CoreLogic, Inc. (CLGX)

CLGX 
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CoreLogic (CLGX)

Q1 2013 Earnings Call

April 25, 2013 11:00 am ET

Executives

Dan Smith

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

Frank D. Martell - Chief Financial Officer

Analysts

Darrin D. Peller - Barclays Capital, Research Division

Kevin D. McVeigh - Macquarie Research

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

Brett Horn - Morningstar Inc., Research Division

Lauren Slabaugh

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Quarter 1 2013 CoreLogic Inc. Earnings Conference Call. My name is Julianne, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Mr. Dan Smith, Vice President, Investor Relations. Please proceed, sir.

Dan Smith

Thank you, and good morning. Welcome to our investor presentation and conference call where we present our financial results for the first quarter of 2013. 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 detail of 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 included in the most recent annual report on Form 10-K. 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 first quarter financial results to prior periods should be understood on a year-over-year basis, that is in reference to the first quarter of 2012. 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 first quarter earnings call. I will bring -- begin my remarks today with an overview of our first quarter operating results. I will then recap the progress we are making against our 2013 business plan, as well as our strategic growth initiatives. Frank will then cover our financial results and we will end the call with Q&A.

CoreLogic delivered double-digit revenue growth with significantly higher levels of operating and net income, earnings per share and adjusted EBITDA in the first quarter. Our high margin Mortgage Origination and Data and Analytics segments delivered strong top line growth in the quarter. Importantly, all 3 of our operating segments outperformed their respective markets. For the first 3 months of 2013, we are ahead of our targets for Project 30 cost reductions, free cash flow conversion and repurchases of our common stock. We also continue to make significant progress on the Technology Transformation Initiative.

Our first quarter revenues were up about 11%. Revenues in our Mortgage Origination Services and Data and Analytics segment increased about 25% and 10%, respectively, as we gain market share and capitalize on higher demand for our must-have Property Information Analytics and Services. These high-margin segments accounted for approximately 85% of our total first quarter revenues.

During the quarter, revenues in our Asset Management and Processing Solutions segment contracted by almost 11% compared to an estimated 15% decline in overall market volumes. We also exhibit certain low or unprofitable product lines over the past 12 months.

During the first quarter, our Mortgage Origination Services segment continued to benefit from elevated levels of refinancing, as well as market share gains in the tax servicing business. We are benefiting from an increasingly complex regulatory environment and a trend by clients and prospective clients to seek out partners who offer stronger internal controls and processes.

As a result of this trend and our strong underlying operating performance, we expect to continue to outperform market volumes over the balance of the year in this segment.

We continued to expand our D&A footprint during the first 3 months of 2013. We grew data licensing and analytics revenues and expanded our advisory services business in response to our clients' need to navigate through today's evolving regulatory and compliance environment.

We also grew our geospatial business, which leverages CoreLogic's unique property-related data assets at double-digit rates.

As the housing and mortgage industries continue to strengthen and we extend the reach of our property data analytical tools and services into new verticals, we expect to continue to deliver high single to double-digit growth in D&A revenues.

In addition to delivering double-digit top line growth, CoreLogic also expanded profitability during the first quarter. Year-over-year, adjusted EBITDA increased almost 16%. Boosted by Project 30 savings and a favorable mix, adjusted EBITDA margins were up 130 basis points from the first quarter of 2012. We believe we are solidly on track to reach the sustained 30% EBITDA margins as we exit 2013.

CoreLogic's increased profitability and efficient management of working capital resulted in continued strong free cash flow generation in the first quarter. We used a significant portion of this cash flow to repurchase our common shares. Our continued aggressive share repurchase program reflects our view that, in addition to reinvesting for profitable growth and operating efficiency, this remains an attractive avenue for rewarding our shareholders. By almost any measure, the first quarter was a strong start for CoreLogic from a financial perspective. Our focus and highly integrated business model, built around industry-leading data, analytics and services, positions us well to capitalize on the opportunities presented by an improving housing market.

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