CoreLogic, Inc. (CLGX)

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CoreLogic, Inc. (CLGX)

Q2 2011 Earnings Call

August 4, 2011 5:00 p.m. ET


Dan Smith - Investor Relations

Anand Nallathambi - President and Chief Executive Officer

James Balas - Senior Vice President, Controller


Carter Malloy - Stephens Inc.

George Mihalos - Bank of America Merrill Lynch

Darrin Peller - Barclays Capital

Bill Warmington - Raymond James

Kevin Mcveigh - Macquarie Research Equities

Thomas Egan - JPMorgan



Good day, ladies and gentlemen and welcome to the Second Quarter 2011 CoreLogic Incorporated Earnings Conference Call. My name is Stacey and I will be your conference moderator for today. At this time all participants are in a listen-only mode. We will conduct a question and answer session towards the end of the conference. (Operator Instructions) I would now like to turn the presentation over to your host for today, Mr. Dan Smith, Head of Investor Relations. Please proceed.

Dan Smith

Thank you and good afternoon. Welcome to our investor presentation and conference call where we present our financial results for the second quarter of 2011. Speaking today will be CoreLogic's President and CEO, Anand Nallathambi, and Controller and Principal Accounting Officer Jim Balas. 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 our 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 second quarter financial results to prior periods should be understood on a year-over-year basis, that is in reference to the second quarter of 2010. Thanks. And now let me introduce our President and CEO, Anand Nallathambi.

Anand Nallathambi

Thank you, Dan, and good afternoon everyone. Welcome to our second quarter earnings conference call. During the second quarter CoreLogic recorded $409 million in adjusted revenue and $61 million in adjusted EBITDA. Our core businesses in tax servicing flood determination and risk and fraud analytic performed in line with or better than initial expectations. In these strategic areas we had significant client wins as well as revenue and EBITDA performance that were better than industry trends.

As we have discussed in the past, these areas benefit from significant competitive advantages and barriers to entry and represent the core of our company. In contrast to these businesses, results in our marketing services, appraisal and default related businesses experienced significant declines in revenue and EBITDA, as client losses, volume declines and other business specific issues impacted results.

Looking forward, it is critical for us to build on the success in our core business areas and mitigate the risks in others. This will improve overall operating efficiency and business mix. I will take you through our current plans in few minutes, but first let me give you a brief description of the final results from the quarter.

In the risk and fraud group, on an adjusted basis revenues increased 17% and EBITDA increased 20% from the same quarter last year. Excluding the acquisition of RP Data, risk and fraud revenues were up 7%, and EBITDA was up about 8%. Continued growth in risk and fraud reflects strong winds in data licensing, forensic due diligence and document retrieval solutions. In addition, continued growth in fraud detection, income verification and risk advisory services made for a great quarter.

In the specialty finance group, a significant decline in revenues from our marketing services business and increased associated with credit reports led to lower revenues and EBITDA compared to a year ago. In the mortgage origination services group, on an adjusted basis, revenues and EBITDA declined significantly as lower appraisal volumes in our captive appraisal company and in our national joint ventures led to weaker results. As we discussed on our first quarter call, increased competitive pressure and government actions have yielded an extremely difficult market environment for appraisal. We have been taking a longer-term view in responding to pricing and service terms and renewals.

As a result of these developments, we decided to walk away from significant customer volumes in our captive appraisal business during the quarter. While this decision will ultimately help us to improve our financial returns in the appraisal business, it produced a significant amount of the year-over-year decline in revenue and EBITDA for the segment. The same market pressures I commented on earlier impacted the revenues of the appraisal business within our joint ventures. In addition a large joint venture customer closed an origination division that focused on FHA loans.

Because we recognize our share of joint venture net earnings under the equity method of accounting, our results are affected disproportionately relative to these revenue changes. Tax servicing and flood zone determination businesses performed significantly better than the market as a whole. With a 6% decline in revenues verses roughly 25% lower origination volumes. In default and technology, the loss of client volumes led to decrease in revenues and EBITDA.

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