Q1 2020 Earnings Call

Thank you, Dan and good afternoon everyone. Welcome to corelogic's first quarter earnings call today. I will discuss first quarter operating and financial highlights our initial covid-19 and key areas of focus for the balance of the Year. Jim will summarize our first quarter Financial results and address our second quarter and full-year financial guidance will finish up the call today with a Q&A session CoreLogic delivered an outstanding operating and financial performance in the first quarter. We reported strong top-line growth driven by acceleration in our home mortgage insurance and spatial and platform related businesses margins were up significantly driven by favorable Revenue mix operating leverage and ongoing cost productivity programs during the first quarter are for mortgage operations surpassed underlying industry trends

regarding

The covid-19 pandemic CoreLogic is laser focused on protecting our employees and fulfilling our client obligations. We aggressively deployed our business continuity plans during March this included activating multi-disciplined crisis-management teams augmented facility management protocols and finally making required adjustments in technology and data operations and securing our supply chain approx. 95% of our Workforce is now deployed in home-based work environments.

We have also designated. We're also designated at the essential infrastructure Workforce due to our important role supporting many critical work flows that underpin Housing Finance in the housing economy in the case where our employees are required to work from one of our facilities. We have implemented social distancing aggressive cleaning and sanitizing and other actions to make our facilities as safe as possible importantly. Our our employees have done a great job delivering outstanding quality and uninterrupted service to our clients CoreLogic with its scale and financial strength durable high-quality operations and unique data-driven Solutions remains a strong and reliable strategic partner to countless real estate professionals financial institution insurance carriers government agencies and other housing market participants.

While the full extent of covid-19 impact on the global economy remains to be seen the CoreLogic team is navigating the changing environment with organizational agility Faith nation and optimism. We are well prepared to support existing and emerging client needs.

I almost every measure. We had a strong start to 2020 both operationally and financially from a financial perspective CoreLogic achieved its best-ever first-quarter results in a 20 total company revenues were up 12% in the quarter normalizing for the AMC transformation and wind down of non-core Technology units, which were largely completed over the course of the first three months of last year.

Accor mortgage operations continue to the game scale and build Market leadership to the provision of bundles solution packages that leverage our efficient and integrated technology and back-office wage structure and best in the industry data repositories.

In addition to capitalizing on strong Market volumes over the past several quarters. We've been gaining significant numbers of new clients seeking strategic Innovative and reliable partners for their critical under processes. We have gained new customers across our core Mortgage Solutions, including flood tax servicing mortgage credit and collateral valuations as well as for Thursday. We imagined AMC service.

Regarding our tax servicing and and see Solutions share games included several Mega wins. I expect the share gains. I just discussed to significantly boost second half revenues in terms of overall mortgage Market volumes considering externally available forecasts our year-to-date internal volumes as well as a high level of understanding mortgages with a clear economic incentive to refinance. We believe that refinancing activity likely remain at elevated levels through at least the next several quarters.

Hi refinancing.

Tivity should provide an important cushion for a likely Decline and purchase transactions. We expect purchase activities softened considerably in the second and third quarters as the economic Fallout covid-19 pandemic becomes more pronounced in light of the pandemic is too early to forecast full-year twenty-twenty mortgage volumes with a high degree of certainty but based on current indicators and our view of likely trans, we believe that mortgage unit volumes will be largely in line with prior-year levels are non-mortgage verticals wage are off to a solid start and the first quarter with local currency International revenues and insurance and spatial Solutions growing by more than 3% during the quarter. We also saw growth in our analytical and solutions. We expect recent share gains and inflate investments in new Innovative capabilities in such areas of insurance and spatial platforms property Marketing Solutions visual off.

And valuation models to boost our Revenue growth beginning in the second half of this year.

First quarter adjusted ebitda total $130 a record level for any first quarter in our history collectively higher revenues and federal revenue mix as well worth leverage and ongoing productivity gains helped us to drive adjusted ebitda margin to 29% which is an improvement of six full percentage points over prior year off the past three quarters. The company has delivered margins in line with our 30% Target.

We achieved our targeted margin levels to a combination of favorable shifts and revenue mix application of scale and operating leverage and the implementation of productivity initiatives.

In terms of Revenue tax we continue to strengthen and grow our platforms which connect many of the most critical activities in constituencies in the housing ecosystem these businesses generate consistent revenue streams with strong margins and leverage are unmatched data and analytical Solutions over the past several years, we have built and or expanded our platform offering to the mortgage underwriting home purchased related marketing services and insurance and spatial Solutions the evolution of our collateral valuation business into a unique market leader is a great example of how we're shifting are mixed towards platforms building off a strong 2019 Trend are collateral valuation platforms delivered in an exceptional performance to start off 20 28 growing over 35% as we picked up share and launched innovative solutions into the market.

Are collateral valuation platforms accounted for approximately 60% of our total valuation revenues in the first quarter?

Scale and operating leverage and cost proactive initiatives also continue to help us to drive up margins as our long-term investors know. Well, we have an established track record of successfully driving productivity in our push towards first quartile levels of operational excellence in 2020. We expect to lower run-rate cost by managing Staffing levels simplifying our organization automating certain activities and other operational improvements.

Rose and Martin

Expansion help us to achieve trailing-twelve-month free cash flow conversion rates of 59% in the first quarter are durable cash generative business model position as well address the challenges and the opportunities resident in these unprecedented times our Capital allocation strategy remains anchored around three consistent imperatives first month appropriately investment in our platforms Solutions human capital and infrastructure second, returning significant Capital to our shareholders and finally food management our debt level in line with our long-term Targets in terms of reinvestment. Our priorities include building Next Generation capabilities with a particular focus on data quality structures and visualization as well as technology platforms and advanced automation Technics. These capabilities allow us to build operating leverage tap into new growth opportunities across multiple verticals and sets a foundation phone number.

additional future of margin expansion

In addition, we are investing in new Solutions in digital tax processing new driven valuation models as well as state-of-the-art realtor workflow platforms and the National Rollout of our digital marketing and digital tour business.

Finally, we are supporting the onboarding of new clients including recent Mega wins and funding productivity programs as I discussed earlier beginning in mid 2020. The company will be also washing a new initiative to build out a next-generation Ai and machine learning driven data intake and production capability to be located in North America over the next 24 to 36 months. We expect to invest between twenty and twenty-five million in this important initiative, which we expect to reduce collection and production costs over time and provide greater supply chain flexibility dead.

A long-standing principle on our Capital allocation model has been the consistent return of capital to our shareholders in this regard from 2011 to 2019 that we repurchased am retired over 40% of our common shares during the fourth quarter of 2019. We initiated a dividend program.

We paid our first-ever dividend of $0.22 per common share in January yesterday our board authorized a second quarterly dividend in the amount of $0.22 per common share of payable in June month.

I want to conclude my remarks today by thanking our employees clients and shareholders for their support. These are certainly unprecedented times and the impacts of the global pandemic are significant and still unfolding. No person community or Nation will be left untouched on behalf of our more than 5,000 Global team members. I also want to sincerely thank every Healthcare professional first responder government department and volunteer engaged in the historic fight against covid-19. We owe you a debt of gratitude words cannot fully Express.

well

Race start in 2020. We're controlling what we can control and delivering on our commitments to our stakeholders. Our team is up for the challenges ahead and importantly we're excited about the opportunities ahead of us back to create value for our stakeholders as we push to achieve our our strategic vision of providing transformative cutting-edge property and sites platforms and solutions. Thanks again for joining us today. Jim will now discuss our financial results. Thanks, Frank and good afternoon everyone today. I'm going to discuss our first quarter 2020 Financial results and provide updated views on financial guidance.

It's Frank mentioned CoreLogic delivered a strong operating and financial performance in the first quarter of 2020 while delivering on our client commitments and providing for the ongoing health and safety of our life, please I made the covid-19 crisis financial highlights for the courtroom included first strong total revenue growth of 6% which after adjusting wage 2019 effects of the ANSI transformation in the sale of non-core default technology, and it's was approximately 12%

Second strong market share gains across both Mall both segments contribute to organic growth in addition. We added major client wins during the quarter which are expected to benefit second half revenues third significant adjusted ebitda margin expansion of more than six hundred basis points driven by growth favorable business mix and productivity, June 4th, the generation of $315 in free cash flow. This represents a conversion rate of 59% of our adjusted ebitda on a trailing 12-month basis. And finally the return of approximately twenty million dollars in capital primarily through the payment of our first quarter dividend.

First quarter revenues totaled $444 million dollars up $26 or 6% driven by growth in core mortgage and insurance and spatial companies International operations. Also grew on a constant currency basis as noted in our press release first-quarter 2019 revenues included twenty 1 million dollars a truck to non-core default technology units sold in the AMC transformation, which have no twenty-twenty counterpart revenues were up 12% excluding these discrete items. Also during the quarter. We secured a number of new client wins, including significant contracts and collateral valuation and property tax Solutions, which are expected to benefit second half of any issue.

Uws revenues total $276 billion dollars of $31 or 13% driven by higher mortgage unit volumes inorganic growth by market share gains in the areas of flood property tax Solutions in valuation platforms uws, first quarter 2019 revenues included $21 off to the transformational initiatives. I mentioned earlier uws revenues were up 23% excluding these discrete items.

improperly

Tax Solutions Revenue growth of 18% benefited from strong origination volumes and market share gains. In addition. We achieve significant competitive takeaways that we expect to generate strong growth in the second half 2020 or the quarter tax servicing volumes were up more than 70%

Credit reporting mortgage credit revenues grew by more than 30% while Auto and alternative credit volumes fell on covid-19 related contraction as we noted in our press release. We issued. Impacts related to the covid-19 pandemic which we estimated at approximately six million dollars across both segments mainly in our Consumer Credit related businesses.

Perm revenues totaled $173 compared to $176 in the prior-year insurance and spatial and constant currency International wage were higher offsetting the impacts of lower tenant screening volumes the exit of an encore business line and currency translation, which aggregated to approximately five million dollars wage insurance and spatial and international on a constant currency basis each group by 3% operating income from continuing operations total $67 for the first quarter of about 46 million dollars or 216% compared to the same prior-year. Higher operating income was principally attributable to the benefits of Revenue growth of operating leverage improved business mix and cost productivity.

First-quarter net income from continuing operations. So thirty-four million dollars compared with two million dollars in 2019 diluted EPS from continuing operations totaled $0.42 increase of $0.40 over the same part of your.

Adjusted EPS totaled $0.76 compared with $0.45 in 2019 an increase of 69% These increases were due to the company's strong operating performance with us previously.

Adjusted ebitda, totaled $130 of 33% compared to $98 in the same prior-year. Adjusted ebitda. Margin was 29% an increase of approximately 600 basis points the increase in adjusted ebitda and margin was principally attributable to revenue growth improved business mix in the benefits of ongoing cost. T programs.

Uws adjusted ebitda with $91 compared to $63 for the prior-year quarter reflecting operating leverage benefits driven by higher revenues or Revenue mix and continued productivity gains uws adjusted ebitda margins grew by approximately 700 basis points to 33%

PIR M adjusted ebitda totaled $49 up from $46 million dollars higher PIR M adjusted ebitda and margins were driven by growth and insurance and spatial and National as well as the benefit of lower costs, which offset lower tenant screening volumes in the impacts of currency translation.

pirs

Adjusted ebitda margins told 28% an increase of approximately 200 basis points.

Finally, we generated strong levels of free cash flow for the twelve months ending march Thirty 12020 free cash flow total $315 a 59% off version rate of last 12 months adjusted ebitda and an increase of approximately seven hundred basis points versus the metric we reported as of the fourth quarter of 2019 Dodge strong free cash flow performance has allowed us to build up our cash balances to $153 as of March 31st, 2020 an increase of approximately 48 million dollars over the last three months.

In terms of capital return we paid our first ever quarterly dividend of $0.22 per share combined with our repurchase of 50,000 shares. We returned approximately $20 in capital to all shareholders in the first quarter. It's Frank mentioned earlier this week the board declared our second quarter dividend of $0.22 per share while our current dividend represents approximately seventy million dollars annual Capital return. We continue to maintain flexibility to opportunistically repurchase shares while maintaining a prudent leverage profile as we have discussed. We anticipate increasing the dividend over time as our financial results grow. I will close my prepared remarks today with a recap of our financial Guidance with regard to the second quarter based on our current view of Market conditions internal business activity and our estimates on covid-19 related impacts. We expect Revenue to be in the range of 420 to $445 a month.

Adjusted ebitda for the second quarter is expected to be in the range of $120 to $135 million dollars these ranges include covid-19 related impact on revenue and adjusted ebitda of approximately 15 to 20 million dollars each for the second quarter while the overall Financial impacts have covid-19 are still evolving and challenging to protect based on first quarter actual results in our second quarter guidance ranges as well as latest external estimates of us full year mortgage Market volumes are full year guidance remains. It's changed.

consistent with past practice we will re-evaluate our guidance and update as needed as part of our second quarter earnings release cycle in July to summarize the CoreLogic team delivered strong financial results in the first quarter of 2020 we are well-positioned to drive Revenue growth and expand profitability throughout this year and Beyond thanks for your time today I will now turn the call back over to the operator.

Thank you we will not begin the question-and-answer session on your telephone please pick up your handset before pressing them to withdraw your question please press star then to the first question comes from John Campbell Stevenson please go ahead hey guys good afternoon off on a great quarter thanks just a two-part question here to kick off within valuations Frank I think you said the platform businesses make up maybe 60% how quickly is a growing first question

Yeah, so so in our our our collateral valuation job we talked about just to talk about it's it's over 35% in the first quarter. Okay, and then the remaining 40% that kind of transactional Peace, you know, if you guys are assuming kind of flat here of your origination units. I'm just trying to get a better sense for our new contracts. It sounds like you're going to see a pretty nice list in the second half that's going to help offset some of the pressure and two Q. I guess just conceptually would you expect that business to outpace overall resignations dead?

I would yeah based on his history and you know and to share games that you mentioned on. Yes.

Okay, that's helpful. And then the second question here just from a higher level, you know as we get out of.

Yeah, so, you know we came into the year with high expectations, you know, we had a lot of investment over the last couple of years around, you know, visual imagery around automation AI driven tools analytics analytical models which which I think have a great opportunity to transform the way, you know, some of the basic workflow processes of our clients, you know, those those um, you hear a lot about visual tours and that type of thing we have we have a significant footprint in place to provide that service and we're working on nationalizing that footprint. So those things off once KO Bata dunga think we're pass through that. I think those those will become much more prominent. So I think we're really well positioned in the digital virtual, you know automated range. And then I think a lot of our our data repositories are going to be a lot more accessible across multiple verticals. So we've got a lot in the hopper off.

And I think we were really and I think there are more than in the first quarter somewhat reflective of that that momentum that we had coming out of last year. So I think we have a plethora of different opportunities. We're playing all those I think especially strong at the front end of the house the house purchase cycle around things like a realtor platforms visual top of that type of thing and as well as throughout the underwriting process. Okay? That's very helpful. Thanks guys.

Next question comes from Kevin Costner with Delmon and Associates, please go ahead.

Hey guys. Thanks for taking my call. I got a question. I guess regarding some of the the winds. Is there anything you can point to as a catalyst for some of these new client ones? You mentioned a mega win and loss I guess tax processing and flood and what not is it may be elevated refi volumes that are pushing people to a Breaking Point or maybe missteps that competitors.

No.

In the case of Kevin in the case, the mega win still those take a while to to to secure and I think that if I had to say those those individuals are based on our ability and our our service in our domain expertise and I think those those were in the hospital for quite some time. There's a couple others out there that we feel are also be actionable that we're working on. So we hope that there's more to come on the mega win side. I think you know, we're seeing a little bit of a flight to Quality. We saw that in the recession coming out of recession where your clients look for durable scaled players like us that they can rely on and I think you know, these types of crises always exposed the cracks and some of the smaller players. So I think we see that as well. I think we're we are also um, you know, we retooled our sales organization last year and we are on the phone number.

Put in the marketplace from a sales and marketing perspective as well. So I think those are the three principal areas that are driving the share gains that we've experienced and and I think they they've accelerated over the last couple of quarters as well.

Okay, great. That's helpful. Thank you and on property tax Solutions this quote. I got that you have a big one that's going to come on the second half but this quarter were there any significant changes in maybe the assumptions? I know how to estimate kind of Revenue recognition for that but did anything change meaningfully in a quarter either with those assumptions or maybe a sure shift relative to the fourth quarter of 2019?

The cabinets gym on the tax business, you know, usually you have to look at a couple of components. Of course as the deferred revenue model to it the general about, you know, twenty-five percent in the first year and on a year-over-year basis the way the model worked is the run off of the Deferred was pretty much the same year over year or so that bump and the the 18% year-over-year is primarily due to the new stuff coming online taking a quarter of that 70% or so volume that we had as I said in my prepared remarks. So it's it's all the new stuff that came online that drove the increase.

Year-over-year deferred was flat in other words.

Okay.

All right. Okay. That's that's helpful. Thank you. Kevin. Just the other thing is this is Frank. Just you know, we we talked about in the past. We we have launched our digital tax platform, which we think is a superior offering in the marketplace that clearly Superior offering the marketplace and you know as a result of that that that that's a great play for our new clients and we've been winning a lot of clients in tax as well. Not just the mega win, but a lot and that that platform is part of the reason why we're doing that we got at remember seeing there as well. So we just have a heck of a lot of momentum in that business that really was built up over over, you know the balance of last year and into this into this first quarter. So we expect them to progressively be boarded. You know, those loans are going to be boarded over the balance of this year. So that gives us a lot of runway for growth.

in the next

The bunch of quarters the revenue recognition and kind of that this the expenses associated with that is that similar in terms of how the revenue flows through in the margins and all that do the either, you know, you're more standard tax processing business. So that that is the new platform bed. The whole business is is running on that platform. So it doesn't doesn't really affect Revenue recognition per se it's more efficiency and automation a client experience. So one of the reasons why you're seeing Mars and accretion in that particular line is because of the it's tremendously more automated. That's that's been traditionally a paper driven. So a little bit what John alluded to one of the the new ways of working on the digital platform is you get rid of a lot of paper and a lot of cycle time. So it's a completely new workflow very exciting for our clients and a lot more user-friendly to that dead.

Facilitating, you know the adoption by existing and new clients. So it's more of a a say a client experience in a cost play than it is a revenue recognition play-off. Okay. Got it. Thanks a lot.

Thank you. The next question comes from Wilmington, please go ahead.

Good afternoon, everyone. So I'm trying to reconcile the the unit data that you've mentioned with the other pieces of the business and Gemma thought yep, good job reconciling the tax piece. Meaning that was running a roughly a quarter of the of the level of the of the NBA units that they talked about for about 69% And then you know flood looks like it tracked pretty closely to what you would expect up 63% that would seem to make sense. Maybe you can help bridge then uh credit the valuation piece and then the other piece just to make sure I'm not missing something there.

Yeah, when we file the the queue later today later this evening early tomorrow. You're going to see our outlook on the closed loans is roughly thirty-five to forty percent on closed loans Bill and that's pretty consistent with what we saw at the title guys as well in their reports. I think one was around 34. The other was on the low 40s off. So I think the volumes that we see in tax tax is kind of post close loan. So it's a little bit different animal than the other businesses credit as I indicated my prepared remarks, you know kind of in the low 30s and again that was consistent with one of the other players that we saw as well in terms of pure companies on the valuation side the growth Frank put in his office, you know, smack dab in that range thirty-five. We thought the performance there was very good on the AMC side were kind of going through that transition piece of the post transformation in New Jersey.

The ramp-up of new work that's going to be coming online that we indicated will benefit the second half of the year.

And then flood just was on a tear this corner and that's of course on the more on the open, you know at the open order part of the process and they they had a terrific quarter and great results.

Okay, and then you mentioned the twenty to twenty-five million in in it investment that you're planning to do. What kind of savings do you expect to generate month from that investment?

Yeah, so I think I think the the pandemic has obviously had a lot of companies looking at there, you know Supply chains, I think from that perspective though, you know, I think there's a couple of benefits of this initiative one. First of all one is the with the Advent of technology is tied to re-evaluate traditional of supply chain, and we have a very good one, but it's a traditional one. So we want to we want to look at an onshore capability that's machine learning and AI driven. So it's a it's a kind of A New Concept wage. Um, that's going to take a couple of years to build out. You know, my guess is that's going to you know, we're spending over a hundred million dollars a year, you know ingesting and curating our data. So, it's a big it's a big area. You know, I I'd say we'd be looking at I'm hoping 10 to 30% of that can come out.

So sorry a hundred billion got it. So it's a big it's a big price but I think equally important issue the you know, is is transforming to supply chain because the other thing is we are, you know, as I mentioned we are investing a lot in individual and different imagery as well as mobile data sets and you know things like i o t and that that type of very exciting new opportunities for us to get into different verticals would that data and I think to to you know, those are higher volume office complex datasets and to ingest those efficiently, I think this platform will help as well. So it's a little bit of a if you look at the current data, you're going to say that you know that tended 30% off but also I think if you look at the growth opportunity and how to enable at a at the type of margin, I mean we run a 30% that's a that's a pretty good clip. And so we want to we want to bring on those new data sets off.

That type of margin so this will enable that as well.

Got it. All right. Well, thank you.

Thank you. The next question comes from Jeff Mueller with please. Go ahead. Yes. Thank you into two on the estimated negative impact. What time is it Rental screening and non-mortgage credit or am I missing a piece on the revenue side? And then on the similar even hit the revenue head is it like a higher wage a mental? Margin? Plus there's some unusual expenses that you're incurring to operate because of covid-19 to help under better understand the Q2 covid-19. I'm sure a job. It's Jim. So on the covid-19 packed number of number of pieces in there. So it's a continuation of what we saw in the first quarter. The newer elements be the impact on the international businesses. There wasn't a lot going on in q1, but we've seen a more dramatic impact in Q2, you know as we noted in our earlier birth.

International is actually up 3%

Your rear x x the currency on a common currency basis. So we're going to see the impact of those, uh, geographies largely in the second quarter and those tend not to higher-margin platform type of businesses. So the way to think about what we believe we're going to be impacted within the second quarter is a few more long lines in there. So it's going to be the tenant screening alternative credit auto credit the international also some project-based work that we would typically see and not a lot of projects going on. So the overwhelming majority of that is going to be probably a higher-margin mix with some elements to the cost structure.

Okay, and then I know you previously didn't give you two guidance specifically and it sounds like you're not changing your full year mortgage assumption, but I just thought I would think I would think that given the way volumes have been trending including the inquiries in March that close loans in Q2 would be up a lot. Just I'm kind of clothes Lotus growth assumption is underpinning your cue to guidance.

I'm sorry. Are you asking for full-year or cue to know for guidance data points are you know if you look at all the projections out there, they're pretty all over the place. And so you you've seen probably what I've seen it could be as minus 5% 2 + 50. That's the pretty wide range. So what we basically went on informing our our guide for Q2 was to Simply look at the trends of what we're experiencing early in the quarter cup in the weeks so far into April and it feels like a continuation of the trends that we've seen in the the last quarter to, you know, very strong refi volumes to purchase season that we would typically see probably not going to happen as as I'm sure you're aware. A lot of the listing data is down for the most part. So we just went with a lot of internally driven data off.

In order to support our view of the quarter.

Okay, and then obviously Mega wins are they in the guidance now where the in the guidance before or I'm just trying to when you're talking about a mega when am trying to understand how impactful these winds are going to be once they start impacting Revenue.

Hi Jeff, it's Frank. So it's a mega win. Their those are tens of millions a year contract value. So they're they're they're large wage tax of our our our business. So, um in some cases, you know, the top-end could be 30 to 40 million dollars a year and they are in the in the projects for this year more pronounced. Uh, because if you look at the particularly the tax service win will start boarding those loans in the middle of this year off. So you'll see a ramp-up this year, but the more pronounced the full impact will be much more significant in 2021, but certainly for the back half of this year. It provides good support, you know in case covid-19.

the AMC

And which I talked about last quarter. You know, that is we started to board from those those those volumes beginning in in April and we have we're what's going to happen is they will rent will ramp up as a percentage of that Originators total volumes, which we expect to have ultimately get to about a third right now. We're running kind of very, you know, it's it's relatively de minimis. But by the time we get the second half of the Year, well, you know get to ten fifteen twenty per-cent. So and then and next year, you know, if we perform well, we'll get the 30% level. So that's how that kind of plays in as well.

Got it. Thank you.

Thank you. The next question comes from Tommy McGee, please. Go ahead.

Hey guys, good evening. I can't recall if you guys like reference this map more recently than the past the estimated that every a hundred billion dollars of mortgage volumes could translate directly $25 incremental revenues and that depends on how to you know, a pretty high ebitda margin upwards of fifty percent or so now industry is worked out there a bit all over the place with summer time, you know, two point eight billion dollars we've seen that could provide quite a bit of Tailwind for you guys just in general does that not kind of still hold true today?

That that was telling me that that was our traditional kind of sensitivity $4. It does fluctuate a bit because you know, we've had a. Wage had relatively High loan values being so the dollars dollar growth didn't translate nearly into the unit growth. So when I talked about, you know, the market big flat year-over-year are kind of estimate for the full year that includes phenomenon like that as well as as well, as you know, you have to deflate the, you know, just the age and that type of thing so it's a little there's a little bit of nuance to it. But that's traditionally been our our overall sensitivity that we provided.

I would say, you know, as I said in my full year estimate of Market, I think like a lot of people, you know, we assume refinancing activity will be elevated rates are obviously uh at all-time lows and that likely to continue. So you have a strong refi environment. Um, um again, I think subject to as you get in the year of the impact of covet on, you know, the ability of people to to to buy, you know, just on their their employment that type of thing but uh, but you do have a strong refinancing I think purchase is going, you know, it's already impact and it's going to be impacted particularly the second the third quarter the fourth quarter for purchase traditionally is a is a seasonal thing so you don't have a lot of activity traditionally in that quarter anyway, but the second third quarter are impacted and I think it's really hard to tell what the full impact is and Ed.

Quickly to purchase Market comes back. I think a lot depends on you know, how long

People a lock down and and a lot of other the severity of the the pandemic Etc. So I think I personally think our projections are pretty reasonable based on what's going on today as Jim alluded to their the the external available forecast range dramatically, especially if you get into quarterly splits and I just think it's it's kind of chasing your tail trying to figure those out. We see a lot of other volumes and we see most you know, we're not exactly indexed to the full Market but we see a pretty good slug of of room. The one thing to remember is if we have a credit and a flood uh-uh Revenue dollar typically the the the tax fall quarter later or you know, sixty days or ninety days later. When is Jim said it when you close the loan and like the loan so there's that kind of nuance as well if you're talking about quarterly split. So yep.

Take a general my recommendation of my and and way we feel the market is going to play out is is kind of a largely a flat if it's a little bit better. We will be will do but it's hard to estimate the covid-19 packed, you know, because the problem is the covid-19 extend to be shocked. So as Jim alluded to we do have a high incremental impact on the bottom line because normally if you see those shocks and they they happen over time. Do you have chance to you know address your cost structure but these shocks are kind of sudden and you know, I haven't laid anybody off and we're managing our cost structure, you know, as we do always carefully, but but we're not we're not trying to react to suddenly because I think the transitory impact that will hopefully hopefully come out of as we as we get through this the third quarter.

Got it. Yeah, I agree. There's a lot of uncertainty in the forecast out there. I'm switching topics. If we were to enter somewhat of a prolonged economic downturn could you walk through which of your businesses having a counter-cyclical Tendencies and apart from just low rates generating hiring mortgage Goings?

Well, I think one of the one of the I don't know if it's counter-cyclical, but kind of is it's obviously, you know, we're seeing a lot of demand for loan modification work and other other, you know, we used to call default Services, you know, um, and we used to have very significant presence there. We still have the Platforms in the analytical models of support from work around Port valuations and Loan modifications. So we're seeing a we're seeing and I think it will grow or the second half the year that type of demand for those services will grow and those are good Mark and they products for us. So that's an example of something that will do better. I think our businesses, you know, the move to platform businesses. It gives us a you know, they're very efficient suck us a lot of I think protection on the profitability side, you know, assuming assuming it's not you know, complete blowout and I don't I don't think there's any any reason

To assume that so, you know, I think we're we're well-positioned.

In our key businesses, you know the the one you know, the one area that a little bit of a wild card right now is international which is not a huge chunk of our Revenue, but right now the UK and am New Zealand in particular I think are Frozen the whole economy is frozen and Australia's okay, but you know but challenge. So I think those are economies that are are pretty much going to come back whenever the government, you know pulls the, you know pulls the lever and and and people are able to do that safely. So so I think it's it's a it's a collection of different impacts, but overall, you know, we have held up remarkably well in every different cycle and you know the last five five ten years we've seen a lot of different Cycles in the mortgage market and we've consistently improved our profitability and and I think we made the company into a much more profitable and durable entity so dead.

I think I think we're in pretty decent shape. I don't know, you know covid-19.

Okay. Thank you.

Thank you. The next question comes from Darren Keller. Please. Go ahead.

Hey guys. Glad to hear you guys are doing okay. Listen, I want to just touch up a bit about the resilience that you could have. If we were to hit a tough recessionary, you know prolonged environment on the on the non-mortgage is whether it's insurance or specifically, you know analytics some of your legacy businesses. I remember back in the first American days. I think we're pretty resilient actually and so I guess I'm curious what you think the the resilience Factor could be in some of those businesses. If we were to hit itself time for, you know, twelve plus months and then I guess on that note on the expense side, you know, you've always done a great job obviously managing your margins and expenses and I'd be curious to hear if there's more if you had to I mean, is there more room to step that up a notch and make that more pronounced of a an impact on a typing The Piano Guys

Yes, let me I'll take the 2 and again appreciate the question. So first of all, I think that you know, we used to be ninety nine.

Mortgage origination and and default and now we're 60% origination and 40% non-mortgage. So that alone gives us a tremendous amount of of Life resiliency. That wasn't there. If you look at the non-mortgage peace, you know, we have international which I discussed which is you know, we're primarily, you know, High market share, you know integral part of the the housing system of those markets. So I think I think those are very durable, you know, and and those markets have been resilient over the years and I think they're they there's every reason to expect that those those will snap back. So I I think that's one thing secondarily is our insurance is official business, you know, I think it's pretty darn steady and reliable it it drives on things like storms and climate and you know insurance claims and and underwriting and I think that's in the property cat Insurance area. So that's pretty cool.

Pretty durable and you always have to have insurance. So I think unless they ban insurance. I think that will be doing pretty well there. I think if you look at the data licensed business in the analytics business, I think Thursday are all longer-term contracts. So, you know, I think you know those will not I don't think people will cancel a lot of the data in bed in the workflows of the of the clients Central so I don't see that as a particularly riskier. So I think overall with the exception of tenant screening which has its own set of parameters and it's and frankly wage is a relatively small piece of the overall pie. I think that the non-mortgage pieces is pretty pretty resilient. I mean, you know oil and gas, you know, the collapse there wasn't helpful we had yeah, we do have some energy related revenues that you know kind of evaporated with that but but they're not again not not that meaningful to the to the go forward picture on the mortgage side. I thought

Our businesses are transformed. I mean we essentially are mostly platform related. If you look at all those businesses for the most part even tax is a platform and off the platform and I think we have over many many years established the contractual relationships and many of them again our multi multi year or it's very difficult to switch off. So I think those give us, you know, a good grounding and those businesses as you may call in years ago were we're in low twenties. Margin now, they're above 30% margin which again provides us with a pretty good installation, you know from downward pressure. So I think even in a market that is you know,

Not currently contemplated. We used to talk about 1.5 trillion and trying to make 25% margin a 1.5 trillion Market or more and I think I think that is you know anything we're we're beyond that. So I think we're we're pretty good shape borrowing, you know some total class and I think that's a that's a different story. But I think in any reasonable doubt or scenario, I think we're we're pretty durable in pretty good shape and I think the market share gains that we have and the additional ones that are in the hopper were going to give us another installation layer for the future.

All right, and just I mean in terms of the capital allocation, it sounds like you guys plan to keep your initial plans on and track maybe just we address your priorities on that. If you don't mind, you know, I know the dividends relatively new but it sounds like it's that's very secure. Um any thoughts around incremental BuyBacks given the market dynamics of our just preserving capital is probably more important than guys. Yeah. Thanks are no I think the gym and the team have done a great job. We we have a tremendous Club. What I've learned over time is the clients are key and our clients are you know, the major carriers the major Banks the major originated services and and you know, we expect they will pay off and so from that standpoint, you know, and and as consistent with the the last recession, you know are we don't have a bad debt experience. That's very significant and I don't suck.

But at this time so I think we got a great client base. Um, I think that our our cash flow is remarkably steady and strong and I think that gives a lot of flexibility and learn from a hundred million roughly 250 million in a quarter. And so I think that you know, we expect our liquidity to be pretty strong we've delivered a little bit in the fourth quarter. So we're we're heading towards three-times leveraged. So I think a lot of that is is um consistent with our our long-term strategy Capital allocation. We did back 50,000 shares in the quarter, you know, as you know, we it's such a short window that you know, traditionally we haven't bought a lot in the first quarter as Jim alluded to I think, you know, we are still not able to opportunistically purchase shares and we we would expect to do so the dividend also is Jim said, you know, I would expect as our profitability continues to God.

That we will grow the dividend over time as well. So, you know from a from a liquidity and capital allocation perspective. I think we're in pretty good shape heading off the balance of the year.

Got it. Got it. All right. Thanks a lot guys.

Thank you. There are no further questions at this time. The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Dead dead dead dead.

Dead dead dead dead.

Thursday Thursday, Thursday, Thursday Thursday

I'm home.

Dead dead dead.

Yes.

dead dead

Thursday