CoreLogic Reports Second Quarter 2013 Financial Results
Email Dan Smith
July 24, 2013, Irvine, Calif. –
Record Levels of Revenue, Operating and Net Income and EPS Delivered
- Revenues up 9.7% to $427.0 million fueled by double-digit growth in Mortgage Origination Services (MOS) and Data and Analytics (D&A) segments.
- Operating and net income from continuing operations up 1.2% to $68.4 million and up 9.0% to $44.9million, respectively reflecting higher revenues, operating leverage benefits and cost reduction programs.
- Adjusted EBITDA up 6.0% to $132.7 million; adjusted EBITDA margin of 31.1%.
- Diluted EPS from continuing operations up 17.9% to $0.46 per share. Adjusted EPS of $0.56, up 21.7%.
- Full-year common share repurchase target raised from 5 to 8 million common shares.
- Marshall & Swift/Boeckh (MSB), DataQuick Information Systems (DataQuick) and Bank of
America's flood and tax processing operations to expand D&A and MOS segments.
CoreLogic (NYSE:CLGX), a leading residential property information, analytics and
services provider, today reported financial results for the quarter ended June 30, 2013.
“CoreLogic delivered outstanding financial results in the second quarter and first half of 2013. Our MOS and D&A segments continue to grow at double-digit rates through a combination of product and service innovation, operating leverage and market share gains," said Anand Nallathambi, President and Chief Executive Officer of CoreLogic. “Importantly for the future, we continue to aggressively reinvest in strategic growth areas and our technology transformation initiative. The acquisition of MSB and DataQuick, once it closes, will expand our footprint in property and casualty insurance and add additional scale to our D&A segment. We are also excited to be able to provide flood and tax processing services to Bank of America in line with our long-stated business imperative of driving scale and operating leverage in our MOS segment.”
“Our second quarter financial results demonstrate the impact of our relentless focus on delivering against the key elements of our strategic business plan. We continue to grow and scale up D&A and MOS, boost profit margins and drive free cash flow,” added Frank Martell, Chief Financial Officer of CoreLogic. “Our strong margin and cash flow profile provides the financial flexibility to complete the recently-announced acquisitions and, at the same time, significantly increase the return of capital to our shareholders by expanding our 2013 repurchase program to at least 8 million shares.”
Second Quarter Financial Highlights
Consolidated second quarter revenues increased 9.7% to $427.0 million. MOS revenues grew 24.6% to $184.4 million as a result of higher demand for credit reports, tax services and flood certifications as well as market share gains by the credit and tax services businesses. D&A revenues rose 11.2% to $169.0 million driven principally by higher demand for property-related information and analytics as well as advisory services related to assisting clients with regulatory compliance. Asset Management and Processing Services segment (AMPS) revenues of $80.1 million were down 14.5% reflecting a double-digit drop in market volumes of delinquent loans and foreclosure starts as well as the impact of the exit of unprofitable product lines over the past twelve months.
Operating income totaled $68.4 million for the second quarter of 2013 compared with $67.6 million for the second quarter of 2012. The 1.2% increase in operating income was principally attributable to revenue gains in the MOS and D&A segments and improved MOS operating leverage which more than offset the impact of lower AMPS revenues as well as one-time transaction fees of $4.2 million related to the Company's recently announced acquisitions and investments of $6.4 million in the Technology Transformation Initiative (TTI). Second quarter 2012 operating income included the benefit of approximately $7.0 million related to the settlements of intellectual property (IP) claims asserted by CoreLogic, partially offset by $3.1 million in one-time costs related primarily to the TTI launch.
Second quarter 2013 operating income margin was 16.0% which included the impact of TTI and one-time acquisition costs discussed above (248 basis points of operating income margin) compared with 17.4% for the second quarter of 2012. Second quarter 2012 operating income margins also included net benefits of $3.9 million (100 basis points of operating income margin) related to the IP settlements discussed previously. Excluding the effects of non-recurring items, positive operating margin trends reflect the benefit of a shift in business mix toward higher margin MOS and D&A revenues as well as ongoing cost reductions programs. Second quarter 2013 cost reductions related to the Company's Project 30 program were approximately $5.8 million. Project 30 cost savings relate primarily to workforce productivity and cuts in spending on real estate and outside services.
Net income from continuing operations totaled $44.9 million, up 9.0% from the prior year. Diluted earnings per share (EPS) from continuing operations totaled $0.46 for the second quarter of 2013, up 17.9% from $0.39 in the second quarter of 2012. Adjusted diluted EPS totaled $0.56, which represented a $0.10 or 21.7% increase over the same 2012 period. Increases in EPS and adjusted EPS reflect higher revenue and profit margins as well as the impact of share repurchases during 2012 and the first quarter of 2013.
Adjusted EBITDA totaled $132.7 million in the second quarter 2013, up $7.6 million or 6.0% from the second quarter of 2012. Second quarter 2012 adjusted EBITDA included the previously discussed benefit of $7.0 million related to the settlements of IP claims which has no 2013 counterpart. Second quarter 2013 adjusted EBITDA margin was 31.1%. MOS adjusted EBITDA increased 12.8% to $73.2 million compared with prior-year levels driven by higher volumes processed and market share gains. D&A adjusted EBITDA totaled $52.5 million, a 1.2% decrease from second quarter 2012 as double-digit revenue growth largely offset the year-on-year trend impact of the 2012 IP settlement benefit and continued reinvestment in new product and service capabilities. Adjusted EBITDA attributable to AMPS was $18.8 million, 13.1% below prior-year levels as cost reduction programs partially offset the impact of lower revenues.
Liquidity and Capital Resources
At June 30, 2013, the Company had cash and cash equivalents of $176.6 million compared with $148.9 million at December 31, 2012. Year-to-date 2013 free cash flow (FCF) totaled $114.4 million, which represented 46.0% 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.
Total debt as of June 30, 2013 was $788.8 million, down $3.6 million from December 31, 2012. As of June 30, 2013, the Company had available capacity on its revolving credit facility of $500 million.
Subsequent to the close of the second quarter, the Company purchased assets and platforms related to Bank of America's flood zone determination and tax processing services operations. The consideration paid to acquire these assets and operating platforms totaled $62.5 million which was funded by cash on hand. The Company also announced the pending acquisition of MSB and DataQuick for $661.0 million. This transaction is expected to close during the third quarter of 2013 and is subject to customary closing conditions including regulatory clearance.
2013 Financial Guidance
Based on current revenue and volume trends within CoreLogic's operating segments, projected Project 30 cost savings and TTI investments, and seasonality, the Company expects to generate revenues between $1.575 and $1.6 billion and adjusted EBITDA of $460 - $475 million. These ranges are consistent with the Company's full year 2013 financial guidance issued on January 31st. As a result of expected improvements in net income and the increase in the Company's share repurchase program, previous adjusted EPS guidance of $1.65 - $1.75 is being increased to $1.70 - $1.80.
Updated guidance assumes a $1.55 trillion originations market, a 15% reduction in the market volume of delinquent loans and foreclosure starts and 8 million common shares repurchased during 2013.
The guidance ranges discussed previously exclude the impact of the acquisition of Bank of America's flood and tax processing operations and the pending acquisition of MSB and DataQuick. The Company plans to issue updated guidance including the impact of these transactions following the closing of the acquisition of MSB and DataQuick, which is expected during the third quarter of 2013.
The CoreLogic press release announcing its financial results for the second quarter 2013 is available to download as a PDF by clicking the link below.
CoreLogic Reports Second Quarter 2013 Financial Results
CoreLogic management will host a live webcast and conference call on Thursday, July 25, 2013, 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: 1-877-474-9505 for U.S./Canada callers or 857-244-7558 for international callers. The Conference ID for the call is 60364162.
Additional detail on the Company's second 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 1-888-286-8010 for U.S./Canada participants or 617-801-6888 for international participants using Conference ID 96937273.
Media Contact: Alyson Austin, office phone: 949-214-1414, e-mail: firstname.lastname@example.org
Investor Contact: Dan Smith, office phone: 703-610-5410, e-mail: email@example.com
CoreLogic (NYSE: CLGX) is a leading property information, analytics and services provider in the United States and Australia. The Company's combined data from public, contributory and proprietary sources includes over 3.3 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, transportation and government. 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 seven countries. For more information, 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 overall financial performance, including future revenue and profit growth, future margin improvement, future adjusted EBITDA and adjusted EPS performance, and future free cash flow generation and margin expansion; our ability to meet our 2013 business, strategic growth and financial objectives; the Company's full-year expected results and 2013 financial guidance; estimated future cost savings and the impact thereof; mortgage and housing market trends, including mortgage origination and mortgage delinquency volumes; net operating expense reductions, expected non-recurring cash and non-cash charges; targeted cost reductions including Project 30 and the Technology Transformation Initiative; the anticipated benefits of the acquisitions of MSB, DataQuick, and Bank of America's flood and tax processing operations to the Company's 2013 financial results and the expected timing thereof; and our plans to continue to return capital to shareholders through our 2013 share repurchase program, including the expected number of shares expected to be repurchased. 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 failure to consummate or delay in consummating the transaction if required closing conditions or regulatory clearances are not satisfied or for any other reason; failure to successfully integrate the operations, technology, infrastructure and employees of MSB, DataQuick and Bank of America's flood and tax processing operations into our Data & Analytics and Mortgage Origination Services segments; and the additional 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 various external sources; government legislation, regulations and the level of regulatory scrutiny affecting our customers or us, including the Consumer Financial Protection Bureau and with respect to the use of public records and consumer data; compromises in the security of our data transmissions, including the transmission of confidential information or systems interruptions; difficult conditions in the mortgage and consumer lending industries and the economy generally, together with our customer concentration and the impact of these factors thereon; our growth strategy and cost reduction plan and our ability to significantly decrease future allocated costs and other amounts in connection therewith; risks related to the outsourcing of services and our international operations; the inability to control the operations and dividend policies of our partially-owned affiliates; impairments in our goodwill or other intangible assets; and the restrictive covenants in the agreements governing certain of our outstanding indebtedness. 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 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 EBIDTA 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 and adjusted EPS 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 one-time 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, non-operating gains/ losses, and other adjustments plus pretax equity in earnings of affiliates, tax affected at an assumed effective tax rate of 40%. Adjusted EPS is derived by dividing adjusted net income by diluted weighted shares. Other firms may calculate non-GAAP measures differently than CoreLogic, which limits comparability between companies.