CoreLogic Reports Fourth Quarter and Full-Year 2014 Financial Results
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February 24, 2015, Irvine, Calif. –
—Execution of Strategic Transformation Program Drives Double-Digit Data & Analytics Growth, Technology Processing Solutions Market Outperformance and Record Free Cash Flow—
- Revenues up 5% to $345.5 million driven by 16% growth in Data and Analytics (D&A) segment. Technology and Processing Solutions (TPS) revenues outperformed estimated U.S. mortgage volume trends.
- Operating income from continuing operations increased $55.4 million to $36.2 million reflecting the impact of lower operating expenses including a 2013 non-cash impairment charge with no 2014 counterpart.
- Net income from continuing operations up $25.8 million to $16.5 million. Diluted EPS from continuing operations of $0.18 per share compared with a $0.10 per share prior year loss. Adjusted EPS up 12% to $0.28 per share.
- Adjusted EBITDA up 16% to $84.1 million; adjusted EBITDA margin of 24%.
- Repurchased 0.6 million common shares; $81.2 million debt repaid.
- Revenues of $1.4 billion, unchanged from 2013 levels - 13% growth in D&A and the benefit from TPS share gains offset the impact of an estimated 40% decline in U.S. mortgage market volumes.
- Operating income from continuing operations up 19% to $169.8 million reflecting the impact of lower operating expenses and impairment charges partially offset by higher depreciation and amortization.
- Net income from continuing operations down 11% to $89.7 million primarily due to the impact of lower U.S. mortgage volumes and higher interest expense. Diluted EPS from continuing operations of $0.97 per share, down 6%. Adjusted EPS of $1.33 per share, down 21%.
- Adjusted EBITDA of $360.2 million; adjusted EBITDA margin of 26%.
- Completed 2014 share repurchase program (3.1 million shares repurchased).
Irvine, Calif., February 24, 2015—CoreLogic (NYSE:CLGX), a leading global property information, analytics and data-enabled services provider, today reported financial results for the full year and quarter ended December 31, 2014.
“CoreLogic delivered an outstanding operating performance in 2014 in the face of a very challenging set of market dynamics. We finished the year with accelerating momentum as we continued to expand our D&A footprint and reap the benefits of our market leadership in TPS. Revenue, profit and cash flow were up in the fourth quarter, despite a drop of about 5% in U.S. mortgage volumes," said Anand Nallathambi, President and Chief Executive Officer of CoreLogic. “We are exiting 2014 a strong and high performing company. As we move forward into 2015, we are squarely focused on enabling and accelerating the growth of our unique data assets, analytics and services through innovation, technology and operational excellence and deeper client intimacy.”
“We continue to shift our business mix toward data-driven, subscription based models built around scaled market-leading solutions and services. As a result of this strategy, our core mortgage operations continue to outperform market volume trends and we materially expanded and diversified our D&A revenues in the fourth quarter,” added Frank Martell, Chief Operating and Financial Officer of CoreLogic. "The durability of our business model allows us to continue to invest in product and service innovation, technology leadership and operational improvements and, at the same time, return significant amounts of capital to our shareholders and reduce our debt balances.”
Fourth-Quarter Financial Highlights
Fourth quarter revenues totaled $345.5 million, 5% higher than prior-year levels, as market share gains, organic growth and acquisition-related revenues more than offset the impact of an estimated 5% decline in mortgage origination volumes. D&A revenues rose 16% to $164.1 million driven principally by growth in insurance, spatial solutions, international and core property data revenues, which more than offset the impact of lower mortgage volumes, unfavorable foreign currency translation and the exit of certain non-core product lines. TPS revenues decreased 3% year-over-year to $183.6 million as the impact of contracting mortgage volumes, lower project-related document processing and retrieval revenues and the planned run-off of a non-core credit reporting service offset the benefit of market share gains.
Operating income from continuing operations totaled $36.2 million for the fourth quarter compared with a loss of $19.3 million for the fourth quarter of 2013. The fourth quarter 2013 operating loss was attributable to a pre-tax non-cash goodwill impairment charge of $42.2 million related to the planned divestiture of the Company’s Asset Management and Processing Solutions (AMPS) business. Before the effect of the 2013 impairment charge, fourth quarter 2014 operating income from continuing operations increased 58%, reflecting benefits from D&A growth and favorable mix, TPS share gains, as well as lower operating and SG&A costs related to the ongoing cost efficiency programs. These benefits were partially offset by increased depreciation and amortization associated with the acquisition of Marshall & Swift/Boeckh (MSB) and Data Quick (DQ). Fourth quarter 2014 operating income margin was 10% compared with 7% (before the impairment charge discussed above) for the fourth quarter of 2013.
Fourth quarter net income from continuing operations totaled $16.5 million compared with a net loss of $9.3 million in the same 2013 period. The $25.8 million year-over-year increase was driven primarily by D&A growth, TPS share gains, the 2013 AMPS impairment charge discussed previously and lower taxes which more than offset the impact of lower U.S. mortgage volumes, unfavorable foreign currency translation and higher interest expense associated with the acquisition of MSB and DQ. Diluted EPS from continuing operations totaled $0.18 for the fourth quarter of 2014 compared with a loss of $0.10 in the fourth quarter of 2013. As discussed previously, fourth quarter 2013 diluted EPS from continuing operations included pre-tax non-cash impairment charges of $42.2 million associated with the exit of AMPS. Adjusted diluted EPS totaled $0.28, up 12% from the same 2013 period reflecting the positive impacts of D&A revenue growth, lower taxes and share repurchases partially offset by an estimated 5% decrease in mortgage loan origination volumes and higher interest expense.
Adjusted EBITDA totaled $84.1 million in fourth quarter 2014 compared with $72.5 million in the same prior year period. Fourth quarter 2014 adjusted EBITDA margin was 24%, compared with 22% in the prior year. The year-over-year increase in adjusted EBITDA was principally the result of D&A revenue growth and favorable business mix and lower costs related to cost productivity programs. D&A adjusted EBITDA totaled $48.6 million, a 22% increase from 2013, as higher revenues from insurance and spatial solutions and international operations more than offset the impact of lower U.S. mortgage loan application volumes, unfavorable currency translation and the exit of a non-core product line. TPS adjusted EBITDA increased 25% or $9.9 million to $50.0 million as share gains, cost management benefits and lower acquisition-related integration costs more than offset the unfavorable impact of lower U.S. mortgage market volumes and the decreased client-related project and discretionary spending.
Operational Excellence Programs
CoreLogic launched Phase I of its Technology Transformation Initiative (TTI) during mid-2012. Phase I of the TTI is focused on migrating the Company's existing technology infrastructure from CoreLogic internal management to an outsourced service arrangement with Dell Services. The migration of CoreLogic’s legacy systems and data center infrastructure to Dell Services is expected to provide new functionality, increased performance and a reduction in costs commencing during the second half of 2015. During 2014, the Company successfully completed the migration of its Dallas, Texas data center to a Dell Services operated facility. The migration of the Company’s remaining data center, based in Santa Ana, California, is expected to be complete by mid-2015. Full-year 2014 charges related to implementation of Phase I of the TTI totaled $15.6 million.
Phase II of the TTI, launched during 2014, focuses on the development of the Company's next generation technology (NextGen) platform which is designed to augment and eventually replace portions of our legacy systems. During 2014, the Company commenced the development of its NextGen platform capabilities including certain proof of concept deliverables. During the fourth quarter of 2014, the Company announced the formation of the CoreLogic Innovation Labs (CIL) in collaboration with Pivotal Software, Inc. The CIL is designed to accelerate progress on the NextGen platform as well as support the upgrading of existing technology assets and facilitating the greater monetization of the Company’s data assets. Investments in Phase II of the TTI are expected to aggregate approximately $15 million per year beginning in 2015. Full-year 2014 charges related to implementation of Phase II of TTI aggregated $3.4 million.
During the fourth quarter of 2013, CoreLogic launched a cost reduction program and operational initiatives designed to lower 2014 operating expenses by at least $25 million. Full-year 2014 savings associated with these programs totaled approximately $30 million.
Liquidity and Capital Resources
At December 31, 2014, the Company had cash and cash equivalents of $104.7 million compared with $134.4 million at December 31, 2013. As of December 31, 2014, the Company had available capacity on its revolving credit facility under the Credit Agreement of $465 million.
Total debt as of December 31, 2014 was $1.3 billion compared with $1.4 billion as of September 30, 2014 and $840 million as of December 31, 2013. The decrease in debt from September 30 to December 31, 2014 was attributable to the Company’s ongoing debt reduction program. The increase in debt from December 31, 2013 to December 31, 2014 reflects the financing of the acquisition of MSB and DQ completed on March 25, 2014 which was partially offset by $194.9 million in principal repayments made over the final nine months of 2014 attributable to the Company’s debt reduction program.
During the fourth quarter of 2014, the Company repaid approximately $81.2 million in term loan, revolving and other debt obligations. The Company also repurchased 0.6 million of its common shares for a total of $18.7 million during the quarter. In 2014, the Company repurchased approximately 3.1 million of its common shares for $91.5 million.
Free cash flow (FCF) for the twelve months ended December 31, 2014 totaled $248.4 million, which represented 69% of adjusted EBITDA. FCF is defined as net cash provided by continuing operating activities less capital expenditures for purchases of property and equipment, capitalized data and other intangible assets. Net operating cash provided by continuing operations for the twelve months ended December 31, 2014 was $335.6 million.
2015 Financial Guidance (Continuing Operations)
($ in millions except adjusted EPS)
$1,470.0 - $1,500.0
$390.0 - $405.0
$1.50 - $1.60
(1) Definition of adjusted results, as well as other non-GAAP financial measures used by management is included in the Use of Non-GAAP Financial Measures section of this release. A reconciliation of 2014 Non-GAAP measures to their nearest GAAP equivalents are also provided in this release.
2015 guidance is based upon the following estimates and assumptions:
- 2015 U.S. new purchase and refinancing mortgage origination unit volumes equivalent to 2014 levels.
- 10%-15% appreciation of the U.S. dollar against the Australian and New Zealand currencies.
- Completion of TTI Phase I by mid-2015; estimated 2015 savings of approximately $10 million.
- TTI Phase II investment of approximately $15 million.
- Progressive reduction in debt balances in line with long-term debt to EBITDA target ratio of 2.5 times.
- Repurchase of 2 to 3 million common shares over the balance of 2015.
The CoreLogic press release announcing its financial results for the fourth quarter and full-year 2014 is available to download as a PDF by clicking the link below.
CoreLogic Reports Fourth Quarter and Full-Year 2014 Financial Results
CoreLogic management will host a live webcast and conference call on Wednesday, February 25, 2015, at 8:00 a.m. Pacific time (11:00 a.m. Eastern Time) to discuss these results. All interested parties are invited to listen to the event via webcast on the CoreLogic website at http://investor.corelogic.com. Alternatively, participants may use the following dial-in numbers: 866-202-0886 for U.S./Canada callers or 617-213-8841 for international callers. The Conference ID for the call is 94079698.
Additional detail on the Company's fourth quarter results is included in the quarterly financial supplement, available on the Investor Relations page at http://investor.corelogic.com.
A replay of the webcast will be available on the CoreLogic investor website for 30 days and also through the conference call number 888-286-8010 for U.S./Canada participants or 617-801-6888 for international participants using Conference ID 12263010.
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CoreLogic (NYSE: CLGX) is a leading global property information, analytics and data-enabled services provider. The Company's combined data from public, contributory and proprietary sources includes over 3.5 billion records spanning more than 40 years, providing detailed coverage of property, mortgages and other encumbrances, consumer credit, tenancy, location, hazard risk and related performance information. The markets CoreLogic serves include real estate and mortgage finance, insurance, capital markets, and the public sector. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and managed services. Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and mitigate risk. Headquartered in Irvine, Calif., CoreLogic operates in North America, Western Europe and Asia Pacific. For more information, please visit www.corelogic.com.
Safe Harbor / Forward Looking Statements
Certain statements made in this press release are forward-looking statements within the meaning of the federal securities laws, including but not limited to those statements related to the Company's investment and strategic growth plans, cost productivity and the TTI; the Company's overall financial performance, including future revenue and profit growth and market position, and the Company's margin and cash flow profile; the Company's 2015 financial guidance and assumptions thereunder; mortgage and housing market trends, including mortgage origination volumes; and our plans to reduce our outstanding debt and continue to return capital to shareholders through our share repurchase program. Risks and uncertainties exist that may cause the results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements include the risks and uncertainties set forth in Part I, Item 1A of our most recent Annual Report on Form 10-K, as amended or updated by our Quarterly Reports on Form 10-Q. These additional risks and uncertainties include but are not limited to: limitations on access to or increase in prices for data from external sources, including government and public record sources; changes in applicable government legislation, regulations and the level of regulatory scrutiny affecting our customers or us, including with respect to consumer financial services and the use of public records and consumer data; compromises in the security of our data, including the transmission of confidential information or systems interruptions; difficult conditions in the mortgage and consumer lending industries and the economy generally; our ability to protect proprietary rights; our TTI and growth strategies and our ability to effectively and efficiently implement them; risks related to the outsourcing of services and international operations; our indebtedness and the restrictions in our various debt agreements; our ability to realize the anticipated benefits of certain acquisitions and/or divestitures and the timing thereof; the inability to control the dividend policies of our partially-owned affiliates; and impairments in our goodwill or other intangible assets. The forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
Use of Non-GAAP (Generally Accepted Accounting Principles) Financial Measures
This press release contains certain non-GAAP financial measures which are provided only as supplemental information. Investors should consider these non-GAAP financial measures only in conjunction with the most directly comparable GAAP financial measures. These non-GAAP measures are not in accordance with or a substitute for U.S. GAAP. A reconciliation of non-GAAP measures to the most directly comparable GAAP financial measures is included in this press release. The Company is not able to provide a reconciliation of projected adjusted EBITDA or projected adjusted earnings per share, where provided, to expected results due to the unknown effect, timing and potential significance of special charges or gains.
The Company believes that its presentation of non-GAAP measures, such as adjusted EBITDA, adjusted EPS and FCF, provides useful supplemental information to investors and management regarding CoreLogic's financial condition and results. Adjusted EBITDA is defined as earnings from continuing operations before interest, taxes, depreciation, amortization, non-cash stock compensation, non-operating gains/losses and other adjustments plus pretax equity in earnings of affiliates. Adjusted net income is defined as income from continuing operations before equity earnings of affiliates, adjusted for non-cash stock compensation, amortization of acquisition-related intangibles, non-operating gains/losses, and other adjustments plus pretax equity in earnings of affiliates, tax affected at an assumed effective tax rate of 38% for 2014 and 40% for 2013. Adjusted EPS is derived by dividing adjusted net income by diluted weighted average shares. FCF is defined as net cash provided by continuing operating activities less capital expenditures for purchases of property and equipment, capitalized data and other intangible assets. Other firms may calculate non-GAAP measures differently than CoreLogic, which limits comparability between companies.