CoreLogic® (NYSE: CLGX), a leading global provider of property information, insight, analytics and data-enabled solutions, today reported financial results for the quarter ended June 30, 2017.
“CoreLogic delivered a very strong operating performance for the second quarter and first half of 2017. In terms of revenues, we materially outperformed market volume trends in U.S. mortgage and grew our insurance, spatial and international operations. Underlying organic growth accelerated to 4% in the quarter buoyed by new product growth, share gains and pricing actions across our core solution sets,” said Frank Martell, President and Chief Executive Officer of CoreLogic. “We also made major strides in our collateral valuations business during the quarter by expanding our platform-related revenues and footprint, aggressively building our roster of new clients, and significantly boosting operating efficiency and margins.”
“Second quarter results also demonstrate how aggressively we are pursuing and achieving efficiency and operating leverage targets that support our strategic adjusted EBITDA margin goals. Our relentless focus on building unique and market-leading solutions and driving for best-in-class operational and cost efficiencies has resulted in the creation of a durable and highly cash generative business model. This model has allowed us to return $1.1 billion to our shareholders over the past 6 years, including $41 million in share repurchases in the first half of 2017,” Martell added.
Second quarter reported revenues totaled $474 million compared with $500 million in the same 2016 period. During the quarter, market share and pricing-related gains as well as contributions from new products in both the Property Intelligence (PI) and the Risk Management and Work Flow (RMW) segments helped to partially offset the impact of an estimated 15% decline in U.S. mortgage market unit volumes. RMW revenues totaled $225 million, largely consistent with 2016 levels, as the benefits from organic growth mostly offset lower mortgage market volumes. PI revenues declined 9% to $251 million as higher insurance, spatial solutions and international revenues were more than offset by lower valuation solutions revenues attributable to reduced U.S. mortgage market volumes and planned vendor diversification by a significant appraisal management client.
Operating income from continuing operations totaled $78 million for the second quarter, 3% higher than the same 2016 period. Operating margin was 17% of revenues, compared with 15% in the prior year. The year-over-year growth in operating income was driven by significant efficiency gains from ongoing productivity initiatives which more than offset investments in technology and innovation platforms as well as compliance capabilities.
Second quarter net income from continuing operations totaled $41 million, up 2% from prior year. The increase resulted primarily from higher operating income and lower interest expense and tax provisions offset partially by a one-time $6 million charge associated with the final settlement of a previously terminated pension plan. Diluted EPS from continuing operations totaled $0.48 for the second quarter of 2017 compared with $0.45 in 2016. Adjusted diluted EPS totaled $0.72, up 11%, reflecting operating upsides, lower interest expense and the positive impacts of share repurchases.
Adjusted EBITDA totaled $135 million in the second quarter compared with $136 million in the same prior year period as the impact of lower U.S. mortgage market volumes were largely offset by operating leverage and cost productivity program benefits. Adjusted EBITDA margin was 28%, up from 27% in the same prior year period. PI segment adjusted EBITDA totaled $70 million compared to $71 million in 2016 as the impact of lower mortgage origination volumes were mostly offset by the benefits of cost productivity initiatives and higher margins in our valuation solutions related businesses. PI adjusted EBITDA margin was 28%, up from 26% in the same prior year period. RMW adjusted EBITDA was $72 million, down 3% from 2016 levels, as continued organic growth and cost management mostly offset the impacts of lower mortgage volumes. RMW adjusted EBITDA margin was 32%, down from 33% in the same prior year period.
Liquidity and Capital Resources
At June 30, 2017, the Company had cash and cash equivalents of $89 million compared with $72 million at December 31, 2016. Total debt as of June 30, 2017 was $1,655 million compared with $1,619 million as of December 31, 2016. As of June 30, 2017, the Company had available capacity on its revolving credit facility of $178 million.
Net operating cash provided by continuing operations for the twelve months ended June 30, 2017 was $377 million. Free cash flow (FCF) for the twelve months ended June 30, 2017 totaled $305 million, which represented 63% 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.
In June 2017, the Company acquired a 45% ownership position in Mercury Network, LLC for $70 million which was funded by cash on hand and through available capacity on its revolving credit facility. Mercury Network is a technology company headquartered in Oklahoma City, servicing more than 800 small and medium-sized mortgage lenders and appraisal management companies to manage their collateral valuation operations. The purchase of the remaining 55% ownership of Mercury Network is expected to close in the third quarter of 2017, subject to customary closing conditions.
During the second quarter, CoreLogic repurchased 0.5 million of its common shares for $21 million. Year-to-date, the Company has repurchased 1 million shares for $41 million.
The Company recently initiated a process to refinance its current term loan debt and revolving credit facilities. The purpose of this refinancing is to secure a new Credit Agreement (CA) that increases the Company’s financial flexibility by expanding capacity and extending tenor at interest rates and terms substantially equivalent to CoreLogic’s existing CA. This CA is expected to be closed in August 2017.
Financial Guidance and Assumptions
The Company raised the lower end of its 2017 guidance ranges as follows.
($ in millions except adjusted EPS)
Initial 2017 Outlook/Guidance
Revised 2017 Outlook/Guidance
$1,825 - $1,875
$1,835 - $1,875
$450 - $480
$460 - $480
$2.15 - $2.40
$2.20 - $2.40
(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.
The Company is also increasing its full year stock repurchase target by 10% to 3.3 million shares.
CoreLogic second qtr 2017 financial results.pdf
CoreLogic management will host a live webcast and conference call on Wednesday, July 26, 2017, 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: 1-866-807-9684 for U.S./Canada callers or 1-412-317-5415 for international callers.
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 10 days and also through the conference call number 1-877-344-7529 for U.S. participants, 855-669-9658 for Canada participants or 1-412-317-0088 for international participants using Conference ID 10109164.
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CoreLogic (NYSE: CLGX) is a leading global property information, analytics and data-enabled solutions 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 solutions. 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, share repurchase amounts, cost reductions, 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 updated 2017 financial guidance and assumptions thereunder; including those related to the mortgage market overall; and the Company's plans to continue to return 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 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 cost reduction program, technology 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 operations or 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 to respective GAAP 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 net income from continuing operations adjusted for interest, taxes, depreciation and amortization, stock compensation, non-operating gains/losses and other adjustments. Adjusted EPS is defined as diluted income from continuing operations, net of tax per share, adjusted for stock compensation, amortization of acquisition-related intangibles, non-operating gains/losses, and other adjustments; tax affected at an assumed effective tax rate of 35% and 36% for 2017 and 2016, respectively. 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.