CoreLogic, Inc. (CLGX)

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CoreLogic, INC. (CLGX)

Credit Suisse 15th Annual Global Services Conference

March 12, 2013 2:30 pm ET


Frank D. Martell - Chief Financial Officer


Unknown Analyst

Okay, so I think we're about ready to begin. Our next presenting company is CoreLogic. And we're very pleased to have with us today CoreLogic's CFO, Frank Martell. And I also do want to point out that Dan Smith, who runs the IR effort at CoreLogic is also in the audience as well.

And with that, I will pass it over to Frank.

Frank D. Martell

Thanks, George [ph]. Good morning, everyone. As George [ph] mentioned, I'm the CFO of CoreLogic. And what I'm going to do today is just to give you just -- for those of you who are not familiar with the company, just a little bit of a primer on what we do, our unique value proposition, take you through how we did the recently concluded year, talk about the focus areas for 2013, and then I'll answer any questions at the end that anybody may have.

By way of a quick overview, CoreLogic at its essence is the leading property information, analytics and services company in the U.S. and Australia. We have approximately 99.9% of the U.S. residential properties in our database in the U.S. and about 98% of the Australian residential properties in our database. Most of our information is must-have, and I'll talk about that, why that is the case in both the origination and the servicing of home loans and mortgages. And we have significant revenue streams across the real estate, mortgage and capital markets and increasingly, in other verticals such as geospatial, insurance, oil and gas and telco.

As I mentioned, we have must-have data analytics and services. We believe we have the most comprehensive set of data in the industry. I think if you call most of the clients across the industry, the key originators and servicers, they would acknowledge that CoreLogic is the gold standard in property records and analytics. A lot of our analytics are patented. We have over 20 patents and counting on the analytics side. We have comprehensive servicing. When you originate a loan, the credit checks, the flood certifications and the escrow tax payment processing are all areas that CoreLogic has a significant market share, and then we have a significant scale of managing those businesses, and then we have a blue-chip client base.

CoreLogic has been on a journey of transformation the last couple of years, culminating in record financial results in 2012. We actually spun off our parent company, First American, in the middle of 2010. From 2010 to the end of last year, we restructured the company very aggressively, reshaped the portfolio into the segments, in which I'll talk about in a minute. In addition, we took out about $82 million of cost out of the infrastructure of the company, transformed the margin characteristics and the cash flow characteristics and delivered a lot of value for our shareholders.

These are our 3 key operating segments: Data Analytics, Mortgage Origination Services and what we call AMPS, which is Asset Management and Processing Solutions. This is formerly called the Default segment. You can see the revenue distribution in these segments, about 40% of our revenue comes from Data Analytics, 40% from Mortgage Origination Services and about 20% from AMPS.

A part of the transformation process that I alluded to is we are growing the Data and Analytics segment. About 3 years ago, it's about 1/3 of the company; last year, it was 40%. And we stated that one of our key goals in the next couple of years is to drive that percentage up over 50% of the company, and we believe we have the plans to do that.

If you look at each segment, in the Data and Analytics area, 2/3 of the revenue stream come from our core property records, licensing and related analytics and advisory services. The model there is long-term contracts, staggered terms across the client base, very, very sticky and consistent growing revenue. CoreLogic is in the residential property sector primarily, but this is an area that tends to be embedded in the key operating systems of our clients. So it's a very sticky revenue stream, very predictable revenue stream.

We have a geospatial business, which is related to taking property maps and overlaying different data sets on it, primarily for the property and casualty insurance industry where we model hazard risks, either flood, wildfire, earthquake, et cetera and score the properties based on the risk of natural hazards. We are a leading provider of realtor solutions. About 50% of the realtors in the U.S. use our workflow solution on their desktops. We call it kind of a Zillow on steroids, where you're able to go through and interrogate in, in depth the properties that are in the areas that the realtors service, do analytics, valuations on those properties, et cetera.

We are one of the largest tenant screening for multifamily properties, so we do background screening for prospective tenants for major clients in the multifamily space. And then we are also a credit bureau for the under-banked population, about 40 million folks across the U.S. that avail themselves of payday lending services. They don't have access to traditional retail banking opportunities. Last year, the Data and Analytics generated about 31% margin and grew 12% year-over-year.

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