CoreLogic® (NYSE: CLGX), a leading global provider of property information, insight, analytics and data-enabled solutions, today reported financial results for the quarter ended September 30, 2016.
“CoreLogic delivered another exceptionally strong operating performance in the third quarter. Quarterly revenues and operating income were at record levels as we continued to grow our market leadership and operational scale. We also aggressively executed against productivity programs through which we expect to yield cost reductions of at least $30 million in 2016 and a similar amount in 2017,” said Anand Nallathambi, President and Chief Executive Officer of CoreLogic. “We generated strong organic growth rates from our core operations during the third quarter. As we enter 2017, we expect to continue this strong performance as we capitalize on opportunities in such areas as valuation solutions, share gains, pricing, and product development.”
“Our consistently outstanding operating performance over the past six years has allowed us to return almost $1 billion in capital to our shareholders in the form of share repurchases. Our success is the result of a relentless focus on efficiently deploying scaled must have data-driven solutions that, collectively, enable our clients to more precisely underwrite and manage their risks and capitalize on opportunities as they arise,” added Frank Martell, Chief Operating Officer of CoreLogic. “Our cash flow generation remains consistently strong and we are returning the majority of these funds to our shareholders. In 2016 and 2017, we expect to repurchase at least 8 million of our common shares and believe the continued repurchase of a significant amount of our shares represents a substantial value creation mechanism for our long term shareholders.”
Third Quarter Financial Highlights
Third quarter reported revenues totaled $524 million compared with $386 million in the same 2015 period. The year-over-year increase of 36% was driven primarily by valuation solutions (VSG-related) upsides, growth in insurance and spatial solutions, international operations and higher risk management and underwriting solutions revenues; offset partially by the timing of project-related revenues and the wind down of non-core product lines. Property Intelligence (PI) segment revenues rose 79% to $281 million driven principally by growth attributable to VSG as well as insurance and spatial solutions and international operations. Risk Management and Work Flow (RMW) revenues totaled $246 million, 6% above 2015 levels, as the benefits from higher U.S. origination unit volumes and market share and/or pricing gains in tax, flood zone determination and credit services were partially offset by the exit of non-core product lines.
Operating income from continuing operations totaled $85 million for the third quarter of 2016 compared with $66 million for the same prior year period. The 29% year-over-year increase in operating income was principally attributable to higher revenue and cost reduction program benefits which more than offset elevated levels of investment in compliance and cyber-security.
Third quarter net income from continuing operations totaled $36 million compared with $28 million in the same 2015 period. The 27% increase was primarily the result of the operating upsides discussed previously and lower interest expense and tax provisions. Diluted EPS from continuing operations totaled $0.40 for the third quarter of 2016, up from $0.31 in the prior year reflecting the positive impacts of revenue growth and cost reduction programs as well as reduced interest expense and taxes. Adjusted diluted EPS totaled $0.73, up 35% year-over-year.
Adjusted EBITDA totaled $143 million in the third quarter compared with $116 million in the same prior year period. The 23% year-over-year increase in adjusted EBITDA resulted principally from revenue growth and expense management partially offset by investments in compliance and cyber-security discussed previously. Adjusted EBITDA was 27% of revenues. PI segment adjusted EBITDA totaled $68 million compared with $50 million in 2015 reflecting higher revenues and cost reduction program benefits. RMW adjusted EBITDA of $84 million was $8 million higher than the same 2015 period as gains were fueled primarily by favorable market volumes, as well as pricing and/or share gains in tax, flood zone determination and credit services.
Liquidity and Capital Resources
On July 18, 2016, the Company amended and increased its senior secured credit facility by $525 million. Upon closing, the Company’s amended senior secured credit facility consisted of $1,333 million of outstanding term loans and a $550 million revolving credit facility. The Company utilized approximately $411 million of the $525 million proceeds to redeem all of its outstanding 7.25% Senior Notes due 2021 (103.625% of the principal amount outstanding plus accrued and unpaid interest and transaction-related fees). The Company utilized $110 million of the proceeds to reduce its outstanding revolving credit facility to approximately $280 million. Subsequently in the third quarter, the Company made additional term loan and revolver principal payments of approximately $42 million.
As of September 30, 2016, the Company had available capacity on its revolving credit facility of $295 million. Total gross debt as of September 30, 2016 was approximately $1,634 million compared with $1,653 million as of June 30, 2016 and $1,364 million as of December 31, 2015.
During the third quarter, the Company repurchased 2.1 million of its common shares for $84 million. Year-to-date the Company has repurchased approximately 2.9 million shares for $113 million.
At September 30, 2016, the Company had cash and equivalents of $79 million compared with $99 million at December 31, 2015. Net operating cash provided by continuing operations for the twelve months ended September 30, 2016 was $394 million. Free cash flow (FCF - defined as net cash provided by continuing operating activities less capital expenditures for purchases of property and equipment, capitalized data and other intangible assets) for the twelve months ended September 30, 2016 totaled $309 million, which represented 65% of adjusted EBITDA.
Updated Financial Guidance
Based on actual operating performance through September 30, 2016 and projected fourth quarter business and market trends, CoreLogic expects to achieve the upper ends of its previously issued 2016 financial guidance ranges which appear below:
($ in millions except adjusted EPS)
Implied Growth 2016 Versus 2015 Actual
$1,890 - $1,920
24 - 26%
$480 - $500
14 - 18%
$2.20 - $2.30
16 - 21%
(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. These non-GAAP measures should be considered as purely supplemental to GAAP measures and relevant reconciliations, where appropriate, of each non-GAAP to its nearest equivalent GAAP measure are also provided as part of the financial tables provided with this release.
The CoreLogic press release announcing its financial results for the third quarter 2016 is available to download as a PDF by clicking the link below.
CoreLogic Reports Third Quarter Financial Results
The Company expects to increase its 2016 share repurchase program from 3 million to 4 million shares and repurchase at least 4 million additional common shares during 2017.
The Company has expanded its 2017 cost reduction program target from $15 to $30 million.
CoreLogic management will host a live webcast and conference call on Tuesday, October 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 85282281.
Additional detail on the Company's third 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 85282281.
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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 updated financial guidance and market expectations; investment and strategic growth plans, cost reductions, and productivity programs; the Company's overall financial performance, and the Company's margin and cash flow profile. 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, including the launch of the VSG, 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 the Company believes are useful supplemental information to investors and management regarding the Company’s financial condition and results. Investors should consider these non-GAAP financial measures only in conjunction with the most directly comparable GAAP financial measures presented in this press release. 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.
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 effected at an assumed effective tax rate of 36% for 2016 and 35% for 2015. Adjusted EPS is derived by dividing adjusted net income by diluted weighted average shares. Free cash flow 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.