CoreLogic, Inc. (CLGX)

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CoreLogic (CLGX)

Q4 2012 Earnings Call

February 22, 2013 11:00 am ET


Dan Smith

Anand K. Nallathambi - Chief Executive Officer, President, Director and Member of Acquisition Committee

Frank D. Martell - Chief Financial Officer


Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

Darrin D. Peller - Barclays Capital, Research Division

Kevin D. McVeigh - Macquarie Research

Carter Malloy - Stephens Inc., Research Division

Brett Horn - Morningstar Inc., Research Division

Bethany Caster



Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 CoreLogic Incorporated Earnings Conference Call. My name is Chanel, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Dan Smith, Vice President, Investor Relations. Please proceed.

Dan Smith

Thank you and good morning. Welcome to our investor presentation and conference call where we present our financial results for the fourth quarter of 2012. Speaking today will be CoreLogic's President and CEO, Anand Nallathambi and CFO, Frank Martell.

Before we begin, let me make a few important points. First, we have posted our slide presentation, which includes additional details on our financial results on our website. Second, please note that during today's presentation, we may make forward-looking statements within the meaning of the federal securities laws, including statements concerning our expected business and operational plans, performance outlook and acquisition and growth strategies and our expectations regarding industry conditions.

All of these statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please refer to our SEC filings, including the most recent annual report on Form 10-K and subsequently filed 10-Qs. Our forward-looking statements are based on information currently available to us, and we do not intend and undertake no duty to update these statements for any reason.

Additionally, today's presentation contains financial measures that are non-GAAP financial measures. A reconciliation of these non-GAAP measures to their GAAP equivalents is included in the appendix to today's presentation.

Finally, unless specifically identified, comparisons of fourth quarter financial results to prior periods should be understood on a year-over-year basis. That is, in reference to the fourth quarter of 2011.

Thanks, and now let me introduce our President and CEO, Anand Nallathambi.

Anand K. Nallathambi

Thank you, Dan, and good morning, everyone. Welcome to CoreLogic's Fourth Quarter 2012 Earnings Call. I will begin today with an overview of our fourth quarter and full year operating performance. I will then recap our 2013 focus areas and growth opportunities. Frank will then cover our financial results, and we'll end the call with Q&A.

2012 was an exceptional year for CoreLogic, and we finished on a high note in the fourth quarter with record financial results. The fourth quarter marked our sixth consecutive quarter of exceeding market expectations. Over the last 3 months of 2012, we delivered double-digit revenue growth, significantly higher margins and earnings per share and record free cash flow.

Our 3 operating segments outperformed their respective markets and delivered EBITDA growth in the quarter. In addition, we made significant progress on the core elements of our Technology Transformation Initiative and exceeded our Project 30 cost savings target. Fourth quarter revenues were up almost 19%. Revenues in our Mortgage Origination Services and Data and Analytics segments jumped 38% and 12%, respectively; as we gained market share and capitalized on higher demand for our must-have property information, analytics and services. Revenues in our Asset Management and Processing Solutions segment, or AMPS as we now call it, contracted by a relatively modest 2% in the fourth quarter compared with a double-digit decline in overall market volumes.

For the full year, CoreLogic's revenues rose more than 17%, fueled by strong growth in our Mortgage Origination Services segment and Data and Analytics segment. Our Mortgage Origination Services segment benefited from elevated levels of refinancing in 2012. Our scale and strong operational performance also helped us to realize substantial market share gains. These gains were particularly strong in the flood data and tax servicing businesses, where new loan volumes processed grew at approximately 45% and 52%, respectively. This compares with the overall growth of mortgage originations volumes in the 30% range.

We continued to expand our D&A footprint in 2012. We grew data licensing and analytics revenues and rapidly expanded our advisory services business in response to our clients' need to navigate through today's evolving and complex regulatory and compliance environment.

We also grew our geospatial business, which leverages CoreLogic's unique property-related data assets. With the acquisition of CDS Business Mapping in December, CoreLogic is emerging as a leading provider of geospatial data and analytics to the P&C insurance, real estate, telecommunications and energy industries.

The company continued to boost productivity and improve profit margins in the fourth quarter. Progress in this area was evidenced by a 49% year-over-year increase in fourth quarter adjusted EBITDA. Adjusted EBITDA margins were 26%, 530 basis points higher than last year. Adjusted EBITDA for the full year was up 54% and adjusted EBITDA margins expanded 690 basis points from 2011.

As I mentioned on past calls, Project 30 was the single largest driver of CoreLogic's margin expansion in 2012. In addition to exceeding our cost savings target in 2012, Project 30 has also been a catalyst for transforming our technology operations and corporate shared services functions into higher performing contributors to the company's long-term success.

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