CoreLogic Earnings Call Insights: EBITDA Outlook and Buyback vs Acquisitions
Darrin Peller – Barclays Capital: Just want to start off with the – when you look at the actual run rate, your EBITDA for the first quarter was about $116 million. When you think about that relative to your guidance for the full year, I mean, I understand first quarter was better than normal would be the case seasonality wise. However, when you consider the – in fact, you are spending more frontloaded-wise on TTI in the year and there still are some seasonality, seasonal implications in the quarter versus other parts of year would be. Your EBITDA guidance of $460 million to $475 million, it just makes me wonder a little bit, given that you first quarter alone extrapolating off that number gets you to the midpoint. So can you just explain, is there anything that we should expect that’s going to sort of depress EBITDA in the next few quarters? Maybe it’s around technology spending or anything else that I’m thinking about properly.
Frank Martell – CFO: Darrin, this is Frank. First of all, you have to factor in the refinancing trends, which has somewhat muted the normal seasonal patterns on the origination side. I think you also have to factor the – in the default area, foreclosure starts and delinquent loan volumes continue to drop at double-digit rate. So we want to make sure we’re not over our skis in terms of projecting anything out of line with the market trends in that area. So I think those are the two biggest drivers if you look at patterns in the business. Obviously, we feel pretty good about the start of the year, but I think it’s a little early to talk about changing our guidance for the full year.
Darrin Peller – Barclays Capital: Let me just follow-up on the Data & Analytics growth. I mean, again, you’re trending near 10% overall. The margin was, obviously, down and I know some of that was tax spending. I think – or you guys had mentioned earlier something to the effect of – it was really mostly just TTI initiatives. But can you explain what the growth rate of the EBITDA – D&A EBITDA would have been? Maybe if I missed that on the call earlier, I’m sorry. But what would have been without the sort of one-time or unusual items, would have been more similar to revenue growth?
Frank Martell – CFO: So, I think in the final quarter of last year the EBITDA margin was a little over 26.5%. So we’ve climbed in the first quarter of this year and, obviously, we’re down just marginally from the first quarter of last year. The big drivers really are the TTI spend that you talked about, Darrin. But also as I mentioned in my remarks, we are spending a fair amount of money as we did in the fourth quarter of last year on ramping up our capacity in Doc Solutions business, and that’s one of the things. As Anand talked about, we’re seeing a lot of demand from clients for services related to compliance matters. So we – the good news is the demand is outstripping the supply. The bad news is, we’ve to put in the capacity to handle the demand. So we expect that investment over the first half of this year will continue to make sure that we have the right capacity, and frankly the right product and service offering in that area. The other area that’s been a little weak for us, which is a smaller business, is the Teletrack, especially credit business, where we’ve had regulatory issues in a number of states, and that whole market has been under stress in the brick-and-mortar payday lending area. So that’s been a little soft for us coming out of the year. So those are the big drivers of the current pattern in the D&A margins. I’d say that we haven’t changed our long-term perspective, and this is a 30 margins business.
Darrin Peller – Barclays Capital: I think if I remember the document, was that the Southeast – this is an actual plant you’re adding, right?
Frank Martell – CFO: We – yeah, actually it’s in the Charlotte.
Darrin Peller – Barclays Capital: Just a last question on cash flows. You have, again, $65 million, or 57%, or 56% of your EBITDA. Just help us understand, I mean, is that – should we just assume that now we’re in the 55% plus, is that going to stay consistent as a conversion? It’s generally thought of as 50%, but it’s obviously continuously been coming in better than that. Any moving parts in the quarter that should not be reflective of future quarters?
Frank Martell – CFO: The big thing is the timing of tax payments pretty much. So the second quarter we’ll have our estimated tax payments will kick-in. So that’s the big moving part. Now that we’re through a lot of the heavy restructuring that we were in certainly 2011, the tax rates are normalizing around 40%. So that will also make sure that that’s more consistent. The other thing we do have that’s a little bit different is the pattern on a TTI spending, which will be I think a little – it will fluctuate marginally. It’s not a major impact, but it will fluctuate marginally by quarter…
Darrin Peller – Barclays Capital: Just last question and I’ll turn it back to the queue, Frank. Can you help frame for us – or maybe, Anand, you can help us with this as well. The deal sizes with – it’s probably in Data & Analytics primarily, but what types of deals are you actually looking for in terms of scale?
Anand K. Nallathambi – President and CEO: That’s difficult to say. Obviously, there is – we look at a lot of different sizes, but one of the things that we’re very careful of is the accretion and to make sure that something that really takes us to the next level in terms of leveraging our dataset. So maybe if you look at CDS Mapping, that was in a different price scale and Case-Shiller was in a different level. So it’s very difficult to put a number on it.
Buyback vs Acquisitions
Kevin McVeigh – Macquarie: Frank, as we think about taking the buyback up to 5 million from 3 million, just any thoughts around that relative to acquisitions? I mean, obviously, with the stock at the level it is, probably makes sense to deploy more capital there. But how should we think about buyback versus acquisitions? Any thoughts on that would be helpful.
Frank Martell – CFO: We’re not constrained, I think, either way. So we’re going to be, as we have been, really aggressive on the share repurchase front, and we can afford to do that with our cash flow and with careful management. So I don’t see – it’s not a mutually exclusive thing. We feel we can do both. As Anand mentioned though, I think on the acquisition front we just want to make sure that our acquisitions are disciplined and that they are focused on the D&A segment, as well as tax and flood on the MOS side.
Kevin McVeigh – Macquarie: Then just it sounds like we’re taking a pragmatic conservative approach to the guidance, but we did take the buyback up and didn’t change EPS at all. Is that just conservative, or is that the mechanics of when it will be deployed? Because I know ultimately when you buy, it will ultimately impact the impact from an EPS perspective.
Frank Martell – CFO: Yeah, it’s more – we just spread it into the second half of the year, so that’s why it had more of a marginal impact.
Kevin Mcveigh – Macquarie: And then just any – I know – on the refinance range, any change in amount that’s kind of origination versus – or rather purchase versus refinance, or how are we thinking about the $1.45 trillion to $1.55 trillion based on what we’ve seen to-date, year-to-date?
Frank Martell – CFO: It’s still pretty consistent. We were happy to see the HARP program extended to 2015 from a refi support perspective, but the percentages of total volumes remain the same. They are expected to tick down from the low-70s to the mid-60% range as we move forward. But right now we’re still seeing kind of a 70/30 split, although purchase activity defiantly has been picking up, as you probably know.
A Closer Look: CoreLogic Earnings Cheat Sheet>>