Anand Nallathambi, President and Chief Executive Officer, commented on the quarter, "During the third quarter, we took aggressive actions to sharpen our focus on our core businesses and better position CoreLogic to capitalize on our competitive strengths in the data and analytics and core mortgage origination services areas. These core businesses benefit from their leading market presence, unique data assets, intellectual property and world-class domain expertise."
Nallathambi continued, "With a more focused set of businesses and an aggressive cost reduction plan, we believe CoreLogic is positioned for stronger financial results in 2012 and beyond with less dependency on improvement in the mortgage market. Going forward, we believe CoreLogic shareholders will benefit from balanced revenue growth and enhanced margin profiles across our core businesses."
Frank Martell, Chief Financial Officer, commented on the increased cost reduction targets, "We believe the actions taken this quarter, along with our continuing program of aggressive cost reductions and productivity improvements, will allow CoreLogic to reach its goal of 30% adjusted EBITDA margins through 2013. As a result of accelerated progress on our cost reduction plans and stronger mortgage refinancing activity in the second half of 2011, we are increasing our full-year 2011 guidance to $290 - $300 million in adjusted EBITDA and $0.75 - $0.80 in adjusted EPS."
In the discussion below of the business segments and of CoreLogic as a firm, certain information is presented on an adjusted basis. For more information about the Company's adjusted results, as well as other non-GAAP financial measures used by management, please see the Company's quarterly financial supplement on the CoreLogic investor website and discussion on the Use of Non-GAAP Financial Measures found on page 4 of this release.
Third Quarter Financial Highlights (continuing operations)
- Revenues, equity in earnings of affiliates and income from continuing operations were positively impacted by higher-than-anticipated mortgage loan refinancing volumes, cost reduction initiatives and the acquisitions of RP Data Limited and Dorado Network Systems.
- Revenues increased 5.5% year-over-year to $348.4 million, driven by a 14.5% jump in Data and Analytics segment revenues which reflected the acquisition of RP Data in the second quarter of 2011 as well as higher project-related revenues. Business and Information Services segment revenues totaled $169.6 million, down 3.1% from the third quarter of 2010 reflecting an estimated 22.4% year-over-year decrease in mortgage origination volumes offset partially by the acquisition of Dorado Network Systems.
- Third quarter pretax income from continuing operations totaled $9.3 million. Compared to the third quarter of 2010, pretax income from continuing operations was down $31.0 million due mainly to higher expenses including depreciation and amortization ($11.3 million), interest expense ($6.3 million), investments in improving operating efficiency ($10.1 million) and other one-time charges ($8.1 million); which together more than offset the impact of higher revenues. Third quarter net loss of $107.2 million was primarily due to the pre-tax write-down of goodwill and intangibles of $139.5 million related to the exit of the LeadClick business and other charges attributable to discontinued operations.
- Total adjusted EBITDA for the third quarter was $85.4 million (23.6% of adjusted revenues), a decline of 12.1% from the same prior year period. This decline was primarily attributable to the impact of lower mortgage originations.
- Adjusted EBITDA for the Data & Analytics segment totaled $54.9 million in the third quarter, up 5.4% from the third quarter of 2010, reflecting the acquisition of RP Data. Adjusted EBITDA margin for the third quarter was 29.4%, down from 31.5% in the third quarter of 2010 reflecting a greater proportion of advisory project revenue, costs incurred as a result of new product development initiatives and increased external cost of consumer credit data.
- Adjusted EBITDA for the Business and Information Services segment totaled $44.3 million, down 24.3% from the prior year due principally to lower equity earnings in the Company's affiliates, softness in default services and lower flood certification volumes. Adjusted EBITDA margin for the third quarter was 24.5% versus 30.3% in the third quarter of 2010.
- Loss from continuing operations per diluted share was $0.03 for the third quarter.
Liquidity and Capital Resources
- At September 30, 2011, CoreLogic had cash of $138.7 million. During the third quarter, the Company acquired Tarasoft Corporation, a leading provider of Multiple Listing Service systems software to the real estate industry for $30.3 million and also retired a pension-related note of approximately $17.0 million.
- Total debt as of September 30, 2011, was $911.1 million, down $28.0 million from June 30, 2011, with available capacity on the Company's credit facility of approximately $501.7 million. Trailing twelve-month debt-to-adjusted EBITDA ratio as of September 30, 2011 was 2.85x.
- Going forward, the Company will consider the repurchase of common shares and retirement of outstanding debt on an opportunistic basis.
- At November 2, 2011 there were approximately 106.5 million shares of common stock outstanding.
Non-Core Businesses Exited
- During the third quarter, CoreLogic determined that five business units would be exited in order to increase the focus of the Company's core operations and to improve overall profitability.
- Businesses designated as held-for-sale and reported as discontinued operations include Appraisal Management Services, American Driving Records, Inc., CompuNet Credit Services, and Consumer Credit Monitoring Services. As previously announced, LeadClick (Marketing Services) was closed during September 2011.
- For the third quarter of 2011, revenues for these five businesses totaled $58.6 million and adjusted EBITDA aggregated a negative $15.6 million, of which $10.7 million was attributable to shut down costs associated with LeadClick.
Cost Reduction Program Expanded
- The Company increased its estimated annualized costs savings target to $80 - $100 million. These savings measures, implemented over the course of 2011 and 2012, include information technology, corporate overhead, real estate and procurement cost reductions as well as the results of enhanced productivity in the individual business units.
- During the third quarter, the Company reduced its U.S.-based workforce approximately 6% and completed the sale of its captive offshoring platform to Cognizant. The Company expects to further reduce its U.S. workforce by approximately 5% during the fourth quarter.
Increased Full Year 2011 Guidance (continuing operations)
- Company increased 2011 guidance to $290 - $300 million in adjusted EBITDA and $0.75 - $0.80 in adjusted EPS. This positive revision reflects the impact of stronger-than-anticipated mortgage refinancing volumes and accelerated cost savings initiatives.
- 2011 adjusted revenues from continuing operations are expected to total $1,350 - $1,370 million reflecting the impact of exiting the five businesses discussed previously partially offset by higher mortgage refinancing volumes.
Strategic Alternatives Review
- As previously announced on August 29, 2011, CoreLogic's Board of Directors has created a committee of independent directors to explore a wide range of options aimed at enhancing shareholder value. This review is currently ongoing.
The CoreLogic management team will host a live webcast and conference call on Thursday, November 3, 2011, at 8:00 a.m. Pacific time (11:00 a.m. Eastern time) to discuss these results. All interested parties are invited to listen to the event via webcast on the CoreLogic website at
http://investor.corelogic.com . The discussion is also available through dial-in number 1-866-713-8564 for U.S./ Canada participants or 617-597-5312 for international participants using Conference ID 48074633.