CoreLogic Reports Fourth Quarter and Full-Year 2015 Financial Results
Email Dan Smith
February 24, 2016, Irvine, Calif. –
Record Full-Year Revenues, Operating and Net Income, Free Cash Flow and EPS
- Revenues up 9% to $1,528 million driven by double-digit growth in the Property Intelligence (PI) segment and market outperformance in the Risk Management and Work Flow (RMW) segment and partially offset by $23 million in unfavorable foreign currency translation.
- Operating income from continuing operations up 20% to $203 million reflecting the benefits of revenue growth and cost management.
- Net income from continuing operations up 43% to $128 million with growth in operating results, a gain on investments related to the acquisition of RELS, LLC (RELS) and lower interest costs partially offset by higher taxes and unfavorable currency translation.
- Diluted EPS from continuing operations up 46% to $1.42 per share. Adjusted EPS up 43% to $1.90.
- Adjusted EBITDA up 17% to $423 million including $8 million unfavorable FX; adjusted EBITDA margin of 28%.
- Completed 2015 share repurchase program (2.5 million shares repurchased).
- Revenues up 13% to $391 million driven by 24% growth in PI and RMW market outperformance which more than offset unfavorable currency translation.
- Operating income from continuing operations down 25% to $27 million as positive operating results were offset by transaction and integration costs associated with the launch of the Valuation Solutions Group (VSG) and investments supporting previously announced cost reduction programs.
- Net income from continuing operations up 130% to $38 million including the investment gain mentioned above.
- Diluted EPS from continuing operations of $0.42 compared with $0.18 per share in the prior year period. Adjusted EPS up 25% to $0.35 per share.
- Adjusted EBITDA up 4% to $88 million after absorbing costs attributable to the VSG integration and previously announced cost reduction programs.
- Completed the acquisition of RELS as part of the VSG launch.
CoreLogic® (NYSE:CLGX), a leading global property information, analytics and data-enabled services provider, today reported financial results for the quarter and full-year ended December 31, 2015.
“CoreLogic delivered an outstanding operating performance in 2015 with strong growth in revenue, adjusted EBITDA and adjusted EPS. Fourth quarter revenues grew at a double-digit rate as we accelerated growth in our core underwriting and risk management operations and launched the VSG,” said Anand Nallathambi, President and Chief Executive Officer of CoreLogic. “We are entering 2016 with a clear pathway to sustained growth as we deploy our unique data, analytics and data-enabled services that, collectively, enable our current and future clients in the real estate ecosystem to more precisely underwrite and manage their risks and capitalize on opportunities as they arise. Along these lines, the VSG affords us with a unique value catalyst and an opportunity for strategic growth and leadership in a highly-fragmented and challenged market space.”
“Our fourth quarter financial results exceeded our plan and drove full-year results above the high end of our previously announced 2015 guidance ranges. We exited 2015 with record financial performance and a laser-like focus on scaling our core platforms and enhancing operating margins and cash flow,” added Frank Martell, Chief Operating and Financial Officer of CoreLogic. “Our 2016 guidance reflects strong growth in revenues and profits which will be powered by the VSG launch, organic growth and productivity. Our durable business model allows us to continue to invest in our products and solutions, technology leadership and operational improvements and, at the same time, return capital to our shareholders and manage our debt balances.”
Fourth-Quarter Financial Highlights
Fourth quarter revenues totaled $391 million, 13% higher than prior-year levels, as market share gains, organic growth and acquisition-related revenues more than offset unfavorable currency translation. PI segment revenues rose 24% to $192 million driven principally by improved organic growth trends in property information and analytics and the launch of the VSG which more than offset unfavorable currency translation. Benefits from market share and pricing gains drove RMW revenues up 4% year-over-year to $201 million despite flat U.S. mortgage loan application volumes, the impact of lower project-related document processing and retrieval revenues and the planned run-off of a non-core credit reporting service.
Operating income from continuing operations totaled $27 million for the fourth quarter compared with $36 million for the fourth quarter of 2014. Benefits of previously discussed revenue gains and productivity were offset by VSG-related transaction as well as integration costs and investments in previously announced cost reduction programs aggregating $14 million. Before the effect of these items, operating income from continuing operations increased by approximately $5 million. Fourth quarter operating income margin was 7% compared with 10% for the fourth quarter of 2014. One-time items identified above negatively impacted fourth quarter 2015 operating income margin by about 350 basis points.
Fourth quarter net income from continuing operations totaled $38 million compared with $16 million in the same 2014 period. The $21 million year-over-year increase was driven primarily by increased operating results and a $26 million after-tax gain on investments associated with the acquisition of RELS, which were partially offset by costs associated with the launch of the VSG and previously-announced cost reduction programs as outlined above, higher tax provisions and unfavorable currency translation. Diluted EPS from continuing operations totaled $0.42 for the fourth quarter compared with $0.18 in the fourth quarter of 2014. Adjusted EPS totaled $0.35, up 25% reflecting the positive impacts of growth, reduced operating expenses and share repurchases.
Adjusted EBITDA totaled $88 million in the fourth quarter compared with $84 million in the same prior year period. The 4% year-over-year increase in adjusted EBITDA was principally the result of revenue growth and run rate benefits of previously-completed expense productivity programs which were partially offset by VSG-related transaction and integration costs, investments in ongoing cost reduction programs and unfavorable currency translation of approximately $2 million. PI segment adjusted EBITDA totaled $47 million compared to $48 million in 2014, as higher revenues were offset by unfavorable currency translation of $2 million and investments in cost efficiency and innovation. RMW adjusted EBITDA was $50 million, consistent with 2014 levels, as the benefits of share gains in tax, credit and flood zone determination services, cost management and improved pricing were offset by investment in cost efficiency programs, lower document processing and retrieval revenues and the run-off of a non-core credit reporting service.
Liquidity and Capital Resources
At December 31, 2015, the Company had cash and cash equivalents of $99 million compared with $105 million at December 31, 2014. As of December 31, 2015, the Company had available capacity on its revolving credit facility under the Credit Agreement of $475 million. During the fourth quarter of 2015, the Company acquired Wells Fargo N.A.’s 49.9% interest in RELS for $65 million and Cordell for $49 million using cash on hand.
Free cash flow (FCF) for the twelve months ended December 31, 2015 totaled $256 million, which represented 60% 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, 2015 was $336 million.
In 2015, the Company repurchased 2.5 million of its common shares for $97 million.
Total debt as of December 31, 2015 was $1,364 million compared with $1,331 million as of December 31, 2014. During April 2015, the Company completed an amendment to its Credit Agreement which increased borrowing capacity and lowered interest rates. In addition, the amendment provided for increased flexibility for acquisitions and certain types of investments as well as an extension of the maturity by approximately 13 months.
Financial Guidance and Assumptions
The Company reaffirms the following 2016 guidance ranges which were issued on January 28, 2016.
($ in millions except adjusted EPS)
$1,830 - $1,860
20 - 22%
$465 - $485
10 - 15%
$2.05 - $2.15
8 - 13%
(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 found at the end of the release.
2016 Guidance Assumptions
- Mortgage industry loan origination unit volumes expected to decline approximately 15% from 2015 levels.
- Realization of targeted cost savings totaling at least $30 million.
- Successful integration of LandSafe Appraisal Services (LAS) and RELS with integration costs expected to total $10 to $12 million.
- Successful completion of the FNC, Inc. (FNC) acquisition by the end of the first quarter of 2016.
- U.S. dollar appreciation against the Australian and New Zealand dollars and the Euro of approximately 5% of average 2015 actual rates.
- Opportunistic repurchases of common shares with a focus on managing ratio of net debt to adjusted EBITDA to a long-term target of 2.5 times.
VSG Strategic Update
In line with CoreLogic’s longstanding strategic focus on building scaled and unique data-enabled services, the Company launched the VSG during September 2015. The primary focus of the VSG is to provide unique insights into the valuation of residential properties for underwriting, risk management and opportunity generation.
As part of the launch of the VSG, the Company acquired LAS and the 49.9% interest of Wells Fargo Bank N.A. in RELS during the third and fourth quarters of 2015, respectively. Previously, CoreLogic had owned 50.1% of RELS and reported its operating results in the Company’s financial reporting, in line with its ownership percentage, as a component of equity in earnings of affiliates. LAS and RELS provide real estate asset valuation and appraisal solutions. During December 2015, CoreLogic also announced that it had entered into an agreement to acquire FNC for $475 million. FNC is a leading provider of real estate collateral information technology and solutions that automate property appraisal workflows. The transaction will be funded using cash and debt and is subject to closing conditions and regulatory clearance. It is expected to close by the end of the first quarter of 2016.
The purchase price for LAS, RELS and FNC aggregates $662 million. The Company expects to derive approximately $46 million in cash tax benefits on a net present value basis associated with the acquisitions. The aggregate purchase price, net of expected tax benefits, represents approximately 9.1 times pro forma projected full-year incremental 2016 adjusted EBITDA (excluding CoreLogic’s existing 50.1% share of RELS earnings and integration costs). The acquisition of LAS, RELS and FNC are expected to be accretive to 2016 financial results excluding one-time integration investments and reductions from transitional accounting items.
The Company believes the VSG provides a unique opportunity for strategic growth and leadership in a highly fragmented and challenged market, and the combination of LAS, RELS and FNC, together with CoreLogic’s existing property intelligence assets, provide the foundational elements of a scaled, integrated solutions provider powered by a broad suite of fulfilment, platform, data and analytics capabilities and assets.
Segment and Financial Reporting
In conjunction with the formation of the VSG and CoreLogic’s continued scaling of its core global property information, analytics and data-enabled services and solutions, effective as of December 31, 2015 the Company has enhanced its operating segmentation and reporting as follows:
- The Data & Analytics or "D&A" segment has been renamed PI to reflect the broad and unique nature of the property-level insights provided by the solutions sets contained within this segment. These solution sets are utilized across multiple industry verticals including real estate, mortgage, insurance, public sector, telecommunications and energy. PI includes the Company’s property information and analytics solutions including international operations and the VSG. In addition, all advisory services units have been consolidated and are now reported through the PI segment.
- The Technology and Processing Solutions or "TPS" segment has been renamed RMW to reflect the risk management and underwriting-focused solutions provided by this segment. RMW comprises the Company’s credit services and tenant screening solutions as well as its escrow and post-closing focused units including residential and commercial property tax processing and flood zone determination services. CoreLogic’s existing technology solutions focused units also report through RMW.
The PI and RMW segments are supported by shared enterprise-wide sales, marketing, information technology, data operations and functional centers of excellence.
The Company believes this updated reporting convention will facilitate the review of its results. Three years of reclassified quarterly segment results (on an unaudited basis) can be accessed at http://investor.corelogic.com. Additional details on the Company’s updated financial reporting will be provided in conjunction with the release of the Company’s 2015 Form 10K.
The CoreLogic press release announcing its financial results for the fourth quarter and full-year 2015 is available to download as a PDF by clicking the link below.
CoreLogic Reports Fourth Quarter and Full-Year 2015 Financial Results
CoreLogic management will host a live webcast and conference call on Thursday, February 25, 2016, 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: 1-877-930-8098 for U.S./Canada callers or 253-336-8228 for international callers. The Conference ID for the call is 34530112.
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 1-855-859-2056 for U.S./Canada participants or 404-537-3406 for international participants using Conference ID 34530112.
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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 4.5 billion records spanning more than 50 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 including the VSG and the completion of the acquisition of FNC, cost reduction, and productivity excellence; the Company's overall financial performance, including future revenue and profit growth, and the Company's margin and cash flow profile; the Company's 2016 financial guidance and assumptions thereunder; including those related to the mortgage market overall and the Company's plans regarding outstanding debt and return of capital to shareholders through the 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 clients 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 cyber-based attacks, 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 technology rights; our cost containment and growth strategies and our ability to effectively and efficiently implement them; risks related to the outsourcing of services and international operations; the level of our indebtedness and the restrictions in our various debt agreements; our ability to realize the anticipated benefits of certain acquisitions and the timing thereof; competition in the market and the in-house capabilities of our clients; our ability to attract and retain qualified management; 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 net income, 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 36% for 2016, 35% for 2015 and 38% for 2014. Adjusted EPS is derived by dividing adjusted net income by diluted weighted average common shares outstanding. 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.