Q4 2019 Earnings Call
Good day and welcome to the Corelogic fourth quarter 2019 earnings Conference call I would now like to turn the conference over to Dan Smith. Please go ahead Sir.
Thank you and good afternoon.
Welcome to our Investor presentation Conference call, where we present, our financial results for the fourth quarter 20, Ninee speaking today will be Corelogics, president and CEO Frank Martell.
So Jim Dallas before we begin let me make a few important points firstly, the costar slide presentation, which includes additional details on our financial results on our website.
Second please note that during todays presentation, we may make forward looking statements within the meaning of the federal Securities laws.
Any statements concerning our expected business and operational plans.
Mormons outlook in acquisition and growth strategies, and our exact 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.
Further details concerning these risks and uncertainties, please refer to our FCC filings.
The most recent annual were.
10-K, and the subsequent 10-Q's.
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.
Reconciliations to non-GAAP measures to their cash equivalence is included in the appendix to todays presentation.
Unless specifically identified comparisons at fourth quarter financial results to prior periods should be understood on a year over year basis that is in reference to the fourth quarter of 2018.
Finally, please limit yourselves to one question with a brief follow up we'll take additional questions at the end the call as time permits thanks, and now let me introduce our president and CEO Frank Martell.
Thank you Dan and good afternoon, everyone welcome to Corelogics fourth quarter and full year 2019 earnings call.
My prepared remarks today will cover significant 2019 operating highlights as well as key areas of focus for 2020.
Jim will follow and summarize our fourth quarter in full year 2019 financial results and provide commentary on our first quarter and full year 2020 financial guidance well then finished up the call with acuity session.
[noise] Corelogic topped off a very strong 2019, with an outstanding operating and financial performance in Q4.
Revenues normalizing for the AMC transformation in the wind down of non core technology units were up almost 12% in the quarter driven primarily by core by growth in core mortgage platform related and other high margin businesses as well as higher origination unit volumes in the U.S. market.
Organic growth trends accelerated during the quarter boosted by market share in pricing gains.
One example of accelerated momentum on the organic growth front relates to our new collateral valuation services model.
As you know we successfully completed our AMC transformation last December.
Our new service model has attracted significant market interest and we've recently secured major new contracts with two of the top 10 U.S. mortgage originators.
These wins together with a host of other new contracts for our we imagine service model are expected to generate strong double digit underlying and see revenue growth with higher margins in 2020.
Our operating income in adjusted EBITDA margins significantly increased during the quarter, reflecting the benefits of favorable revenue mix and operating leverage and ongoing productivity gains.
Collectively higher revenues and favorable revenue mix as well as cost efficiencies helped us to drive adjusted EBITDA margins above 30%.
This represents a margin improvement of five full percentage points over prior year.
As we exit 2019, we believe we're well positioned to drive for higher organic growth rates and profitability in 2020 and beyond.
During the fourth quarter, we accelerated free cash flow conversion rates to finish out 2019 at 52%.
During 2019, we continued to fall, we balanced and consistent three pillar capital allocation model, which focuses on appropriate reinvestment in our platform solutions human capital and infrastructure, returning significant capital to our shareholders and finally prudent management of our debt levels along were in line with long term.
Targets.
I'll now provide a bit of color on each of these pillars in terms of accomplishments over the past year.
In 2019, our business reinvestment focused on expanding our platforms and integrated solutions offerings transform their collateral valuations business model enhancing quality service and operating efficiency investing in cyber and information security and finally progressing the GCP platform migration.
[noise] with regard to capital return, we allocated about one third of our total free cash flow generated during 2019 to share repurchases.
Importantly, the company's board of Directors also approved the initiation of a dividend beginning in Q1 of two up 2020.
This quarterly dividend level is equivalent to approximately 30% of adjusted 2019 earnings.
Although we expect our primary capital return to come in the form of dividends going forward, we plan to continue to repurchase our shares on an opportunistic basis.
Finally, we reduced our debt by 110 million in 2019 as part of an ongoing program to progressively aligned debt levels with our longer term planning targets.
The balance of my prepared remarks today will focus on our revenue mix and driving high margin organic growth.
As we push for higher growth rates at higher margins, we've made significant progress over the past several years building market leadership in our core solutions, which focus on delivering unique data driven insights that help millions of people find by and protect the homes. They love.
During 2020, we expect to continue to strengthen and grow our platforms, which connect many of the most critical activities and constituencies in the housing ecosystem.
These businesses our scale market leaders generate consistent revenue streams, and strong margins and leverage our unmatched data and analytic solutions.
Over the past several years Weve built into our expanded our platform offerings focused on marketing services.
Home purchase insurances spatial in international.
We're also making strong progress building next generation capabilities with a particular focus on data quality structures and visualization as well as technology platforms and advanced automation techniques.
These capability should allow us to build operating leverage tap into new growth opportunities across multiple verticals and steady foundation for additional margin expansion beyond that 30%.
We are sick. So we are successfully shifting greater percentage of our revenue mix towards high margin platforms integrated solutions and expansion of our non mortgage adjacent sees.
In 2019, we grew non U.S. mortgage volume sensitive solutions to almost 40% of our revenues.
A key component of our strategic plan remains to grow our non U.S. mortgage sensitive footprint to at least 50% of our total revenues over the next few years.
None of these advances will be possible without a strong success of our core mortgage solutions, we estimate that our solutions powered the origination of at least seven out of 10 mortgages in the U.S. in 2019.
As a leader in critical underwriting, we're able to drive strong quality of service and operational performance for our clients.
During 2019, our core mortgage operations continued to gain scale and build market leadership through the provision a bundled solution packages that leverage our efficient and integrated technology back office infrastructure and best in the industry data repositories.
In terms of market volumes, we saw overall unit volumes grow by slightly more than 10% in 2019 boosted by elevated refinancing activity.
Over the first six months of this year U.S. market unit volumes remain elevated due to continued heavy refinancing activity.
Based on current market conditions and external projections.
We believe overall market volumes will likely remain elevated through at least the first six months of this year.
Full year, we expect interest rates to remain low and market volumes to be largely consistent with 2019 levels.
In conclusion to Corelogic team delivered an outstanding operational financial performance in 2019, and we're well positioned for continued growth and success in 2020 and beyond.
Want to thank our employees clients and shareholders for their support.
We're excited by the opportunities ahead of us to create value for our stakeholders, who we push to achieve our strategic vision a profile, providing transformative cutting edge property insights platforms and solutions that enable real estate professionals financial institutions insurance carriers government agencies and other housing market participants.
To help millions of people find defy and protect their homes.
Thanks for joining us today, Jim will now discuss our financial results.
Thanks, Frank and good afternoon, everyone.
Today, I'm going to discuss our fourth quarter in full year 2019 financial results and then provide updated views on capital return in financial guidance for 2020.
As Frank mentioned Corelogic delivered a strong operating and financial performance in the fourth quarter of 2019 financial highlights included.
First total revenue growth of 6% driven largely by higher U.S. mortgage unit volumes and growth in valuations real estate solutions and insurance focus platform businesses.
Second successful completion of our AMC transformation program, which positions us for growth and margin expansion in 2020 and beyond.
Third significant adjusted EBITDA margin expansion to more than 30% an increase of approximately 500 basis points, driven by favorable business mix and productivity gains.
For the repurchase of 625000 common shares which brought our 2019 fiscal year total to more than 2 million shares reduced our total share count by about 3% and finally, we announced the initiation of our quarterly cash dividend program.
Full year 2019 revenues totaled $1.762 billion full year, adjusted EBITDA totaled $498 million and adjusted EPS was $2, an 83 cents per share.
These results were all above the guidance ranges, we provided last October.
The balance in my remarks on 2019 results relate to our fourth quarter performance.
Fourth quarter revenues totaled $426 million up 6% or $23 million compared with $403 million in the prior year, driven primarily by growth in core mortgage real estate solutions as well as improved U.S. mortgage unit volumes and an insurance relate.
Good acquisition closed in December of 2018.
The transformation of the AMC and exit of non core technology and its impacted 2019 fourth quarter revenues by $24 million, excluding the effect of the AMC transformation in non core technology units revenue increased approximately 12%.
You Ws revenues totaled $259 million up 8% from 2018 levels led by the benefits and hire us mortgage origination unit volumes inorganic growth.
Excluding the effect of DMC transformation in non core technology units discussed earlier, you Ws revenues increased approximately 20%.
Key IR and revenues rose to $171 million, an increase of 2% as growth in insurance and real estate solutions more than offset the impact of lower tenant screening volumes currency translation and reduced housing market activity in Australia.
Operating income from continuing operations totaled $56 million for the fourth quarter compared with $29 million in same prior year period.
Operating margins increased approximately 600 basis points to 13%.
Higher operating income was principally attributable to the benefits of revenue growth operating leverage improved business mix in cost productivity.
Fourth quarter net income from continuing operations, so $30 million compared with $13 million in 2018, an increase of 131%.
Diluted EPS from continuing operations totaled 37 cents compared with 16 cents in the same prior year period, an increase of 131%.
Adjusted EPS totaled 77 cents compared with 48 cents in 2018, an increase of 60%.
These increases were due to the company's strong operating performance discussed previously.
Adjusted EBITDA totaled $129 million up 26% compared to $103 million in the prior year.
Adjusted EBITDA margin was 30% an increase of approximately 500 basis points.
The $27 million increase in adjusted EBITDA was principally attributable to revenue growth improved business mix and the benefits of ongoing cost productivity programs.
You Ws adjusted EBITDA was $99 million compared to $71 million for the prior year quarter.
Flexing operating leverage benefits from higher U.S. mortgage unit volumes organic growth favorable revenue mix and continued productivity gains.
Yeah, our as adjusted EBITDA totaled $40 million in line with 2018 as growth in insurance and real estate solutions and cost productivity actions offset investments in new products platforms in technology currency translation and reduced housing market activity in Australia.
Finally, we continue to gain momentum and generate significant levels of free cash flow as we exited the year.
For the 12 months ending December 31, 2019 free cash flow totaled $257 million, a 52% conversion rate of last 12 months adjusted EBITDA and an increase of approximately 400 basis points versus the third quarter.
Our relentless focus on operational productivity in building scale in unique solutions has resulted in a durable and cash generative business model.
Over the past 10 years, we have repurchased approximately 49 million or 42% of our common shares for approximately $1.5 billion.
In 2019, we repurchased more than 2 million or 3% of our outstanding shares for $87 million. Additionally, we reduced our debt outstanding by approximately 110 million.
As we announced on December 11th of last year, we initiated our first ever quarterly common stock dividend of 22 cents per share.
We would anticipate increasing the dividend overtime as our financial results grow.
While our current dividend represents approximately 70 million of the annual capital return, we continue to maintain flexibility to opportunistically repurchase shares.
I will close my prepared remarks today with a recap of our financial guidance. Our full year 2020 guidance issued on February 19, 2020 remains unchanged.
With regard to the first quarter based on seasonality patterns internal business activity in our current view of market unit volumes, we expect revenue to be in the range of $420 million to $440 million.
In terms of adjusted EBITDA for the first quarter, we expect to be in the range of $117 million to $127 million, which represents a 20% to 30% increase from prior year.
[noise] commencing with the reporting of our first quarter 2020 actual results company intends to provide an adjusted 2019 revenue measure that will incorporate the impact of DMC transformation and the wind down of our noncore mortgage and default technology operations.
The 2019 revenue impacts the brand to see transformation in the wind down of non core technology units can be found in our revenue supplement posted on Corelogic dotcom under Investor Relations.
To summarize the Corelogic team delivered strong financial results in 2019, we are well positioned to drive revenue growth and expand profitability in 2020 and beyond.
Thanks for your time today, I will now turn the call back over to the operator for today.
Thank you if you would like to ask your question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure that function, it's turned off to allow you're sick.
<unk>.
Please press star one to ask your question.
Pause momentarily to allow everyone an opportunity to signal for questions.
Well take our first question from <unk>.
With Wells Fargo.
Good afternoon, everyone.
Hey, Bill.
So the first question I wanted to ask was about the.
Performance of you NWS first is the overall market.
And.
No I know, it's not you know you have to.
[laughter] pick your Youre metric.
And that you've got part of the business.
With credit and flood being driven by the applications level, and then you've got to tax business being driven by the closing level.
But it seems that add on an adjusted basis, the 20% that your that you're showing for you end up U.S. seems like that.
You know quite a bit below the level of the inquiries and the closings.
The question that we've been getting from investors is then you know what what's what the gap.
Especially in light of.
No mentions of share gains so.
Yeah on the you W. Escos, Jim So you know property tax solutions was up 30%.
Roughly on the quarter year over year flood salary upper twentys, and so forth really where we had the the challenges on the credit side of the business, which is a continuation of the share shifting that we've seen as we profiles in the past quarter, but all in all.
We thought or core mortgage businesses performed quite well.
Okay Fine damn D and evaluation platforms were also strong performers.
The.
Similar growth profiles of the tax business.
[noise] so.
On that on that headwind you mentioned on bad credit side for the three in one reports when when do you actually lap that.
I think we get close to lapping it within the next quarter or so.
Okay.
And then for my My second question I wanted to ask about Oh, if we could talk about a bridge for EBITDA from the.
The 2019 level, just under 500 million to.
The guidance for 20, 2500 to 525 million in terms of.
Hi, you see yourself getting there given the puts and takes coming from the different pieces of the business.
Yeah, I mean, a it's it's it's actually a fairly clean year, because we've assumed a flat market.
So we've embedded you know two to three points of ER organic growth is I think most of the notes reflected that they picked up as well.
On that incremental revenue, it's the same pull through that you would expect.
Roughly half of that fall into the bottom line.
We also profile within our bridge you know the 70 million, which you know really doesn't carry a margin with it and then there's the FX piece that we profiled roughly $10 million, we continue to see that Ozzy dollar weekend.
So we embedded that assumption in place and then the margin the we put out with the guidance that 30% we've shown good.
You know shown very well on the margin performance over the last two quarters. So we feel like we're very well positioned to continue to hit 30 for the full year in 2020.
We do have some productivity initiatives and so forth like we always do that is embedded within that margin profile.
Okay.
All right well, thank you very much.
Thanks.
Our next question from Bose George with KBW.
Hey, guys. This is telling me joined on for those I wanted to ask about the switch over to the P.I.R.M. segment. The margin came in a bit weaker than we were expecting just wanted to see if there was any investments or anything specific that happened out this quarter that you wanted to call out and then could you also remind us if there's any degree of seasonality and that.
Side of the business [noise].
Yeah, I told me Hey, this is Frank.
I'm just before I answer your question you know just a pickup Bill's point. So I think that a you know we had a great year and I think looking at applications that type of stuff. You know these numbers are all over the place I think we're right on top of.
Close close to title orders and and you know more relevant metrics. So we we actually performed very strongly against what we know to be the market volumes out there I think if you're looking at apps in the high Wi Fi activity kind of market, you're going to see a lot of fall out and and as as Bill talked about we have a we have a difference.
Cycle for some of the businesses and that's certainly when you get into things like valuation, where the AMC is primarily geared around a couple of major clients.
It's not going to reflect the mark them the more mortgage market volumes on a daily basis. So just a little bit of a clarification there, but I think we were really Oh, we had a great year, we hit 30% margin over the second half of the year.
Yeah, we saw organic growth pick up which is which is good I think we'll continue to pick up as we get into 2020 and throughout 2020.
A lot of the investment was around product and service that you know as as we've talked about for for a long time, you know obviously with the regulations and that's kind of thing in this industry, it's a slower selling but we're kind of at that point now what we're actually selling and getting take up in the new service and I think the AMC is a great example of that so.
I think I think were.
Yeah, we're we're in pretty.
Pretty good shape, there and in my view in terms of where we're positioned well for the year I think if you talk about P.I.R.M. Yeah. There is some seasonality in that business obviously.
And I think you've got a in terms of the margins right now and we've talked about that's pretty consistently.
That's where you're seeing the heavier investment in the data repository.
You know, we're driving a new visual virtual data repository to big investment on the part of the company part of what the cloud.
Spend is in support of that so you're going to see a heavier investment over the you know the short to medium term and that's really been going through for the last year. So that has an impact on those margins, there's still good margins, but no. They should come back up when we get through this period of Oh.
We estimate, but I think the investments well warranted because it it creates the competitive mode and it builds the value to the client base that is essential because we're you know they demand a strategic partnership level boss and I'd say the last thing is you know we have a a fair amount of investment we talked about cyber and somebody other areas that do have.
Did have a depressive impact on the margin the short run, but as everybody knows you know cyber is a is you have to do it and you have to spend the money. So ah so there's a little bit of that the seasonality is not super pronounced.
And then of course, they get all of our FX exposure.
It's also in that segment. So that's a fairly significant number there, but but the business performed pretty well in 19, and I think we're going to see a you know the organic pull through accelerating into 2020 in that and that area.
Gotcha, and and just following up on a the investment in the data repository and in the cloud stand I guess, obviously, you can never stop upgrading technology, but when do you kind of see that you guys will be at a point, where you're you're kind of happy with what the investment that you made and you really see more of a pick up in margin.
Yeah. So you know and we by the way, we obviously because we're talking about this we run it through our PML. So you know everything is fully transparent there and I think from that standpoint, I think I now I believe in and because I remember in October so of 2018 that we're going to boost investment and the platform area. So you saw that a 19.
We see play out I'd say that we'll continue to have.
Elevated levels of investment, but I think we're over the initial hall now.
That we did in late 18, and 19, but again it all runs through the PNM also you're just seeing it but but certainly you know that's the core of the company the data repositories, the crown Jewel a company and it's a it's something that.
We will enable market leadership and I also there is actually flavor not perversely, there's a there's it a growth and an efficiency element here with the envestnet because the GCP for example is a significant component of savings.
And beginning in 19.
And it will it will continue to grow into 2020.
A significant pace and then you obviously again it'll be in the run rate, but I'm. So there's a there's a growth element and eight efficiency element related some of these investments that you know you will see.
Manifest themselves as we get through 2020 to 2021.
Okay. Thanks, and then just switching over to the dimension of the two top 10 lenders that you sign for the new valuation model could you talk through what type of valuation work on your orders are fulfilling for them and and is there is that still 100% ice transaction dependent or are there any contractual floors, but those contracts.
[noise] no. So this is for <unk> as you know we kinda we did a lot of work to reset the appraisal company that we have.
We have a different model than than the industry. We have a full of full are fully employed panel.
And what we what we've done is is that a introduced a.
A a technology heavy technology element.
So we have a lot of automation in the cycle, which has allowed us to improve.
Significantly the cycle times and improve also but the the customer experience related. So these are appraisal orders you know there on a primarily on the on the mortgage origination side, although we do a few other things, but the vast majority is on the mortgage origination side and they would be a they would be driven by.
Hi orders that would come in based on the clients volumes that that's about as we've talked about that's about a third of the.
Overall valuation revenues, we've done that portion of revenues of doing dropping as we've added the platform revenues and that was a high growth area for us in 19 and that is more the I'm.
Kinda they there's there's a regular realm revenue recognition to that versus you know pure volume, there's some volume related that but it's much less than the a devaluation portion.
Okay. Thanks, guys.
Thank you we'll take our next question from Darrin Peller.
Research.
Hey, guys. Thanks for the for the time, but let me just ask first starting on the you double U.S. segment. When we think about the context of a flat market that you are guiding towards for origination units. The again you talk about share gains I mean, what can we expect what are you guys expect at least for the growth rate of that segment overall.
You know, obviously, just given the backdrop of a flat market with potential for you guys to outperform that and then obviously the valuations piece you. If you have new wins coming on that will grow well that should obviously ultibro profile and I think correct me if I'm wrong. It I'm pretty good margin right just given the platform related revenues and they're also come at much much higher margin. So how does that impact.
The overall segment margin opportunity for the year.
Yeah, I'd say, there and there's two elements to this that we talked about and again I think.
You know, there's the growth side of it and I think we've got a.
A number of very.
Very strong growth drivers.
Again because of regulated portion of this this this market now there's a lot of scrutiny that goes on by the clients before orders actually flow and revenue flows, but but having said that you know we've had a lot of share gains and I would say.
Across each of the business units, except the AMC.
Over the last 18 months or so.
They are starting to filter in in a more material way as we get into 2020, so you'll see share gains impact the AMC I talked about so we expect very strong growth there that the flip side of that is it's not going to be the same super high margin that the platform side of that that segment generates but they'll be they'll be.
More significant.
And then we have a few new products that we're excited about things like a you know we have a borrower verification suite a few other things that are hitting the market. So I.
I think you'll see solid organic growth.
In that segment and 2020 and beyond.
So and it's really driven by those areas I talked about.
Okay. That's helpful. I guess, when we look at the underlying growth of the the business outside of I mean, again AMCC clearly driver the valuations piece of drives you know better growth in the market for sure.
Do you expect into anymore, I mean property you seem like you're at a pretty good market you're at this point I'm just wondering how much more you can do there and credit obviously, you've got its competitive dynamics that might anniversary, but flooded still gonna do you know in your view still grow at least in line with the market.
Yeah. So you know I think there's always share gain opposite we have high share positions in a number of businesses, but I think there's always share gain and yeah. We did take a share and some some lower enter the market in flight for example last year. So there's that type of thing I think.
You know there there is opportunity to grow and attacks as well and certainly and credit.
As well there so oh credit credits and then a as Jim mentioned theres been a bit more volatility with share shifting because clients can can shift shares depending on their requirements and et cetera, but but in terms of of that I think we've got good momentum in the market right now so oh.
I feel good about that Oh, but I think there's room to grow the shares in each of the areas with clearly the strongest momentum right now and and the re imagined AMC area, where we got to have outsized gains this year [noise].
That's great to hear it looking not just us one follow up on the property intelligence risk management side. The look I mean at the end of the data growth rate. There is still relatively flattish and I guess I'm curious, especially if you back out some ability I mean, it looks like organic growth correct me, if I'm wrong was down a little bit maybe a percent or too.
I'm just curious what you see as the drivers to get that more three accelerator.
Yeah look I think I think the organic so I think that a couple of things Deron. One is you know I think I think I would characterize the growth rate is kind of flat last year for a number reasons, but I think you. We did have a yeah. The Australian market compressed for the first time than like three decades. So we have.
Where you know those guys were down in the upper teens in terms of market volumes.
Currency you know, it's it's amazing how low some of these currencies are the U.S. dollar.
So that we took a hair cut there I think the fundamental product offerings.
And the client relationships are very strong.
I feel pretty good about the some very significant product offerings that are going to hit the market. So I feel good about where we can get to on an organic growth trend in 2020.
So we're working hard to make that you know reality, so I think the growth trend to kind of flat too.
Accelerating is the right characterization I say within within that segment.
Okay.
Right. Thanks, Frank Thanks, guys.
Thank you we'll take our next question from Chris Gamaitoni.
Compass point.
Thanks for taking my call.
Oh I wanted to start on free cash flow a conversion was 52% this year.
Lots of moving parts. This year I'm just wondering what the outlook is moving forward for free cash flow to EBITDA convert.
Hey, Chris it's Jim on the free cash flow, we yes, we wound up.
52% for the year.
But a couple of things in there we did have higher investment levels and spend levels associated with some of our initiatives.
If you kind of normalize for that we would have finished the year kind of in that 50% to 60% range.
To date to 60% arrangement, which of course is well within our long term target of 55 to 60. So that was elevated investment. If you look on the cash flow. The capex was little higher and so forth and some of the investments and we had going on that help pay for that down.
Okay.
On property tax it was up 30% year over year $26 million.
How much of that was influenced by revenue Oh lifetime revenue recognition remeasurement the refinance cycle I'm, just trying to understand kind of what's core growth versus the refinancing dynamic accelerating deferred revenue.
I don't think there's anything unusual on the Rev. Rec side of things with tax we did have some client wins and then in the first year, we generally pick up somewhere between 25% to 30% of that ticket in the current period.
So a lot of that was volume and new clients that we added during the quarter [noise].
Okay [noise].
That's good [noise].
It could you help us understand.
The revenue detail you gave 'em in on the web site or the transitional and see revenue.
By the fourth quarter, it's 5% evaluations you've made to combat that AMC is one third I'm trying to understand how much a kind of your new AMC revenue.
Is currently in the <unk> in the valuations. Excluding this number that you gave you know what's been mix if I take out these numbers.
Oh, Okay I got you it's.
So without the.
If you look at the valuation line item there on the supplement.
It's probably like a 50 545 between the platforms and the you know in the AMC. Yeah. We've talked about on past calls that were north of 100 million collectively with all the platform businesses.
So that should help you anchor towards that number.
Okay, but.
Okay very helpful. Thank you so much.
Right.
Thank you we'll take our next question from John Campbell with Stephens.
Hey, guys. Good afternoon, congrats and good results.
Back to the property tax business I want to check on that another revenue stream you guys have there is pretty much a recurring kinda nature to it you guys mentioned that the growth was was pure on a quarter I'm just want to put a you know just make sure I'm getting to a good jumping off point there, but for the Fourq you revenues is that a good run rate over the next.
I guess three quarters.
Oh, you know, there's some seasonality you with the tax business the way that the revenue model works. So it's not gonna be something that is linear going you know shooting through them.
But there is a seasonable part to the most important thing there so.
Recall is that if they close.
Closed loan a product that is 60 to 90 days after a loan closes that's when we'll get the ordering and processing is going to the invoicing and payment and so forth. So it does lagged the market. So we had a softer growth rate in Q3, that's picked up in Q4, you know we should have a pretty solid.
Result in the first quarter as a result of all that uses a strong volume activity that we're seeing right now, but it's not going to be linear over the course of each quarter of the or there's some seasonality.
Okay. That's helpful. And then I'm guessing this is pretty minimal, but how much did in T.S. contribute in the quarter.
Minimal [laughter] okay.
And then what might on it it's a [noise].
It's small, but I think to pick up one of the comments that was was raised earlier yeah. You look at commercial tax it's an area of significant opportunity for US we've had us we've had a an operation that space for some period of time. This gives us a lot more scale. So although it's small in the Grand scheme of things right now it is a pretty big.
Hey, I'm, that's pretty fragmented. So we're excited about the opportunity I think right now quarterly splits it's small, but hopefully it's a it grows much bigger.
As we go forward.
Okay last question for me on the on the you WMS margin that was really really good results I think 840 bips year over year.
Could you guys just maybe talk to the degree to live you saw from the you Ws gross margin standpoint, I know you get some product mix shift there, that's probably pretty favorable just versus overall opex leverage.
Yeah, I don't I don't think you know a.
I think that if you look at that the mark the the but margin performance, John I would say that it's being driven by.
No the operational efficiency of the platform I mean years, you're putting more volume through that platform I think the team you may recall that one of the big underpinnings of our.
About 30% margin was the tax automation project that we work it out for a couple of years, we're saying benefits from that so I think you're seeing a much more efficient operational platform coming into play for the volume play I'm coming in and that's something that could be a if we get into any quarter could be related to mix.
As well you know the mix of what's what types of revenue were taking [noise].
Because you had these are these are you know hundreds of thousands of loans than they were talking about thousands per day that are being boarded so it's a it's a it's a mixed can play a little bit, but but I think I think the big thing is.
It's a plot platforms more automated [noise].
Yeah, we have a better processing infrastructure and you know the team has that digitize the some of the a the output the clients. So I think we have some savings there. So it's a it's a pretty a pretty much driven by that.
Personally myself Martin Opex.
Thank you.
Thank you we'll take our next question from Jeff.
Baird.
Yes. Thank you so I guess congratulations on the 2020 margin guidance and achieving a target we set out a while ago. So I guess my other questions. The what snack so intermediate to long term just how much more margin potential in the is there in this business and where do you kind of view as the the key factors ducks.
Get your from a you know the 2020 achievement to or whatever is back. Thanks.
Sure Jeff So yeah look I think I think the team has done an amazing job I mean lifting the margins up four or 500 basis points and I I would say and in a.
Pretty challenged macro environment in the mortgage market because that I think a lot of the mortgage volume upside we've been talking about throughout this call is been re Fi related.
And I'll take you know, we'll take it certainly and I think it's been a big part of the market and we'll continue to be but but I think yeah. I think the team did a great job on the margin along a lot of it came through.
I would say the efficiency side with with product mix, becoming a bigger and impact. So we talk about you know the oh, three or four years ago. You know the devaluation platform business didn't exist now it's a it's a high margin component of revenue stream. For example, so I'd say we of course.
Continue to drive both mix and efficiency.
As we go forward there is additional margin accretion in the business.
No I think Wanna get through 2020, and ER and on our 30% margin, but but I would say, you'll you should expect incremental margin expansion and the business in my experience in data and analytics in the last 20 years or so 25 years is that you know above 30, you're getting into rarefied air.
There in terms of most companies and asset and most diversified information.
Companies you know obviously, we have we have a couple of businesses that that are important but tend to be a little bit lower margin by their nature.
And I'd say that you know again, we talked about things like the M.C., but but there are things that we can do to reimagine those models to get them up so I'm excited to see exactly how far the team can go on margins and things like the M.C., which you know, which if you look at it.
You know just purely from a financial point of view.
You know, it's a little bit of a drag on the overall margin, but if you look at it from a.
Trajectory perspective, it'll it'll be accretive so I look at just like I believe we planted the flag for organic growth acceleration I think the margins I'm still have room to grow and I'm not sure.
Well, we can put up through your target out there at this point in time, but but I would again I expect that you'll see some margin expansion what we have based on what we haven't flight and the revenue mix.
[laughter] and then just for property in sites since I think there's lots of different solutions Ameri, obviously tough Australia have a couple different.
So bad markets such as sell to within the U.S. can you just kind of.
Maybe to help break down the rough sizing of the big pieces and the different trends I think the call up this quarter was there some headwind and.
And in like tenant screening, but just if you can help us break down the big pieces, and which ones are doing better or worse, what they could be helpful. Thanks.
[laughter].
Yeah look I think a I would say broadly speaking you know you have the data business with analytics and big data and analytics business in there.
Yeah, that's doing.
Pretty well, we have growth and for example, good growth in the a valuation model area as an example.
Yeah, we're launching and it's in test now an AI driven a valuation model, which we're very excited about hi, hi pickup rate and high accuracy. So that that that that business is that is a decent size chunk. The international piece. There's also I'd say is the other.
Big chunk in there.
And I would say, we talked about Australia kind of a market.
Volume driven issue, an FX driven issue good growth in the UK This year, which is or last year, which is good and I think new Zealand a bit smaller market, but the good growth in the UK I think rebounding in Australia, because Ah thankfully. The I think we've got a little bit of market grow so far this year and and yeah projection is for.
A positive year this year versus the down here. So that's that's a and again those two businesses are very kinda platform data intensive businesses.
So they have good revenue characteristics and durable revenue characteristics.
Tenant screening is not in that I think the big the big this line.
That one yeah, we have a small business there it's a it's a good quality.
Business point solutions business.
But it has not grown the last couple of years.
You know turnover has been kind of flat and yeah. There's there's a a week there's a lot of challenge with the the end to end players, but that again, it's kind of a small number.
But but yeah, but but it's been a a little bit of a drag. So I think this year, we're going to see a better picture in PRM in general I think in data and analytics, we should see a better picture, Australia. So I I think you're going to see that and that and I think insurances.
Spatial yeah, we we bought stability and December of last year. The idea was put you know the underwriting claims platforms into a cohesive package.
Which makes us a.
No relevant to the big carriers in the U.S.. So I think so far I don't want to talk a lot about it but yeah. We feel good about you know discussions and dialogue and you know different trial period and stuff that we've been doing several major players across the U.S. So.
More to come on that but that business makes a lot of money and is Ah you know kind of down a little bit flat you know.
I guess, Fortunately, we didn't have a lot of storms last year like we had the year before so you know that business always generates a lot of revenue when there's storms and weather events that oh, so that creates a little bit of lumpiness, the revenue profile, but but again that that business. We have new spatial layers that we're going to be able to sell this coming year.
So I think spatial we'll see a little bit of bump as well.
So all in all I think a again to kind of a similar theme to the other areas I think where we planted a lot of seats for organic growth.
I think there and the right margin spots to help us on the accretion of the margin as well.
Got it thank you Frank.
Thank you we'll take our next question from Kevin Cacs morale.
And then associates.
Hey, guys. Thanks for taking my question.
No it wasn't property intelligence the it all the FX revenue headwind would be any or the property analytics line out right not there's none in insurance or special.
Correct. It's it's.
In the property insight line item <unk> okay.
No actually let me I stand corrected there is a little bit and.
The insurance, but it's quite modest so the bulk of it isn't the prime pretty insights line item.
Okay.
And then and then Frank I know you discuss the expense benefits regarding the GCP migration, but you also mentioned that growth aspect I mean, I assume you're talking about revenue growth can you give us a maybe a better sense as a potential benefits, maybe faster production product development or enhancements and when we might start seeing that.
Yes, I think that GCP offers a quite a few benefits, Kevin you know and durability and systems performance or or one.
And you know.
There's a lot of <unk>, the public cloud with resiliency and backup and recovery and that type of thing is are there are benefits there that.
We should help us save some some money.
I think the biggest example, though that I would give you is that we're building our smart data platform, which drives our visual imagery, and our repository, which which is.
Big built to be vertical agnostic, so our data repository, which we think is best in class, we can apply that to different verticals and this gives us the ability to do that in a cheaper.
Away and then apply some advanced analytics that we're not able to do.
With the with the old technology, and I think that clearly opens up new vertical opportunities adjacent fees.
That we can't really get out that that easily it all also offers.
You know us access to 18, the pie game, which is something that we do play and now but we don't we don't do as much as we can do on a p. eyes, and allowing you know customer sandbox and that kind of stuff. So that really is a you know I talked about growth enablement there.
That's really what I'm talking about.
Okay, and and by verticals, what do you mean like a it's like a real estate type customers are oil and gas or something like that so I would you mean by verticals.
Oh public sector is a big one okay. I think if you look at Geo spatial and that consumers of our Geo spatial alphabets, what's your which are at this point predominantly public sector, but yeah, we're increasingly lenders and insurance carriers you know it facilitates that because you have.
A lot of yeah, you're you're you're going to use a lot more capacity and computational power to generate that kinda data versus the traditional data that we have and then yeah oil and gas telco that kind of stuff, where we've had a presence and but it's I'd say, it's relatively minor.
Okay, all right. Thanks for taking my questions.
Thank you, we'll take our final question from Andrew Jeffrey with Suntrust.
Hi, [noise].
Pardon me. Good afternoon, guys. Appreciate taking the question I jumped on little late so I apologize if I missed it but.
Okay can you talk about just pricing power across the business and I'm thinking in particular in.
In insurance and spatial I wonder if he can give us some sense of watch.
It's kind of going on there in terms of maybe price versus volume dynamics and what the competitive environments like.
Oh, Yeah look I think competition you know we have scattered competition and if so you know it'll depend on what area. We're talking about here I'd say that our effective price increases have been kind of 1% to 2% overall for last couple of years.
Some are much higher and some are kinda no no price increase because then we have a lot of our revenue is long term contract.
Contractual some of which has cost of living adjustments some of them don't I would say in general I characterize our pricing power as we have.
Moderate pricing power.
And I'd say most of it relates to you know feature enhancement.
Or or new dataset.
That type of thing I don't think our clients because you know everybody's trying to do the same thing window to get more efficient. So yeah, there to stock at electric rolling in and do a discretionary price increase but I think we've been able to get price through surface Ah Ah consolidating our services into a cohesive work flow offering.
And also I think with enhanced feature enhancements et cetera, we'd like to raise the you know we'd like to get to 3% you know kind of consistently and we've been working on it a couple of years ago. We we didn't get any price last couple of years gotten you know couple of percent I think with what our aspiration goals is to get up to the 3% level.
No again, assuming inflation stays where it is.
Alright, Thank you very much.
Thank you ladies and gentlemen, this concludes todays teleconference. You may now disconnect.
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