CoreLogic Reports Second Quarter 2018 Financial Results. Revenue Growth and Margin Expansion Highlight Strong Operating Performance; 2018 Full-Year Financial Guidance Enhanced
CoreLogic, a leading global provider of property information, insight, analytics and data-enabled solutions, reported financial results for the quarter ended June 30, 2018. Operating and financial highlights for the second quarter appear below.
- Revenues of $488 million were up 3% reflecting growth in the Property Intelligence & Risk Management (PIRM) segment and market out performance in the Underwriting & Workflow Solutions (UWS) segment and favorable revenue recognition timing associated with the amendment of a long-term contract, which more than offset the impact of lower U.S. mortgage origination volumes.
- Operating income rose 14% to $90 million attributable to the benefits of cost management and productivity programs, revenue growth including favorable revenue recognition timing and business mix.
- Net income from continuing operations increased $17 million, or 42%, to $59 million.
- Diluted EPS from continuing operations rose 48% to $0.71. Adjusted diluted EPS totaled $1.00, up 39%.
- Adjusted EBITDA rose 18% to $159 million. Adjusted EBITDA margin was up 410 basis points to 33%.
- A total of 872,000 common shares were repurchased in the second quarter.
- The Company enhanced its full-year 2018 financial guidance for adjusted EBITDA and adjusted EPS.
“CoreLogic delivered a very strong set of operating and financial results in the second quarter and first half of 2018. We grew the top line, expanded operating income and adjusted EBITDA margins and generated strong free cash flow despite lower U.S. mortgage activity. I believe this is a clear and important demonstration of the durability and resiliency of our business model as well as the progress we are making toward achieving our longer-term profitability targets,” said Frank Martell, President and Chief Executive Officer of CoreLogic.
“We head into the balance of 2018 and beyond, excited by the opportunities inherent in our strategic plan which is focused on delivering unique, must-have insights that power and connect the global housing ecosystem. We remain focused on employing our market leadership to secure opportunities presented by the evolving purchase-driven mortgage cycle in the U.S. In addition, our insurance & spatial solutions and international businesses provide us with opportunities for high margin non-cyclical growth,” Martell added.
Second Quarter Financial Summary
Second quarter revenues totaled $488 million compared with $474 million in the same 2017 period, an increase of 3%. PIRM revenues rose 4% to $183 million driven primarily by organic growth in property insights, including real estate-related and international operations, as well as contributions from insurance & spatial solutions acquisitions completed in 2017. UWS segment revenues were up 3% to $308 million despite a more than 10% decline in U.S. mortgage loan unit volumes and the impact of the wind down of certain non-core product lines. The positive year-over-year growth trend resulted principally from organic growth and the benefit of accelerated revenue recognition (approximately $23 million) resulting from the amendment of a long-term contract. UWS revenue growth also benefited from the scaling of CoreLogic’s valuations solutions platform through the acquisitions of Mercury Network and a la mode technologies (ALM).
Operating income totaled $90 million for the second quarter compared with $78 million for the second quarter of 2017. The 14% year-over-year increase in operating income was principally attributable to revenue growth upsides discussed previously, favorable business mix and gains from cost management and productivity programs. Second quarter operating income margin was up approximately 180 basis points to 18%.
Second quarter net income from continuing operations totaled $59 million compared with $41 million in the same 2017 period. The increase was primarily attributable to operating upsides outlined previously. Second quarter diluted EPS from continuing operations totaled $0.71 compared with $0.48 in 2017. Adjusted diluted EPS totaled $1.00, up from $0.72 in the second quarter of 2017.
Adjusted EBITDA aggregated $159 million in the second quarter compared with $135 million in the prior year period. The 18% increase in adjusted EBITDA was principally attributable to revenue growth, improved business mix and cost productivity partially offset by the impact of lower U.S. mortgage market volumes. PIRM adjusted EBITDA increased 2% to $60 million. UWS adjusted EBITDA rose 26% to $104 million driven by organic growth, including the previously mentioned revenue recognition benefit of approximately $23 million resulting from the amendment of a long-term contract, as well as the scaling of CoreLogic’s valuations solutions platform, which more than offset lower U.S. mortgage loan unit volumes and the wind down of certain non-core product lines. Adjusted EBITDA margin was up approximately 410 basis points to 33%.
As previously announced, the Company intends to incur cash and non-cash charges of approximately $15 million over the course of 2018 relating to its expansion of certain efficiency programs and infrastructure enhancements. These charges will be reflected in the Company’s GAAP financial results and will be excluded from Adjusted EBITDA and Adjusted EPS metrics which are non-GAAP measures. This program is expected to increase overall margins in line with long term strategic targets by improving operating efficiency and accelerating the transformation of certain technology and data platforms. In addition, the Company expects to further consolidate its real estate footprint, reduce SG&A costs and automate and/or outsource certain business activities.
Liquidity and Capital Resources
As of June 30, 2018, the Company had cash and cash equivalents of $85 million compared with $119 million at December 31, 2017. Total debt as of June 30, 2018 was $1,830 million versus $1,777 million as of December 31, 2017. As of June 30, 2018, the Company had available capacity on its revolving credit facility of $580 million.
Net operating cash provided by continuing operations for the twelve months ended June 30, 2018 was $392 million. Free cash flow (FCF) for the twelve months ended June 30, 2018 totaled $314 million, which represented 61% of adjusted EBITDA. FCF is defined as net cash provided by continuing operating activities less capital expenditures for purchases of property and equipment, capitalized data and other intangible assets.
In April 2018, the Company acquired ALM for $120 million which was funded through available capacity on its revolving credit facility. ALM is headquartered in Oklahoma City and provides subscription based software solutions to more than 40,000 appraiser professionals across the United States.
In the second quarter of 2018, the Company repurchased 872,000 of its common shares for $45 million.
Updated Financial Guidance
Based on the actual first half financial results and currently available projections of market conditions including U.S. origination market volumes for the second half of 2018, the Company is providing the following updates to its 2018 full year guidance:
|($ in millions except adjusted EPS)||
January 31, 2018
July 25, 2018
$1,825 – $1,875
$1,825 – $1,875
$455 – $485
$480 – $500
$2.45 – $2.65
$2.70 – $2.85
(1) Definition of adjusted results, as well as other non-GAAP financial measures used by management, is included in the Use of Non-GAAP Financial Measures section found at the end of the release.
The revised 2018 guidance ranges provided above reflect the following updated estimates and assumptions:
- U.S. mortgage loan origination unit volumes expected to decline approximately 10% to 15% from 2017 levels.
- A full-year net benefit of approximately $20 million attributable to accelerated revenue recognition resulting from the amendment of a long-term contract discussed earlier. This benefit is expected to be partially offset by increased research and development costs of approximately $5 to $10 million related to the enhancement of the Company’s data visualization and solutions delivery capabilities.