CoreLogic, Inc. (CLGX)

CLGX 
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CoreLogic, INC. (CLGX)

2013 Investor Day Conference

May 16, 2013 1:00 pm ET

Executives

Dan Smith

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

Frank D. Martell - Chief Financial Officer

George S. Livermore - Executive Vice President of Global Sales and Client Strategy

Susan Allen - Vice President of Strategic Relationships

Jay Kingsley

Barry M. Sando - Executive Vice President for the Mortgage Origination Services and Default Services Segments

Arlene Hyde - Senior Vice President of Strategic Relationships For Business and Information Services

Mark Fleming

Analysts

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

Darrin D. Peller - Barclays Capital, Research Division

Lauren Slabaugh - Stephens Inc., Research Division

Presentation

Dan Smith

All right. Good morning -- afternoon. Welcome to the CoreLogic 2013 Investor Day. I'm Dan Smith, in charge of IR for the company. This our first investor day since our spin at 2010. And as you'll hear from management team today, we had a busy 3 years, as many of you would know. We've refined the business mix, we've improved our operational efficiency and cost efficiency, we've increased our market share in key businesses, and we delivered strong shareholder value through earnings and return of capital and share repurchases. Main point today is CoreLogic has a solid growth strategy, we've identified the engines of future growth and we're taking decisive steps towards securing a strong, profitable and growing future. Through the focus strategic growth plan, our close to drive cost savings and technology transformation initiatives, we think that we are in good position to deliver continued satisfaction to our customers with industry leading data, analytics and workflow solutions, and we see a clear path towards meaningful growth in the future.

As we discussed, we expect to use the funds from our free cash flow from operations to reinvest in the business for future growth, while at the same time, returning capital mostly via share repurchases. So this will be a great and informative day for you. And then from a disclosure perspective, I'll just make a couple of points. First, we posted our slide presentation on the web, which includes additional details and reconciliations to non-GAAP measures. Second, we may make forward-looking statements during today's presentation which are in the context of federal securities laws concerning our expected business and operational plans, and acquisition and growth strategies and expectations for industry conditions. And all these statements are subject to unknown risks and uncertainties that could cause results to be different than the material from those described in the forward-looking statements. Thanks. With that, we've got a brief video, and then we'll turn it over to Anand Nallathambi, our President and CEO.

[Presentation]

Anand K. Nallathambi

Good afternoon. Welcome to our second investor day. The first one was on May 10th of 2010 when we just went out, and we've been busy over the last 3 years, and so we're excited to talk to you today and brief you on how we are repositioning the company for the future. You heard from Frank and I and you hear from us regularly on the quarterly earnings call, so we'll keep our comments brief today. But today is about giving you a deeper dive into our operations and to give you how we have transformed the business and how we're repositioned for the future. I'm excited to have our executive team here presenting to you today. I'll give a very brief introduction to the people so you can get -- put it in some context.

After me, it will be Frank Martell. In addition to -- all of you know him. And in addition to being our Chief Financial Officer, Frank is a key architect in transforming our vision into operational strategies. He also plays a critical role in shepherding our operational strategies to make sure they stay within the confines of prudent financial metrics. After Frank, we'll have George Livermore, I don't need to necessarily go through all the order, I'll just say George Livermore and Barry Sando, they are 20-plus veterans in the business and they've been with CoreLogic for a long time. And they will talk to you about different things. George more on the growth initiatives and in our alignment towards client engagement and putting everything that we have across products into closer view with our customers. Barry will talk about our high scale, high operating leverage businesses that our market leaders in their industry, and over the last 2 years, in a very transaction-rich, refi environment, his margins had been really growing, and he'll talk to the transformation that he is doing to continue that path and continue to gain further margins and profitability.

After them, I want to also recognize Arlene Hyde and Susan Allen, these are practitioners in mortgage banking, they've been with major mortgage banking companies. We're glad to have them because they bridge the gap between where we have as far as data provision and all the analytics and stuff. And they bring the client perspective and identify that -- identify the new pinpoints that the customers have with all the evolving and changing regulatory environment and several products, the proper way, to enable the deep embedment that we are going to talk about throughout our presentations today. Then we'll have Jay Kingsley come in and talk about -- he leads our geospatial solutions group, and he is going to be talking about our significant diversification to date. And that's our foray into insurance underwriting and also in the energy verticals. In addition to the diversification into adjacent markets, the one important thing about geospatial is it's a testament and a great example of our competency that started as an outgrowth of our operational excellence initiatives coming out of the flood data services operation. So you could kind of see how through what we do sometimes, we find areas of interest that we can carry across and monetize those things into adjacent verticals.

Last but certainly not the least is Dr. Mark Fleming, our Chief Economist, he's the public face for our CoreLogic insights, and Mark's group is responsible for converting our data points into industry forecast, especially on home price depreciation, valuation and housing economic trends. So that's the lineup today. Let's get into my piece of it.

I want to just give a little bit of a perspective on what makes our firm unique. What's our unique value proposition? We want to talk about the business model that has been transformed to produced sustainable growth and profitability over the last 36 months. We'll provide you a little bit with the market context and our position as the preferred choice of underwriting and risk management support to the financial services industry. And we'll also talk a little bit about the strategic pillars for longer-term growth and shareholder value creation.

Here's the new CoreLogic. We're a much different company today than we were in 2010 when we became a stand-alone public company. Over the last 3 years, we have streamlined our top -- portfolio mix, we engineered our operations to fit the evolving mortgage environment and repositioned the company for future growth. We have transformed the company with a concentrated focus on Data and Analytics and in growing mortgage services that have high operating leverage. Our operational model is now more nimble and it leverages strategic partners, consolidated and centralized infrastructures, and simply put, all of this leads to, we are the leading provider of must-have data, analytics and services in the U.S. and Australia, and we are the leader by a big margin.

What's our unique value proposition? Unparalleled data assets, comprehensive covers and property data that's hard to replicate resulting in significant barriers to entry. You will hear that through Susan Allen's presentation and also Arlene Hyde's and Jay Kingsley's. We provide best-in-class services, evidenced by the size and scale of our mortgage services. Barry will hit up on them and he'll also talk about the future transformation plans that he's got to continue that growth. We are the preferred provider of risk management services to the market makers in the financial services industry, and we're taking that competency to adjacent verticals. Our new operational infrastructure provides us with the elasticity to produce sustainable financial results in the new normal mortgage environment. Obviously, 2012 and '13 have been really good mortgage years but we think we are ahead of the curve and we are prepared and well positioned the company to produce sustainable results going into the trough years that everybody expects in the mortgage industry. To supplement that ability will also be our diversification efforts that you will hear about today.

Putting our data, analytics and mortgage leadership through partnering with our blue chip client base, we are poised for continued growth in our existing markets and expand into adjacent verticals.

I'll quickly hit CoreLogic operating segments. These 3 are the operating segments that we report through today. In Data and Analytics, we are much more than a service bureau of data. The focus is in growing analytics, advisory services and also in diversifying into geospatial solutions. In Mortgage Origination Services, our growth rate is a testament to our client relationships and the best-in-class nature of our services. While we outpace the market in a transaction-rich refinance environment, we also know that the market makers, our clients, tend to retain share better in a declining transaction environment. This bodes well for us, especially in the coming years. In AMPS, we're assisting major clients in managing their servicing needs, addressing key regulations like QM, and the new CFPB guidelines.

On the competitive advantages, our guys are going to be talking about it throughout their presentation. I'll quickly hit it. In Data and Analytics, as we always talk about it and we'll say it again, the breadth, depth and currency of our property and consumer database is a huge competitive advantage. This competency that we have, has been honed and grown since 1959, some 50-plus years. In Mortgage Origination Services, most of our service solutions are market leaders in their own domains. In our scale-oriented businesses, high automation rates drive operating leverage. In AMPS, we are an extension of our customers' operation. In a complex and evolving regulatory environment, we are the trusted partner for outsourced processing where we partner with clients to solve their key paying points. We have long-standing client relationships, some of them lasting over 25 years. As the flight to quality takes hold in the housing industry, our solutions are deeply embedded within our clients' operating environment. The foundation core for our company is the massive database of property data and mortgage data that powers mission-critical solutions in the real estate, mortgage and insurance, financial services and consumer industries. If you look at the various solutions, it becomes clear that we cover the entire lifecycle of a property and mortgage loan by the scale and comprehensive nature of our extended service solutions in almost all the different phases of lending. It should be noted that we also provide services to the investor and regulatory sides of the business. From a consumer standpoint, the flip side of it, from the time a consumer moves into a rental property, all the way to buying their home, upgrading and investing and protecting their investment, CoreLogic powers a lot of touch points in the homeownership continuum. We help make the process faster and more efficient for all our constituents. The consumers, realtors, lenders, insurance companies and regulatory agencies.

I talked about the touch points in the homeownership continuum. Here, you can see how we intend to leverage our current strength into future growth. The 2 boxes on the left deal with the different data layers. Our team will provide more color on these later. While you could find bits and pieces of many of the disparate sources of data, we have the ability to add the critical dimension of property valuation that brings new sense and new meaning to the whole way of how to manage risk and how to underwrite risk. This is a key value differentiator that separates us from our traditional competitors. We are the market leader in valuations. The 3 boxes on the right speaks to the data elements, the other data elements that CoreLogic has to supplement the traditional data providers. We have done a lot of tests where CoreLogic data provides a significant lift to what you could get outside anywhere in terms of undisclosed liens, in terms of deepness of the -- richness of the property records in terms of who's owning the loan, where the property has been and how is it going, where could it go. Depending upon the future economic trends, we can provide the added dimension that people need to properly underwrite risk. Suffice it to say, we have significant future growth opportunities across the property ecosystem.

We'll talk a little bit about the blueprint for the future. Leveraging from our current strengths, we have laid these out as our strategic pillars. Number one, grow Data and Analytics segment to -- greater than 50% of total revenues. These are pillars that we have talked about, so I'm just reiterating to it because it is the fundamental plan, blueprint for us for the future. We have made good progress on growing our Data and Analytics segment from about 30%, 33% of total revenue, today it's about 41%. It is our segment of focus for diversification of future growth. Scaling Mortgage Origination Services. We have done a lot, we gain share even now. Over the last couple of years, we have added on a lot of new customers and new products and new services. We believe we can grow in MLS and further improve margins and profitability. You will see our track record today in Barry's presentation. It's remarkable. Our unique data solutions and service competencies are applicable in insurance underwriting regulatory compliance and customer acquisition. That's where we intend to diversify and scale especially in the P&C and other markets. In terms of monetizing the data assets, we have an enterprise data management strategy, along with our technology transformation initiative, to put all the data points that we have across our enterprise at the forefront to enhance new product innovation. We have also reorganized internally our organization structure to make sure that we -- our client engagement is much deeper and our product management and delivery is that much closer to bring in the customer's perspective and to funnel these things out.

On implementing the roadmap, in terms of operational excellence and completing Project 30, I believe in the middle of 2011, when we ran out and we said, here's our plan and we have a plan of saving our cost savings target of about $100 million, people said, everybody said it's very hard to accomplish. I stand here today by the strength of the people that are in the room, supporting CoreLogic. Were at 87% of target. Well on our way, on track towards our goal of $100 million by the end of this year.

Finally, consistent capital is something that we've been very serious and we try to distill it all the way down into our organization about what -- how do we -- how we take shareholder value creation and long-term growth as a significant objective across the board. Our capital allocation strategy is based -- balanced on 3 objectives. Frank will talk in detail about it later. But simply, number one, investing in growth for future growth and profitability; returning capital to our shareholders; and the third one, managing debt.

To sum it up, CoreLogic is the market leader in property-centric, must-have data analytics and services. For the past 36 months, like I've said before, we have transformed CoreLogic in a higher-margin growth company. The resiliency that we have in terms of ups and downs of the market is remarkable now and it's been demonstrated over the last 7 quarters. Through our strategic pillars, we have also shown you the blueprint for the future and charting the course for our future. In an environment that calls for increased focus on compliance transparency and higher loan quality, CoreLogic is the industry's trusted partner, offering unique data and services with significant scale and operating leverage. We are deeply embedded with our clients' operations and you'll hear that over and over again because it's a consistent theme, that's what separates us from the competition. On that note, I'm glad that you're here. Thank you for coming. And I'd like to introduce, and let me bring up our Chief Financial Officer, Frank Martell.

Frank D. Martell

Thanks, Anand. Good afternoon, everyone. I appreciate your time today and your attention to and support of CoreLogic. It means a lot to the company and we're proud today to talk a little bit about the progress we make, making in the future, which I think is very, very bright for the company.

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