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, 2017.
“CoreLogic delivered a very strong operating performance in the third quarter. As we did throughout the first half, we expanded revenues in our insurance, spatial and international operations and continued to deploy new products, pick up market share and take pricing actions in mortgage and real estate solutions. Our core mortgage operations have unmatched scale and capabilities which ensure we are strategic partners to our clients and allow us to continue to significantly outperform U.S. mortgage market volume trends,” said Frank Martell, President and Chief Executive Officer of CoreLogic. “Demand for unique property-related solutions and insights has never been greater across the real estate ecosystem. This demand is reflected in our organic growth rate for 2017 which we believe to be a very strong result in the face of the ongoing reset of the U.S. mortgage market to a purchase-driven cycle.”
“Adjusted EBITDA margins were up substantially versus the prior year to 29%. We believe these gains demonstrate the positive impacts of improving revenue mix, efficiency and operating leverage and help validate we are on track to hit our longer term 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 $1.2 billion to our shareholders over the past 6 years. This year alone, we have repurchased almost 4% of our outstanding shares for $132 million,” Martell added.
Third quarter reported revenues totaled $483 million compared with $524 million in the same 2016 period and $474 million in the second quarter of this year. 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 25% decline in U.S. mortgage origination unit volumes. RMW revenues totaled $227 million, a decline of 8%, as the benefits from market outperformance, pricing and new product growth partially offset lower mortgage market volumes. PI revenues declined 8% to $258 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 $62 million for the third quarter, 27% below the same 2016 period. The year-over-year decline in operating income was primarily driven by legal settlement costs totaling approximately $18 million and the impact of an estimated 25% decline in U.S. mortgage loan origination volumes that collectively more than offset the revenue upsides discussed above, as well as the benefits of ongoing productivity and cost management programs. Operating margin was 13% of revenues, including the unfavorable impact of approximately 360 basis points attributable to the previously discussed legal settlement costs, compared with 16% in the prior year.
Third quarter net income from continuing operations totaled $31 million, down 14% from prior year. The decrease resulted primarily from the impacts of the legal settlement costs and lower U.S. mortgage market volumes discussed previously as well as higher interest costs, which more than offset the operating benefits discussed above. Diluted EPS from continuing operations totaled $0.36 for the third quarter of 2017 compared with $0.40 in 2016. Adjusted EPS totaled $0.72 compared with $0.73 in 2016.
Adjusted EBITDA totaled $139 million in the third quarter compared with $143 million in the same prior year period and $135 million in the second quarter of this year. The modest year-over-year decline in adjusted EBITDA was principally attributable to the estimated 25% decline in U.S. mortgage unit volumes which were largely offset by operating leverage and cost productivity program benefits. Adjusted EBITDA margin was 29%, up from 27% in the same prior year period. PI segment adjusted EBITDA totaled $72 million compared to $68 million in 2016 as the benefits of growth in insurance, spatial and international operations, significantly higher valuation solutions related margins and cost productivity initiatives more than offset lower mortgage market volumes. PI adjusted EBITDA margin rose approximately 400 basis points to 28% fueled primarily by revenue mix and higher valuation solutions margins. RMW adjusted EBITDA was $76 million, down 10% from 2016 levels, as market outperformance, pricing and new product growth and cost management partially offset the impacts of lower mortgage origination volumes. RMW adjusted EBITDA margin was 33%, down approximately 100 basis points year-over-year. RMW margins were up approximately 100 basis points compared with the second quarter of 2017.
Liquidity and Capital Resources
In June 2017, the Company acquired a 45% stake in Mercury Network for $70 million which was funded through available capacity on its revolving credit facility. In August 2017, the Company closed the acquisition of the remaining 55% of Mercury Network for $83 million which was funded by cash on hand and through available capacity on the revolving credit facility. Mercury Network is a technology company headquartered in Oklahoma City, providing software used by more than 800 small and medium-sized mortgage lenders and appraisal management companies to manage their collateral valuation operations.
In August 2017, the Company completed an amendment of its senior secured credit facility which increased borrowing capacity by more than $500 million, and extended tenor by 28 months to August 2022. Upon closing, the Company’s amended senior secured credit facility consisted of $1,800 million of outstanding term loans and a $700 million revolving credit facility.
At September 30, 2017, the Company had cash and cash equivalents of $149 million compared with $72 million at December 31, 2016. Total debt as of September 30, 2017 was $1,822 million compared with $1,619 million as of December 31, 2016. As of September 30, 2017, the Company had available capacity on its revolving credit facility of $700 million.
Net operating cash provided by continuing operations for the twelve months ended September 30, 2017 was $365.4 million. Free cash flow (FCF) for the twelve months ended September 30, 2017 totaled $293 million which represented 61% 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.
During the third quarter, CoreLogic repurchased 2 million of its common shares for $92 million. Year-to-date, the Company has repurchased 3 million or about 4% of our common shares for $132 million, and has increased its full year stock repurchase target by 10% to 3.65 million shares.
CoreLogic third qtr 2017 financial results.pdf
CoreLogic management will host a live webcast and conference call on Thursday, October 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: 1-844-861-5502 for U.S./Canada callers or 1-412-858-4604 for international callers.
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 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 10112615.
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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 share repurchase amounts, cost reductions, market share gains and pricing actions, 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 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 the Company'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.