CoreLogic, Inc. (CLGX)

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Corelogic Inc (CLGX)

Q2 2013 Earnings Call

July 25, 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

Lauren Slabaugh - Stephens Inc., Research Division

Carter Malloy - Stephens Inc., Research Division

Brett Horn - Morningstar Inc., Research Division

Ryan O'Steen - Keefe, Bruyette, & Woods, Inc., Research Division

Kevin D. McVeigh - Macquarie Research



Good day, ladies and gentlemen, and welcome to the Q2 2013 CoreLogic Incorporated Earnings Conference Call. My name is Allison, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I'd now 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 second 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 details 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 including the most recent annual report on Form 10-K and the subsequent 10-Q. Our forward-looking statements are based on information currently available to us, and we do not intend to 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 equivalence is included in the appendix to today's presentation. Finally, unless specifically identified, comparisons to second quarter financial results to prior periods should be understood on a year-over-year basis that is in reference to the second quarter 2012. Thanks.

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

Anand K. Nallathambi

Thanks, Dan, and good morning, everyone. Welcome to CoreLogic's second quarter earnings call. I will begin my remarks today with an overview of our second quarter and first half operating results. I will then discuss our focus for the balance of 2013, and the progress we're making against our strategic growth initiatives. Frank will then cover our financial results, and we will end the call with Q&A.

CoreLogic delivered outstanding financial results in the second quarter in the first half of 2013. Our Mortgage Origination Services and Data and Analytics segments continue to grow at double-digit rates through a combination of product and service innovation, operating leverage and market share gains. We believe all 3 of our operating segments have outperformed their respective markets so far in 2013.

Through the first half of 2013, CoreLogic has delivered strong growth in revenues, operating and net income, adjusted EBITDA and adjusted EPS. We also exceeded our Project 30 targets, generated adjusted EBITDA margins of 30% and repurchased about 3% of our common shares. Importantly for the future, we continue to aggressively reinvest in key strategic growth areas and our Technology Transformation Initiative, or TTI. The recently announced acquisitions of Marshall & Swift/Boeckh or MSB, DataQuick and the flood and tax processing operations of Bank of America are important catalysts to help us accelerate progress against our strategic goals. I'll talk more about these transactions in a few minutes.

Second quarter revenues were up 9.7%. MOS and D&A segment revenues increased 25% and 11%, respectively, as we gained market share in several business units and capitalized on higher demand for our must-have property information, analytics and services. These high-margin segments accounted for approximately 83% of our total second quarter revenues. Our MOS segment continued to benefit from elevated levels of refinancing, as well as shared gains in our flood, credit and tax servicing businesses in the second quarter. We also benefited from a trend among current and prospective clients to outsource critical functions to partners with strong or internal controls and processes in response to an increasingly complex and difficult regulatory environment.

As a result of our strong operating performance over the past 2 years and the purchase of BofA's flood and tax processing operations, we expect our MOS segment to continue to outperform overall market volume trends for the balance of this year and into 2014. D&A revenue growth accelerated during the second quarter in response to increase purchase market activity and our clients' need for help in navigating through today's evolving regulatory environment.

Our geospatial business also expanded at double-digit rates. Revenues in our Asset Management and Processing Solution segments, or AMPS, contracted about 15% in the second quarter compared to an estimated 20% decline in industry volumes. In addition to contracting market volumes, the decline in revenues was also partially attributable to our exit of certain marginally profitable product lines over the past year. In the face of likely continued double-digit declines in market volumes, our focus on AMPS remains on service quality and margin expansion.

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