Black Knight says little on CEO change

Jabbour replacing Sanzone on April 1.
By: 
Feb. 12, 2018

Black Knight Inc.’s announcement of a new chief executive officer coincided with its fourth-quarter earnings release.

So it was surprising the Jacksonville-based mortgage technology firm didn’t have much to say about the change during its quarterly conference call with analysts, which followed the two Wednesday afternoon news releases.

Anthony Jabbour

Outgoing CEO Tom Sanzone commented on fourth-quarter results without mentioning his upcoming retirement. He is remaining with Black Knight as vice chairman of the board.

Executive Chairman Bill Foley did briefly comment on new CEO Anthony Jabbour, who will take over April 1.

“I’ve known Anthony and worked with him for over 14 years. I am confident that Anthony and the rest of the management team will take the company to the next level,” Foley said.

Jabbour is joining Black Knight from Fidelity National Information Services Inc., or FIS, the banking technology company which previously operated the mortgage technology business that evolved into Black Knight.

Black Knight and FIS were spun off from the title insurance company built by Foley, Fidelity National Financial Inc.

Jabbour joined FIS in 2004 when it was still part of Fidelity National Financial. He was promoted to co-chief operating officer of FIS in December 2015.

FIS disclosed in a Securities and Exchange Commission filing in December that Jabbour was resigning to “pursue another opportunity,” but gave no other details.

Analysts didn’t ask questions about the CEO change during the hour-long conference call.

At least one analyst did address the transition in his post-earnings report on Black Knight.

Tom Sanzone

“(Tom) Sanzone will be missed given his strong leadership in operational execution, but we like that he is staying on with the board and being replaced by a very capable leader that we like in Anthony Jabbour,” said J.P. Morgan analyst Tien-tsin Huang.

“Cultural fit shouldn’t be an issue, given overlap of FIS and Black Knight, and Jabbour’s focus on similar enterprise banking clients. It will be interesting to see if Jabbour steps up the M&A (mergers and acquisitions) engine, given FIS’ history of doing deals,” Huang said.

FIS, Black Knight and Fidelity National Financial are headquartered at the same Riverside Avenue office complex.

FIS and Fidelity National Financial are Fortune 500 companies with revenue exceeding $7 billion last year, while Black Knight is much smaller, with revenue of about $1.05 billion in 2017.

However, Black Knight has a much bigger Jacksonville employment base than the other two.

The roots of its mortgage processing business go back to a Jacksonville company started more than 50 years ago, and Fidelity National Financial moved its headquarters from California to Jacksonville after acquiring that business in 2003.

Black Knight is one of Jacksonville’s largest employers with about 2,400 workers, according to JAXUSA Partnership data.

FIS has about 1,100 Jacksonville employees and Fidelity National Financial has 500, according to JAXUSA, the economic development division of JAX Chamber

Black Knight stock falls after earnings disappoint

Black Knight’s stock fell Thursday after its earnings report disappointed investors.

Adjusted fourth-quarter earnings of 37 cents a share were 7 cents higher than the previous year and in line with analysts’ forecasts. But its adjusted revenue of $268.4 million was below the average forecast of $270 million, Goldman Sachs analyst James Schneider said in his research report.

Black Knight’s forecast of 2018 revenue between $1.105 billion to $1.125 billion was also below expectations, Schneider said.

“We believe investors had expected stronger 2018 guidance given implementation delays in 2017, and will likely view the company’s guidance as disappointing,” he said.

Black Knight’s stock fell $2.45 to $46.10 Thursday.

Piper Jaffray analyst Jason Deleeuw lowered his price target on the stock from $61 to $56 but maintained his “overweight” rating.

“We believe the investment thesis is on track and would be buyers on weakness,” Deleeuw said in his report.

FIS outlines its plans for tax savings windfall

The ink is barely dry on the new federal income tax law, but FIS has plans to put its tax savings to work.

Gary Norcross

During the company’s quarterly conference call last week, CEO Gary Norcross said FIS is expecting $650 million to $700 million in additional cash flow over the next three years because of the lower tax rate, and the company already identified ways in which to use that money.

The first is to increase wages and bonuses for employees, “paying for high performance and rewarding results,” Norcross said. FIS also will enhance tuition reimbursement programs for employees, he said.

FIS also will use some of the proceeds to invest in new innovations for clients and in consolidation of its data centers.

Besides investing in employees and operations, FIS plans to spend some of the extra money to benefit shareholders. Before the earnings report last week, FIS increased its quarterly cash dividend by 3 cents to 32 cents a share.

“We are very pleased with this opportunity to further advance the long-term interest of our employees, clients and shareholders,” Norcross said.

FIS reported adjusted earnings of $1.36 in the fourth quarter, up from $1.14 in the fourth quarter of 2016.

The company forecast 2018 earnings of $5.10 to $5.30 a share, compared with adjusted 2017 earnings of $4.42.

“We are very pleased with our full-year 2017 results, which highlight our ability to drive revenue growth and realize exceptional gains and profitability. We expect the positive momentum that we created to continue into 2018,” Norcross said.

New Zealand timber boosts Rayonier profits

Rayonier Inc. reported fourth-quarter adjusted earnings of 20 cents a share, 15 cents higher than the fourth quarter of 2016 and better than analysts’ forecasts, which ranged from 2 cents to 14 cents, according to Yahoo Finance.

David Nunes

“I remain optimistic about the market environment as we look into 2018,” CEO David Nunes said in the timber and real estate company’s conference call.

“We continue to see steady growth in single-family construction, which is the key driver of wood products demand and ultimately timber demand,” he said.

Demand from China is helping Rayonier, which has timber properties in the Northwest U.S. and in New Zealand as well as in the Southeast U.S.

“One of the most exciting and likely sustainable elements of the Rayonier story is the emergence of New Zealand as a material source of earnings, thanks to its productivity and favorable access to the insatiable Chinese market,” D.A. Davidson analyst Steven Chercover said in a research note.

“We believe New Zealand might be the most underappreciated element of the Rayonier story,” he said.

Rayonier moved its headquarters last year from Downtown Jacksonville to the company’s Wildlight development in Yulee, while it continues to market the project.

The company said it closed $6 million in sales covering 20.7 acres of commercial property in Wildlight in the fourth quarter, and closed another $400,000 in sales for eight residential lots.

Rayonier’s stock edged up by 24 cents to $31.64 Thursday after the strong earnings report, a positive outcome on a day when the Dow Jones industrial average dropped 1,000 points and the other major market indexes also fell by close to 4 percent.

Tax law lifts Web.com earnings by $22.9 million

Web.com Group Inc. is one of a growing list of companies that recorded a one-time benefit from the new federal income tax law that lifted fourth-quarter earnings.

David Brown

Fourth-quarter earnings of $30.8 million, or 62 cents a share, included a $22.9 million tax benefit. The company did not say how that benefit affected earnings per share.

Web.com’s adjusted operating income in the quarter rose 2.6 percent to $43 million.

Jacksonville-based Web.com provides website development services for businesses. During the company’s conference call Thursday, CEO David Brown said Web.com is offering clients more services than just setting up a website.

“Web.com is in the midst of a significant strategic repositioning, which is designed to clearly differentiate us in the market and make us the leader in the faster growing, value-added product segment,” Brown said.

“In the past five years, we’ve seen small businesses’ use of the internet change from just wanting a presence online to taking that website and domain and making it useful, getting found, driving leads, and interacting with customers,” he said.

Kevin Carney

“This segment of the market, value-added services, is growing rapidly, has little national competition, and provides us good returns on our marketing investments.”

Brown also announced during the conference call that Kevin Carney, chief financial officer since 2002, is retiring. The company has not yet picked a replacement.