board of directors oversees our
ESG program and initiatives, supported by executive
management and key operational stakeholders. In 2022, we continued to focus on maintaining a diverse and engaged workforce, a strong
cybersecurity program, continuing to evolve our sustainability policies and practices to help reduce our already limited environmental
impact, and to foster diversity, equity and inclusion throughout our workforce.
As part of our efforts to think strategically about
our approach to ESG, in October 2022, we asked various Black Knight stakeholder groups to participate in an ESG materiality assessment.
We requested responses to the assessment from top investors, key customers and suppliers, and various community partners, as well as
all of our employees. The assessment asked each respondent to rank 16 ESG topics in order of importance to Black Knight. The responses
received from all stakeholder groups were aggregated, normalized, and analyzed, and we are using that information to provide a strategic
lens to assist us in identifying, understanding and prioritizing the relative importance of specific ESG and sustainability topics to
our organization as we move forward with our sustainability programs and initiatives.
Below are some other highlights from our ESG program
and initiatives in 2022.
Human Capital
We maintain a consistent commitment to
expanding diversity in our workforce and promoting a business culture that is representative of the unique values, opinions and needs
of our employees and all of our stakeholders. Our Policy Statement on Diversity, Equity and
Inclusion includes our commitment to ensuring that all employees feel welcome, respected and
included at Black Knight. This policy statement applies not only to our interactions within our own organization, but also to our vendors
and suppliers who interact with our employees. We publish racial and ethnic diversity statistics about our employee base in our annual
Corporate Sustainability Report, a practice we
began in 2020 and will continue going forward. Through a variety of programs sponsored by our executives and human resources team, we
have increased diversity hires from 37% in 2021 to 41% in 2022.
Our Human
and Labor Rights Policy Statement reflects our commitment to the principle
that all of our employees should work in a respectful environment regardless of race, color, religion, gender, gender identity or expression,
sex, sexual orientation, national origin, disability, age, veteran or military status or other categories protected by applicable law.
We encourage our business partners and suppliers to adhere to the principles embodied in our Code
of Business Conduct and Ethics and our Human
and Labor Rights Policy Statement. This statement is overseen by the corporate
governance and nominating committee of our board of directors.
The health and safety of our employees is always a
top priority for Black Knight. Our Enterprise Business Continuity Office (EBCO) monitors and reports on events that can significantly
impact our employees and/or our campus, such as the COVID-19 pandemic and hurricanes, and works with our leadership team to quickly update
our protocols and safety measures in response to such events. The EBCO enables faster decision-making by our leadership team to keep
our employees safe and engaged.
We continued to prioritize employee health and safety
during 2022, including providing comprehensive health and welfare benefits, providing access to mental and physical wellness support
and engaging our employees through frequent Town Halls to connect, thank and encourage our employees.
The results of our 2022 Employee
Engagement Survey reflect our efforts to support our employees and create a family-oriented culture. Of our U.S. employees who responded
to the survey, 90% indicated they are proud to work for Black Knight and 96% said their managers treat them with respect. Employee sentiments
reveal a strong culture that values diverse perspectives, with 88% of employees responding that diversity is valued at Black Knight.
Information Security and Risk Management
We
are highly dependent on information technology networks and systems to securely process, transmit and store electronic information. Attacks
on these systems continue to grow in frequency, complexity and sophistication.
Oversight of the strategies, processes, and procedures
we put in place to protect our systems and data from outside threats starts at the top. Our board of directors includes several directors
who have attended third-party director education courses on trends in cybersecurity, data and privacy. The risk committee of our board
of directors receives quarterly reports from our Chief Risk Officer, Chief Information Security Officer, and Chief Compliance Officer
on various topics including cyber and data security practices, risk assessments, emerging issues and trends, and any security incidents
that may have occurred during the period, as well as strategic investments in cybersecurity including expenses for hardware, software,
personnel, and consulting services. Our Corporate Secretary also reports on our progress and initiatives under our corporate sustainability
program. The risk committee chairman reports on these matters to the board each quarter.
We have established policies related to data privacy
and cybersecurity. We employ a broad and diversified set of risk monitoring and mitigation, disaster recovery, and business continuity
management techniques and processes.
Our risk management framework is aligned to the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) integrated framework. Industry frameworks including FFIEC guidelines,
(ISO/IEC) 27000, NIST SP 800-53, COBIT 5 and ITIL are leveraged to inform our policies and standards.
Internal audits, external audits and self-assessments
are conducted on a regular basis to evaluate the effectiveness and maturity of the Enterprise Risk Management and Information Security
Program. We also maintain errors and emissions coverage for cybersecurity incidents as part of our insurance program.
Our employees are one of our strongest assets in protecting
client and company information and mitigating the risk of a cybersecurity threat. All employees are required to participate in annual
compliance training that focuses on the applicable data privacy, security, legal and regulatory requirements needed to maintain the high
level of security and risk standards at Black Knight. Employees also receive a monthly phishing email test, and those who fail are
required
to undergo additional training. Employees who are considered to be highly targeted or high-risk,
based on job function, also receive periodic spear phishing tests, and those who fail receive additional
training. Finally, the new hire onboarding process covers data risk, data security and data safety
training.
The Environment
Black Knight is dedicated to acting as a steward of
the environment, promoting environmental sustainability and ensuring that our employees understand that minimizing our impact on the
environment while on campus is a part of their job at Black Knight.
We have adopted an Environmental
Policy Statement that commits Black Knight to the continuous improvement
and development of sustainability initiatives and a more efficient use of natural resources and energy. This statement has been reviewed
and approved by senior management and the risk committee of our board of directors, which maintains oversight of Black Knight’s
ESG risks, programs and initiatives.
This year, we undertook the following initiatives aligned
with our commitments:
| • | Reduced
energy consumption – As a technology provider, we recognize that our greatest environmental
impact is energy consumption and as such, we are constantly looking for ways to reduce our
energy use. These efforts in 2022 included, but were not limited to: |
| » | Replacing
aging and end-of-life equipment with energy-efficient alternatives, such as Energy Star®-compliant
technology |
| » | Using
an automated demand response system to reduce our energy usage during peak demand times |
| » | Using
energy-efficient LED and compact fluorescent lamps (CFLs) on our corporate campuses |
| » | Utilizing
automated occupancy lighting controls to activate only when lighting is required |
| » | Natural
light harvesting to reduce energy demand in office spaces |
| • | Water
conservation – While our facilities do not consume a significant amount of water
or impact the water supplies around them, we continue to utilize the following mitigating
measures to reduce water consumption: |
| » | Using
faucet flow restrictors in all our breakrooms and restrooms at our owned facilities to reduce
water consumption |
| » | Using
soil-moisture managed irrigation on our corporate campus, and a no-concrete watering policy |
| • | Waste
management – We are committed to ensuring that waste generated in our operations
is managed appropriately. The strategies we use towards this end include the proper disposal
of waste and waste reduction. These include: |
| » | Providing
centralized recycling bins with accompanying education notices |
| » | Ensuring
hazardous waste is disposed of correctly |
| » | Centralized
printing with default setting to double-sided printing to reduce paper usage |
| » | Limiting
use of printers for work-from-home employees |
| » | Compostable
food containers |
| » | Using
an eStewards® certified end-of-life equipment disposal vendor |
| » | Outsourcing
the disposal of our sensitive documents to a third-party vendor that is committed to shredding
and recycling in an environmentally responsible manner |
Improved Transparency
We
view transparency and disclosure as the underpinning of our ESG strategy. We have included reference indexes aligned with SASB and TCFD
in our 2022 Sustainability Report.
We also completed the CDP Climate Change 2022 Questionnaire as a first-time
respondent and we expect to complete the CDP Climate Change Questionnaire on an annual basis going forward.
For
additional information on Black Knight’s environmental, social and governance efforts, please see our 2022 Corporate and Social
Responsibility Report, our ESG policy statements, our Privacy Notice, and our Code of Business Conduct and Ethics,
all of which are available on the Sustainability page of our website at www.BlackKnightInc.com/
About/Sustainability.
The Board
Our
board is composed of Anthony M. Jabbour (Executive Chairman), Catherine L. Burke, Thomas M. Hagerty, David K. Hunt, Joseph M. Otting,
Ganesh B. Rao, John D. Rood and Nancy L. Shanik. In February 2023, we announced that Thomas M. Hagerty would retire from our board
when his term ends at our 2023 annual meeting of shareholders.
Our
board met six times in 2022. All directors attended at least 75% of the meetings of the board and of the committees on which they served
during 2022. Our non-management directors also met periodically in executive sessions without management. Our Lead Independent Director
presides over each executive session of our independent directors. Thomas M. Hagerty currently serves as our Lead Independent Director.
We do not, as a general matter, require our board members to attend our annual meeting of shareholders, although each of our directors
is invited to attend our 2023 annual meeting. None of our directors attended our 2022 annual meeting.
Majority Voting
Our board of directors
has implemented “majority voting” in uncontested director elections. Pursuant to Section 3.1 of our bylaws, each director
is elected by a majority of the votes cast with respect to the director at any meeting for the election of directors at which a quorum
is present. However, if as of 10 days in advance of the date we file our proxy statement with the SEC the number of director nominees
exceeds the number of directors to be elected in such election (a contested election), the directors are elected by a plurality
of the votes cast.
In an uncontested election
of directors, any incumbent director who does not receive a majority of the votes cast will promptly tender his resignation to the board
of directors. The board will decide, after considering the recommendation of the corporate governance and nominating committee, whether
to accept or reject the tendered resignation, or whether other action should be taken. The director nominee in question will not participate
in the recommendation or decision-making process. We will publicly disclose an explanation by the board of its decision within 90 days
after we publish the election results. If the board determines to accept a director’s resignation, or if a director nominee who
is not an incumbent director is not elected, then the board, in its sole discretion, may fill any resulting vacancy in accordance with
our bylaws.
Board Governance
and Independence
Our nominating and corporate
governance committee evaluates our relationships with each director and nominee and makes a recommendation to our board of directors
as to whether to make an affirmative determination that such director or nominee is independent. Under our corporate governance guidelines,
an “independent” director is one who meets the qualification requirements for being independent under applicable laws and
the corporate governance listing standards of NYSE.
During the first quarter
of 2023, our board of directors determined that Catherine L. Burke, Thomas M. Hagerty, David K. Hunt, Joseph M. Otting, Ganesh B. Rao,
John D. Rood and Nancy L. Shanik, or 88% of our board, are independent. The board of directors also determined that Messrs. Hagerty
and Hunt are independent for purposes of service on our compensation committee.
In
determining independence, the board of directors considered all relationships that might bear on our directors’ independence from
Black Knight. The board of directors determined that Anthony M. Jabbour is not independent because he is the Executive Chairman and an
employee of Black Knight.
In
considering the independence of our other directors, the board of directors considered the following factors:
| • | Mr. Hagerty
and Mr. Rao are each Managing Directors of Thomas H. Lee Partners, L.P. (THL).
In February 2022, we purchased THL’s minority interest in Optimal Blue Holdco,
LLC (Optimal Blue) for aggregate consideration of (y) $289 million in cash and
(z) 14,550,544 shares of common stock of Dun & Bradstreet Holdings, Inc. (DNB)
owned by Black Knight. For further discussion of our purchase of the minority interests
in Optimal Blue, see “Certain Relationships and Related Transactions” on the
next page. |
| • | Prior
to our purchase of the minority interests in Optimal Blue, we owned approximately 13% of
the outstanding common stock of DNB. THL owned approximately 11% of DNB’s common stock,
and Messrs. Hagerty and Rao each serve on the board of directors of DNB. We, THL and
certain other investors in DNB are party to a letter agreement regarding voting pursuant
to which the parties agreed to vote their shares in DNB as a group on all matters relating
to the election of directors to the DNB board, including the election of Messrs. Hagerty
and Rao, for a period of three years following DNB’s initial public offering. The letter
agreement regarding voting automatically terminates on June 30, 2023. |
Following
consideration of these matters, the board of directors determined that these relationships were not of a nature that would impair Mr. Hagerty’s
or Mr. Rao's independence.
Committees
of the Board
The
board has four standing committees: an audit committee, a compensation committee, a corporate governance and nominating committee and
a risk committee. The charter of each committee is available on the Investors page of our website at www.BlackKnightInc.com.
Each committee reviews their charters annually.
Shareholders
also may obtain a copy of any of these charters by writing to the Corporate Secretary at the address set forth under “Available
Information” below.
Corporate Governance
and Nominating Committee
The members of the corporate
governance and nominating committee are David K. Hunt (Chair), Catherine L. Burke and Thomas M. Hagerty. Following Mr. Hagerty’s
retirement at our 2023 annual meeting, our board has determined that the corporate governance and nominating committee will be composed
of Catherine L. Burke (Chair) and David K. Hunt. Our corporate governance and nominating committee met two times in 2022.
The
primary functions of the corporate governance and nominating committee, as identified in its charter, are to:
| • | Identify
individuals qualified to become members of our board of directors (or to fill vacancies),
consistent with the criteria approved by our board of directors, and to recommend to the
board the nominees to stand for election as directors. In doing so, the committee considers
characteristics of directors and director nominees with the goal of maintaining a mix of
skills, background, gender diversity, ethnic diversity and tenure on the board to support
and promote the Company’s strategic vision. |
| • | Make
recommendations to our board of directors as to changes to the size of the board or any committee
thereof. |
| • | Review
the independence of each director in light of the independence criteria of NYSE and any other
independence standards applicable to directors and submit a recommendation to our
board of directors with respect to each director’s independence. |
| • | Make
recommendations to the board regarding the composition of the board’s committees. |
| • | Review and monitor the Company’s
policies and initiatives addressing human capital matters, including diversity, equity and
inclusion. |
| • | Develop, review annually and recommend
to the board any revisions to the Company’s Corporate Governance Guidelines. |
| • | Oversee the evaluation of the performance
of the board and its committees. |
| • | Review our overall corporate governance
and report to the board on a regular basis, but not less than once per year, on committee
findings, recommendations and any other matters that the committee deems appropriate or the
board requests. |
Audit Committee
The members of our audit committee
are Joseph M. Otting (Chair), John D. Rood and Nancy L. Shanik. The board has determined that each of the audit committee members is
financially literate and independent as required by the rules of the SEC and NYSE, and that each of Mr. Otting,
Mr. Rood and Ms. Shanik is an audit committee financial expert, as defined by the rules of the SEC. Our audit committee
met a total of eight times in 2022.
The primary functions
of the audit committee include:
| • | Appointing, compensating and overseeing
our independent registered public accounting firm; |
| • | Overseeing the integrity of our financial
statements and our compliance with legal and regulatory requirements; |
| • | Discussing the annual audited financial
statements and unaudited quarterly financial statements with management and the independent
registered public accounting firm; |
| • | Establishing procedures for the receipt,
retention and treatment of complaints (including anonymous complaints) we receive concerning
accounting, internal accounting controls, auditing matters or potential violations of law; |
| • | Approving audit and non-audit services
provided by our independent registered public accounting firm; |
| • | Discussing earnings press releases and
financial information provided to analysts and rating agencies; |
| • | Discussing with management our policies
and practices with respect to risk assessment and risk management; |
| • | Reviewing any material transaction between
our chief financial officer or chief accounting officer that has been approved in accordance
with our Code of Ethics for Senior Financial Officers, and providing prior written approval
of any material transaction between us and our chief executive officer; and |
| • | Providing an annual report for inclusion
in our proxy statement, in accordance with applicable rules and regulations. |
Report of the Audit Committee
The audit committee of
the board of directors submits the following report on the performance of certain of its responsibilities for the year 2022:
The primary function
of the audit committee is oversight of (i) the quality and integrity of the Company’s consolidated financial statements and
related disclosures, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independent registered
public accounting firm’s qualifications and independence, and (iv) the performance of the Company’s internal audit function
and the independent registered public accounting firm.
Our
audit committee acts under a written charter, which the audit committee reviewed in February 2023 without material change. We review
the adequacy of our charter at least annually. Our audit committee is comprised of the three directors named below. Each of our audit
committee members has been determined by the board of directors to be independent as defined by NYSE independence standards. In addition,
our board of directors has determined that each of Mr. Otting, Mr. Rood and Ms. Shanik is an audit committee financial
expert as defined by the rules of the SEC.
In performing our oversight
function, we reviewed and discussed with management and KPMG LLP (KPMG), the independent registered public accounting firm, the
Company’s audited consolidated financial statements as of and for the year ended December 31, 2022. Management and KPMG reported
to us that the Company’s consolidated financial statements present fairly, in all material respects, the consolidated financial
position and results of operations and cash flows of Black Knight and its subsidiaries in conformity with generally accepted accounting
principles, and that the Company maintained, in all material respects, effective internal control over financial reporting as of December
31, 2022, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. We also discussed with KPMG matters required to be discussed by the applicable requirements
of the Public Company Accounting Oversight Board and the SEC.
We have received and
reviewed the written disclosures and the letter from KPMG required by applicable requirements of the Public Company Accounting Oversight
Board regarding the independent registered public accounting firm’s communications with the audit committee concerning independence
and have discussed with KPMG their independence. In addition, we have considered whether KPMG’s provision of non-audit services
to the Company is compatible with their independence.
Finally, we discussed
with the Company’s internal auditors and KPMG the overall scope and plans for their respective audits. We met with KPMG at each
meeting. Management was present for some, but not all, of these discussions. These discussions included the results of their examinations,
their evaluations of our internal controls and the overall quality of our financial reporting.
Based
on the reviews and discussions referred to above, we recommended to the board of directors that the audited consolidated financial statements
referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and that
KPMG be appointed independent registered public accounting firm for Black Knight for 2023.
In carrying out our responsibilities,
we look to management and the independent registered public accounting firm. Management is responsible for the preparation and fair presentation
of the Company’s annual consolidated financial statements. The independent registered public accounting firm is responsible for
auditing the Company’s annual consolidated financial statements and expressing an opinion as to whether these consolidated financial
statements are presented fairly, in all material respects, in conformity with U.S. generally accepted accounting principles.
Management is also
responsible for maintaining and assessing the effectiveness of its internal control over financial reporting, including providing Management’s
Report on Internal Control over Financial Reporting. The independent registered public accounting firm is responsible for auditing these
internal controls and expressing an opinion as to whether the Company maintained, in all material respects, effective internal control
over financial reporting based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
The independent registered
public accounting firm performs its responsibilities in accordance with the standards of the Public Company Accounting Oversight Board.
Our members are not professionally engaged in the practice of accounting or auditing, and are not experts under the Securities Exchange
Act of 1934, as amended, in either of those fields or in auditor independence.
The foregoing report
is provided by the following directors:
AUDIT
COMMITTEE
Joseph
M. Otting (Chair)
John
D. Rood
Nancy
L. Shanik
Compensation Committee
The
members of the compensation committee are Thomas M. Hagerty (Chair) and David K. Hunt, each of whom were deemed to be independent by
the board, as required by NYSE. Following Mr. Hagerty’s retirement at our 2023 annual meeting, our board has determined that
the compensation committee will be composed of David K. Hunt (Chair) and Catherine L. Burke. Our compensation committee met four times
during 2022.
The functions of the
compensation committee include the following:
| • | Reviewing
and approving the corporate goals and objectives relevant to compensation of the company’s
CEO, evaluating the CEO’s performance in light of those goals and objectives and determining
and approving the CEO’s compensation level based on this evaluation; |
| • | Setting
salaries and approving incentive compensation awards other than equity-based awards, as well
as compensation policies for all Section 16 officers as designated by our board of directors,
and recommending to our board of directors equity-based incentive awards for board approval; |
| • | Reviewing
and recommending to our board of directors policies with respect to equity compensation arrangements
that are subject to board approval; |
| • | Overseeing
our compliance with the requirement under applicable stock exchange rules that, with
limited exceptions, shareholders approve equity compensation plans; |
| • | Evaluating
and approving the equity incentive plans, compensation plans and similar programs advisable
for us, as well as modification or termination of existing plans and programs; |
| • | Authorizing
and approving any employment or severance agreements and amendments with all designated Section 16
officers; |
| • | Reviewing,
discussing with management and recommending to our board of directors for inclusion in our
annual proxy statement or annual report on Form 10-K the compensation discussion and
analysis section; |
| • | Reviewing
and approving the annual compensation risk assessment conducted by management and the Chief
Executive Officer pay ratio for inclusion in our proxy statement or annual report on Form 10-K; |
| • | Preparing
the report of the compensation committee that the SEC requires in our annual proxy statement; |
| • | Considering
the results of shareholder say-on-pay votes and recommending to our board of directors any
change to the frequency of say-on-pay votes; |
| • | Reviewing
and approving the form and amount of compensation of our board of directors’ non-management
directors; |
| • | Evaluating
and recommending to our board of directors the type and amount of compensation to be paid
or awarded to board members; |
| • | Reporting
to our board of directors; |
| • | Reviewing
the adequacy of its charter on an annual basis; and |
| • | Reviewing
and evaluating, at least annually, the performance of the compensation committee, including
compliance of the compensation committee with its charter. |
For
more information regarding the responsibilities of the compensation committee, please refer to the section of this proxy statement entitled
“Compensation Discussion and Analysis and Executive and Director Compensation.”
Risk Committee
The members of the risk
committee are John D. Rood (Chair), David K. Hunt and Ganesh B. Rao, each of whom were determined by the board to be independent. Effective
as of our 2023 annual meeting of shareholders, our risk committee will be composed of Mr. Rood, Mr. Rao and Ms. Shanik,
who has been determined by our board to be independent. Our risk committee met four times in 2022.
The
primary functions of the risk committee include providing oversight of our risk management and compliance efforts, as well as oversight
of our material risks. Our risk committee’s functions include, among other things:
| • | Oversight
of our enterprise risk management program, including data privacy, information security and
ESG risk; |
| • | Oversight
of our compliance program; and |
| • | Oversight
of the enterprise risk management and compliance functions. |
Board Leadership
Structure
On May 16, 2022, as part of
our succession planning strategy, we executed on the following transitions among our executive team:
| • | Anthony
M. Jabbour transitioned from Chairman and Chief Executive Officer to Executive Chairman of
our board. In his role as Executive Chairman, Mr. Jabbour focuses on the strategic direction
of Black Knight, capital allocation and works with the executive leadership team to extend
our track record of success. |
| • | Joseph
M. Nackashi assumed the role of Chief Executive Officer. Mr. Nackashi had served as
our President since 2017 and is a 37-year veteran of Black Knight and its predecessor companies.
Over his career, he has developed strong and trusted relationships with our clients and leaders
throughout the mortgage industry. Mr. Nackashi continues to work with Mr. Jabbour
to lead Black Knight to act with urgency, treat each client like they are our only client,
care for our employees, and deliver on our commitments to stakeholders. |
| • | Kirk
T. Larsen assumed the role of President in addition to his role as our Chief Financial Officer.
Mr. Larsen joined Black Knight as CFO in 2014 and led the company through our initial
public offering in 2015. In his expanded role, Mr. Larsen has responsibility for the
compliance, enterprise risk management, human resources, legal and marketing functions and
works closely with Mr. Nackashi to achieve Black Knight’s strategic goals. |
We believe this leadership structure
is appropriate and allows our Executive Chairman, CEO and President to focus on the responsibilities of their respective offices while
creating a collaborative relationship that benefits our Company and stakeholders.
In February 2020,
our board appointed Thomas M. Hagerty, one of our independent directors, to serve as our Lead Independent Director. Following engagement
and feedback from our shareholders, the board determined it to be useful and appropriate to designate a Lead Independent Director to
coordinate the activities of the other non-employee directors and to perform such other duties and responsibilities as the board may
determine. Mr. Hagerty has extensive board governance experience and has a deep understanding of our business from serving on our
board since 2014. Since commencing service as our Lead Independent Director, Mr. Hagerty has provided a clear and independent voice
on the Board that appropriately balances our leadership structure.
Following Mr. Hagerty’s
retirement at our 2023 annual meeting, our board has determined that Joseph M. Otting will serve as our Lead Independent Director. Mr. Otting
has a strong leadership background and understanding of our clients and industry that he gained in various leadership roles with OneWest
Bank, CIT Group and U.S. Bank. He also has a high level of understanding of the risks, regulatory environment, and other challenges facing
our business and industry that he gained as Comptroller of the Currency.
The responsibilities
of our Lead Independent Director include:
| • | Call
and preside over all executive meetings of non-employee directors and independent directors
and report to the board, as appropriate, concerning such meetings; |
| • | Review
information sent to the board, as well as board meeting agendas and schedules in collaboration
with the Chairman to ensure that there is sufficient time for discussion of all agenda items
and recommend matters for the board to consider and information to be provided to the board; |
| • | Serve
as a liaison and supplemental channel of communication between non-employee/ independent
directors and the Chairman without inhibiting direct communications between the Chairman
and other directors; |
| • | Serve
as the principal liaison for consultation and communication between the non-employee/independent
directors and shareholders; |
| • | Advise
the Chairman concerning the retention of advisors and consultants who report directly to
the board; and |
| • | Be
available to major shareholders for consultation and direct communication. |
Board Role in Risk
Oversight
The
board of directors administers its risk oversight function directly and through committees. Our audit committee has the responsibility
to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures,
including guidelines and policies to govern the process by which risk assessment and management is undertaken. The audit committee also
oversees the performance of the independent auditor, our internal audit function and monitors compliance with legal and regulatory requirements.
Our risk committee has the responsibility to assist
our board of directors in overseeing our enterprise risk management framework, including ESG risk, and our comprehensive compliance program,
and to review and approve our risk governance policies and procedures. At each regular meeting of the risk committee, our Chief Risk
Officer, Chief Compliance Officer and Chief Information Security Officer provide reports relating to our cyber and data security practices,
risk assessments, emerging issues and any security incidents, and each of them has an opportunity to engage with the risk committee individually
in executive session. Our Corporate Secretary reports to the risk committee our corporate sustainability programs and initiatives. Our
risk committee chairman reports on these discussions to our board of directors on a quarterly basis.
The corporate governance and nominating committee
considers the adequacy of our governance structures and policies, including as they relate to our environmental, social and governance
practices. The compensation committee reviews and approves our compensation and other benefit plans, policies and programs and considers
whether any of those plans, policies or programs creates risks that are likely to have a material adverse effect on Black Knight. Each
committee provides reports on its activities to the full board of directors.
Black Knight's
commitment to corporate responsibility means integrating it throughout our business, including how we manage ESG topics. Our board and
its committees oversee the execution of Black Knight’s ESG strategies and initiatives as an integrated part of our oversight of
the overall strategy and risk management for the Company. Our management team is actively engaged on related topics including innovation
of our software, data and analytics solutions and client, investor and other stakeholder expectations. In addition, our management team
actively manages our approach to our corporate social responsibilities, public policy issues, human capital issues, environmental, health
and safety matters, as well as the environmental impact of the Company’s operations, and will discuss these matters with
the board and appropriate committees. The Corporate Responsibility section, beginning on page 10 and our 2022 Corporate and Social
Responsibility Report available on the Investors page of our website at www.BlackKnightInc.com
further outline our approach to these issues.
Contacting the
Board
Any shareholder or other interested person who desires
to contact any member of the board or the non-management members of the board as a group may do so by writing to: Board of Directors,
c/o Corporate Secretary, Black Knight, Inc., 601 Riverside Avenue, Jacksonville, Florida 32204. Communications received are distributed
by the Corporate Secretary to the appropriate member or members of the board.
CERTAIN
INFORMATION
ABOUT OUR DIRECTORS
Director Criteria,
Qualifications and Experience and Process for Selecting Directors
Our board and the corporate governance and nominating
committee is committed to including the best available candidates for nomination for election to our board based on merit. Our board
and our corporate governance and nominating committee regularly evaluate our board’s composition with the goal of developing a
board that will meet our strategic goals, and one that includes diverse, experienced and highly qualified individuals.
The corporate governance and nominating committee
does not set specific, minimum qualifications that nominees must meet in order for the committee to recommend them to the board, but
rather believes that each nominee should be evaluated based on his or her individual merits, taking into account our needs and the overall
composition of the board. In accordance with our Corporate Governance Guidelines, the corporate governance and nominating committee considers,
among other things, the following criteria in fulfilling its duty to recommend nominees for election as directors:
| • | Personal qualities and characteristics,
accomplishments and reputation in the business community; |
| • | Current
knowledge and contacts in the communities in which we do business and in our industry or
other industries relevant to our business; |
| • | Ability
and willingness to commit adequate time to board and committee matters; |
| • | The
fit of the individual’s skills and personality with those of other directors and potential
directors in building a board that is effective, collegial and responsive to our needs; and |
| • | Diversity of viewpoints, background, experience, and other demographics,
and all aspects of diversity in order to enable the board to perform its duties and responsibilities
effectively, including candidates with a diversity of age, gender, nationality, race, ethnicity,
and sexual orientation. |
Each year in connection with the nomination of
candidates for election to the board, the corporate governance and nominating committee evaluates the background of each candidate, including
candidates that may be submitted by shareholders. The corporate governance and nominating committee will evaluate candidates submitted
by shareholders generally using the same criteria as that used for any other candidate. Nomination procedures for shareholders are described
below under “Shareholder Proposals and Nominations.”
Composition, Tenure,
Recent Refreshment and Diversity
We believe that the current composition of our
board includes directors who possess relevant experience, skills and qualifications that contribute to a well-functioning board that
effectively oversees our long-term strategy. Black Knight has undergone significant change in the eight years since FNF’s acquisition
of LPS in January 2014. Our board includes four directors who have been on our board since 2014 and have a strong understanding
of our business, operational and strategic goals, as well as our industry and the risks we face. Having directors with a longevity of
service and deep understanding of our business has been critical to our ability to smoothly and successfully navigate through this prolonged
period of transition.
In recent years, our board has focused on refreshment
and diversity. In furtherance of our commitment to having a board of directors and board committees that reflect diversity of background,
skills, age, gender, nationality, race, ethnicity and sexual orientation, we added three new highly talented directors to our board during
that time:
| • | In December 2019, Nancy L. Shanik was elected as the first
woman to serve on our board, and in February 2020, Ms. Shanik was appointed to
serve on our audit committee. Ms. Shanik has a strong background in risk management
and is an audit committee financial expert. |
| • | In June 2020, Joseph M. Otting was elected to our board,
and in July 2020, Mr. Otting was appointed to serve as Chairman of our audit committee.
Mr. Otting, who is the former Comptroller of the Currency, brings strong financial expertise,
as well as significant industry and regulatory experience. |
| • | In October 2020, Catherine L. Burke was elected as the
second woman to serve on our board and in February 2021, she was appointed to serve
on our corporate governance and nominating committee. Ms. Burke diversifies the talent
set on our board through her extensive leadership experience in marketing and communications
strategy and execution. |
Each of these directors possesses skills and
qualifications that augment those of our other directors, is independent and has no prior relationships as directors or employees with
any of the companies with which we have had relationships in the past, including FNF or DNB. For additional information about each of
these directors, please see “Certain Information about our Directors.”
In 2023, we expect our board will focus on the execution
of our strategy to drive growth by selling our products and solutions to new clients, cross-selling additional services to existing clients,
innovating through the development of new solutions and further integration of our solution sets. Our board is also focused on the successful
consummation of the ICE Merger.
Our board is committed to examining ways to continue
to foster the diversity of our board across many dimensions to ensure that it operates at a high functioning level and reflects the board’s
commitment to inclusiveness. Our Corporate Governance Guidelines expressly include diversity of age, gender, nationality, race, ethnicity,
and sexual orientation as a part
of the criteria the committee may consider when
selecting nominees for election to the board, all in the context of the needs of our board at any given point in time. Specifically,
the corporate governance and nominating committee is focused on considering highly qualified individuals from minority groups as candidates
for nomination as directors.
Proxy Access
Our bylaws include a “proxy access”
procedure for shareholder director nominations. Pursuant to Section 3.1 of our bylaws, a shareholder, or a group of up to 20 shareholders,
may include in our proxy materials director nominees constituting up to two individuals or 20% of our board, whichever is greater, provided
that:
| • | The nominating shareholder(s) own
shares representing 3% or more of the total voting power of the Company’s outstanding
shares of capital stock entitled to vote in the election of directors; |
| • | The
nominating shareholder(s) have owned that number of shares continuously for at least
three years; and |
| • | The
nominating shareholder(s) and their director nominee(s) otherwise satisfy the applicable
requirements of Section 3.1 of the amended and restated bylaws. |
The corporate governance and nominating committee
considers qualified candidates suggested by current directors, management and our shareholders. A shareholder who wishes to suggest a
qualified candidate for director to the corporate governance and nominating committee but does not meet the requirements described above
may do so by writing to our Corporate Secretary at 601 Riverside Avenue, Jacksonville, Florida 32204. The submission must provide the
information required by, and otherwise comply with the procedures set forth in, Section 3.1 of our bylaws. Section 3.1 also
requires that the nomination notice be submitted by a prescribed time in advance of the meeting. See “Shareholder Proposals and
Nominations” below.
Information About
the Director Nominees and Continuing Directors
We continuously consider our governance profile
and look for opportunities to improve our corporate governance. Following strong support from our shareholders at our 2019 annual meeting,
our board approved an amendment to our certificate of incorporation to eliminate the classification of our board over a three-year period
beginning at the 2020 annual meeting and provide for the annual election of all directors beginning at the 2022 annual meeting. Accordingly,
each year all of our directors standing for election are nominated for one-year terms expiring our next annual meeting of shareholders.
We continuously consider our governance profile
and look for opportunities to improve our corporate governance. This year, we are looking to ascertain the level of our shareholders’
support for a management proposal that our board of directors amend our bylaws to include proxy access rights for our shareholders.
Director Skills and Experience
The matrix below lists the skills and experience
that we consider most important for our directors in light of our current business and structure. In addition, biographical information
concerning our nominees proposed for election at the annual meeting, including each directors’ relevant experience, qualifications,
skills and diversity, is included below.
| |
BOARD OF DIRECTORS |
| |
Anthony M. |
|
|
|
|
|
|
|
| Knowledge, Skills |
Jabbour |
Catherine |
Thomas M. |
David K. |
Joseph M. |
Ganesh B. |
John D. |
Nancy L. |
| and Experience |
(Exec. Chair) |
L. Burke |
Hagerty |
Hunt |
Otting |
Rao |
Rood |
Shanik |
| Board of Directors Experience |
● |
● |
● |
● |
● |
● |
● |
● |
| Industry Experience |
● |
|
|
|
● |
|
|
● |
| CEO/Business Head/ Leadership |
● |
● |
● |
● |
● |
● |
● |
● |
| Human
Capital Management/Compensation |
● |
● |
● |
● |
● |
● |
● |
● |
| Finance/Capital Allocation |
● |
● |
● |
● |
● |
● |
● |
● |
| Financial Literacy |
● |
● |
● |
● |
● |
● |
● |
● |
| Regulatory |
● |
|
|
● |
● |
|
● |
● |
| Mortgage/Banking |
● |
|
● |
|
● |
● |
● |
● |
| Risk Management |
● |
● |
● |
● |
● |
● |
● |
● |
| Corporate Governance |
● |
● |
● |
● |
● |
● |
● |
● |
| Technology/Information Security |
● |
● |
● |
● |
● |
● |
● |
● |
| Marketing/Sales |
● |
● |
● |
● |
● |
● |
|
|
| Demographics |
|
|
|
|
|
|
|
|
| Race/Ethnicity |
|
|
|
|
|
|
|
|
| African American |
|
|
|
|
|
|
|
|
| Asian/Pacific Islander |
|
|
|
|
|
● |
|
|
| White/Caucasian |
● |
● |
● |
● |
● |
|
● |
● |
| Hispanic/Latino |
|
|
|
|
|
|
|
|
| Native American |
|
|
|
|
|
|
|
|
| Gender |
|
|
|
|
|
|
|
|
| Male |
● |
|
● |
● |
● |
● |
● |
|
| Female |
|
● |
|
|
|
|
|
● |
| Board Tenure |
5 |
3 |
9 |
9 |
3 |
9 |
9 |
4 |
| Age |
55 |
47 |
60 |
77 |
65 |
46 |
68 |
69 |
Nominees for Director – Term Expiring 2024
(if elected)
| Name |
Position |
| Anthony
M. Jabbour |
Executive Chairman |
| Catherine
L. Burke* |
Member
of the Corporate Governance and Nominating Committee |
| David
K. Hunt* |
Chairman
of the Corporate Governance and Nominating Committee
Member of the Compensation Committee
Member of the Risk Committee |
| Joseph
M. Otting* |
Chairman
of the Audit Committee |
| Ganesh
B. Rao |
Member
of the Risk Committee |
| John
D. Rood |
Chairman
of the Risk Committee
Member of the Audit Committee |
| Nancy
L. Shanik* |
Member
of the Audit Committee |
*As previously announced, Thomas M. Hagerty will retire
from our board of directors when his term ends at the 2023 annual meeting. Mr. Hagerty currently serves as our Lead Independent
Director, Chairman of the compensation committee and member of the corporate governance and nominating committee. In order to balance
our committees following Mr. Hagerty's retirement, the following changes to the composition of the compensation committee, the corporate
governance and nominating committee, the risk committee and our Lead Independent Director will be effective as of the 2023 annual meeting:
| • | The compensation committee will
be composed of David K. Hunt (Chair) and Catherine L. Burke. |
| • | The corporate governance and nominating
committee will be composed of Catherine L. Burke (Chair) and David K. Hunt. |
| • | The risk committee will be composted
of John D. Rood (Chair), Ganesh B. Rao and Nancy L. Shanik. |
| • | Joseph M. Otting will serve as Lead
Independent Director. |
Anthony M. Jabbour
has served as our Executive Chairman since June 2021 and as a director since April 2018. Mr. Jabbour served as our
Chief Executive Officer from April 2018 until May 2022. Mr. Jabbour has served as the Chief Executive Officer and a director
of DNB since February 2019. He also serves on the board of Paysafe Ltd. Prior to joining Black Knight, Mr. Jabbour served as
Corporate Executive Vice President and Co-Chief Operating Officer of Fidelity National Information Services, Inc. (FIS)
from December 2015 through December 2017.
Mr. Jabbour served as Corporate Executive
Vice President of the Integrated Financial Solutions segment of FIS from February 2015 until December 2015. He served as Executive
Vice President of the North America Financial Institutions division of FIS from February 2011 to February 2015. Prior to that,
Mr. Jabbour held positions of increasing responsibility in operations and delivery from the time he joined FIS in 2004. Prior to
joining FIS, Mr. Jabbour worked for Canadian Imperial Bank of Commerce and for IBM’s Global Services group managing complex
client projects and relationships.
Mr. Jabbour’s qualifications to serve
on the Black Knight board of directors include his extensive experience in leadership roles with financial services and technology companies,
resulting in his deep knowledge of our business and industry, as well as his strong leadership abilities.
Catherine (Katie) L. Burke has served on the
board of Black Knight since October 2020. Ms. Burke is Senior Advisor to DJE Holdings,
a
portfolio of companies and divisions that
provide communications, marketing, public affairs, government affairs, data and analytics, and advisory services across a variety of
sectors and geographies. She is also Founder and Principal of Fall Creek Advisors. Mrs. Burke first joined Edelman – a
division of DJE Holdings – in 2008 and has served in a variety of roles at the firm including Chief Corporate Strategy
Officer, President, Practices and Sectors, Global Chairman of Public Affairs and Global Chief of Staff. Between 2015 and 2018
Mrs. Burke served as Executive Vice President of Marketing and Communications at Nielsen Holdings, Inc. and founded and
managed a communications firm, Katie Burke Communications, until she returned to Edelman in 2018. She also serves as a director of
NCR Corporation.
Ms. Burke’s qualifications
include her extensive experience and senior leadership roles in marketing, communications strategy and execution, and operations; her
domestic and international experience in these areas; her financial literacy; and her independence.
David K. Hunt
has served on the board of directors of Black Knight and its predecessors since April 2014. In addition, Mr. Hunt
served as a director of FIS from June 2001 until May 2020 and served as a director of Lender Processing Services, Inc.
(LPS) from February 2010 until January 2014, when LPS was acquired by FNF. Since December 2005, Mr. Hunt has
been a private investor.
Mr. Hunt’s qualifications to serve on
our board of directors include his long familiarity with our business and industry that he acquired as a director of LPS and FIS, as
well as Mr. Hunt’s prior service as chairman of LPS’ risk and compliance committee and his deep understanding of the
regulatory environment and other challenges facing our industry.
Joseph M. Otting has served on the board of
Black Knight since June 2020. Mr. Otting is the former Comptroller of the Currency, a position for which he was nominated in
June 2017, confirmed by the U.S. Senate and sworn in during November 2017, and in which Mr. Otting served until May 29,
2020. Mr. Otting also served as Acting Director of the Federal Housing Finance Agency, which oversees the government-sponsored enterprises
Freddie Mac and Fannie Mae, from January 2020 through April 2020. Mr. Otting served as President, Chief Executive Officer,
and a director of OneWest Bank, N.A. from October 2010 until August 2015, at which time OneWest Bank was merged with CIT Group.
Mr. Otting served as President of CIT Bank and Co- President of CIT Group from August 2015 to December 2015. Prior to
joining OneWest Bank, Mr. Otting served in various roles at U.S. Bank, a subsidiary of U.S. Bancorp, including as one of eight Vice
Chairmen and as the head of the Commercial Banking Group. Mr. Otting also serves as a director of Blockchain.com Inc.
Mr. Otting’s qualifications to serve on
our board of directors include his strong understanding of the risks, regulatory environment, and other challenges facing our business
and industry that he gained as Comptroller of the Currency, his understanding of our clients that he gained in various leadership roles
with OneWest Bank, CIT Group and U.S. Bank, and his experience running a complex and highly regulated business organization.
Ganesh B.
Rao has served on the board of Black Knight and its predecessors since January 2014. Mr. Rao is a Managing
Director of THL, which he joined in 2000. Prior to joining THL, Mr. Rao worked at Morgan Stanley & Co. Incorporated in
the Mergers & Acquisitions Department. Mr. Rao is currently
a director of DNB and Ceridian HCM Holding, Inc. In his capacity as Managing Director of THL, Mr. Rao also serves on the boards
of the following privately held companies: AbacusNext,
AmeriLife Group, Auction.com, Carpe Data, Hexure,
Hightower Advisors, Insurance Technologies Corporation, Nextech, Odessa and as a board observer of Guaranteed Rate. Mr. Rao
is a former director of Comdata, MoneyGram International, Inc. and Nielsen Holdings N.V.
Mr. Rao’s qualifications to serve
on our board of directors include his managerial and strategic expertise working with large growth-oriented companies as a Managing Director
of THL, and his experience with enhancing value at such companies, along with his expertise in corporate finance.
John D. Rood has served on the board of Black
Knight and its predecessors since January 2014. Mr. Rood is the founder and Chairman of The Vestcor Companies, a real
estate firm with 40 years of experience in multifamily development and investment. Mr. Rood also serves on the boards
of FNF and F&G Annuities & Life, Inc. From 2004 to 2007, Mr. Rood served as the US Ambassador to the Commonwealth
of the Bahamas. Mr. Rood previously served on the board of Alico, Inc., and currently serves on several private boards. In
1999, he was appointed by Governor Jeb Bush to serve on the Florida Fish and Wildlife Commission where he served until 2004. He was appointed
by Governor Charlie Crist to the Florida Board of Governors, which oversees the State of Florida University System, where he served until
2013. Mr. Rood was appointed by Mayor Lenny Curry to the JAXPORT Board of Directors, where he served from October 2015 to July 2016.
Governor Rick Scott appointed Mr. Rood to the Florida Prepaid College Board in July 2016, where he serves as Chairman of the
Board. Mr. Rood served on the Enterprise Florida and Space Coast Florida board of directors from September 2016 until February 2019.
Mr. Rood’s qualifications to serve
on our board of directors include his experience in the real estate industry, his leadership experience as a United States Ambassador,
his financial literacy and his experience as a director on boards of both public and private companies. Mr. Rood has participated
in numerous risk and audit training programs with KPMG, Booz Allen and the National Association of Corporate Directors, or NACD. He is
a Board Leadership Fellow with NACD.
Nancy L. Shanik is a private investor and
has served on our board since December 2019. Ms. Shanik served as Chief Risk Officer of Citizens Financial Group, Inc.
from November 2010 until April 2016, where she oversaw the risk management organization within Citizens. Prior to joining Citizens,
Ms. Shanik served as a Managing Director of Alvarez & Marsal, a professional services firm focused on turnaround management,
corporate restructuring and operational performance improvement, from 2009 to 2010. Prior to that, Ms. Shanik spent 31 years with
Citigroup Inc. where she was both a Managing Director and Senior Credit Officer and served as the Chief Credit Officer of Citigroup Inc.’s
Global Commercial Markets business. Ms. Shanik also serves on the board of directors of RBC US Group Holdings, which owns the U.S.
operations of the Royal Bank of Canada. She also serves on the board of directors of City National Bank, which is a subsidiary of the
Royal Bank of Canada.
Ms. Shanik’s qualifications
to serve on our board of directors include her strong background in the financial services industry and oversight of risk enterprise
management for a complex and highly regulated business organization, resulting in her deep understanding of the risks, regulatory environment
and other challenges facing our business and industry.
PROPOSAL
NO. 1:
ELECTION
OF DIRECTORS
The
certificate of incorporation and the bylaws of the Company provide that our board shall consist of at least one and no more than fourteen
directors. The board determines the number of directors within these limits. Effective upon Thomas M. Hagerty’s retirement at our
2023 annual meeting of shareholders, the number of directors serving on our board shall be set at seven.
At
this annual meeting, the persons listed below have been nominated to stand for election for a one-year term expiring in 2024 and the
board believes that each of the following nominees will serve if elected as a director.
THE
BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE LISTED NOMINEES.
Anthony
M. Jabbour
Catherine
L. (Katie) Burke
David
K. Hunt
Joseph
M. Otting
Ganesh
B. Rao
John
D. Rood
Nancy
L. Shanik
CERTAIN
INFORMATION ABOUT
OUR EXECUTIVE OFFICERS
The
executive officers of the Company are set forth in the table below, together with biographical information, except for Mr. Jabbour,
whose biographical information is included in this proxy statement under the section titled “Certain Information about our Directors
– Information About the Director Nominees and Continuing Directors.”
| Name |
Position
with Black Knight |
Age |
| Anthony
M. Jabbour |
Executive
Chairman |
55 |
| Joseph
M. Nackashi |
Chief
Executive Officer |
59 |
| Kirk
T. Larsen |
President
and Chief Financial Officer |
52 |
| Michael
L. Gravelle |
Executive
Vice President and General Counsel |
61 |
Joseph
M. Nackashi has served as Chief Executive Officer since May 2022. He previously served as our President from July 2017
until May 2022. Mr. Nackashi served as President of our Servicing Software division from January 2014 until July 2017
and as our Chief Information Officer from January 2014 until June 2015. Mr. Nackashi previously served as Executive Vice
President and Chief Information Officer of LPS from July 2008 until LPS was acquired by FNF in January 2014.
Kirk
T. Larsen has served as our President since May 2022 and as our Chief Financial Officer since January 2014. From January 2014
to April 2015, Mr. Larsen also served as Executive Vice President and Chief Financial Officer of ServiceLink, LLC, a national
provider of loan transaction services to the mortgage industry. Prior to joining Black Knight, Mr. Larsen served as the Corporate
Executive Vice President, Finance and Treasurer of FIS from July 2013 until December 2013 and as Senior Vice President and
Treasurer from October 2009 until July 2013.
Michael
L. Gravelle has served as the Executive Vice President and General Counsel of Black Knight and its predecessors since January 2014
and served as Corporate Secretary of Black Knight from January 2014 until May 2018. Mr. Gravelle has also served as Executive
Vice President, General Counsel and Corporate Secretary of FNF since January 2010, and as Executive Vice President, General Counsel
and Corporate Secretary of Cannae since April 2017. Mr. Gravelle also served as General Counsel and Corporate Secretary of
the following special purpose acquisition companies: Austerlitz Acquisition Corporation I (from December 2020 to January 2023),
Austerlitz Acquisition Corporation II (from January 2021 to January 2023), Foley Trasimene Acquisition Corp. (from April 2020
to July 2021) and Foley Trasimene Acquisition Corp. II (from July 2020 to March 2021).
COMPENSATION
DISCUSSION AND
ANALYSIS AND EXECUTIVE AND
DIRECTOR COMPENSATION
Compensation
Discussion and Analysis
The
following discussion and analysis of compensation arrangements should be read with the compensation tables and related disclosures that
follow.
In
this compensation discussion and analysis, we provide an overview of our approach to compensating our named executive officers in 2022,
including the objectives of our compensation programs and the principles upon which our compensation programs and decisions are based.
In 2022, our named executive officers were:
| • | Anthony
M. Jabbour, Executive Chairman |
| • | Joseph
M. Nackashi, Chief Executive Officer |
| • | Kirk
T. Larsen, President and Chief Financial Officer |
| • | Michael
L. Gravelle, Executive Vice President and General Counsel |
| • | Michele
M. Meyers, Chief Accounting Officer and Treasurer (until March 12, 2022) |
Executive
Leadership Transition
During
2022, the following executive leadership transitions occurred effective May 16, 2022:
| • | Anthony
M. Jabbour, our former Chief Executive Officer, transitioned from his role as CEO and assumed
the role of Executive Chairman of our board of directors. |
| • | Joseph
M. Nackashi, our former President, assumed the role of CEO. |
| • | Kirk
T. Larsen, our Chief Financial Officer assumed the additional role of President. |
Merger
with ICE
As
discussed above under "General Information about the Company – Merger with ICE," on May 4, 2022, we entered into
a definitive agreement to be acquired by Intercontinental Exchange, Inc. (ICE) (the Merger Agreement) a leading global
provider of data, technology, and market infrastructure, in a transaction valued at approximately $13.1 billion, or $85 per share, based
on ICE’s 10-day volume weighted average price as of May 2, 2022 of $118.09, with consideration in the form of a mix of cash
(80%) and stock (20%). On March 7, 2023, we entered into Amendment No. 1 to the Merger Agreement (the Amendment), which
provides for, among other things, a reduction in the merger consideration to $75.00 per share, with consideration in the form of a mix
of approximately $68.00 per share in cash and stock with
an
exchange ratio of 0.0682 based on ICE’s 10-day VWAP as of March 3, 2023 of $102.62 (the ICE Merger). In connection
with the Amendment, ICE has also committed to litigate with the Federal Trade Commission, if necessary, to obtain approval of the
ICE Merger. In connection with the ICE Merger and pursuant to the terms of the Merger Agreement, our compensation committee approved
certain compensation decisions, including with respect to severance arrangements and compensation adjustments, as discussed further below.
Executive
Summary
Our
Company had a solid year in 2022, despite a very challenging time for the markets we serve. A rapid rise in interest rates caused operational
challenges for our clients and prospects and a heightened focus on expenses by clients and prospects as well as the proposed ICE Merger
have elongated the sales cycle in the short term. Market conditions have also resulted in elevated originator consolidation and bankruptcies,
resulting in associated client attrition. In the face of that challenging market backdrop, our team remained focused and continued to
execute against our strategic initiatives to deliver profitable growth over the long term.
Our
financial results for 2022 demonstrated our high recurring revenue business model and resilience in a challenging market environment.
While the operating environment has created some near-term headwinds to our financial performance, we remain positive about our long-term
growth opportunities and are committed to creating value for all of our stakeholders.
Our
sales results for 2022 reflect the value that lenders, servicers and other market participants see in our solutions. To that end, we
signed 13 new MSP® loan servicing system clients, 29 new Empower® loan origination system (LOS)
clients or additional channels to existing clients, and 129 new Optimal BlueSM
product, pricing and eligibility (PPE) engine
clients. We also had continued success in cross-selling solutions to our existing clients.
Recognizing
the strategic importance of our acquisition of Optimal Blue, we completed the acquisition of the minority interests of Optimal Blue that
were previously held by Cannae Holdings, Inc. (Cannae) and Thomas H. Lee Partners, L.P. (THL) on February 15,
2022. The transaction had a positive impact on our 2022 Adjusted earnings per share (EPS) and simplified our organizational structure
with Optimal Blue as a wholly-owned subsidiary of Black Knight.
Looking
ahead to 2023, we will continue to act with focus and urgency to execute on our long-term strategic initiatives to drive growth by signing
new clients, cross-selling to existing clients and delivering innovative solutions.
Financial
Highlights
*
In 2022, the effect of our investment in DNB was an increase in Net earnings attributable to Black Knight of $306.7 million, or $1.97
per diluted share, including a gain of $305.4 million, net of tax, or $1.96 per diluted share, recognized in the first quarter of 2022
as a result of the exchange of shares of DNB common stock as part of the consideration for acquiring the remaining 40% interest in Optimal
Blue Holdco, LLC in February 2022, compared to an increase in Net earnings attributable to Black Knight of $2.6 million, or $0.02
per diluted share in 2021.
Adjusted
revenues, Adjusted EBITDA, Adjusted net earnings and Adjusted EPS are non-GAAP financial measures. Please refer to Appendix A for a reconciliation
of these measures to the most directly comparable GAAP measures.
Our
Compensation Programs are Driven by Our Business Objectives
Our
compensation committee takes great care to develop and refine an executive compensation program that recognizes our stewardship responsibility
to our shareholders while our talent strategy supports a culture of growth, innovation, and performance.
Our
compensation committee believes it is important to reward our executives for strong performance in an industry with significant operational
and regulatory challenges, and to incentivize them to deliver strong results for our investors by winning new clients, cross-selling
to existing clients, innovating with urgency and executing acquisitions to further enhance our offerings.
At
the same time, our compensation committee believes it is important to discourage our executives from taking unnecessary risks. The compensation
committee believes that our compensation programs are structured to foster these goals.
We
believe that our executive compensation programs are structured in a manner to support our Company and to achieve our business objectives.
For 2022, our executive compensation approach was designed with the following goals.
| • | Sound
Program Design. We designed our compensation programs to fit with our Company, our strategy
and our culture. There are many facets and considerations that enter into this equation,
some of which are discussed below in “—Compensation Best Practices.” Consequently,
we aim to deliver a sound compensation program, reflecting a comprehensive set of data points
and supporting our success. |
| • | Pay-for-Performance.
We designed our compensation programs so that a substantial majority of our executives’
compensation is tied to our performance. We used pre-defined performance goals for our annual
cash-incentives to make pay-for-performance the key driver of the cash compensation paid
to our named executive officers. The performance measures used for our 2022 annual incentive
plan are Adjusted revenues, Adjusted EBITDA, Adjusted EPS, Sales Annual Contract Value (ACV),
and strategic risk management objectives. The financial performance measures we use are key
components in the way we and our investors view our operating success and are highly transparent
and objectively determinable. The committee includes the strategic risk management objective
in our annual incentive plan because it is reflective of the priority our board places on
our executives’ oversight and management of the risks facing our business, including
those related to cybersecurity in particular. To complement the annual incentives, we used
performance-based restricted stock awards in 2022. These grants tie executives to our shareholder
return and our operating performance over the long-term. Our performance-based long-term
incentives are linked to our executive stock ownership guidelines, where together the grants
and the guidelines strongly promote long-term stock ownership and provide direct alignment
with our shareholders. |
| • | Competitiveness.
Total compensation is intended to be competitive in order to attract, motivate and retain
highly qualified and effective executives who can build shareholder value over the long-term.
The level of pay our compensation committee sets for each named executive officer is influenced
by the executive’s leadership abilities, scope of responsibilities, experience, effectiveness,
and individual performance achievements, as well as a detailed assessment of the compensation
paid by our peers. |
| • | Incentive
Pay Balance. We believe the portion of total compensation contingent on performance should
increase with an executive’s level of responsibility. Annual and long-term incentive
compensation opportunities should reward the appropriate balance of short- and long-term
financial and strategic business results. In the case of promotions, we use time-based restricted
stock awards to bring our executives compensation to an acceptable range and to encourage
retention. Our compensation committee believes long-term incentive compensation opportunities
should significantly outweigh short-term cash-based opportunities. Annual objectives should
be compatible with sustainable long-term performance. |
| • | Investor
Alignment and Risk Assumption. We place a strong emphasis on delivering long-term results
for our investors and clients and discourage excessive risk taking by our executive officers. |
| • | Good
Governance. Good compensation governance plays a prominent role in our approach to compensation.
As discussed in the next section, our compensation committee reviews current trends in compensation
governance and adopts policies that work for us. |
We
believe it is important to deliver strong results for our investors and clients, and we believe our practice of linking compensation
with corporate performance will help us to accomplish that goal.
Compensation
Best Practices
We
take a proactive approach to compensation governance. Our compensation committee regularly reviews our compensation programs and makes
adjustments that it believes are in the best interests of the Company and our investors. As part of this process, our compensation committee
reviews compensation trends and considers current best practices and makes changes in our compensation programs when the committee deems
it appropriate, all with the goal of continually improving our approach to executive compensation. Our 2022 compensation programs include
the following notable best practices:
| Things
We Do: |
| ✓ |
Set
a high ratio of performance-based compensation to total compensation, and a low ratio of non-performance-based compensation, including
fixed benefits, perquisites and salary, to total compensation. |
| ✓ |
Maintain
aggressive stock ownership guidelines that are linked to a holding period requirement for executives and directors who have not met
the guidelines. |
| ✓ |
Clawback
any overpayments of incentive-based or equity-based compensation that were attributable to restated financial results. |
| ✓ |
Our
compensation committee sets maximum levels payable under our annual incentives, and our equity incentive plan has a limited award
pool. |
| ✓ |
Our
long-term equity incentive awards granted to our officers use a vesting schedule of at least three years, and awards granted under
our omnibus incentive plan vest no sooner than one year after the grant date, except in the case of unanticipated, early vesting
due to death, disability or a termination of employment in connection with a change in control, with a standard carveout for awards
relating to no more than 5% of the plan’s share reserve. |
| ✓ |
Generally,
require achievement of a performance-based vesting goal in each year of the vesting term of our annual restricted stock awards to
our officers. |
| ✓ |
Dividends
and dividend equivalents would be paid only on equity awards that vest. |
| ✓ |
Limit
perquisites. |
| ✓ |
Our
compensation committee uses an independent compensation consultant who reports solely to the compensation committee. |
| ✓ |
The
dilution rate from our equity-based incentive awards is well below industry average. |
| ✓ |
Board
compensation is below peer group average. |
| Things
We Don’t Do: |
| X |
Provide
tax gross-ups or reimbursement of taxes on perquisites. |
| X |
Permit
the repricing of stock options or any equivalent form of equity incentive. |
| X |
Have
multi-year guarantees for salary increases or guaranteed equity compensation in our executive employment agreements. |
| X |
Employment
agreements do not allow tax gross-ups for compensation paid due to a change of control and do not contain single trigger severance
payment arrangements related to a change of control. |
| X |
Supplemental
executive retirement plans, executive pensions or excessive retirement benefits. |
2022
Shareholder Engagement
We
are committed to hearing and responding to the views of our shareholders. In 2022, our officers met with investors on various occasions,
both in group and one-on-one settings. The investors with whom we met in 2022 represented six of our top 15 shareholders, who collectively
owned more than 27% of our shares as of December 31, 2022. At these meetings, our officers discuss a variety of topics, including
our operational and stock performance, ESG, corporate governance and executive compensation matters. We report and discuss these meetings
with our board or applicable board committees, as appropriate.
Overview
of Our Compensation Programs
Principal
Components of Compensation
We
link a significant portion of each named executive officer’s total annual compensation to performance goals that are intended to
deliver measurable results. Executives are generally rewarded only when and if the pre-established performance goals are met or exceeded.
We also believe that material ownership stakes for executives assist in aligning executives’ interests with those of shareholders
and strongly motivate executives to build long-term value. We structure our compensation programs to assist in creating this link. The
principal components of our executive compensation program for 2022 were base salaries, annual cash incentives, and long-term performance-based
equity incentive awards. In connection, with certain leadership transitions discussed below, we also granted time-based restricted stock
awards to Messrs. Nackashi and Larsen under to our Amended and Restated 2015 Omnibus Incentive Plan (the Omnibus Incentive Plan).
In connection with the ICE Merger, our compensation committee also approved certain compensation decisions, including with respect to
fine-tuning certain provisions of our named executive officers’ employment agreements and accelerating discretionary bonus and
2022 annual cash incentive payments and the vesting of certain equity awards to mitigate the potential impact of Sections 280G and 4999
of the Internal Revenue Code on our executives and Black Knight.
The chart on the
following page illustrates the principal elements of our named executive officer compensation program in 2022:
| Fixed
Compensation |
Short-Term
Incentives |
Long-Term
Incentives |
Benefits |
| Base
Salary |
Annual
Cash Incentive |
Performance-based
Restricted Stock |
Employee
stock purchase plan; 401(k) plan and deferred compensation plan; and limited perquisites. |
| Fixed
cash component with annual merit increase opportunity based on responsibilities, individual performance results and other considerations. |
Annual
cash award for profitability, growth, operating strength and risk oversight during the year. |
Annual
restricted stock grants with service and performance-based vesting conditions tied to operating
strength and efficiency. Our restricted stock awards also contain holding requirements tied
to our stock ownership guidelines to promote significant long-term stock ownership.
|
| Link
to Performance |
| Individual
performance |
Adjusted
revenues, Adjusted EBITDA, Adjusted EPS, sales annual contract value and strategic risk management
objectives
|
Adjusted
EBITDA and shareholder return |
In 2022, our compensation
committee placed heavy emphasis on the at-risk, performance-based components of performance-based cash incentives and performance-based
equity incentive awards. The compensation committee determined the appropriate value of each component of compensation after considering
each executive’s level of responsibility, the individual skills, experience and potential contribution of each executive, and the
ability of each executive to impact Company-wide performance and create long-term value. As shown in the table on the following page,
on average approximately 68% of total compensation of our named executive officers (other than Ms. Meyers, and excluding the one-time
Discretionary Bonus paid to Mr. Jabbour in 2022 to mitigate the potential impact of Sections 280G and 4999 of the Internal Revenue
Code on Mr. Jabbour and Black Knight) was based on performance-based incentives and benefits comprised less than 3% of total compensation.
The compensation committee believes a significant portion of an executive officer’s compensation should be allocated to compensation
that effectively aligns the interests of our executives with the long-term interests of our investors.
In particular,
with respect to Mr. Nackashi, our compensation committee considered the increased responsibilities he would assume in connection
with his transition from President to CEO, including the critical role he has played in the continued oversight and execution of our
business strategy following the announcement of the ICE Merger. The committee also considered the below-market positioning of Mr. Nackashi’s
base salary and determined to set his annual incentive at a higher level to drive performance and position his overall pay, including
his long-term equity incentive, at an appropriate level. For Mr. Jabbour, the compensation committee considered the critical role
he plays in our organization in shaping and providing continuity with respect to the Company’s strategic vision and his continued
mentorship of Mr. Nackashi. For the last several years, Mr. Jabbour has led the execution
of our strategic
vision, including organically growing our software, data and analytics businesses with urgency through selling our products to new clients,
cross-selling additional services to existing clients, and innovating through the development of new solutions and refining our current
offerings to provide better insight to our clients, and selectively pursuing strategic acquisitions, while maintaining an efficient cost
structure to create the most value for our shareholders. In 2022, Mr. Jabbour also played significant role in the negotiation of
the ICE Merger, the value of which represents a 27% premium to our stock price on March 3, 2023 and a 27% premium to our stock price
on April 4, 2022, the last date before the publication of news reports relating to a potential acquisition of Black Knight (in each
case based upon a merger consideration value of $75 per share).
Allocation of
Total Compensation for 2022
The following tables
show the allocation of 2022 total compensation paid to our named executive officers as reported in the Summary Compensation Table below.
The compensation committee believed this allocation to be appropriate after considering the factors described above, including the new
roles and responsibilities of our executives and Mr. Jabbour’s significant role in executing on our growth strategies and
negotiating a significant premium for our stockholders in connection with the ICE Merger.
| |
|
Performance- |
Time-Based |
Annual |
Benefits |
|
|
Performance- |
| |
|
Based
Equity |
Equity |
Cash |
&
Other |
Discretionary |
Total |
Based |
| Name |
Salary |
Incentives |
Incentive |
Incentive |
Compensation |
Bonus2 |
Compensation |
Compensation1 |
| Anthony
M. Jabbour |
1.2% |
14.9% |
0.0% |
1.2% |
1.2% |
81.5% |
100% |
16.1% |
| Joseph
M. Nackashi |
8.3% |
41.9% |
30.0% |
9.0% |
2.7% |
8.1% |
100% |
50.9% |
| Kirk
T. Larsen |
10.0% |
56.6% |
16.5% |
8.2% |
1.4% |
7.3% |
100% |
64.8% |
| Michael
L. Gravelle |
14.1% |
71.4% |
0.0% |
7.1% |
1.1% |
6.3% |
100% |
78.5% |
| Michele
M. Meyers |
86.6% |
0.0% |
0.0% |
0.0% |
13.4% |
0.0% |
100% |
0.0% |
| 1. | Calculated
from Total Compensation, less the amounts included in “Salary”, “Time-Based
Equity Incentives”, “Discretionary Bonus,” and “Benefits and Other
Compensation” |
| 2. | Amounts
include the amounts paid as annual performance-based cash incentives to Messrs. Jabbour,
Nackashi, Larsen and Gravelle with respect to adjustments made to the performance results
to account for the impact of the pending ICE Merger as described under the section titled
“Annual Performance-Based Cash Incentive” below. With respect to Mr. Jabbour,
the amount also includes a one-time $40,000,000 discretionary bonus paid with respect to
the ICE Merger, which was paid in 2022 to mitigate the impact of Sections 280G and 4999 of
the Internal Revenue Code following closing of the ICE Merger. |
The following
table reflects the allocation of Mr. Jabbour’s 2022 total compensation excluding the impact of a one-time discretionary bonus
paid to Mr. Jabbour in connection with the ICE Merger (the Discretionary Bonus). The Discretionary Bonus was paid after consideration
of Mr. Jabbour’s significant contributions to the Company and the critical role he plays in our organization in shaping and
providing continuity with respect to the Company’s strategic vision.
The Discretionary
Bonus, which is contingent upon the successful closing of the ICE Merger, was paid to Mr. Jabbour in December 2022 in connection
with certain tax-planning actions to mitigate the potential impact of Sections 280G and 4999 of the Internal Revenue Code on Mr. Jabbour
and Black Knight. In furtherance of the early payment of the Discretionary Bonus, the Company and Mr. Jabbour entered into a letter
agreement that provides that (i) the after-tax proceeds of the Discretionary Bonus be placed into an escrow account, and (ii) if
Mr. Jabbour is terminated by the Company for cause or Mr. Jabbour resigns his employment without good reason, in each case
prior to consummation of the ICE Merger, or if the Merger Agreement is terminated without the consummation of the ICE Merger, Mr. Jabbour
will be required to pay liquidated damages to Black Knight equal to the value of the after-tax proceeds of the Discretionary Bonus that
would not have ultimately been paid absent the tax-planning actions described above (plus any tax refund he receives in respect of such
payment).
| |
|
Performance- |
Time-
Based |
Annual |
Benefits |
|
|
Performance- |
| |
|
Based
Equity |
Equity |
Cash |
&
Other |
Discretionary |
Total |
Based |
| Name |
Salary |
Incentives |
Incentive |
Incentive |
Compensation |
Bonus |
Compensation |
Compensation |
| Anthony
M. Jabbour |
5.9% |
73.7% |
0.0% |
5.9% |
5.6% |
8.8% |
100% |
79.6% |
| Average
of Named Executive Officers’ |
| 2022
Compensation Mix |
*Excludes Mr. Jabbour’s
Discretionary Bonus.
Analysis
of Compensation Components
Note
that the financial measures used as performance targets for our named executive officers described in this discussion are non-GAAP measures
and differ from the comparable GAAP measures reported in our financial statements. We explain how we use these non-GAAP measures in our
discussions about incentives below.
Base
Salary
Base
salaries reflect the fixed component of the compensation for an executive officer’s ongoing contribution to the operating performance
of his or her area of responsibility. We provide our named executive officers with base salaries that are intended to provide them with
a level of assured, regularly paid cash compensation that is competitive and reasonable.
Our
compensation committee reviews salary levels annually as part of our performance review process, as well as in the event of promotions
or other changes in our named executive officers’ positions or responsibilities. When establishing base salary levels, our compensation
committee considered the peer compensation data provided by our independent compensation consultant, as well as a number of qualitative
factors, including the named executive officer’s experience, knowledge, skills, level of responsibility and performance.
As
discussed further below, Messrs. Nackashi’s and Larsen’s base salaries were adjusted in connection with the executive
leadership transition.
Annual
Performance-Based Cash Incentive
In
2022, we awarded annual cash incentive opportunities to each named executive officer. We use the annual incentives to provide a form
of at risk, performance-based pay that is focused on achievement of critical, objectively measurable, financial objectives. These financial
objectives are tied to our annual budget and our strategic planning process, which provide the basis for communicating our performance
expectations to the investment community. It is reviewed in detail and approved by our board. Consistent with prior years, the 2022 annual
cash incentives were conditioned upon the achievement of pre-defined objectives for fiscal year 2022, which were determined by our compensation
committee. In 2022, 90% of our named executive officers’ target annual incentives were tied to four objective financial metrics,
with the remaining 10% tied to strategic risk management objectives. The performance measures were formulaic, established by the compensation
committee in writing in February 2022, and, as applicable, final payment amounts were derived from our audited and reported financial
results. In setting the performance measures, the committee generally seeks to set targets that are higher than the prior year results.
In May 2022, the compensation committee determined to increase Mr. Nackashi’s annual incentive target from 150% to 200%
of his base salary in light of his increased responsibilities in connection with his transition to CEO and to encourage significant focus
on execution of the Company’s strategic vision and operating performance.
Our
annual cash incentives play an important role in our approach to total compensation. They motivate participants to work hard and proficiently
toward improving our operating performance and achieving our business plan for a fiscal year. We believe that achieving our financial
and risk objectives is a result of executing our business strategy, which is to drive growth by winning new clients, cross-selling to
existing clients and innovating with urgency to further enhance our offerings, while successfully managing the financial and strategic
risks of our business.
The execution of
our business strategy is important to delivering long-term value for our stakeholders. In addition, the annual cash incentive program
helps to attract and retain a highly qualified workforce and to maintain a market competitive compensation program.
In the first quarter
of 2022, our compensation committee approved the 2022 performance objectives and a target incentive opportunity for our named executive
officers as well as the potential incentive opportunity range for threshold and maximum performance. No annual incentive payments were
payable to an executive officer if the pre-established, threshold performance levels were not met, and payments were capped at the maximum
performance payout level. The compensation committee had the authority to reduce (but not increase) an executive’s annual incentive
award, and the annual incentive awards are subject to recoupment under our clawback policy.
The amount of the
annual incentives actually paid depends on the level of achievement of the pre-established goals as follows:
| • | If
threshold performance is not achieved, no incentive will be paid. |
| • | If
threshold performance is achieved, the incentive payout will equal 50% of the executive officer’s
target incentive opportunity. |
| • | If
target performance is achieved, the incentive payout will equal 100% of the target incentive
opportunity for Mr. Gravelle; and 150% for Mr. Larsen, and 200% for each of Messrs. Jabbour
and Nackashi. |
| • | If
maximum performance is achieved, the incentive payout will equal 200% of the executive officer’s
target incentive opportunity, except for Mr. Jabbour whose 2022 maximum incentive opportunity
was equal to 300% of his target incentive opportunity. |
| • | Between
these levels, the payout is prorated. |
Threshold performance
levels were established to challenge our executive officers. Maximum performance levels were established to limit annual incentive awards
so as to avoid excessive compensation while encouraging executives to reach for performance beyond the target levels. An important tenet
of our pay for performance philosophy is to utilize our compensation programs to motivate our executives to achieve performance levels
that reach beyond what is expected of us as a company.
Target
performance levels are intended to be difficult to achieve, but not unrealistic. The performance targets were based on discussions between
management and our compensation committee. In setting 2022 performance metrics, our compensation committee considered our 2022 financial
plan and sales pipeline, management’s continued focus on managing risk, and prior year performance.
The 2022 financial
performance metrics and weightings were consistent with the 2021 financial performance metrics and weightings except Sales Contract Value
was replaced with Sales Annual Contract Value (Sales ACV). These performance metrics are among the most important measures in
evaluating the financial performance of our business, and they can have a significant effect on long-term value creation and the investment
community’s expectations. In the following table, we explain how we calculate or assess the financial performance measures and
why we use them.
Performance
Measure |
Weight |
How
Calculated |
Reason
for Use |
| |
|
|
|
| Adjusted
revenues |
20% |
We
define Adjusted revenues as Revenues adjusted to include the revenues that we did not record during the respective period due to
the deferred revenue purchase accounting adjustment recorded in accordance with GAAP. We also exclude the effect of in-year acquisitions
and divestitures and the market and/or legislative effect on origination and foreclosure volumes. |
Adjusted
revenues is an important measure of our performance as it reflects the execution of our growth strategy. Adjusted revenues is widely
followed by the investment community. |
| Adjusted
EBITDA |
20% |
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 (i) Depreciation and amortization; (ii) Impairment charges; (iii) Interest
expense, net; (iv) Income tax expense; (v) Other (income) expense, net; (vi) Equity in (earnings) losses of unconsolidated affiliates,
net of tax; (vii) (Gains) losses on sale of investments in unconsolidated affiliate, net of tax; (viii) Net earnings (losses) attributable
to redeemable noncontrolling interests; (ix) deferred revenue purchase accounting adjustment; (x) equity-based compensation, including
certain related payroll taxes; (xi) acquisition-related costs, including costs pursuant to purchase agreements; (xii) costs related
to the ICE Transaction; and (xiii) costs associated with expense reduction initiatives. We also exclude the effect of in-year acquisitions
and divestitures and the market and/or legislative effect on origination and foreclosure volumes. |
Adjusted
EBITDA is an important measure of our performance as it reflects growth and operational efficiency. Adjusted EBITDA is a common basis
for enterprise valuation and widely followed by the investment community. |
| Adjusted
EPS |
20% |
We
define Adjusted EPS as Adjusted net earnings divided by the diluted weighted average shares
of common stock outstanding. Adjusted net earnings is defined 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: (i) equity in (earnings) losses of unconsolidated
affiliates, net of tax; (ii) (gains) losses on sale of investments in unconsolidated affiliate,
net of tax; (iii) the net incremental depreciation and amortization adjustments associated
with the application of purchase accounting; (iv) deferred revenue purchase accounting adjustment;
(v) equitybased compensation, including certain related payroll taxes; (vi) costs associated
with debt and/ or equity offerings; (vii) acquisition-related costs, including costs pursuant
to purchase agreements; (viii) costs related to the ICE Transaction; (ix) costs associated
with expense reduction initiatives; (x) costs and settlement (gains) losses associated with
significant legal matters; (x) adjustment for income tax expense primarily related to the
tax effect of non-GAAP adjustments and a discrete income tax benefit related to the establishment
of a deferred tax asset as a result of our reorganization of certain wholly-owned subsidiaries;
and (xi) adjustment for redeemable non-controlling interests primarily related to the effect
of the non-GAAP adjustments. We also exclude the effect of in-year acquisitions and divestitures
and the market and/or legislative effect on origination and foreclosure volumes.
|
Adjusted
EPS is an important measure of our performance as it reflects growth and profitability as well as the effectiveness of our capital
allocation. Adjusted EPS is a common basis for equity valuation and widely followed by the investment community. |
Performance
Measure |
Weight |
How
Calculated |
Reason
for Use |
| |
|
|
|
| Sales
ACV |
30% |
We
define Sales ACV as the total annualized value of a contract. ACV is calculated by taking the total incremental revenue from a new
client contract and dividing it by the number of years in the term of such contract. An assumed term of three years is used for contracts
that do not have a specified term. ACV for transactional service contracts without minimums is estimated using conservative pro forma
models based on historical usage rates. ACV excludes professional services deals unless it’s a net new dedicated team under
contract for at least 12 months or an implementation fee that will be recognized over the life of a software contract. |
Sales
ACV is an important measure of our performance as it is a driver of future revenue growth. It rewards management for success at selling
new products and services to our clients and gaining new clients. We believe this performance measure is a tangible indication of
how well our executives’ immediate efforts will grow and impact Adjusted revenues, Adjusted EBITDA and Adjusted EPS in future
years. |
| |
|
|
|
Adjusted
revenues, Adjusted EBITDA, and Adjusted EPS are non-GAAP financial measures that we believe are useful to investors in evaluating our
overall financial performance. We believe these measures provide useful information about operating results and profitability, 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.
Final
calculations of our achievement of the performance measures are subject to certain adjustments as described above, including the effect
of in-year acquisitions and divestitures and the market and/or legislative effect on origination and foreclosure volumes. These adjustments
encourage our executives to focus on achieving strong financial performance and efficient operation of our continuing businesses during
the year to achieve the performance measures. The adjustments also ensure that the achievement of the performance measures, as determined
by the compensation committee at the end of the performance period, correlate with the budget and thereby serve as barometers of management’s
performance in growing our business and operating the business effectively and efficiently irrespective of impacts, positive or negative,
of legislative or market influences. The adjustments also encourage our executives to focus on the long-term benefit of acquisitions
or divestitures regardless of whether they may have a positive or negative impact on our Adjusted revenues, Adjusted EBITDA or Adjusted
EPS in the current year.
Since
2018, our named executive officer’s annual incentives have also included a qualitative risk-based performance criteria, reflecting
the importance our board places on management’s actions to manage and mitigate risk across Black Knight. To emphasize the significance
of cybersecurity risk and other risks to our organization and to focus our executives on effectively managing these risks, the committee
determined to once again tie 10% of our executives’ annual incentive awards to the achievement of the Company’s risk objectives
for 2022. The maximum payout for achievement of the risk objectives is 100%, although the compensation committee may determine that the
objective has been achieved at a level below 100%.
Set forth below are the relative percentage weights
of the 2022 performance metrics, the threshold, target and maximum performance levels for each performance metric and 2022 performance
results. In February 2022, our compensation committee set the target levels for Adjusted revenues, Adjusted EBITDA and Adjusted
EPS targets for the 2022 incentives based on our 2022 financial plan, reflecting the committee’s commitment to using rigorous goals
that incentivize and reward continued growth in these important measures. In February 2023, after consideration of the impact of
the proposed ICE Merger on the achievement of the financial performance metrics under the annual incentive plan (as permitted by the
Merger Agreement), including $7.7 million of Adjusted revenues, $11.7 million of Adjusted EBITDA, $0.09 of Adjusted EPS and $15.7 million
of Sales ACV, the committee determined to make adjustments to the achievement of the performance results to account for the impact of
the pending ICE Merger. For information on the ranges of possible annual incentive payments, see “—Grants of Plan Based Awards”
under the column “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards.” Dollar amounts are in millions.
| |
|
|
|
|
|
|
Performance |
Payout |
| |
|
|
|
|
|
|
Result
after |
Factor
after |
| |
|
|
|
|
Performance |
Payout |
Adjustment |
Adjustment |
| Performance |
|
|
|
|
Result
Under |
Factor
Under |
for
Impact of |
for
Impact of |
| Metric |
Weight |
Threshold |
Target |
Maximum |
Plan1 |
Plan2 |
ICE
Merger3 |
ICE
Merger2 |
| Adjusted
Revenues |
20% |
$1,570.0 |
$1,602.0 |
$1,618.0 |
$1,577.1 |
61% |
$1,584.8 |
73% |
| Adjusted
EBITDA |
20% |
$768.6 |
$794.0 |
$806.7 |
$758.0 |
0% |
$769.7 |
52% |
| Adjusted
EPS |
20% |
$2.56 |
$2.68 |
$2.74 |
$2.46 |
0% |
$2.55 |
0% |
| Sales
ACV |
30% |
$112.5 |
$125.0 |
$137.5 |
$123.3 |
93% |
$139.0 |
200% |
| Strategic
Risk Management Objectives4 |
10% |
– |
– |
– |
Achieved |
100% |
|
100% |
| 1. | Includes $25.2 million of Adjusted revenues,
$22.7 million of Adjusted EBITDA, and $0.11 of Adjusted EPS related to legislative and market
effect on origination and default volumes, as permitted under the 2022 annual incentive plan. |
| 2. | Payout
factor reflects a target payout at 100% of the executives target incentive and a maximum
payout of 200% of executive’s target incentive, except for Mr. Jabbour whose maximum
payout is 300% of his target incentive. |
| 3. | In addition
to the adjustments described in footnote 1 above, includes $7.7 million of Adjusted revenues,
$11.7 million of Adjusted EBITDA, $0.09 of Adjusted EPS, and $15.7 million of Sales ACV related
to the estimated impact of the ICE Merger. |
| 4. | The compensation
committee determined that the Company had achieved its risk management objectives based upon
a report provided by our risk committee on the management of the Company’s overall
risk profile and various risk-related achievements in 2022. |
The table below shows each named executive officer’s
2022 target incentive opportunity, and the annual incentive amounts actually paid with respect to 2022 performance and following adjustment
for the impact of the ICE Merger. Performance was achieved at 50.2% of each executive’s target incentive opportunity under the
annual incentive plan, and at 95.1% of Messrs. Nackashi’s, Larsen’s and Gravelle’s respective target incentive
opportunities and 125.1% of Mr. Jabbour’s target incentive opportunity in each case following adjustment for the impact of
the pending ICE Merger. Ms. Meyers’ 2022 annual incentive bonus was forfeited due to her departing the Company on March 12,
2022.
| |
|
|
|
|
|
|
2022
Total |
| |
|
|
|
|
|
Performance |
Incentive |
| |
|
2022 |
|
|
2022
Total |
Multiplier
after |
Earned
after |
| |
|
Annual |
2022 |
Performance |
Incentive |
Adjustment |
Adjustment |
| |
2022 |
Incentive |
Incentive |
Multiplier |
Earned
Under |
for
Impact of |
for
Impact of |
| Name |
Base
Salary |
Target |
Pay
Target |
Under
Plan |
Plan |
ICE
Merger |
ICE
Merger |
| Anthony
M. Jabbour |
$600,000 |
200% |
$1,200,000 |
50.2% |
$602,145 |
125.1% |
$1,500,602 |
| Joseph
M. Nackashi |
$750,000 |
200% |
$1,500,000 |
50.2% |
$752,681 |
95.1% |
$1,425,753 |
| Kirk
T. Larsen |
$575,000 |
150% |
$862,500 |
50.2% |
$432,792 |
95.1% |
$819,808 |
| Michael
L. Gravelle |
$148,000 |
100% |
$148,000 |
50.2% |
$74,265 |
95.1% |
$140,674 |
| Michele
M. Meyers |
$270,000 |
50% |
$135,000 |
– |
– |
– |
– |
On December 20, 2022, to mitigate the potential
impact of Sections 280G and 4999 of the Internal Revenue Code, the compensation committee determined that the each of Messrs. Jabbour,
Nackashi, Larsen and Gravelle would receive a 2022 annual cash incentive award equal to 75.0% of his target incentive opportunity, with
such payment to be made no later than December 30, 2022. Subsequently, in February 2023, after consideration of the Company’s
achievement of the performance metric objectives under the annual incentive plan, including adjustments for the impact of the pending
ICE Merger, the Committee determined to that each executive would receive a supplemental annual cash incentive award equal to the difference
between 95.1% (125.1% for Mr. Jabbour) of the executive’s target incentive opportunity and the 75% of the target incentive
opportunity paid in December 2022.
Long-term Equity Incentives
Performance-based Restricted Stock
We typically approve
our long-term equity incentive awards during the first quarter as the compensation committee sets our compensation strategy for the year.
In March 2022, we used the Omnibus Incentive Plan to grant long-term incentive awards to our executive officers in the form of performance-based
restricted stock, with both performance and service vesting requirements. The performance-based awards granted in 2022 vest over three
years based on continued employment with us. The performance vesting requirements must be met before the time-based vesting would apply.
For the performance-based
vesting requirements, in response to feedback received from our shareholders in 2019, our compensation committee determined to include
three annual performance periods for the 2022 performance-based restricted stock awards. The first 1/3 of the award would vest only if
the Company achieved Adjusted EBITDA of at least $724.2 million in 2022 (which was the 2021 Adjusted EBITDA); the second 1/3 of the award
will vest only if the Company achieves Adjusted EBITDA in 2023 at least equal to the Adjusted EBITDA achieved in 2022; and the third
1/3 will vest only if the Company achieves Adjusted
EBITDA in 2024 at least
equal to the Adjusted EBITDA achieved in 2023. If we do not achieve the performance metric in any year, the portion of the award that
was subject to achievement of that metric will be forfeited. In other words, there is no “catch-up” to allow a portion of
an award to vest in a subsequent year if we fail to achieve the performance metric applicable to that year. We achieved Adjusted EBITDA
of $758.0 million for the fiscal year 2022 performance period, including adjustments to exclude the negative effect of budgeted origination,
foreclosure and bankruptcy volumes that were higher than actual volumes during 2022. For the time-based vesting requirements, 1/3 would
vest per year and shall vest ratably on each of the first three anniversaries of the grant date, subject to the Company’s achievement
of the applicable adjusted EBITDA targets.
For 2022, Mr. Gravelle’s
long-term incentive award was increased from $675,000 to $750,000. Ms. Meyers did not receive a long-term incentive award in 2022
due to her departing the Company on March 12, 2022.
In setting the performance
target for our long-term incentive awards, our compensation committee seeks to set a goal for our executives that requires them to achieve
results that are better than the prior year. However, due to the importance of these awards in the retention of our executives and the
design of our long-term incentives so that the entire award is forfeited if the performance target is not achieved, the committee does
not set the performance target at a level that it considers to be a stretch for our executives. The committee’s approach in this
respect is different than its approach in setting the goals for our annual cash-based incentive, where the committee sets the minimum,
target and maximum performance targets at levels that are intended to drive superior performance by our executives. Furthermore, after
the restricted shares have vested and if those shares have not otherwise satisfied the executive stock ownership guidelines, Section 16
officers are required to hold 50% of the vested shares for 6 months.
The awards were designed
with a primary objective of creating a long-term retention incentive, the value of which is tied to our stock price performance, and
a secondary objective of requiring that management achieve Adjusted EBITDA results during each year of the award that are equal to or
better than the prior year performance.
We selected Adjusted
EBITDA because it is one of the most important measures in evaluating the combination of growth and operational efficiency. It also reflects
our ability to convert revenue into operating profits for shareholders and our progress toward achieving our long-term strategy. It is
a key measure used by investors and has a significant effect on our long-term stock price. For our performance-based restricted stock,
Adjusted EBITDA is calculated as noted above under “Annual Performance-based Cash Incentive,” including adjustments for the
effect of in-year acquisitions and divestitures and the market and/or legislative effect on origination and foreclosure volumes.
To the extent we were
to pay dividends on our shares, credit for such dividends would be provided on unvested shares, but payment of those dividends would
be subject to the same vesting requirements as the underlying shares—in other words, if the underlying shares do not vest, the
dividends are forfeited. We have not paid any cash dividends to date and have no current plans to pay any cash dividends for the foreseeable
future.
One-Time Restricted Stock Awards
As discussed further below, in connection with the
executive leadership transition, on May 16, 2022, our compensation committee approved the grant of supplemental time-based restricted
stock awards under the Omnibus Incentive Plan to each of Messrs. Nackashi and Larsen with grant date fair values of $2,500,000 and
$875,000 respectively, in each case with an effective date of grant of May 16, 2022 and 1/3 of which would vest on each of the first
three anniversaries of the grant date.
Impact of ICE Merger on Outstanding Equity
Pursuant to the Merger Agreement with ICE, at the
effective time of Closing of the ICE Merger each outstanding Black Knight restricted stock award, including those held by our named executive
officers, will be automatically assumed and converted into a restricted stock award of ICE common stock based on the exchange ratio (as
defined in the Merger Agreement), and will be subject to the same terms and conditions previously applicable to such Black Knight restricted
stock award, except that each “performance restriction” will be deemed satisfied and a change of control will be deemed to
have occurred.
Compensation
Changes in Connection with Leadership Changes
In May 2022, the Company underwent an executive
leadership transition. Mr. Jabbour transitioned from Chairman and CEO to Executive Chairman. In his role as Executive Chairman,
Mr. Jabbour focuses on the strategic direction of Black Knight, capital allocation and works with the executive leadership team
to extend the Company’s track record of success. Mr. Nackashi transitioned from President to CEO. In his role as CEO, Mr. Nackashi
is responsible for oversight of the execution of our business strategies, including acting with urgency, treating each client like they
are our only client, caring for our employees and delivering on our commitments to stakeholders. Mr. Larsen transitioned from CFO
to President and CFO. In his expanded role, Mr. Larsen assumed responsibility for the compliance, enterprise risk management, human
resources, legal and marketing functions and works closely with Messrs. Jabbour and Nackashi to achieve Black Knight’s strategic
goals. Our board determined that this leadership structure is appropriate for the Company and will allow our Executive Chairman, CEO,
and President and CFO to focus on the responsibilities of their respective offices while creating a collaborative relationship that benefits
our Company and stakeholders.
In connection with the foregoing leadership transition,
the compensation committee approved several changes to executive compensation, as well as related amendments to our named executive officers’
employment agreements, which are discussed in more detail below.
For Messrs. Nackashi and Larsen, the compensation
committee approved changes to their minimum base salaries and target annual incentive opportunities, as well as supplemental time-based
restricted stock awards under our Omnibus Incentive Plan. The changes to Messrs. Nackashi’s and Larsen’s base salaries
and target annual incentive opportunities and the supplement restricted stock awards were approved following discussion with the compensation
committee’s independent compensation consultant in consideration of Messrs. Nackashi’s and Larsen’s total compensation
levels relative to their respective experience, duties and responsibilities in their new roles, as well as peer and market data.
In consideration of
his new role as CEO, Mr. Nackashi’s base salary increased from $600,000 to $750,000, his target long-term incentive opportunity
increased from 150% to 200% of his base salary, with a maximum payout of 400%, and he received a supplemental restricted stock grant
with a grant date value of $2,500,000. In connection with his expanded role as President and CFO, Mr. Larsen’s base salary
increased from $450,000 to $575,000, his target long-term incentive opportunity increased from 100% to 150%, and he received a supplemental
time-based restricted stock award with a grant date value of $875,000. One-third (1/3) of Messrs. Nackashi’s and Larsen’s
supplemental time-based restricted stock awards vest on each of the first three anniversaries of the grant date, and they are otherwise
subject to similar terms and conditions as our annual performance-based restricted stock awards.
Payments
in Connection with ICE Merger
In connection with
the entry into the Merger Agreement with ICE and consistent with the terms of Mr. Jabbour’s employment agreement, dated as
of April 1, 2018 and as amended as of May 16, 2022, the compensation committee determined to award Mr. Jabbour a discretionary
bonus of $40,000,000 contingent upon the closing of the ICE Merger (the Discretionary Bonus). The Discretionary Bonus was paid
after consideration of Mr. Jabbour’s significant contributions to the Company and the critical role he plays in our organization
in shaping and providing continuity with respect to the Company’s strategic vision. For the last several years, Mr. Jabbour
has led the execution of our strategic vision, including organically growing our software, data and analytics businesses with urgency
through selling our products to new clients, cross-selling additional services to existing clients, and innovating through the development
of new solutions and refining our current offerings to provide better insight to our clients, and selectively pursuing strategic acquisitions,
while maintaining an efficient cost structure to create the most value for our shareholders. In 2022, Mr. Jabbour played significant
role in the negotiation of the ICE Merger, the value of which represents a 27% premium to our stock price on March 3, 2023 and a
27% premium to our stock price on April 4, 2022, the last date before the publication of news reports relating to a potential acquisition
of Black Knight (in each case based upon a merger consideration value of $75 per share).
In
December 2022, in connection with certain tax-planning actions to mitigate the potential impact of Sections 280G and 4999 of the
Internal Revenue Code on Mr. Jabbour and Black Knight, the compensation committee determined that such bonus would be paid to Mr.
Jabbour no later than December 28, 2022, rather than upon closing of the ICE Merger, but would be contingent upon successful consummation
of the ICE Merger. In furtherance of the early payment of the Discretionary Bonus, the Company and Mr. Jabbour entered into a letter
agreement that provides that if Mr. Jabbour is terminated by the Company for cause or Mr. Jabbour resigns his employment without
good reason, in each case prior to consummation of the ICE Merger, or if the Merger Agreement is terminated without the consummation
of the ICE Merger, he will be required to pay liquidated damages to Black Knight equal to the value of the after-tax proceeds of the
Discretionary Bonus that would not have ultimately been paid absent the tax-planning actions described above (plus any tax refund he
receives in respect of such payment), which amount will be deposited in an escrow account established by Mr. Jabbour as security
for the liquidated damages.
In addition, on December 20, 2022, to further
mitigate the potential impact of Sections 280G and 4999 of the Internal Revenue Code on the applicable executive and Black Knight, the
compensation committee determined that the outstanding equity awards granted to Mr. Jabbour that would otherwise have vested in
the first quarter of 2023 would accelerate and vest, which were vested on December 20, 2022. The compensation committee further
determined that each of Messrs. Jabbour, Nackashi, Larsen and Gravelle would receive a 2022 annual cash incentive award equal to
75.0% of his target incentive opportunity, with such payment to be made no later than December 30, 2022. For additional information
concerning payments with respect to the 2022 annual cash incentive plan, see the section title “Annual Performance-Based Cash Incentive.”
We
Promote Long-term Stock Ownership for our Executives
We have formal stock
ownership guidelines for all corporate officers, including our named executive officers and members of our board of directors. The guidelines
were established to encourage such individuals to hold a multiple of their base salary (or annual retainer) in our common stock and thereby
align a significant portion of their own economic interests with those of our shareholders. Further, the award agreements for our 2022
restricted stock awards provide that our executives who do not hold shares of our stock with a value sufficient to satisfy the applicable
stock ownership guidelines must retain 50% of the shares acquired as a result of the lapse of vesting restrictions (excluding shares
withheld in satisfaction of tax withholding obligations) until the executive satisfies the applicable stock ownership guideline. The
ownership levels are shown in the “Security Ownership of Management and Directors” table below. The guidelines call for the
executive or director to reach the ownership multiple within four years. Shares of restricted stock count toward meeting the guidelines.
The guidelines, including those applicable to non-employee directors, are as follows:
| Position |
Minimum
Aggregate Value |
| Chairman
of the Board |
7
× annual base salary |
| Chief
Executive Officer |
7
× base salary |
| Other
Executive Officers |
2
× base salary |
| Members
of the Board |
5
× annual cash retainer |
Our named executive
officers and our board of directors maintain significant long-term investments in our Company. As of December 31, 2022, each of
our named executive officers and non-employee directors holdings of our stock significantly exceeded these stock ownership guidelines,
other than Ms. Shanik who joined our board in December 2019 and Ms. Burke who joined our board in October 2020. Collectively,
as reported in the table “Security Ownership of Management and Directors,” our named executive officers and directors beneficially
own an aggregate of 2.1 million shares of our common stock as of May 19, 2023, which represents 1.3% of our outstanding common
stock with a value of approximately $116.4
million based on the
closing price of our common stock of $55.62 on that date. The fact that our executives and directors hold such a large investment in
our shares is part of our culture and our compensation philosophy. Management’s sizable investment in our shares aligns their economic
interests directly with the interests of our shareholders, and their wealth will rise and fall as our share price rises and falls. This
promotes teamwork among our management team and strengthens the team’s focus on achieving long-term results and increasing shareholder
return.
Benefit Plans
We provide retirement and other benefits to our U.S.
employees under a number of compensation and benefit plans. Our named executive officers generally participate in the same compensation
and benefit plans as our other executives and employees. In addition, our named executive officers are eligible to participate in broad-based
health and welfare plans. We do not offer pensions or supplemental executive retirement plans for our named executive officers.
401(k) Plan.
Our domestic employees, including our named executive officers, have the opportunity to participate in the Black Knight 401(k) Profit
Sharing Plan, or 401(k) Plan, our defined contribution savings plan that is intended to be qualified under Section 401(a) of
the Internal Revenue Code. Our 401(k) Plan contains a cash or deferred arrangement under Section 401(k) of the Internal
Revenue Code. Participating employees can contribute up to 75% of their eligible compensation, but not more than statutory limits, generally
$20,500 in 2022.
A participant could receive the value of his or her
vested account balance upon termination of employment. A participant is always 100% vested in his or her voluntary contributions. Vesting
in matching contributions, if any, occurs proportionally each year over the first three years based on continued employment.
Employee Stock Purchase
Plan. We maintained an employee stock purchase plan, or ESPP, through which our executives and employees can purchase shares of our
common stock through payroll deductions and through matching employer contributions. Participants in the ESPP could deduct up to 15%
of their after-tax base pay. At the end of each calendar quarter, we would make a matching contribution to the account of each participant
who has been continuously employed by us or a participating subsidiary for the last four calendar quarters if the participant has held
the shares purchased in the quarter to which the matching contribution relates for at least one year. For those employees with 10 or
more years of service or who were at the employee “Director” level or above, including our named executive officers, matching
contributions were equal to 1/2 of the amount contributed during the quarter that is one year earlier than the quarter in which the matching
contribution was made. The matching contributions, together with the employee deferrals, were used to purchase shares of our common stock
on the open market.
For
information regarding the matching contributions made to our named executive officers in 2022, see “—Summary Compensation
Table” under the column “All Other Compensation” and the related footnote.
Health
and Welfare Benefits. We sponsor various broad-based health and welfare benefit plans for our employees. We provide all our employees,
including our named executive officers, with basic life insurance and the option for additional life insurance. The taxable portion of
the premiums on this additional life insurance for our named executive officers is reflected under “—Summary Compensation
Table” under the column “All Other Compensation” and related footnote.
Other
Benefits. We provide few perquisites to our executives. In general, the perquisites provided are intended to help our executives
be more productive and efficient and to protect us and the executive from certain business risks and potential threats. For example,
our audit committee has adopted a policy that requires our Chairman of the Board and our Chief Executive Officer to travel on the corporate
aircraft whenever possible for safety reasons. The compensation committee regularly reviews the perquisites provided to our executive
officers. Further detail regarding executive perquisites in 2022 can be found in the “— Summary Compensation Table”
under the column “All Other Compensation” and the related footnote.
Employment and
Other Agreements and Post-Termination Compensation and Benefits
We
are party to employment agreements with our named executive officers. These agreements provide us and the named executive officers with
certain rights and obligations following a termination of employment. We believe these agreements are necessary to protect our legitimate
business interests, as well as to protect the named executive officers in the event of certain termination events. For a discussion of
the material terms of these agreements, see the narrative following “—Grants of Plan Based Awards” and “—Potential
Payments Upon Termination or Change in Control.”
Role of Compensation
Committee, Compensation Consultant and Executive Officers
Our
compensation committee is responsible for reviewing, approving and monitoring all compensation programs for our named executive officers.
Our compensation committee is also responsible for administering our annual cash incentives, our Omnibus Incentive Plan, the Optimal
Blue 2020 Incentive Plan and approving individual grants and awards under those plans for our named executive officers.
In
connection with our 2022 executive compensation programs, Mercer, as independent compensation consultant to our compensation committee,
conducted an annual review of our compensation programs for our named executive officers and other key executives and our board of directors.
Mercer was selected, and its fees and terms of engagement were approved, by our compensation committee in 2022. Mercer reports directly
to the compensation committee and receives compensation only for services related to executive compensation issues. During 2022, the
Company also engaged Mercer’s Health & Benefits business to provide consulting support in conjunction with Mercer’s
role as broker of record for selected employee benefits and paid Mercer $292,431 in connection with such services.
In
April 2022, the compensation committee reviewed the independence of Mercer in accordance with the rules of the New York Stock
Exchange regarding the independence of consultants to the compensation committee and affirmed the consultant’s independence and
that no conflicts of interest existed.
In
February 2022, our then Chief Executive Officer Mr. Jabbour made recommendations with respect to his direct reports. In addition,
Colleen Haley, our Senior Vice President and Corporate Secretary, coordinated with our compensation committee members and Mercer in preparing
the committee’s meeting agendas and, at the direction of the committee, assisted Mercer in gathering our financial information
and information on our executives’ existing compensation arrangements for inclusion in their reports to our compensation committee.
Our executive officers do not make recommendations to our compensation committee with respect to their own compensation.
While
our compensation committee carefully considers the information provided by, and the recommendations of, its independent compensation
consultant and the individuals who participate in the compensation process, our compensation committee retains complete discretion to
accept, reject or modify any compensation recommendations.
Establishing Executive
Compensation Levels
We
operate in a highly competitive industry and compete with our peers and competitors to attract and retain highly skilled executives within
that industry. To attract and retain talented executives with the leadership abilities and skills necessary for building long-term value,
motivate our executives to perform at a high level and reward outstanding achievement, our executives’ compensation levels are
set at levels that our compensation committee believes to be appropriate and competitive based upon the considerations and factors described
in this section.
When
determining the amount of the various compensation components that each of our named executive officers would receive, our compensation
committee considered a number of important qualitative and quantitative factors including:
| • | A
strong focus on acquiring and retaining our clients and increasing shareholder value; |
| • | The
named executive officer’s experience, knowledge, skills, level of responsibility and
potential to influence our Company’s performance; |
| • | Business
environment and our business objectives and strategy; |
| • | The
named executive officer’s ability to impact the Company’s achievement of the
goals for which the compensation program was designed, including achieving the Company’s
long-term financial goals and increasing shareholder value; |
| • | Market
compensation data provided by the compensation committee’s compensation consultant,
with a focus on the 25th, 50th to 75th percentiles; and |
| • | Other
corporate governance and regulatory factors related to executive compensation, including
discouraging our named executive officers from taking unnecessary risks. |
Our
compensation decisions are not formulaic, and the members of our compensation committee did not assign precise weights to the factors
listed above. Our compensation committee utilized their individual and collective business judgment to review, assess and approve compensation
for our named executive officers.
To assist
our compensation committee, Mercer conducts marketplace reviews of the compensation we pay to our executive officers. It gathers marketplace
compensation data on total compensation, which consists of annual salary, annual incentives, long-term incentives, executive benefits,
executive ownership levels, overhang and dilution from our Omnibus Incentive Plan, compensation levels as a percent of revenue, pay mix
and other key statistics. This data is collected and analyzed twice during the year, once in the first quarter and again in the fourth
quarter. The marketplace compensation data provides a point of reference for our compensation committee, but our compensation committee
ultimately makes subjective compensation decisions based on all the factors described above.
For 2022, Mercer
used two marketplace data sources: (1) general industry companies with revenues between $500 million and $3 billion and (2) compensation
information for a group of companies, or the peer group. The primary factors used to select the peer group were revenue (with
peer group companies’ revenue ranging from approximately 1.13 billion to 3.4 billion, compared to our projected 2022 revenue that
at that time was estimated to be approximately $1.56 billion), market capitalization, EBITDA, industry focus, nature and complexity of
operations, and competition for business and executive talent.
In
addition to the compensation surveys, Mercer gathers compensation practices data from independent sources. That data is helpful to the
compensation committee when reviewing our executive compensation practices.
The
compensation committee reviewed and determined the Company’s peer group in October 2021 for purposes of 2022 compensation
research. Companies may be removed from the peer group for reasons such as mergers and acquisitions, “going private” transactions,
a material change in the business focus of a peer, or other reasons that materially change the business or results of a peer. Companies
may be added to the peer group for reasons such as revenue growth (organic or due to merger or acquisition), an initial public offering,
a change in business focus, or based upon our review of competitor peer groups. For the 2022 peer group, Mercer did not recommend any
changes. The 2022 peer group consisted of the following 14 companies:
| Verisk
Analytics, Inc. |
ANSYS,
Inc. |
| Transunion |
CoStar
Group, Inc. |
| Envestnet,
Inc. |
Fair
Isaac Corporation |
| Paycom
Software, Inc. |
PTC
Inc. |
| Jack
Henry & Associates, Inc. |
Tyler
Technologies, Inc. |
| WEX
Inc. |
Ceridian
HCM Holding, Inc. |
| MSCI
Inc. |
The
Trade Desk, Inc. |
In
setting 2022 target compensation levels for our named executive officers, the compensation committee primarily focused on the 50th percentile
of the market. In considering our compensation mix, the committee determined to set a high level of variable pay to provide our executives
with the opportunity to achieve pay levels at the 75th percentile (or higher) for superior financial performance.
The
marketplace compensation information in this discussion is not deemed filed or a part of this compensation discussion and analysis for
certification purposes.
Hedging and Pledging
Policy
In
order to more closely align the interests of our directors and executive officers with those of our shareholders and to protect against
inappropriate risk taking, we maintain a hedging and pledging policy, which prohibits our executive officers and directors from taking
any of the following actions without obtaining approval from our board of directors: engaging in hedging or monetization transactions
with respect to our securities, engaging in short-term or speculative transactions in our securities that could create heightened legal
risk and/or the appearance of improper or inappropriate conduct or holding Black Knight securities in margin accounts or pledging them
as collateral for loans.
Clawback Policy
We
have a policy to clawback and recover incentive-based compensation paid to our executive officers if we are required to prepare an accounting
restatement due to material noncompliance with financial reporting requirements. Under the policy, in the event of such a restatement
we will clawback any incentive-based compensation paid during the preceding three-year period to the extent it would have been lower
had the compensation been based on the restated financial results. No clawbacks were made in 2022. We intend our policy to comply with
the NYSE listing rules regarding recoupment of incentive compensation when those rules become effective.
Tax and Accounting
Considerations
Our
compensation committee considers the impact of tax and accounting treatment when determining executive compensation.
In
general, Section 162(m) of the Internal Revenue Code places a limit of $1,000,000 on the amount that can be deducted in any
one year for compensation paid to certain executive officers. The Company’s principal executive officer and principal financial
officer serving at any time during the taxable year, its three other most highly compensated executive officers employed at the end of
the taxable year and any employee who was covered under Section 162(m) for any earlier tax year that began after December 31,
2016 will be covered by Section 162(m). While our compensation committee considers the deductibility of compensation as one factor
in determining executive compensation, the compensation committee also looks at other factors in making its decisions, as noted above,
and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program
even if the awards are not deductible for tax purposes.
Our
compensation committee also considers the accounting impact when structuring and approving awards. We account for share-based payments
in accordance with ASC Topic 718, which governs the appropriate accounting treatment of share-based payments under generally accepted
accounting principles (GAAP).
2022 Shareholder
Vote on Executive Compensation
At
our 2022 annual meeting of shareholders, we held a non-binding advisory vote, also called a “say-on-pay” vote, on the compensation
of our named executive officers as disclosed in the 2022 proxy statement. A substantial majority of our shareholders approved our “say-on-pay”
proposal, with 93% of the votes cast in favor of the proposal. The compensation committee considered these results, as well as the feedback
we received from investors prior to and following our 2022 annual meeting. For a description of the feedback we received from investors,
see the section above titled “2022 Shareholder Engagement.”
Compensation Committee
Report
The
compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K with management, and the compensation committee recommended to the board that the Compensation Discussion and Analysis be included
in this proxy statement.
THE
COMPENSATION COMMITTEE
Thomas
M. Hagerty (Chair)
David
K. Hunt
EXECUTIVE COMPENSATION
The following
table contains information concerning the cash and non-cash compensation awarded to or earned by our named executive officers for the
years indicated.
Summary Compensation
Table
The following
table sets forth certain information with respect to compensation awarded to, earned by or paid for the year ended December 31,
2022 to our Chief Executive Officer, our Chief Financial Officer, our three other most highly compensated executive officers who were
serving as executive officers on December 31, 2022.
| |
|
|
|
|
Non-Equity |
|
|
| |
|
|
|
Stock |
Incentive
Plan |
All
Other |
|
| Name
and |
Fiscal |
Salary |
|
Awards |
Compensation |
Compensation |
|
| Principal
Position1 |
Year |
($)2 |
Bonus
($)3 |
($)4 |
($)5 |
($)6 |
Total
($) |
Anthony
M. Jabbour
Executive
Chairman |
2022 |
600,000 |
40,898,457 |
7,500,015 |
602,145 |
574,634 |
50,175,251 |
| 2021 |
600,000 |
– |
7,500,060 |
3,244,286 |
218,210 |
11,562,556 |
| 2020 |
600,000 |
– |
13,129,954 |
2,268,000 |
63,481 |
16,061,435 |
Joseph
M. Nackashi
Chief
Executive Officer |
2022 |
694,521 |
673,072 |
6,000,097 |
752,681 |
224,949 |
8,345,320 |
| 2021 |
600,000 |
– |
3,500,028 |
1,666,607 |
95,910 |
5,862,545 |
| 2020 |
600,000 |
– |
6,200,674 |
1,251,000 |
51,800 |
8,103,474 |
Kirk
T. Larsen
President
and Chief Financial Officer |
2022 |
528,767 |
387,016 |
3,875,069 |
432,792 |
79,484 |
5,303,128 |
| 2021 |
450,000 |
– |
3,000,024 |
833,304 |
138,232 |
4,421,560 |
| 2020 |
450,000 |
– |
4,803,329 |
625,000 |
33,548 |
5,911,877 |
Michael
L. Gravelle
Executive
Vice President and General Counsel |
2022 |
148,000 |
66,409 |
750,030 |
74,265 |
11,100 |
1,049,804 |
| 2021 |
148,000 |
– |
675,032 |
274,064 |
11,214 |
1,108,310 |
| 2020 |
148,000 |
– |
675,014 |
206,000 |
11,487 |
1,040,501 |
Michele
M. Meyers
Former
Chief Accounting Officer and Treasurer7 |
2022 |
57,115 |
– |
– |
– |
8,837 |
65,952 |
| 2021 |
267,500 |
– |
425,068 |
249,992 |
26,329 |
968,889 |
| 1. | Mr. Nackashi
served as CEO beginning in May 2022. Our former CEO, Mr. Jabbour, became Executive
Chairman in May 2022. |
| 2. | Amounts
are not reduced to reflect the named executive officers’ elections, if any, to defer
receipt of salary under our ESPP, or under our 401(k) plan. |
| 3. | Amounts
include the amounts paid as annual performance-based cash incentives to Messrs. Jabbour,
Nackashi, Larsen and Gravelle with respect to adjustments made to the performance results
to account for the impact of the pending ICE Merger. With respect to Mr. Jabbour, the
amount also includes the Discretionary Bonus paid with respect to the ICE Merger, which was
paid in 2022 to mitigate the impact of Sections 280G and 4999 of the Internal Revenue Code
following closing of the ICE Merger. The after-tax proceeds of the Discretionary Bonus are
held by Mr. Jabbour in an escrow account and will be paid to the Company as liquidated
damages (together with any tax refund he receives in respect of such payment) in the event
that he is terminated for Cause or voluntarily terminates his employment with the Company
prior to closing of the ICE Merger or in the event the Merger Agreement is terminated without
consummation of the ICE Merger. |
| 4. | Represents
the grant date fair value of performance-based restricted stock awards granted on March 10,
2022 based on the probable outcome of the performance conditions for performance-based awards.
Also represents the grant date fair value of time-based restricted stock awards granted on
May 16, 2022 to Messrs. Nackashi and Larsen. For Messrs. Jabbour, Nackashi,
Larsen and Gravelle, 2021 and 2020 amounts include the grant date fair value of performance-based
restricted stock awards granted on March 10, 2021 and February 18, 2020, respectively.
For Messrs. Jabbour, Nackashi and Larsen, 2020 amounts also reflects the grant date
fair value of the Optimal Blue profits interest awards. All amounts are computed in accordance
with ASC Topic 718, Compensation—Stock Compensation, excluding forfeiture assumptions.
See the Grants of Plan Based Awards table for details regarding the awards. Assumptions used
in the calculation of these amounts are included in Footnote 16 to our Audited Consolidated
Financial Statements for the fiscal year ended December 31, 2022 included in our Annual
Report on Form 10-K filed with the Securities and Exchange Commission on February 28,
2023. Ms. Meyers did not receive a any restricted stock awards in 2022 due to her departing
the Company on March 12, 2022. |
| 5. | Amounts
shown for 2022 represent performance-based amounts earned as annual cash incentives. Amounts
shown for 2022 reflect a performance multiplier of 50.2% for Messrs. Jabbour, Nackashi,
Larsen and Gravelle. Ms. Meyers did not receive a 2022 annual cash incentive due to
her departing the Company on March 12, 2022. |
| 6. | Amounts
shown for 2022 include matching contributions under our 401(k) Plan and ESPP; life insurance
premiums paid by us; personal use of corporate aircraft; employer contributions to a health
savings account and accrued vacation payout. The amount of incremental cost for personal
aircraft usage is determined by calculating the hourly variable costs (i.e., fuel, catering,
aircraft maintenance, landing and parking fees, crew costs and other miscellaneous costs)
for the aircraft, and then multiplying the result by the hours flown for personal use during
the year. |
| 2022 |
Jabbour
($) |
Nackashi
($) |
Larsen
($) |
Gravelle
($) |
Meyers($) |
| 401(k)
Matching Contributions |
6,863 |
5,265 |
6,173 |
– |
195 |
| ESPP
Matching Contributions |
45,000 |
45,000 |
27,000 |
11,100 |
4,500 |
| Life
Insurance Premiums |
387 |
387 |
207 |
– |
21 |
| Personal
Airplane Use |
521,584 |
173,497 |
45,504 |
– |
– |
| HSA
contributions |
800 |
800 |
600 |
– |
123 |
| Accrued
vacation payout |
– |
– |
– |
– |
3,998 |
| Total |
574,634 |
224,949 |
79,484 |
11,100 |
8,837 |
| 7. | Ms. Meyers voluntarily terminated
her employment with the Company on March 12, 2022. As a result, she did not receive
any stock awards or an annual cash incentive for 2022 and she forfeited all unvested portions
of outstanding equity awards, including the unvested portion of her March 10, 2021 performance-based
restricted stock award, upon her termination. |
Grants of Plan-Based
Awards
The following table
sets forth information concerning awards granted to the named executive officers during the fiscal year ended December 31, 2022.
Michele M. Meyers did not participate in the annual cash incentive plan or receive a 2022 restricted stock award due to her departing
the Company on March 12, 2022.
| |
|
|
|
|
|
|
| |
|
|
Estimated
Future Payouts |
(g) |
|
(i) |
| |
|
|
Under
Non Equity Incentive |
Estimated |
(h) |
Grant |
| |
|
|
Plan Awards1 |
Future |
All
other |
Date
Fair |
| |
|
|
|
|
|
Payments |
stock |
Value
of |
| |
|
|
|
|
|
under
Equity |
awards: |
Restricted |
| |
(b) |
|
(d) |
(e) |
(f) |
Incentive |
Number |
Stock |
| (a) |
Grant |
(c) |
Threshold |
Target |
Maximum |
Plan
Awards |
of
Shares |
Awards |
| Name |
Date |
Award
Type |
($) |
($) |
($) |
Target
(#)2 |
(#) |
($)3,4 |
| Anthony
M. Jabbour |
N/A |
Annual
Incentive Plan |
600,000 |
1,200,000 |
3,600,000 |
__ |
__ |
__ |
| 3/10/22 |
Performance-Based
Restricted Stock |
__ |
__ |
__ |
131,165 |
__ |
7,500,015 |
| Joseph
M. Nackashi |
N/A |
Annual
Incentive Plan |
750,000 |
1,500,000 |
3,000,000 |
__ |
__ |
__ |
| 3/10/22 |
Performance-Based
Restricted Stock |
__ |
__ |
__ |
61,211 |
__ |
3,500,045 |
| 5/16/22 |
Time-Based
Restricted Stock |
__ |
__ |
__ |
__ |
35,761 |
2,500,052 |
| Kirk
T. Larsen |
N/A |
Annual
Incentive Plan |
431,250 |
862,500 |
1,725,000 |
__ |
__ |
__ |
| 3/10/22 |
Performance-
Based Restricted Stock |
__ |
__ |
__ |
52,466 |
__ |
3,000,006 |
| 5/16/22 |
Time-Based
Restricted Stock |
__ |
__ |
__ |
__ |
12,517 |
875,063 |
| Michael
L. Gravelle |
N/A |
Annual
Incentive Plan |
74,000 |
148,000 |
296,000 |
__ |
__ |
__ |
| 3/10/22 |
Performance-Based
Restricted Stock |
__ |
__ |
__ |
13,117 |
__ |
750,030 |
| 1. | Amounts
reflect potential annual incentive payments for fiscal year 2022. The amounts shown in the
Threshold column reflect the amount payable if the threshold level of performance is achieved,
which is 50% of the target amount shown in the Target column. The amount shown in the Maximum
column is 300% of such target amount for Mr. Jabbour and 200% for Messrs. Nackashi,
Larsen and Gravelle. Target annual incentive amounts, as a percentage of base salary, for
each of our named executive officers are as follows: Mr. Jabbour 200%, Mr. Nackashi
200%, Mr. Larsen 150%, and Mr. Gravelle 100%. |
| 2. | The
amounts shown as performance-based restricted stock in column (g) represent the number
of shares of performance-based restricted stock granted on March 10, 2022 for each executive
under our Omnibus Incentive Plan, which are subject to (1) time-based vesting over three
years based on continued employment, and (2) our meeting an Adjusted EBITDA goal in
each of 2022, 2023 and 2024 in order for the 1/3 scheduled to vest in 2023, 2024 and 2025,
respectively, to vest. |
| 3. | Represents
the grant date fair value of time-based restricted stock awards based upon a $69.91 per share
grant date fair value for the awards granted on May 16, 2022. |
| 4. | Represents
the grant date fair value of time-based restricted stock awards based upon a $57.18 per share
grant date fair value for the awards granted on March 10, 2022. |
Outstanding Equity Awards at Year-End
The
following table sets forth certain information with respect to outstanding equity awards held by our named executive officers on December 31,
2022. Ms. Meyers forfeited all outstanding equity awards upon her departures from the Company and therefore does not have any outstanding
equity awards at year-end.
| |
|
|
|
Equity
Incentive |
Equity
Incentive |
| |
|
|
|
Plan
Awards: |
Plan
Awards: |
| |
|
Number
of Shares |
Market
Value of |
Number
of |
Market
Value of |
| |
|
or
Units of Stock |
Shares
or Units of |
Unearned
Shares |
Unearned
Shares |
| |
Grant |
That
Have Not |
Stock
that Have Not |
That
Have Not |
That
Have Not |
| Name |
Date1,2,3 |
Vested
(#) |
Vested
($)4 |
Vested
(#) |
Vested
($)4 |
| Anthony
M. |
3/10/2021 |
— |
— |
32,895 |
2,031,266 |
| Jabbour |
3/10/2022 |
— |
— |
87,443 |
5,399,605 |
| |
2/18/2020 |
— |
— |
15,574 |
961,695 |
| Joseph
M. |
3/10/2021 |
— |
— |
30,702 |
1,895,849 |
| Nackashi |
3/10/2022 |
— |
— |
61,211 |
3,779,779 |
| |
5/16/2022 |
35,761 |
2,208,242 |
— |
— |
| |
2/18/2020 |
— |
— |
13,349 |
824,301 |
| Kirk
T. |
3/10/2021 |
— |
— |
26,316 |
1,625,013 |
| Larsen |
3/10/2022 |
— |
— |
52,466 |
3,239,776 |
| |
5/16/2022 |
12,517 |
772,925 |
— |
— |
| |
2/18/2020 |
— |
— |
3,003 |
185,435 |
| Michael
L. |
3/10/2021 |
— |
— |
5,921 |
365,622 |
| Gravelle |
3/10/2022 |
— |
— |
13,117 |
809,975 |
| 1. | With
respect to restricted stock awards granted on February 18, 2020, the awards vest over
three years, subject to (i) our achievement of Adjusted EBITDA of $583.4 million for
the period of January 1, 2020 to December 31, 2020 (Adjusted EBITDA, as adjusted
for purposes of the awards, of $588.6 million was achieved for this period); our achievement
of Adjusted EBITDA of $609.9 million for the period January 1, 2021 to December 31,
2021 for the second 1/3 of the award to vest (Adjusted EBITDA, as adjusted for purposes of
the awards, of $708.5 million was achieved for this period); and our achievement of Adjusted
EBITDA of $724.2 for the period January 1, 2022 to December 31, 2022 for final
the 1/3 of the award to vest (Adjusted EBITDA, as adjusted for purposes of the awards, of
$758.0 million was achieved for this period); and (ii) the continued service of the
award holder. |
| 2. | With
respect to restricted stock awards granted on March 10, 2021, the awards vest over three
years, subject to (i) our achievement of Adjusted EBITDA of $609.9 million for the period
January 1, 2021 to December 31, 2021 for the first 1/3 of the award to vest (Adjusted
EBITDA, as adjusted for purposes of the awards, of $708.5 million was achieved for this period);
our achievement of Adjusted EBITDA of $724.2 million for the period January 1, 2022
to December 31, 2022 for the second 1/3 of the award to vest (Adjusted EBITDA, as adjusted
for purposes of the awards, of $758.0 million was achieved for this period); and our achievement
of an Adjusted EBITDA goal in 2023 for final the 1/3 of the award scheduled to vest in 2024;
and (ii) the continued service of the award holder. |
| 3. | With
respect to restricted stock awards granted on March 10, 2022, the awards vest over three
years, subject to (i) our achievement of Adjusted EBITDA of $724.2 million for the period
January 1, 2022 to December 31, 2022 for the first 1/3 of the award to vest (Adjusted
EBITDA, as adjusted for purposes of the awards, of $758.0 million was achieved for this period),
and our achievement of an Adjusted EBITDA goal in 2023 and 2024 for the second and third
1/3’s of the award scheduled to vest in 2024 and 2025, respectively; and (ii) the
continued service of the award holder. |
| 4. | Market
values are based on the December 30, 2022 closing price for our common stock of $61.75
per share. |
Outstanding Optimal Blue Profits Interest Awards at
Fiscal Year-End
Due
to the strategic importance of the successful execution of our growth strategy for Optimal Blue, the compensation committee
determined it was important that the interests of our executives with the most ability to impact our execution of that strategy be
tied directly to the growth of Optimal Blue. In November 2020, in order to create a strong link between our executives’
interests and Optimal Blue’s long-term performance and growth, the committee granted equity incentives known as profits
interests in Optimal Blue to Messrs. Jabbour, Nackashi and Larsen. No profits interests were granted to our named executive
officers in 2021 or 2022.
The
profits interest awards are in the form of restricted Class B units of Optimal Blue. Optimal Blue is organized as a limited
liability company and is taxed as a partnership under U.S. federal income tax laws. The Class B units are intended to qualify
as profits interests for U.S. federal income tax purposes. The profits interests are equity interests in Optimal Blue but have value
only following achievement of a specified equity threshold, or hurdle amount. The hurdle amount equals the value of the
Optimal Blue on the date the awards are granted. Due to the proximity of the grants of profits interest awards to the closing of our
acquisition of Optimal Blue in September 2020, the hurdle amount for the Optimal Blue profits interests granted to Messrs.
Jabbour, Nackashi and Larsen is $1.445 billion, which is based on the equity value of Optimal Blue at the time of acquisition.
Thus, similar to a stock option, the Optimal Blue profits interest awards only have value to the extent the equity value of Optimal
Blue increases above $1.445 billion. The committee also linked the Optimal Blue profits interest awards to our retention goals by
providing that the profits interests vest 100% on the third anniversary of grant, subject to continued service. The Optimal Blue
profits interests are subject to the terms and conditions of the Optimal Blue 2020 Incentive Plan and the limited liability company
operating agreement.
The
following table sets forth certain information with respect to outstanding profits interest awards held by our named executive officers
at December 31, 2022.
| |
|
Number
of Class B Units That |
Redemption
Value of Units that |
| Name |
Grant Date |
Have Not
Vested (#)1 |
Have
Not Vested ($)2 |
| Anthony
M. Jabbour |
11/24/2020 |
1,330 |
14,681,764 |
| Joseph
M. Nackashi |
11/24/2020 |
638 |
7,042,831 |
| Kirk
T. Larsen |
11/24/2020 |
426 |
4,702,580 |
| 1. | Optimal
Blue profits interests vest 100% on the third anniversary of the date of grant. |
| 2. | Based
on a redemption value as of December 31, 2022 of $11,038.92 per unit, as determined
using the fair value method of accounting under GAAP. |
Stock Vested
The
following table sets forth information concerning each vesting of restricted stock (on an aggregated basis) during the fiscal year ended
December 31, 2022 for each of the named executive officers:
| |
Stock
Vested Restricted Stock Awards |
| Name |
Number
of Shares Acquired on Vesting (#) |
Value
Realized on Vesting ($) |
| Anthony
M. Jabbour |
223,988 |
13,205,243 |
| Joseph
M. Nackashi |
53,199 |
3,169,985 |
| Kirk
T. Larsen |
42,418 |
2,515,312 |
| Michael
L. Gravelle |
9,211 |
544,812 |
| Michele
M. Meyers |
5,221 |
309,438 |
As discussed above, on December 20, 2022, to further
mitigate the potential impact of Section 280G of the Internal Revenue Code on the applicable executive and Black Knight, the compensation
committee determined to accelerate the settlement and vesting of the outstanding equity awards granted to Mr. Jabbour that would
otherwise vest in the first quarter of 2023, which were vested on December 20, 2022.
Employment Agreements
In 2022, we were party to employment agreements with
each of our named executive officers. The material terms of these agreements are summarized below. Additional information regarding post
termination benefits provided under our continuing executive officer’s employment agreements can be found under “—Potential
Payments Upon Termination or Change of Control” below. As described above, in connection with the leadership transition, our compensation
committee, approved several changes executive compensation, as well as related amendments to our named executive officers’ employment
agreements, including the following:
| • | For
Messrs. Nackashi and Larsen, changes to their minimum base salaries and target annual
incentive opportunities, in each case to be consistent with changes to their base salaries
and target annual incentive opportunity following discussion with the committee’s independent
compensation consultant in consideration of Messrs. Nackashi’s and Larsen’s
total compensation levels relative to their respective experience, duties and responsibilities
in their new roles, as well as peer and market data. |
| • | For
Messrs. Nackashi and Larsen, to increase the lump sum the executive would receive in
the event of a termination by the Company without “Cause” or by the executive
for “Good Reason”, from 200% to 250% of the executive’s base salary and
target annual incentive opportunity in effect for the year in which the date of termination
occurs. |
| • | For
Messrs. Jabbour, Nackashi, Larsen and Gravelle, amendments to the definition of “Good
Reason” to include a material diminution in the executive’s duties or responsibilities
upon or within 24 months following a Change in Control of the Company or receipt of notice
that the term of the executive’s employment agreement will not be renewed such that
the agreement would expire prior to the two-year anniversary of the closing of the ICE Merger,
in each case upon or within 24 months after a Change in Control of the Company. |
| • | For
Messrs. Jabbour, Nackashi, Larsen and Gravelle, that all outstanding equity awards granted
to our executives by the Company or our affiliates will become immediately vested upon a
termination of the executive’s employment by the Company without “Cause”
or by the executive for “Good Reason”. |
| • | For
Messrs. Jabbour and Larsen, amended certain non-competition provisions. |
For
each of our named executive officers their employment agreement provides that, if any payments or benefits to be paid to the executive
pursuant to the terms of the employment agreement or otherwise would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code, then the executive may elect for such payments to be reduced to one dollar less than the amount that would constitute
a “parachute payment” under Section 280G of the Internal Revenue Code; and that if the executive does not elect to have
such payments so reduced, he or she is responsible for payment of any excise tax resulting from such payments and shall not be entitled
to a gross up payment under his employment agreement.
Anthony M. Jabbour
We
entered into an employment agreement with Mr. Jabbour, effective as of April 1, 2018, to serve as our Chief Executive Officer,
with a provision for automatic annual extensions unless either party provides timely notice that the term should not be extended. In
light of Mr. Jabbour role as Executive Chairman, we amended Mr. Jabbour’s employment agreement, effective as of May 16,
2022, to reflect his new title and compensation. Mr. Jabbour’s employment agreement provides that he will receive a minimum
annual base salary of $600,000 and is eligible for an annual incentive bonus opportunity, with amounts payable depending on performance
relative to targeted results. Mr. Jabbour’s target bonus is set at 200% of his base salary, with a maximum of up to 600% of
his target bonus.
Mr. Jabbour’s
employment agreement provides that, in the event the Company is sold during the employment term and/or outperforms its financial projections
in any calendar year, he is eligible to receive a discretionary bonus in an amount determined by the compensation committee. Mr. Jabbour
is entitled to the benefits we provide to our other employees generally.
Joseph M. Nackashi
In
light of Mr. Nackashi’s new role of Chief Executive Officer, we entered into an amendment to Mr. Nackashi’s employment
agreement to reflect his new title and compensation, effective March 16, 2022. As amended, the employment agreement provides a provision
for automatic annual extensions unless either party provides timely notice that the term should not be extended. Under the terms of the
agreement, Mr. Nackashi’s minimum annual base
salary
is $750,000, and Mr. Nackashi is eligible for an annual incentive bonus opportunity, with amounts payable depending on performance
relative to targeted results. Mr. Nackashi’s target bonus was increased to 200% (from 100%) of his base salary, with a maximum
of up to 400% (increased from 200%) of his base salary. Mr. Nackashi is entitled to the benefits we provide to our other employees
generally.
Kirk T. Larsen
In
light of Mr. Larsen’s new role of President and Chief Financial Officer, we entered into an amendment to Mr. Larsen’s
employment agreement effective March 16, 2022. As amended, the employment agreement provides that Mr. Larsen will serve as
our Chief Financial Officer for a three-year term, with a provision for automatic annual extensions unless either party provides timely
notice that the term should not be extended. Under the terms of the agreement, Mr. Larsen’s minimum annual base salary was
increased $575,000 (from $435,000) and Mr. Larsen is eligible for an annual incentive bonus opportunity, with amounts payable depending
on performance relative to targeted results. Mr. Larsen’s target bonus was increased to 150% (from 100%) of his base salary,
with a maximum of up to 300% of his base salary. Mr. Larsen is entitled to the benefits we provide to our other employees generally.
Michael L. Gravelle
We
entered into an amended and restated employment agreement with Mr. Gravelle, effective March 1, 2015, as amended on
April 30, 2016, November 1, 2019, and May 16, 2022 to serve as our Executive Vice President and General Counsel. The
agreement provides for a three-year term with automatic annual extensions unless either party provides timely notice that the term
should not be extended. Under the terms of the agreement, Mr. Gravelle is eligible for an annual incentive bonus opportunity,
with amounts payable depending on performance relative to targeted results. Mr. Gravelle’s target bonus is set at 100% of
his base salary, with a maximum of up to 200% of his base salary. Mr. Gravelle is entitled to the benefits we provide to our
other employees generally.
Michele M. Meyers
From
March 1, 2021 until March 12, 2022, we were party to a severance agreement with Ms. Meyers. Under the terms of the agreement,
Ms. Meyers’ minimum annual base salary was $260,000 and Ms. Meyers was eligible for a target annual incentive opportunity
equal to 50% of her base salary, with the amount to be paid under the annual incentive opportunity to be determined in the discretion
of the compensation committee or the Chief Executive Officer.
Potential Payments Upon Termination or Change of Control
In
this section, we discuss the nature and estimated value of payments and benefits we would provide to our named executive officers in
the event of termination of employment or a change of control. The amounts described in this section reflect amounts that would have
been payable under (i) our plans, and (ii) where applicable with respect to Messrs. Jabbour, Nackashi, Larsen and Gravelle,
their employment agreements, if their
employment
had terminated on December 31, 2022. We do not provide any information in this section regarding amounts payable to Ms. Meyers
because she voluntarily terminated her employment with the Company on March 12, 2022 and did not receive any cash payments or accelerated
vesting with respect to her outstanding equity awards in connection with her termination.
The
types of termination situations include a voluntary termination by the executive, with or without good reason, a termination by us either
for cause or not for cause and termination in the event of disability or death. We also describe the estimated payments and benefits
that would be provided upon a change in control without a termination of employment. The actual payments and benefits that would be provided
upon a termination of employment would be based on the named executive officers’ compensation and benefit levels at the time of
the termination of employment and the value of accelerated vesting of share-based awards would be dependent on the value of the underlying
stock.
For
any termination of employment, our named executive officers would be entitled to benefits that are available generally to our domestic
salaried employees, such as distributions under our 401(k) savings plan, certain disability benefits and accrued vacation. We have
not described or provided an estimate of the value of any payments or benefits under plans or arrangements that do not discriminate in
scope, terms or operation in favor of a named executive officer and that are generally available to all salaried employees.
Potential
Payments Under Employment or Severance Agreements
As
discussed above, we have entered into employment agreements with Messrs. Jabbour, Nackashi, Larsen and Gravelle. The agreements
contain provisions for the payment of severance benefits following certain termination events. On May 16, 2022, the
compensation committee approved amendments to Messrs. Jabbour’s, Nackashi’s, Larsen’s and Gravelle’s
employment agreements in order to reflect the changes to their respective roles, to modify the terms of the “Good
Reason” definition, to clarify the treatment of outstanding equity incentive awards, including Class B Units of Optimal
Blue Holdco, LLC, in the event of a termination by the Company without “Cause” or by the executive for “Good
Reason.” In the cases of Mr. Nackashi and Mr. Larsen, the amended employment agreements also adjusted from 200% to
250% the lump sum payment each of them would receive in the event of a termination by the Company without “Cause” or by
the executive for “Good Reason”. Below is a summary of the payments and benefits that Messrs. Jabbour, Nackashi,
Larsen and Gravelle would receive in connection with various employment or service termination scenarios on December 30, 2022,
the last trading day of our fiscal year end. Ms. Meyers severance agreement terminated in connection with her voluntary
termination of employment on March 12, 2022. She did not receive any payments under her severance agreement in connection with
her voluntary termination of employment.
| |
Without
Cause or |
|
|
| |
by
the Executive for |
|
For
Cause or Without |
| Termination
Payment |
Good
Reason |
Death
or Disability |
Good
Reason |
| Accrued
obligations (earned unpaid base salary, annual bonus payments relating to the prior year, and any unpaid expense reimbursements) |
✓ |
✓ |
✓ |
| Prorated
Annual Bonus based on the actual incentive the named executive officer would have earned for the year of termination1 |
✓ |
✓ |
X |
| Lump
Sum Payment equal to a percentage, of the sum of the executive’s (a) annual base salary and (b) the target bonus
opportunity in
the year in which the termination of employment occurs2 |
✓ |
X |
X |
| Right to convert any life insurance
provided by us into an individual policy, plus a lump sum cash payment equal to thirty-six months of premiums |
✓ |
X |
X |
| COBRA
coverage (so long as the executive pays the premiums) for a period of three years or, if earlier, until eligible for comparable
benefits from another employer, plus a lump sum cash payment equal to the sum of thirty-six monthly COBRA premium payments3 |
✓ |
X |
X |
| Vesting of all stock option,
restricted stock and other equity-based incentive awards, including the Optimal Blue Class B units |
✓ |
✓ |
X |
| 1. | The
prorated annual bonus is based on the following: |
| • | In
the event of a termination without Cause or by the executive for Good Reason, the actual
incentive the named executive officer would have earned for the year of termination and the
fraction of the year the executive was employed by us. |
| • | In
the event of a termination for death or disability, the target annual bonus opportunity in
the year in which the termination occurs or the prior year if no target annual bonus opportunity
has yet been determined and (b) for Mr. Jabbour, the fraction of the year the executive
was employed, and for Messrs. Nackashi, Larsen and Gravelle, based on the amount of
their respective accrued annual bonuses as contained on the internal books of the Company
for the month in which the termination occurs. |
| 2. | The
percentage for the lump sum payment for each executive is as follows: Mr. Jabbour (250%),
Mr. Nackashi (250%), Mr. Larsen (250%) and Mr. Gravelle (200%). |
| 3. | Mr. Nackashi’s
agreement does not include this provision with respect to a termination without Cause or
by Mr. Nackashi for Good Reason. |
Definition:
Cause. The table below shows the reasons that the Company may terminate each named executive officer’s employment for “Cause.”
| Definition
of “Cause” includes: |
Jabbour |
Nackashi |
Larsen |
Leonard |
Gravelle |
| Persistent
failure to perform duties consistent with a commercially reasonable standard of care |
✓ |
✓ |
✓ |
✓ |
✓ |
| Willful
neglect of duties |
✓ |
✓ |
✓ |
✓ |
✓ |
| Conviction
of, or pleading nolo contendere to, criminal or other illegal activities involving dishonesty or moral turpitude |
✓ |
✓ |
✓ |
✓ |
✓ |
| Material
breach of the employment agreement |
✓ |
✓ |
✓ |
✓ |
✓ |
| Impeding
or failing to materially cooperate with an investigation authorized by our board of directors |
✓ |
✓ |
✓ |
✓ |
✓ |
| Material
breach of the Company’s business policies, accounting practices or standards of ethics |
✓ |
✓ |
✓ |
✓ |
✓ |
| Material
breach of any applicable non-competition, non-solicitation, trade secrets, confidentiality or similar restrictive covenant |
✓ |
✓ |
✓ |
✓ |
✓ |
Definition:
Good Reason. The following table shows for each of the named executive officers the reasons that each executive may terminate his
employment for “Good Reason.”
| Definition
of “Good Reason” includes: |
Jabbour |
Nackashi |
Larsen |
Gravelle |
| Material
diminution in executive’s duties or responsibilities |
✓ |
✓ |
✓ |
✓ |
| Receipt
of notice of non-renewal of employment agreement prior to the two-year anniversary of the closing of the ICE Merger |
✓ |
✓ |
✓ |
✓ |
| Material
change in the geographic location of the executive’s principal working location |
✓ |
✓ |
✓ |
✓ |
| Material
diminution of the executive’s title, base salary or annual bonus opportunity |
✓ |
✓ |
✓ |
✓ |
| Material
breach of any of our obligations under the employment agreement |
✓ |
✓ |
✓ |
✓ |
Potential Payments under Omnibus Incentive Plan
In
addition to the post termination rights and obligations set forth in the employment and award agreements, our Omnibus Incentive Plan
provides for the potential acceleration of vesting and/or payment of equity awards in connection with a change in control.
Under our
Omnibus Incentive Plan, except as otherwise provided in a participant’s award agreement, upon the occurrence of a change in control
any and all outstanding options and stock appreciation rights will become immediately exercisable, any restriction imposed on restricted
stock, restricted stock units and other awards will lapse, and any and all performance shares, performance units and other awards with
performance conditions will be deemed earned at the target level, or, if no target level is specified, the maximum level.
Our
performance-based restricted stock award agreements (and for Messrs. Nackashi and Larsen, their May 2022 time-based restricted
stock award agreements) provide that the awards will vest in connection with a change in control only if the executive’s employment
with the Company is terminated in the six months preceding, or at any time following the change in control that is prior the vesting
of the award.
For purposes
of our Omnibus Incentive Plan, the term “change in control” is defined as the occurrence of any of the following events:
| • | An
acquisition by an individual, entity or group of 50% or more of our voting power (except
for acquisitions by us or any of our employee benefit plans), |
| • | During
any period of two consecutive years, a change in the majority of our board, unless the change
is approved by 2/3 of the directors then in office, |
| • | A
reorganization, merger, share exchange, consolidation or sale or other disposition of all
or substantially all of our assets; excluding, however, a transaction pursuant to which we
retain specified levels of stock ownership and board seats, or |
| • | Our
shareholders approve a plan or proposal for our liquidation or dissolution. |
In 2022, the compensation committee approved
changes to the employment agreements of each of Messrs. Jabbour, Nackashi, Larsen and Gravelle to provide that all outstanding equity
awards granted by the Company or our affiliates will become immediately vested upon a termination of the executive’s employment
by the Company without “Cause” or by the executive for “Good Reason”.
Potential Payments Under Optimal Blue 2020 Incentive
Plan
In addition, Messrs. Jabbour, Nackashi and
Larsen may be entitled to receive potential acceleration of vesting in connection with a sale of Optimal Blue under the Optimal Blue
2020 Incentive Plan. According to their profits interest award agreements, 100% of the Class B units granted to Messrs. Jabbour,
Nackashi and Larsen will become vested upon the consummation of a sale of Optimal Blue.
A sale of Optimal Blue for
purposes of the Optimal Blue 2020 Incentive Plan generally means the consummation of a transaction or in a series of related transactions
with any other person on an arm’s-length basis other than an affiliate of Cannae or THL, pursuant to which such party or parties:
| • | acquire (whether by merger, Unit
purchase, recapitalization, reorganization, redemption, issuance of Units or otherwise) more
than 50% of the voting units of Optimal Blue, or |
| • | acquire assets constituting all or
substantially all of the assets of Optimal Blue and its subsidiaries on a consolidated basis. |
Changing the form of organization or the organizational
structure of Optimal Blue or its subsidiaries, contributing securities to entities controlled by Optimal Blue and a public offering of
Optimal Blue do not constitute a sale of Optimal Blue. Black Knight’s acquisition on February 15, 2022 of the minority interests
in Optimal Blue previously held by Cannae and THL did not constitute a sale of Optimal Blue.
In addition, in the event of a change in control
of Black Knight, profits interest holders, including Messrs. Jabbour, Nackashi and Larsen, have the right to require Optimal Blue
to redeem all, but not less than all, of their Class B units (whether vested or unvested). The redemption price for the Class B
units held by any profits interest holder who elects to require redemption of their units would be the fair market value of the units
as determined based upon an appraisal process conducted by a nationally recognized valuation or investment banking firm.
In connection with the amendments to Messrs. Jabbour,
Nackashi and Larsen’s employment agreements described above, in the event of termination by the Company for a reason other than
Cause, death or disability or in the event of a termination by the executive for Good Reason, the Class B units outstanding as of
the date of termination would become immediately vested and/or payable.
Potential Payments Upon Change of Control
Except with respect to Mr. Jabbour’s
Discretionary Bonus, none of our named executive officers’ agreements provide for a payment or a benefit upon a change of control
without termination.
Estimated Cash Payments Upon Termination of
Employment
The following table includes the cash severance
amounts that would have been payable to each named executive officer in the event of a termination of employment by us not for Cause
or a termination by the executive for Good Reason. Our estimate of the cash severance amounts that would be provided to each individual
assumes that their employment terminated on December 30, 2022, the last trading day of our fiscal year ended December 31, 2022.
The severance amounts do not include a prorated 2022 annual incentive since the named executive officers would have been paid based on
their service through the end of the year and therefore would have received the annual incentive whether or not the termination occurred,
and excludes Mr. Jabbour’s Discretionary Bonus, which was paid on December 20, 2022, subject to the terms and conditions
described above.
| Reason
for Termination Payment: |
Jabbour |
Nackashi |
Larsen |
Gravelle |
| |
|
|
|
|
| Termination
by Company Without Cause |
4,605,168 |
5,625,000 |
3,667,614 |
592,000 |
| |
|
|
|
|
| Termination
by Employee for Good Reason |
4,605,168 |
5,625,000 |
3,667,614 |
592,000 |
| |
|
|
|
|
| Death |
— |
— |
— |
— |
| |
|
|
|
|
| Disability |
— |
— |
— |
— |
| |
|
|
|
|
Estimated Equity Payments upon Termination of
Employment or Change in Control
The table below includes the estimated values
of the Black Knight restricted stock awards and, in the case of Messrs. Jabbour, Nackashi and Larsen, the Optimal Blue Class B
units held by our named executive officers that would vest upon a change of control, upon the termination of their employment due to
death or disability, or upon a termination without Cause by the Company or by the executive for Good Reason, in each case assuming such
event occurred on December 31, 2022. The amounts below were determined based upon the number of unvested restricted shares held
by each executive as of December 30, 2022 (as set forth in the Outstanding Equity Awards at Fiscal Year End table above), multiplied
by $61.75 per share, which was the closing price of our common stock on December 30, 2022 (the last trading day of our fiscal year
ended December 31, 2022). For Messrs. Jabbour, Larsen and Nackashi, the amounts reflected for a termination without Cause or
by the executive for Good Reason also include the value of the Optimal Blue Class B units held by each executive as of December 31,
2022 (as set forth in the Outstanding Optimal Blue Profits Interest Awards at Fiscal Year-End table above), multiplied by a redemption
value of $11,038.92 per unit, as determined using the fair value method of accounting under GAAP. As discussed above, on December 20,
2022, to further mitigate the potential impact of Section 280G of the Internal Revenue Code, the compensation committee determined
to accelerate the settlement and vesting of the outstanding equity awards granted to Mr. Jabbour that would otherwise have vested
in the first quarter of 2023, and therefore such awards are not included in the values below.
Estimated
Value of Restricted
Stock Awards that Would Vest |
Jabbour |
Nackashi |
Larsen |
Gravelle |
| Termination
Without Cause or by Executive for Good Reason |
22,112,635 |
15,888,395 |
11,164,594 |
1,361,032 |
| |
|
|
|
|
| Death |
22,112,635 |
15,888,395 |
11,164,594 |
1,361,032 |
| |
|
|
|
|
| Disability |
22,112,635 |
15,888,395 |
11,164,594 |
1,361,032 |
| |
|
|
|
|
| Change
in Control |
— |
— |
— |
— |
| |
|
|
|
|
Compensation Committee Interlocks and Insider
Participation
The compensation committee is currently composed
of Thomas M. Hagerty (Chair) and David K. Hunt. During 2022, no member of the compensation committee was a former or current officer
or employee of Black Knight or any of its subsidiaries. In addition, during 2022, none of our executive officers served (i) as a
member of the compensation committee or board of directors of another entity, one of whose executive officers served on our compensation
committee, or (ii) as a member of the compensation committee of another entity, one of whose executive officers served on our board.
Discussion of Our Compensation Policies and
Practices as They Relate to Risk Management
We reviewed our compensation policies and practices
for all employees including our named executive officers and determined that our compensation programs are not reasonably likely to have
a material adverse effect on our Company. In conducting the analysis, we reviewed the structure of our executive, non-executive, sales
commission and performance-based restricted stock award incentive programs and the internal controls and risk mitigation processes that
are in place for each program. We also reviewed data compiled across our Software Solutions, Data and Analytics and corporate operations
relative to Adjusted revenues, Adjusted EBITDA, compensation expense and incentive program expenses (including as a percentage of both
Adjusted revenues and compensation expense).
We believe that several design features of our
compensation programs mitigate risk. We set base salaries at levels that provide our employees with assured cash compensation that is
appropriate to their job duties and level of responsibility and that, when taken together with incentive awards, motivate them to perform
at a high level without encouraging inappropriate risk taking to achieve a reasonable level of secure compensation.
With respect to our executives’ incentive
opportunities, we believe that our use of measurable corporate financial performance goals, multiple performance levels and minimum,
target and maximum achievable payouts, together with the compensation committee’s discretion to reduce awards, serve to mitigate
excessive risk taking. The risk of overstatement of financial figures to which incentives are tied is mitigated by our compensation committee’s
review and approval of the awards and internal and external review of our financial results. We also believe that our use of restricted
stock awards and multi-year vesting schedules in our long-term incentive awards, as well as our executive stock ownership guidelines
that strongly promote long-term stock ownership, encourage our executives to deliver incremental value to our shareholders and align
their interests with our sustainable long-term performance, thereby mitigating risk.
2022 CEO Pay Ratio
As required by the Dodd-Frank Wall Street Reform
and Consumer Protection Act, we are providing the following information about the relationship of the annual total compensation of our
CEO and the annual total compensation of our employees for 2022, which we refer to as our CEO pay ratio. Our CEO pay ratio information
is a reasonable good faith estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
The ratio of the annual total compensation of
our CEO, calculated as described above, to the median of the annual total compensation of all employees for 2022 was 85 to 1. This ratio
was based on the following:
| • | The
annual total compensation of our CEO, determined as described below was $8,400,799; and |
| • | The
median of the annual total compensation of all employees (other than our CEO), determined
in accordance with SEC rules, was $98,734. |
Annual Total
Compensation of Chief Executive Officer. We are providing the following information about the relationship of the median annual
total compensation of our employees and the total compensation of Mr. Joseph Nackashi, our Chief Executive Officer as of May 16,
2022, pursuant to the SEC’s pay ratio disclosure rules set forth in Item 402(u) of Regulation S-K. Because we had two
CEOs during 2022, SEC rules allow us the option of calculating the compensation provided to each CEO during 2022 for the time each
served as CEO and combine those amounts, or for the CEO serving in that position on the date we selected to identify the median employee
and annualize that CEO’s compensation. Accordingly, and because Mr. Nackashi is our current CEO, we determined it was appropriate
to annualize the compensation Mr. Nackashi received during his role as Chief Executive Officer. The pay ratio is calculated in a
manner consistent with the SEC’s pay ratio disclosure rules.
Methodology
for Determining Our Median Employee. For purposes of the above CEO pay ratio disclosure, we are required to identify a median
employee based on our worldwide workforce, without regard to their location, compensation arrangements, or employment status (full-time
versus part-time). The median employee is determined by identifying the employee whose compensation is at the median of the compensation
of our employee population (other than our CEO). Accordingly, to identify the median of the compensation of our employee population,
the methodology and the material assumptions and estimates that we used were as follows:
Employee Population.
We determined that, as of November 30, 2020, the date we selected to identify the median employee, our total global employee
population consisted of approximately 5,700 individuals.
Compensation
Measure Used to Identify the Median Employee. Given the geographical distribution of our employee population, we use a variety
of pay elements to structure the compensation arrangements of our employees. Consequently, for purposes of measuring the compensation
of our employees to identify the median employee, rather than using annual total compensation, we selected base salary/wages and overtime
pay, plus actual annual cash incentive compensation (annual bonus) and allowances paid through November 30, 2020 as the compensation
measure.
| • | We
annualized the compensation of employees to cover the full calendar year, and also annualized
any new hires in 2020 as if they were hired at the beginning of the fiscal year, as permitted
by SEC rules, in identifying the median employee. |
| • | We
did not make any cost-of-living adjustments in identifying the median employee. |
| • | Using
this methodology, we estimated that the median employee was an employee with base salary/wages
and overtime pay plus actual annual bonuses and allowances paid for the year ended December 31,
2022 of $98,734. |
Annual Total Compensation of Median Employee.
In order to determine the annual total compensation of the median employee, we identified and calculated the elements of that employee’s
compensation for 2022 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation
in the amount of $98,734.
Pay Versus Performance
As required by Item 402(v) of Regulation
S-K, we are providing the following information about the relationship between executive compensation actually paid to our principal
executive officer (PEO) and the other named executive officers (NEOs) and certain financial performance metrics of the
Company. For further information concerning the Company’s variable pay-for-performance philosophy and how the compensation committee
aligns executive compensation with the Company’s performance, refer to “Executive Compensation – Compensation Discussion and
Analysis.”
| | | | | | | | Value of Initial Fixed $100 Investment Based On: | | |
| Year | Summary Compensation Table Total
for PEO (Anthony M. Jabbour)($)(1) | Compensation Actually Paid to PEO
(Anthony M. Jabbour) ($)(2) | Summary Compensation Table Total
for PEO (Joseph M. Nackashi) ($)(1) | Compensation Actually Paid to PEO
(Joseph M. Nackashi) ($)(2) | Average Summary Compensation
Table Total for Non-PEO NEOs ($)(3) | Average Compensation Actually Paid
to Non-PEO NEOs ($)(4) | Total Shareholder Return
($)(5) | Peer Group Total
Shareholder Return ($)(6) | Net Earnings (millions) ($)(7) | Adjusted EBITDA (millions) ($)(8) |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) |
| | | | | | | | | | | |
| 2022 | 50,175,251 | 41,105,699 | 8,345,320 | 3,939,020 | 2,139,628 | 788,187 | 95.77 | 118.60 | 450.0 | 735.3 |
| | | | | | | | | | | |
| 2021 | 11,562,556 | 29,613,520 | N/A | N/A | 2,700,239 | 5,940,561 | 128.55 | 183.47 | 179.9 | 724.2 |
| | | | | | | | | | | |
| 2020 | 16,061,435 | 15,548,514 | N/A | N/A | 4,168,623 | 4,473,999 | 137.02 | 145.15 | 245.8 | 609.9 |
| | | | | | | | | | | |
| (1) | The dollar amounts reported in column (b) are the amounts of total compensation reported for Mr. Jabbour, our PEO, for each corresponding year in the “Total” column of the Summary Compensation Table. In May 2022, Mr. Jabbour transitioned from Chairman and CEO to Executive Chairman and Mr. Nackashi transitioned from President to CEO. The dollar amounts reported in column (d) are the amounts of total compensation reported for Mr. Nackashi, our PEO in 2022, in the “Total” column of the Summary Compensation Table. Refer to “Executive Compensation – Summary Compensation Table.” For Mr. Jabbour, the 2022 amount includes the Discretionary Bonus of $40 million. The Discretionary Bonus is contingent upon the successful closing of the ICE Merger. Mr. Jabbour will only receive the benefit of the Discretionary Bonus if our shareholders benefit from the closing of the ICE Merger. We have entered into a letter agreement with Mr. Jabbour that provides that (i) the after-tax proceeds of the Discretionary Bonus be placed into an escrow account, and (ii) if Mr. Jabbour is terminated by the Company for cause or Mr. Jabbour resigns his employment without good reason, in each case prior to consummation of the ICE Merger, or if the Merger Agreement is terminated without the consummation of the ICE Merger, Mr. Jabbour will be required to pay liquidated damages to Black Knight equal to the value of the after-tax proceeds of the Discretionary Bonus (plus any tax refund he receives in respect of such payment). |
| (2) | The dollar amounts reported in columns (c) and (e) represent the amount of “compensation actually paid” to Mr. Jabbour and Mr. Nackashi (for fiscal year 2022), respectively, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Messrs. Jabbour and Nackashi during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Messrs. Jabbour and Nackashi’s total compensation for each year to determine the compensation actually paid: |
| | Reported Summary | | | |
| | Compensation Table | Reported | | Compensation Actually |
| | Total for PEO (Anthony | Value of Equity | Equity Award | Paid to PEO (Anthony |
| Year | M. Jabbour) ($) | Awards(a) ($) | Adjustments(b) ($) | M. Jabbour) ($) |
| 2022 | 50,175,251 | (7,500,015) | (1,569,537) | 41,105,699 |
| | | | | |
| 2021 | 11,562,556 | (7,500,060) | 25,551,024 | 29,613,520 |
| | | | | |
| 2020 | 16,061,435 | (13,129,954) | 12,617,033 | 15,548,514 |
| | | | | |
| | Reported Summary | | | |
| | Compensation Table | Reported | | Compensation Actually |
| | Total for PEO (Joseph | Value of Equity | Equity Award | Paid to PEO (Joseph M. |
| Year | M. Nackashi) ($) | Awards(a) ($) | Adjustments(b) ($) | Nackashi) ($) |
| 2022 | 8,345,320 | (6,000,097) | 1,593,797 | 3,939,020 |
| | | | | |
| (a) | The
grant date fair value of equity awards represents the total of the amounts reported in the
“Stock Awards” column in the Summary Compensation Table for the applicable year. |
| (b) | The
equity award adjustments for each applicable year include the addition (or subtraction, as
applicable) of the following, as applicable: (i) the year-end fair value of any equity
awards granted in the applicable year that are outstanding and unvested as of the end of
the year; (ii) the amount of change as of the end of the applicable year (from the end
of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding
and unvested as of the end of the applicable year; (iii) for awards that are granted
and vest in same applicable year, the fair value as of the vesting date; (iv) for awards
granted in prior years that vest in the applicable year, the amount equal to the change as
of the vesting date (from the end of the prior fiscal year) in fair value; and (v) for
awards granted in prior years that are determined to fail to meet the applicable vesting
conditions during the applicable year, a deduction for the amount equal to the fair value
at the end of the prior fiscal year. The equity award adjustments related to the Optimal
Blue profits interests awards are based on a redemption value as determined using the fair
value method of accounting under GAAP. The amounts deducted or added in calculating the equity
award adjustments are as follows: |
| | Year End Fair Value | | | | |
| | of Outstanding | Year over Year | Fair Value as of | Year over Year | |
| | and Unvested | Change in | Vesting Date of | Change in Fair Value | Total Equity |
| | Equity Awards | Fair Value of | Equity Awards | of Equity Awards | Award |
| | Granted in Year for | Outstanding and | Granted and | Granted in Prior | Adjustments for |
| | PEO (Anthony M. | Unvested Equity | Vested in the | Years that Vested in | PEO (Anthony |
| Year | Jabbour) ($) | Awards ($) | Year ($) | the Year ($) | M. Jabbour) ($) |
| | | | | | |
| 2022 | 5,399,605 | (5,232,137) | 2,548,993 | (4,285,998) | (1,569,537) |
| | | | | | |
| 2021 | 8,180,000 | 18,532,587 | – | (1,161,563) | 25,551,024 |
| | | | | | |
| 2020 | 8,906,564 | 3,550,949 | – | 159,520 | 12,617,033 |
| | | | | | |
| | Year End Fair Value | | | |
| | of Outstanding and | Year over Year | Year over Year Change | |
| | Unvested Equity | Change in Fair Value | in Fair Value of Equity | |
| | Awards Granted in Year | of Outstanding and | Awards Granted in | Total Equity Award |
| | for PEO (Joseph M. | Unvested Equity | Prior Years that Vested | Adjustments for PEO |
| Year | Nackashi) ($) | Awards ($) | in the Year ($) | (Joseph M. Nackashi) ($) |
| | | | | |
| 2022 | 5,988,021 | (3,154,544) | (1,239,680) | 1,593,797 |
| | | | | |
| (3) | The dollar amounts reported in column (f) represent the average of the amounts reported for our NEOs other than our PEO as a group in the “Total” column of the Summary Compensation Table in each applicable year. The names of each of the NEOs included for purposes of calculating the average amounts in each applicable year are as follows: |
| Year |
Non-PEO
NEOs |
| |
|
| 2022 |
Messrs. Larsen
and Gravelle and Ms. Meyers |
| |
|
| 2021 |
Messrs. Nackashi,
Larsen and Gravelle and Mses. Meyers and Leonard |
| |
|
| 2020 |
Messrs. Nackashi,
Larsen and Gravelle and Ms. Leonard |
| |
|
| (4) | The dollar amounts reported in column (g) represent the average amount of “compensation actually paid” to all NEOs other than our PEO as a group, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to all NEOs other than our PEO as a group during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation for all NEOs other than our PEO as a group for each year to determine the compensation actually paid, using the same methodology described above in footnote 2: |
| | Average Reported | | | Average |
| | Summary Compensation | Average Reported | | Compensation |
| | Table Total for Non-PEO | Value of Equity | Average Equity Award | Actually Paid to |
| Year | NEOs ($) | Awards ($) | Adjustments ($)(a) | Non-PEO NEOs ($) |
| | | | | |
| 2022 | 2,139,628 | (1,541,700) | 190,259 | 788,187 |
| | | | | |
| 2021 | 2,700,239 | (1,670,039) | 4,910,361 | 5,940,561 |
| | | | | |
| 2020 | 4,168,623 | (3,107,273) | 3,412,649 | 4,473,999 |
| | | | | |
| (a) | The amounts deducted or added in calculating
the total average equity award adjustments for all NEOs other than our PEO are as follows: |
| | Average Year End | | | Average Fair | |
| | Fair Value of | | Year over Year | Value at the End | |
| | Outstanding and | Year over Year | Average Change | of the Prior Year | |
| | Unvested | Average Change | in Fair Value of | of Equity Awards | |
| | Equity Awards | in Fair Value of | Equity Awards | that Failed to | |
| | Granted in Year | Outstanding and | Granted in Prior | Meet Vesting | Total Average |
| | for Non-PEO | Unvested Equity | Years that Vested | Conditions in the | Equity Award |
| Year | NEOs ($) | Awards ($) | in the Year ($) | Year ($) | Adjustments ($) |
| | | | | | |
| 2022 | 1,607,559 | (826,764) | (447,578) | (142,958) | 190,259 |
| | | | | | |
| 2021 | 1,657,833 | 3,555,746 | (123,408) | (179,810) | 4,910,361 |
| | | | | | |
| 2020 | 2,348,944 | 959,443 | 104,262 | – | 3,412,649 |
| | | | | | |
| (5) | Represents the value of a fixed $100 invested
on 12/31/2019 in the Company’s stock. |
| (6) | Represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the following published industry index: S&P North American Technology Sector Index. |
| (7) | The dollar amounts reported represent the
reported amount of Net earnings directly from the Company’s audited financial statements
for the year presented. |
| (8) | Adjusted EBITDA is calculated 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 (i) Depreciation and amortization; (ii) Impairment charges; (iii) Interest expense, net; (iv) Income tax expense; (v) Other expense (income), net; (vi) Equity in (earnings) losses of unconsolidated affiliates, net of tax; (vii) Gain related to investment in unconsolidated affiliates, net of tax; (viii) Net losses attributable to redeemable noncontrolling interests; (ix) deferred revenue purchase accounting adjustment; (x) equity-based compensation, including certain related payroll taxes; (xi) acquisition related costs, including costs pursuant to purchase agreements; (xii) costs related to the ICE Transaction; and (xiii) costs associated with expense reduction initiatives. |
Tabular List of Financial Performance Measures
As described in
greater detail in “Executive Compensation – Compensation Discussion and Analysis,” the Company’s executive compensation
program reflects a variable pay-for-performance philosophy. The metrics that the Company uses for both our long-term and short-term incentive
awards are selected based on an objective of incentivizing our NEOs to increase the value of our enterprise for our shareholders. The
most important financial performance measures used by the Company to link executive compensation actually paid to the Company’s
NEOs, for the most recently completed fiscal year, to the Company’s performance are as follows:
Analysis
of the Information Presented in the Pay versus Performance Table
As described in
more detail in the section “Executive Compensation – Compensation Discussion and Analysis,” the Company’s executive
compensation program reflects a variable pay-for-performance philosophy. The Company utilizes three financial performance measures to
align executive compensation with Company performance, one of which, Adjusted EBITDA, is presented in the Pay versus Performance table.
Moreover, the Company generally seeks to incentivize long-term performance, and therefore does not specifically align the Company’s
performance measures with compensation that is actually paid (as computed in accordance with Item 402(v) of Regulation S-K) for
a particular year. In accordance with Item 402(v) of Regulation S-K, the Company is providing the following information concerning
the relationships between information presented in the Pay versus Performance table.
COMPENSATION
ACTUALLY PAID AND CUMULATIVE TSR
Compensation Actually Paid and Net Earnings
While the Company
does not use Net Earnings as a performance measure in the overall executive compensation program, the measure of Net Earnings is correlated
with Adjusted EBITDA, which the Company uses when setting goals in the Company’s annual incentive plan and the performance-based
restricted stock awards that are granted to the NEOs.
COMPENSATION ACTUALLY PAID VERSUS NET
EARNINGS
Compensation Actually
Paid and Adjusted EBITDA
As
described above, Adjusted EBITDA is 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 (i) Depreciation and amortization;
(ii) Impairment charges; (iii) Interest expense, net; (iv) Income tax expense; (v) Other expense (income), net;
(vi) Equity in (earnings) losses of unconsolidated affiliates, net of tax; (vii) Gain related to investment in
unconsolidated affiliates, net of tax; (viii) Net losses attributable to redeemable noncontrolling interests;
(ix) deferred revenue purchase accounting adjustment; (x) equity-based compensation, including certain related payroll
taxes; (xi) acquisition-related costs, including costs pursuant to purchase agreements; (xii) costs related to the ICE
Transaction; and (xiii) costs associated with expense reduction initiatives.
COMPENSATION ACTUALLY PAID VERSUS ADJUSTED
EBITDA
Cumulative TSR of the Company and Cumulative TSR of
the Peer Group
As demonstrated
by the following graph, the Company’s cumulative TSR over the three-year period presented in the table was $95.77, while the cumulative
TSR of the peer group presented for this purpose, the S&P North American Technology Sector Index, was $118.60 over the three years
presented in the table. While the Company’s cumulative TSR underperformed the S&P North American Technology Sector Index during
the three years presented in the table, our financial results for 2022 demonstrated our high recurring revenue business model and resilience
in a challenging market environment. While the operating environment has created some near-term headwinds to our financial performance,
we remain positive about our long-term growth opportunities and are committed to creating value for all of our stakeholders. For more
information regarding the Company’s performance and the companies that the Compensation Committee considers when determining compensation,
refer to “Executive Compensation – Compensation Discussion and Analysis.”
CUMULATIVE TSR VERSUS PEER GROUP
Director Compensation
As an executive
of the Company, Mr. Jabbour receives no additional compensation for services as a director. In 2022, all non-executive directors
received an annual retainer of $75,000, payable quarterly. The chair and each member of the Audit Committee received an additional annual
retainer (payable in quarterly installments) of $40,000 and $30,000, respectively, for their service on the Audit Committee. The chairs
and each member of the Compensation, Corporate Governance and Nominating, and Risk Committees received an additional annual retainer
(payable in quarterly installments) of $21,000 and $16,000, respectively, for their service on such committees. In addition, Mr. Hagerty
received an annual retainer of $30,000 (payable in quarterly installments) for his service as our Independent Lead Director.
Each non-executive
director also received an equity-based award with a grant date fair value of $225,000, which the Compensation Committee determined to
increase from $150,000. In 2022, we offered our non-employee directors the opportunity to elect to receive their annual director equity
award in the form of restricted shares or restricted stock units (RSUs). In the case of the RSUs, the award will not settle until
the director’s separation of service from the board. All restricted shares and RSUs granted to our directors in 2022 were granted
under our Omnibus Incentive Plan, vest in their entirety on the first anniversary of the grant date and are not subject to any performance
restriction.
We also reimburse
each of our directors for all reasonable out of pocket expenses incurred in connection with attendance at board and committee meetings,
as well as with any director education programs, they attend relating to their service on our board of directors. Each non-employee director
is eligible to participate in our deferred compensation plan to the extent he or she elects to defer any board or committee fees. Mr. Rao
deferred the fees he earned in 2022 for his service on the board and the committees on which he serves.
2022 Director Compensation
The following table
sets forth information concerning the compensation of our directors for the fiscal year ended December 31, 2022:
| |
|
|
All
Other |
|
| Name |
Fees
Earned or Paid in Cash ($)1 |
Stock
Awards ($)2 |
Compensation
($) |
Total
($) |
| Catherine
L. Burke |
91,000 |
225,003 |
— |
316,003 |
| |
|
|
|
|
| Thomas
M. Hagerty |
142,000 |
225,003 |
— |
367,003 |
| |
|
|
|
|
| David
K. Hunt |
128,000 |
225,003 |
— |
353,003 |
| |
|
|
|
|
| Joseph
M. Otting |
115,000 |
225,003 |
— |
340,003 |
| |
|
|
|
|
| Ganesh
B. Rao |
91,000 |
225,003 |
— |
316,003 |
| |
|
|
|
|
| John
D. Rood |
126,000 |
225,003 |
— |
351,003 |
| |
|
|
|
|
| Nancy
L. Shanik |
105,000 |
225,003 |
— |
330,003 |
| |
|
|
|
|
| 1. | Amounts include the cash portion
of annual board and committee retainers earned for services as a director in 2022. Amounts
shown are not reduced to reflect directors’ elections, if any, to defer receipt of
retainers into our deferred compensation plan. |
| 2. | Amounts shown for all directors
represent the grant date fair value of restricted stock awards granted in 2022, computed
in accordance with FASB ASC Topic 718. For Ms. Burke, Mr. Hagerty, Mr. Otting
and Ms. Shanik, these awards consisted of 3,383 restricted stock units granted in June 2022.
For Mr. Hunt, Mr. Rao and Mr. Rood, these awards consisted of 3,383 restricted
shares of common stock. All of the restricted stock unit and restricted stock awards granted
to our directors in 2022 vest on the first anniversary of the grant date subject to continued
service on our board. Assumptions used in the calculation of these amounts are included in
Note 16 to our audited financial statements for the fiscal year ended December 31, 2022
included in our Annual Report on Form 10-K filed with the SEC on February 28, 2023.
The grant date fair values of the awards granted in 2022 are based on a per share grant date
fair value of $66.51, which is equal to the closing price of our common stock on June 10,
2022. As of December 31, 2022, awards outstanding for each director were as follows:
Ms. Burke 3,383 restricted stock units; Mr. Hagerty 3,383 restricted stock units;
Mr. Hunt 3,383 restricted shares; Mr. Otting 3,383 restricted stock units; Mr. Rao
3,383 restricted shares; Mr. Rood 3,383 restricted shares; and Ms. Shanik 3,383
restricted stock units. |
Pursuant to the
Merger Agreement, upon closing of the ICE Merger, each outstanding restricted stock award held by a non-employee director will vest in
full and be cancelled and converted into the right to receive the merger consideration, and each restricted stock unit award held by
a non-employee director will vest in full and be deemed settled for a number of shares of Black Knight common stock equal to the number
of shares underlying the restricted stock unit award, which will be cancelled and converted into the right to receive the merger consideration.
PROPOSAL NO.
2:
ADVISORY VOTE ON
EXECUTIVE
COMPENSATION
In
accordance with Section 14A of the Securities Exchange Act of 1934, as amended (the Exchange Act) and Rule 14a 21(a) promulgated
thereunder, we are asking our shareholders to approve, in a non-binding advisory vote, the compensation of our named executive officers
as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K.
As
described in detail in our “Compensation Discussion and Analysis,” our Company takes a proactive approach to compensation
governance. The compensation committee regularly reviews our compensation programs and makes adjustments that it believes are in the
best interests of the Company and our investors. As part of this process, our compensation committee reviews compensation trends and
considers current best practices and makes changes in our compensation programs when the committee deems it appropriate, all with the
goal of continually improving our approach to executive compensation.
We
are committed to hearing and responding to the views of our shareholders. In 2022, our officers met with investors on various occasions,
both in group and one-on-one settings. The investors with whom we met in 2022 represented six of our top 15 shareholders, who collectively
owned more than 27% of our shares as of December 31, 2022. At these meetings, our officers discuss a variety of topics, including
our operational and stock performance, ESG, corporate governance and executive compensation matters. We report and discuss these meetings
with our board or applicable board committees, as appropriate.
In
connection with the first special meeting of our shareholders to approve the ICE Merger that was held in September 2022, we received
a question from one investor relating to Mr. Jabbour’s Discretionary Bonus. Mr. Jabbour’s employment agreement,
which was entered into at the time that Black Knight recruited Mr. Jabbour away from significant personal and financial growth opportunities
at FIS, provides that, in the event the Company is sold during the employment term and/or outperforms its financial projections in any
calendar year, he is eligible to receive a discretionary bonus in an amount determined by the compensation committee. In connection with
the ICE Merger and pursuant to Mr. Jabbour’s employment agreement, the compensation committee determined to pay Mr. Jabbour
the Discretionary Bonus in the amount of $40 million.
In
determining the amount of the Discretionary Bonus, the committee considered Mr. Jabbour’s significant contributions to the
Company and the critical role he plays in our organization with respect to the Company’s strategic vision. In particular: Mr. Jabbour
played a significant role in negotiating the ICE Merger and ensuring that our shareholders would receive a significant premium for their
Black Knight common stock upon closing of the transaction. The value of the ICE Merger represents a 35% premium to Black Knight’s
closing price on May 19, 2023 and a 27% premium to Black Knight’s closing price prior the leak of the transaction through
a Bloomberg article.
Our
compensation committee also took great care to ensure that the Discretionary Bonus is contingent upon the closing of the ICE Merger and
Mr. Jabbour will only receive the benefit of the Discretionary Bonus if our shareholders benefit from the closing of the ICE Merger.
While the Discretionary Bonus was paid to Mr. Jabbour in December 2022 in connection with certain tax-planning actions to mitigate
the potential impact of Sections 280G and 4999 of the Internal Revenue Code on Mr. Jabbour and Black Knight, the Company and Mr. Jabbour
have entered into a letter agreement that provides that (i) the after-tax proceeds of the Discretionary Bonus be placed into an
escrow account, and (ii) if Mr. Jabbour is terminated by the Company for cause or Mr. Jabbour resigns his employment without
good reason, in each case prior to consummation of the ICE Merger, or if the Merger Agreement is terminated without the consummation
of the ICE Merger, Mr. Jabbour will be required to pay liquidated damages to Black Knight equal to the value of the after-tax proceeds
of the Discretionary Bonus (plus any tax refund he receives in respect of such payment).
Our
compensation committee believes it is important to reward our executives for strong performance in an industry with significant operational
and regulatory challenges, and to incentivize them to continue to take actions to deliver strong results for our investors by expanding
our client relationships, continuing to innovate our solutions set and pursuing new market opportunities. At the same time, our compensation
committee believes it is important to discourage our executives from taking unnecessary risks. We ask our shareholders to vote on the
following resolution at the annual meeting:
“RESOLVED,
that the Company’s shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in
the Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of
the Securities and Exchange Commission, including the Compensation Discussion and Analysis and Executive and Director Compensation section,
the compensation tables and related narrative.”
The
vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the compensation
of our named executive officers, as described in this proxy statement in accordance with the compensation disclosure rules of the
Securities and Exchange Commission. Approval of this resolution requires the affirmative vote of a majority of the shares present in
person or represented by proxy and entitled to vote. However, as this is an advisory vote, the results will not be binding on the Company,
the board or the compensation committee, and will not require us to take any action. The
final
decision on the compensation of our named executive officers remains with our compensation committee and the board, although the compensation
committee and the board will consider the outcome of this vote when making compensation decisions.
THE
BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE
OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT.
PROPOSAL NO. 3:
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
General Information about KPMG LLP
Although
shareholder ratification of the appointment of our independent registered public accounting firm is not required by our bylaws or otherwise,
we are submitting the selection of KPMG LLP to our shareholders for ratification as a matter of good corporate governance practice. Even
if the selection is ratified, our audit committee in its discretion may select a different independent registered public accounting firm
at any time if it determines that such a change would be in the best interests of the Company and our shareholders.
If
our shareholders do not ratify the audit committee’s selection, the audit committee will take that fact into consideration, together
with such other factors it deems relevant, in determining its next selection of our independent registered public accounting firm.
In
choosing our independent registered public accounting firm, our audit committee conducts a comprehensive review of the qualifications
of those individuals who will lead and serve on the engagement team, the quality control procedures the firm has established, and any
issue raised by the most recent quality control review of the firm. The review also includes matters required to be considered under
the SEC’s rules on “Auditor Independence,” including the nature and extent of non-audit services to ensure that
they will not impair the independence of the accountants.
Representatives
of KPMG LLP are expected to be present at the annual meeting. These representatives will have an
opportunity to make a statement if they so desire and will be available to respond to appropriate
questions.
Principal Accountant Fees and Services
The
audit committee has appointed KPMG LLP to audit the consolidated financial statements of the Company for the 2023 fiscal year. KPMG LLP
has continuously acted as the independent registered public accounting firm for the Company and our predecessors commencing with the
fiscal year ended December 31, 2007.
For
services rendered to us during or in connection with our years ended December 31, 2022 and 2021, we were billed the following fees
by KPMG LLP:
| |
2022 |
2021 |
| |
(In
thousands) |
| |
|
|
| Audit
Fees |
$2,271 |
$2,076 |
| |
|
|
| Audit
Related Fees |
$1,107 |
$864 |
| |
|
|
| Tax
Fees |
$1,070 |
$532 |
| |
|
|
| All
Other Fees |
$47 |
$50 |
| |
|
|
Audit
Fees. Audit fees consisted of fees and billings for out-of-pocket expenses incurred for the audits, registration statements and other
filings related to the Company’s 2022 and 2021 consolidated financial statements, and audits of certain businesses or subsidiaries,
including audits required for regulatory reporting and contractual purposes.
Audit
Related Fees. Audit related fees consisted of fees for Service Organization Control (SOC) Attestations, including billings
for out-of-pocket expenses incurred.
Tax
Fees. Tax fees primarily consisted of tax compliance and consulting services.
All
Other Services. All other fees consisted of SOC diagnostic services.
Approval of Accountants’ Services
In
accordance with the requirements of the Sarbanes Oxley Act of 2002, all audit and audit related work and all non-audit work performed
by KPMG LLP is approved in advance by the audit committee, including the proposed fees for such work. Our pre-approval policy provides
that, unless a type of service to be provided by KPMG LLP has been generally pre-approved by
the audit committee, it will require specific pre-approval by the audit committee. In addition, any proposed services exceeding pre-approved
maximum fee amounts also require pre-approval by the audit committee. Our pre-approval policy provides that specific pre-approval authority
is delegated to our audit committee chairman, provided that the estimated fee for the proposed service does not exceed a pre-approved
maximum amount set by the committee.
Our
audit committee chairman must report any pre-approval decisions to the audit committee at its next scheduled meeting.
THE
BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE RATIFICATION OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE 2023 FISCAL YEAR.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
The following table
sets forth information regarding beneficial ownership of our common stock by each shareholder who is known by the Company to beneficially
own 5% or more of such class. Percentages in the table reflect the percent of common shares held by each shareholder.
| Name |
Shares
Beneficially Owned1 | Percent
of Total Class2 | |
| The
Vanguard Group |
14,119,015 |
9.0% |
|
| 100
Vanguard Blvd., Malvern, PA 19355 |
|
| |
|
|
| T.
Rowe Price Associates, Inc. |
13,813,507 |
8.8% |
|
| 100
E. Pratt Street, Baltimore, MD 21202 |
|
| |
|
|
| Massachusetts
Financial Services Co. |
12,322,028 |
7.9% |
|
| 111
Huntington Avenue, 24th Floor, Boston, MA 02199 |
|
| |
|
|
| BlackRock, Inc. |
11,534,993 |
7.4% |
|
| 55
East 52nd Street, New York, NY 10055 |
|
| |
|
|
| 1. | Amounts
are based on information publicly filed with the SEC as of December 31, 2022. |
| 2. | Applicable percentages based on 156,761,471
shares of our common stock outstanding as of May 19, 2023. |
Security Ownership of Management and Directors
The
following table sets forth information regarding beneficial ownership of our common stock by:
| • | Each
of our directors and nominees for director; |
| • | Each
of the named executive officers as defined in Item 402(a)(3) of Regulation S-K promulgated
by the SEC; and |
| • | All
of our executive officers and directors as a group. |
Percentages
in the following table reflect the percent of our common shares outstanding as of May 19,
2023. The mailing address of each director and executive officer shown in the table below is c/o
Black Knight, Inc., 601 Riverside Avenue, Jacksonville, Florida 32204.
| Name |
Number
of Shares |
Percent
of Shares1 |
| Catherine
L. Burke |
6,760 |
* |
| |
|
|
| Michael
L. Gravelle |
112,377 |
* |
| |
|
|
| Thomas
M. Hagerty2 |
53,560 |
* |
| David
K. Hunt |
65,045 |
* |
| |
|
|
| Anthony
M. Jabbour3 |
785,847 |
* |
| Kirk
T. Larsen4 |
532,022 |
* |
| Joseph
M. Nackashi |
414,844 |
* |
| |
|
|
| Joseph
M. Otting5 |
16,734 |
* |
| Ganesh
B. Rao |
16,862 |
* |
| |
|
|
| John
D. Rood |
81,487 |
* |
| |
|
|
| Nancy
L. Shanik |
8,024 |
* |
| |
|
|
| Michele
M. Meyers6 |
18,980 |
* |
| All
directors and officers (11 persons)7 |
2,093,562 |
1.3% |
| * | Represents
less than 1% of our common stock. |
| 1. | Applicable
percentages based on 156,761,471 shares of our common stock outstanding as of May 19,
2023. |
| 2. | Includes
14,476 shares of our common stock held by trust. |
| 3. | Includes 41,300 shares of our common stock held by Anthony M. Jabbour Living
Trust and 413,410 shares of our common stock held by the Anthony M. Jabbour 2022 Grantor Retained Annuity Trust. |
| 4. | Includes
148,895 shares of our common stock held by the Kirk Larsen Revocable Trust. |
| 5. | Includes
5,605 shares of our common stock held by the Otting Family Trust. |
| 6. | Reflects
Ms. Meyers, ownership as of March 12, 2022, the date she departed the Company. |
| 7. | Excludes
Ms. Meyers, who departed the Company on March 12, 2022. |
Securities Authorized for Issuance under Equity
Compensation Plans
The following
table provides information as of December 31, 2022 about our common stock which may be issued under our equity compensation plans:
| |
Number
of Securities |
|
Number
of Securities Remaining |
|
| |
to
be Issued Upon |
Weighted
Average |
Available
for Future Issuance |
|
| |
Exercise
of Outstanding |
Exercise
Price of |
Under
Equity Compensation |
|
| |
Options,
Warrants and |
Outstanding
Options, |
Plans
(Excluding Securities |
|
| Plan
Category |
Rights
(a) |
Warrants
and Rights (b) |
Reflected
in Column (a)(c)1 |
|
| |
|
|
|
|
| Equity
compensation plans |
— |
— |
6,126,892 |
|
| approved
by security holders |
|
| |
|
|
|
| Equity
compensation plans not |
— |
— |
— |
|
| approved
by security holders |
|
| |
|
|
|
| Total |
— |
— |
6,126,892 |
|
| |
|
|
|
|
| 1. | In addition to being available for future
issuance upon exercise of options and stock appreciation rights, under the Omnibus Incentive
Plan, shares of our common stock may be issued in connection with awards of restricted stock,
restricted stock units, performance shares, performance units or other equity-based awards. |
CERTAIN RELATIONSHIPS AND
RELATED PERSON TRANSACTIONS
Investment in Dun & Bradstreet Holdings, Inc.
and Related Agreements
As of December 31,
2022, we held an ownership interest of approximately 4% in DNB and our Executive Chairman Anthony M. Jabbour also serves as CEO and a
director of DNB. In addition, two of our other directors, Mr. Hagerty and Mr. Rao, also serve on the board of directors of
DNB. We received quarterly cash dividends totaling $1.8 million from DNB in the year ended December 31, 2022. As of December 30,
2022, DNB’s closing share price was $12.26 and the fair value of our investment in DNB was $226.5 million before tax.
On February 15,
2022 we entered into an agreement with THL and Cannae pursuant to which we exchanged 36,376,360 shares of DNB common stock as partial
consideration for THL’s and Cannae’s minority interests in our subsidiary Optimal Blue. For additional information on this
transaction, see “Purchase of Minority Interests in Optimal Blue” below. As a result of this transaction, our ownership of
DNB common stock was reduced to 18,473,610 shares or approximately 4%.
In June 2021,
we entered into a five-year agreement with DNB to provide certain products and data over the term of the agreement, as well as professional
services, for an aggregate fee of approximately $34 million over the term of the agreement. For the year ended December 31, 2022,
we recognized revenues of $7.4 million. As of December 31, 2022, related party deferred revenues related to this agreement were
$6.2 million.
In June 2021,
we also entered into an agreement with DNB for access to certain of their data assets for an aggregate fee of approximately $24 million
over the term of the agreement. In addition, we will jointly market certain solutions and data. Related party prepaid fees related to
this agreement were $2.3 million as of December 31, 2022. For the year ended December 31, 2022, we recognized expenses of $4.7
million related to this agreement.
For the year ended
December 31, 2022, we made payments of $0.1 million for other DNB solutions.
DNB Letter Agreement
In connection with DNB’s initial public
offering (the DNB IPO) in July 2020, we entered into a letter agreement with the other members of the investment consortium,
including Bilcar, LLC, Cannae and THL. Pursuant to the letter agreement, we have agreed for a period of three years to vote all of our
shares as a group in all matters related to the election of directors, including to elect five individuals to the DNB board of directors,
including Messrs. Hagerty and Rao, as well as DNB directors William P. Foley, II, Chinh Chu and Richard Massey. The letter
agreement expires June 30, 2023.
Registration Rights Agreement
In connection with the DNB IPO, we entered into
a registration rights agreement with DNB and the other members of the investment consortium, including Bilcar, LLC, Cannae and THL. Pursuant
to the registration rights agreement, we have the right to demand that DNB register the DNB shares of common stock that we own. The registration
rights agreement also provides piggyback registration rights, subject to certain exceptions.
Purchase of Minority Interests in Optimal Blue
On February 15, 2022, we entered into a
Purchase Agreement and completed the acquisition of all of the issued and outstanding equity interests of our Optimal Blue subsidiary
owned by Cannae and certain investment entities affiliated with THL (the Optimal Blue Transaction), in exchange for aggregate
consideration of (y) $433,500,000 in cash, funded with borrowings under our revolving credit facility and (z) 36,376,360 shares
of DNB common stock owned by Black Knight. The aggregate consideration and number of shares of DNB common stock paid to Cannae and THL
in connection with the transaction was based on the 20-day VWAP trading price of DNB for the period ending on February 14, 2022.
Following the consummation of the Transaction, Black Knight indirectly owns 100% of the issued and outstanding Class A Units of
Optimal Blue Holdco. Pursuant to authority delegated by the board of directors, the Optimal Blue Transaction was considered and approved
by a Special Committee of independent directors composed of Joseph M. Otting, David K. Hunt and Nancy L. Shanik.
Other Related Party Transactions
Noah Witte, the son-in-law
of Mr. Nackashi, is employed by a subsidiary of Black Knight as a manager in our Servicing Technologies division. In 2022, Mr. Witte’s
gross earnings were $133,193, which is consistent with other employees holding similar titles at the Company. He also received health
and other benefits customarily provided to similarly situated employees.
Audit Committee Approval
Our audit committee has reviewed and approved
each of the transactions described above in accordance with the terms of our Code of Conduct related to the approval of related party
transactions.
Review, Approval or Ratification of Transactions
with Related Persons
Pursuant to our codes of ethics, a “conflict
of interest” occurs when an individual’s private interest interferes or appears to interfere with our interests, and can
arise when a director, officer or employee takes actions or has interests that may make it difficult to perform his or her work objectively
and effectively. Anything that would present a conflict for a director, officer or employee would also likely present a conflict if it
is related to a member of his or her family. Our code of ethics states that clear conflict of interest situations involving directors,
executive officers and other employees who occupy supervisory positions or who have discretionary authority in dealing with any third
party specified below may include the following:
| • | Any
significant ownership interest in any supplier or customer; |
| • | Any
consulting or employment relationship with any client, supplier or competitor; and |
| • | Selling anything
to us or buying anything from us, except on the same terms and conditions as comparable directors,
officers or employees are permitted to so purchase or sell. |
It is our policy
to review all relationships and transactions in which we and our directors or executive officers (or their immediate family members)
are participants in order to determine whether the director or officer in question has or may have a direct or indirect material interest.
Our Chief Compliance Officer, together with our legal staff, is primarily responsible for developing and implementing procedures to obtain
the necessary information from our directors and officers regarding transactions to/from related persons. Any material transaction or
relationship that could reasonably be expected to give rise to a conflict of interest must be discussed promptly with our Chief Compliance
Officer. The Chief Compliance Officer, together with our legal staff, then reviews the transaction or relationship, and considers the
material terms of the transaction or relationship, including the importance of the transaction or relationship to us, the nature of the
related person’s interest in the transaction or relationship, whether the transaction or relationship would likely impair the judgment
of a director or executive officer to act in our best interest, and any other factors such officer deems appropriate. After reviewing
the facts and circumstances of each transaction, the Chief Compliance Officer, with assistance from the legal staff, determines whether
the director or officer in question has a direct or indirect material interest in the transaction and whether or not to approve the transaction
in question.
With respect
to our Chief Executive Officer, President and Chief Financial Officer (who also serves as our principal accounting officer) and Corporate
Controller, our codes of ethics require that each such officer must:
| • | Discuss
any material transaction or relationship that could reasonably be expected to give rise to
a conflict of interest with our General Counsel; |
| • | In
the case of our President and Chief Financial Officer and Corporate Controller, obtain the
prior written approval of our General Counsel for all material transactions or relationships
that could reasonably be expected to give rise to a conflict of interest; and |
| • | In
the case of our Chief Executive Officer, obtain the prior written approval of the audit committee
for all material transactions that could reasonably be expected to give rise to a conflict
of interest. |
In
the case of any material transactions or relationships involving our President and Chief Financial Officer or our Corporate Controller,
the General Counsel must submit a list of any approved material transactions semiannually to the audit committee for its review.
Under
SEC rules, certain transactions in which we are or will be a participant and in which our directors, executive officers, certain shareholders
and certain other related persons had or will have a direct or indirect material interest are required to be disclosed in this related
person transactions section of our proxy statement. In addition to the procedures above,
our
audit committee reviews and approves or ratifies any such transactions that are required to be disclosed. The committee makes these decisions
based on its consideration of all relevant factors. The review may be before or after the commencement of the transaction.
If
a transaction is reviewed and not approved or ratified, the committee may recommend a course of action to be taken.
SHAREHOLDER PROPOSALS
AND NOMINATIONS
Any
proposal that a shareholder wishes to be considered for inclusion in the proxy and proxy statement relating to the Annual Meeting of
Shareholders to be held in 2024 must be received by the Company no later than January 27, 2024. Any other proposal or director nomination
that a shareholder wishes to bring before the 2024 Annual Meeting of Shareholders without inclusion of such matter in the Company’s
proxy materials must also be received by the Company no later than January 27, 2024. All proposals must comply with the applicable
requirements or conditions established by the SEC and the Company’s bylaws, which requires, among other things, certain information
to be provided in connection with the submission of shareholder proposals. In addition, our proxy access bylaw permits a shareholder,
or a group of up to 20 shareholders, owning at least three percent of the Company’s outstanding shares of capital stock continuously
for at least three years, to nominate and include in our proxy materials director nominees which shall not exceed the greater of two
directors or 20% of the board, provided that the shareholders and nominees have complied with the requirements set forth in our bylaws.
Notice of proxy access director nominees must also be received by the Company no later than January 27, 2024. All proposals must
be directed to the Corporate Secretary of the Company at 601 Riverside Avenue, Jacksonville, Florida 32204. The persons designated as
proxies by the Company in connection with the 2024 Annual Meeting of Shareholders will have discretionary voting authority with respect
to any shareholder proposal for which the Company does not receive timely notice.
In
addition to satisfying the foregoing requirements, to comply with the universal proxy rules, shareholders who intend to solicit proxies
in reliance on the SEC’s universal proxy rule for director nominees must provide notice that sets forth the information required
by Rule 14a-19 under the Exchange Act of 1934, as amended, no later than May 13, 2024 and must comply with the additional requirements
of Rule 14a-19(b). Black Knight will not consider any proposal or nomination that is not timely or otherwise does not meet the bylaw
and SEC requirements. We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal
that does not comply with these and other applicable requirements.
OTHER MATTERS
The
Company knows of no other matters to be submitted at the meeting. If any other matters properly come before the meeting, the enclosed
proxy card confers discretionary authority on the persons named in the enclosed proxy card to vote as they deem appropriate on such matters.
It is the intention of the persons named in the enclosed proxy card to vote the shares in accordance with their best judgment.
AVAILABLE INFORMATION
The
Company files Annual Reports on Form 10-K with the SEC. A copy of the Annual Report on Form 10-K for the fiscal year ended
December 31, 2022 (except for certain exhibits thereto), including our audited financial statements and financial statement schedules,
may be obtained, free of charge, upon written request by any shareholder to Black Knight, Inc., 601 Riverside Avenue, Jacksonville,
Florida 32204, Attention: Investor Relations. Copies of all exhibits to the Annual Report on Form 10-K are available upon a similar
request, subject to reimbursing the Company for its expenses in supplying any exhibit.
By
Order of the Board of Directors
Joseph M. Nackashi
Chief
Executive Officer
Dated:
May 26, 2023
APPENDIX A
NON-GAAP FINANCIAL MEASURES
This
proxy statement contains non-GAAP financial measures, including Adjusted revenues, Adjusted EBITDA, 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, operating income, operating
margin, 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.
Adjusted
revenues - We define Adjusted revenues as Revenues adjusted to include the revenues that we did not record during the respective
period due to the deferred revenue purchase accounting adjustment recorded in accordance with GAAP. We also exclude the effect of in-year
acquisitions and divestitures and the market and/or legislative effect on origination and foreclosure volumes.
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; |
| • | Other
expense (income), net; |
| • | Equity
in (earnings) losses of unconsolidated affiliates, net of tax; |
| • | Gain
related to investments in unconsolidated affiliates, net of tax; |
| • | Net
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; |
| • | costs
related to the ICE Transaction; and |
| • | costs
associated with expense reduction initiatives. |
These
adjustments are reflected in Corporate and Other.
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; |
| • | gain
related to investments in unconsolidated affiliates, net of tax; |
| • | the
net incremental depreciation and amortization adjustments associated with the application
of purchase accounting; |
| • | 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
related to the ICE Transaction; |
| • | costs
associated with expense reduction initiatives; |
| • | costs
and settlement losses (gains) associated with significant legal matters; |
| • | adjustment
for income tax expense primarily related to the tax effect of the non-GAAP adjustments and
a discrete income tax benefit related to the establishment of a deferred tax asset as a result
of our reorganization of certain wholly-owned subsidiaries; 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.
BLACK
KNIGHT, INC.
Reconciliation
of GAAP to Non-GAAP Financial Measures
(In millions)
(Unaudited)
| Reconciliation
of Net Earnings to Adjusted EBITDA |
| | |
Year
ended December 31, |
| | |
2022 | |
2021 | |
2020 |
| Net
earnings attributable to Black Knight | |
$452.5 | |
$207.9 | |
$264.1 |
| Depreciation
and amortization | |
369.6 | |
365.0 | |
270.7 |
| Interest
expense, net | |
100.6 | |
83.6 | |
62.9 |
| Income
tax expense | |
22.4 | |
35.7 | |
41.6 |
| Other
expense (income), net | |
11.9 | |
6.4 | |
(16.4) |
| Equity
in (earnings) losses of unconsolidated affiliates, net of tax | |
(1.3) | |
7.3 | |
26.1 |
| Gain
related to investment in unconsolidated affiliates, net of tax | |
(305.4) | |
(9.9) | |
(93.2) |
| Net
losses attributable to redeemable noncontrolling interests | |
(2.5) | |
(28.0) | |
(18.3) |
| EBITDA | |
647.8 | |
668.0 | |
537.5 |
| Deferred
revenue purchase accounting adjustment | |
— | |
— | |
0.4 |
| Equity-based
compensation | |
55.7 | |
42.9 | |
40.6 |
| Debt
and/or equity offering expenses | |
— | |
— | |
0.1 |
| Acquisition-related
costs | |
7.3 | |
8.0 | |
26.1 |
| ICE
Transaction-related costs | |
22.3 | |
— | |
— |
| Expense
reduction initiatives | |
2.2 | |
5.3 | |
5.2 |
| Adjusted
EBITDA | |
$735.3 | |
$724.2 | |
$609.9 |
BLACK
KNIGHT, INC.
Reconciliation
of GAAP to Non-GAAP Financial Measures (Continued)
(In
millions, except per share data)
(Unaudited)
| Reconciliation
of Net Earnings to Adjusted Net Earnings |
| |
|
Year ended December 31, |
| |
|
2022 |
|
2021 |
| Net
earnings attributable to Black Knight |
|
$452.5 |
|
$207.9 |
| Equity
in (earnings) losses of unconsolidated affiliates, net of tax |
|
(1.3) |
|
7.3 |
| Gain
related to investment in unconsolidated affiliates, net of tax |
|
(305.4) |
|
(9.9) |
| Depreciation
and amortization purchase accounting adjustment |
|
207.5 |
|
219.0 |
| Equity-based
compensation |
|
55.7 |
|
42.9 |
| Debt
and/or equity offering expenses |
|
— |
|
2.3 |
| Acquisition-related
costs |
|
7.3 |
|
8.0 |
| ICE
Transaction-related costs |
|
22.3 |
|
— |
| Expense
reduction initiatives |
|
2.0 |
|
5.3 |
| Legal
matters |
|
12.4 |
|
4.2 |
| Income
tax expense adjustment |
|
(82.3) |
|
(67.4) |
| Redeemable
noncontrolling interests adjustment |
|
(5.8) |
|
(48.1) |
| Adjusted
net earnings |
|
$364.9 |
|
$371.5 |
| |
|
|
|
|
| Adjusted
EPS |
|
$2.35 |
|
$2.38 |
| Weighted
average shares outstanding, diluted |
|
155.6 |
|
155.8 |
PAGE
INTENTIONALLY LEFT BLANK
| Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
V18702-P94580
! ! !
For
All
Withhold
All
For All
Except
For Against Abstain
BLACK KNIGHT, INC. To withhold authority to vote for any individual
nominee(s), mark "For All Except" and write the
number(s) of the nominee(s) on the line below.
BLACK KNIGHT, INC.
601 RIVERSIDE AVENUE
JACKSONVILLE, FL 32204
01) Anthony M. Jabbour
02) Catherine L. (Katie) Burke
03) David K. Hunt
04) Joseph M. Otting
05) Ganesh B. Rao
06) John D. Rood
07) Nancy L. Shanik
Nominees:
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor,
administrator, or other fiduciary, please give full title as such. Joint owners should each sign
personally. All holders must sign. If a corporation or partnership, please sign in full corporate
or partnership name by authorized officer.
2. Approval of a non-binding advisory resolution on the compensation paid to our named executive officers.
3. Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the 2023 fiscal year.
NOTE: In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting and any adjournment or
postponement thereof.
1. Election of seven directors to serve until the 2024 annual
meeting of shareholders:
The Board of Directors recommends you vote FOR ALL
for proposal 1.
The Board of Directors recommends you vote FOR proposals 2 and 3.
! ! !
! ! !
VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information
up until 11:59 P.M. Eastern Time on July 11, 2023. Have your proxy card in hand when
you access the website and follow the instructions to obtain your records and to create an
electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/BKI2023
You may attend the meeting via the Internet and vote during the meeting. Have the information
that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M.
Eastern Time on July 11, 2023. Have your proxy card in hand when you call and then follow
the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we
have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717.
SCAN TO
VIEW MATERIALS & VOTEw |
 | V18703-P94580
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
Black Knight, Inc. Meeting Information
2023 Annual Meeting of Shareholders
July 12, 2023
11:00 a.m. Eastern Time
www.virtualshareholdermeeting.com/BKI2023
BLACK KNIGHT, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
BLACK KNIGHT, INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 12, 2023
The undersigned hereby appoints the Chief Executive Officer and Corporate Secretary of Black Knight, Inc. (Black Knight), and
each of them, as Proxies, each with full power of substitution, and hereby authorizes each of them to represent and to vote, as
designated on the reverse side, all the shares of Black Knight common stock held of record by the undersigned as of May 19, 2023,
at the Annual Meeting of Shareholders to be held at 11:00 a.m., Eastern Time, or any adjournment or postponement thereof.
The meeting will be held virtually at www.virtualshareholdermeeting.com/BKI2023.
For shares voted by mail, this instruction and proxy card is to be returned to the tabulation agent (Black Knight, Inc., c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717).
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO SUCH DIRECTION
IS MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
Continued and to be signed on reverse side |
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