Q3 2020 Corelogic Inc Earnings Call
Good afternoon, and welcome to the core logic third quarter 2020 conference call. All participants will be in listen only mode did you need assistance. Please conference specialist by pressing the star team followed by female.
After todays presentation, there will be an opportunity to ask questions to ask.
To ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Dan Smith head of Investor Relations. Please go ahead.
Thank you and good afternoon.
Welcome to our Investor presentation, and conference call, where we present, our financial results for the third quarter 2020.
Speaking today will be Corelogics, president and CEO, Frank Martell, and CFO, Jim Dallas.
Before we begin let me make a few important points.
First we posted our slide presentation, which includes additional details on its catch results on our website.
Second please note that during today's presentation, we may make forward looking statements within meaning within the meaning of federal securities laws, including statements concerning our expected business and operational plans before.
Performance outlook and acquisition and growth strategies, and our 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.
For further details concerning these risks and uncertainties. Please refer to our EPS you see filings, including the most recent annual report on form 10-K, and subsequent 10-Q's.
Our forward looking statements are based on information currently available to us and we do not intend to and undertakes no duty to update these statements for any reason.
Additionally, today's presentation contains financial measures that are non-GAAP financial measures.
A reconciliation of these non-GAAP measures to their GAAP equivalents is included in the appendix to today's presentation.
[noise], unless specifically identified comparisons of third quarter financial results to prior periods should be understood on a year over year basis that is in reference to the third quarter of 2019.
Third as outlined in last week's press release Corelogics reseller operations have been classified as discontinued operations as of September 32020.
Our discussion today will focus on our results from continuing operations.
Fourth as with our second quarter earnings call, we will be fielding questions focused on the company its operational and financial results and our expectations for the future.
Do not intend to discuss the ongoing hostile bid process or matters connected to the upcoming special shareholders meeting.
Finally, please limit yourselves to one question with a brief follow up bill.
We will take additional questions at the end of the call as time permits.
Thanks, and now let me introduce our president and CEO Frank Martell.
Thank you Dan and good afternoon, everyone. Thank you for joining us today for Corelogics third quarter 2020 earnings call.
Today, I will outline the major operating and financial highlights of our third quarter performance, including ongoing market share gains and competitive wins across our businesses, which had been driving higher organic growth rate over the past year and it.
In addition, I will cover the transition of our revenue mix to higher fixed recurring solutions with significantly lower levels of sensitivity to mortgage volumes.
Well also outline the drivers behind the step function increase in our adjusted EBITDA margins and discuss capital return.
Jim will follow me and provide details on our third quarter financial results as well as our plans related to the divestiture of our reseller businesses.
He will also discuss our full year 2020 financial guidance and outlook for 2021.
I will then finish up with a few thoughts on our successful strategic transformation and the accelerated value creation opportunities and the short medium and longer term available to our shareholders.
Well, then wrap up with a Q and a session.
Before I begin I want to take a moment to congratulate our 5000 plus employees and thank our clients and shareholders as we celebrate corelogics 10th anniversary to.
Together over the past decade, we have transformed corelogic into a clear market leader in residential property related data analytics and platforms that power the housing finance and insurance markets in North America, Australia, and New Zealand.
And the process, we returned 1.5 billion to our shareholders that incurred increased our share price 286%.
Now turning to the third quarter, specifically building off of an excellent first half of the year Corelogic delivered record levels of revenue and the strongest operational and financial performance and its 10 year history.
We generated double digit topline growth with 8% organic revenue gains or.
Our organic growth rate more than doubled in the third quarter from the first half as we picked up momentum from Mega wins in mortgage and insurance and other significant share gains secured over the past four quarters.
During the quarter, we continued to boost our non mortgage business and the percentage of fixed recurring revenue in line with our strategic planning objectives.
Strong topline growth favorable mix operating leverage and our ongoing cost management programs also drove profitability to record levels during the quarter.
Our reported third quarter revenues were up 16% from prior year, driven by organic growth strong U.S. housing market activity and a rebound in our major non U.S. markets.
Organic growth rates climb from 5% in the second quarter to 8% in Q3 on the strength of share gains secured over the past 12 to 18 months as well as benefits from our new indoor enhanced solution bundled and favorable pricing.
As we discussed in past earnings calls our share gains included four Mega wins.
We recently announced two of these when.
First a contract to provide tax payment solutions to Mr. Cooper and second a strategically important contract when with Liberty insurance, which is.
Which is centered on corelogics unique capability to deliver next generation solution for insurance carriers, including our insurance claims processing offering.
We believe that the strategic impact of winning a top five insurance client with end to end solutions serves as an important catalyst for the substantial expansion of our insurance footprint over the next three years.
These multiple your relationships aggregating approximately $160 million in total contract value or with innovative market leaders and offer the potential for future scope and service delivery expansion.
These wins and many others are clearly raising our second half organic growth rate and will contribute a substantial portion of our 2021 organic growth target.
In addition to our strong organic and total growth performance in Q3 and over the past four quarters. We've also driven a stair step increase in our profitability margins.
In this regard third quarter adjusted EBITDA was up 46% adjusted EBITDA margins hit 40% up approximately 800 basis points.
Operating income from continuing operations was up 18% and our third quarter net income from continuing operations of 71 million to $102 million.
Third quarter and year to date adjusted EBITDA margins are now <unk> are up approximately 800 basis points are now in line with the highest performing companies within our information services peer group.
Higher margins reflect the shift in our revenues to higher level of the fixed recurring solutions as well as the operating leverage and cost productivity.
In addition to strong growth in higher margin our rate of free cash flow generation continues to accelerate.
On a trailing 12 month basis, we generated free cash flow of $403 million, representing a 73% conversion rate of adjusted EBITDA.
Consistent with long held capital allocation priorities, we remain focused on returning significant levels of capital to our shareholders.
In July we announced a 50% increase in our dividend, which resulted in 26 million of capital return to our shareholders. During the third quarter. In addition, as we previously announced we expect to complete our repurchase of at least $500 million in shares by the end of 2020 as part of a $1 billion share buyback program expected to be <unk>.
Completed by the end of 2022.
The exceptional operating and financial performance that I just discussed reflects the successful implementation of our strategic planning objectives, which include first market leadership and strategic client partnership through innovative data driven solutions.
Second achieving critical scale and operating leverage in our core solutions.
Third increasing predictable fixed recurring and non mortgage revenues to greater than 50% of total.
Fourth achieving first quartile profitability through revenue mix development operating leverage and aggressive cost productivity and fifth.
And fifth and finally, returning significant levels of capital to our shareholders in the form of share repurchases and quarterly dividends.
The strength of our business model and the resiliency of our team have been key factors that success in 2020, as we continue to drive significant value. Despite the unprecedented kobin pandemic.
Over the past nine months, we have successfully navigated through the profound operating changes necessary to protect the health and welfare of our people and at the same time deliver exceptional performance for our clients.
Despite the unprecedented challenges presented by COVID-19, our performance in 2020 stands as a clear confirmation that our company is entering the second decade.
[laughter], but its business with all of our fundamental building blocks in place to unleash a period of strong and sustained revenue and margin growth drive superior shareholder value creation.
Looking beyond this year in terms of 2021, we have security substantial percentage of our organic revenue growth target of 5% through already contracted wins and pricing gains.
In addition, we expect to benefit from the adoption of our next generation integrated insurance solution and the national expansion of our one home and home visits solutions.
Approximately 95% of our 2021 revenues will be recurring in nature, a foundational hallmark of must have information services providers.
I want to close by thanking our employees clients and shareholders for their continued support correlate.
Corelogic today is the integrated innovative and data driven strategic partner for virtually every major participant in housing finance and the insurance ecosystem.
Our consistent exceptional operating and financial performance overtime demonstrates our ability to capitalize on our market leading share positions unmatched data and cloud.
And client platforms, which collectively connect the global housing economy, and help millions of people find buy and protect the homes They love.
I'll now the turn the call over to Jim.
Thanks, Frank and good afternoon, everyone today, I'm going to discuss our third quarter 2020 financial results and provide updated views on capital structure and financial guidance.
As Frank mentioned Corelogic delivered strong financial performance in the third quarter of 2020, while delivering on our client commitments and providing for the ongoing health and safety of our employees amid the COVID-19 crisis.
Financial highlights for the quarter included first strong total revenue growth of 16%, which after adjusting for the 2019 affects a business exits and COVID-19 impact was higher by approximately 23% from the year ago period.
Second strong market share gains across both segments contributed to an organic growth rate of 8% included.
Included in this amount our contributions of the initial onboarding of major client multiyear wins announced earlier this year, which contributed approximately 30% of our organic growth in the third quarter and are expected to benefit 2021 and beyond.
Third significant adjusted EBITDA margin expansion of more than 800 basis points, driven by growth favorable business mix and productivity gains.
Fourth the generation of $403 million in free cash flow. This represents a conversion rate of 73% of our adjusted EBITDA on a trailing 12 month basis and five.
And finally, approximately $26 million in capital return to shareholders and continued reduction of covenant leverage to 2.5 times.
Third quarter revenues totaled $437 million up $61 million or 16% driven by growth in core mortgage insurance and spatial and international.
As noted in our press release third quarter 2019 revenues included $17 million attributable to non core default technology units sold and that AMC transformation, which have no 2020 counterpart.
Also we experienced impacts related to the COVID-19 pandemic of approximately $4 million within our PRM segment.
Revenues were up 23%, excluding these discrete items.
You Ws revenues totaled $263 million.
$54 million or 26% driven by higher mortgage unit volumes in our organic growth fueled by market share gains in both flood in property tax solutions and growth in our valuation platforms you.
You Ws third quarter 2019 revenues included $17 million related to the transformational initiatives I mentioned earlier.
Excluding these discrete items you ws revenues were up 37%.
In property tax solutions revenue growth of 61% benefited from strong origination volumes and market share gains from recently contracted wins.
As we look out into 2021 are significant competitive takeaways in tax announced earlier this year give us high confidence that we will generate strong growth over the next 18 to 24 months.
PRM revenues totaled $176 million compared to $169 million in the prior year.
2023rd quarter, PRM revenues were unfavorably impacted by approximately $4 million of COVID-19 related impacts.
Our international business housing activity within property insights and project related insurance and spatial revenues.
Despite these COVID-19 impacts PRM growth totaled about 4% in the quarter.
As Frank discussed earlier, the big win with Liberty in our insurance and spatial business should provide very significant growth opportunities over the next several years.
Operating income from continuing operations totaled $73 million for the third quarter up $11 million compared to the same prior year period Huh.
Higher operating income was principally attributable to revenue growth operating leverage improved business mix and cost productivity.
Third quarter net income from continuing operations totaled $102 million compared with $32 million in 2019.
Diluted EPS from continuing operations totaled $1.26 cents, an increase of 87 cents over the same prior year period.
Adjusted EPS totaled $1.21 cents compared with 71 cents in 2019, an increase of 70%.
These increases were due to the company's strong operating performance discussed previously.
Adjusted EBITDA totaled $176 million, an increase of 46% compared to the same prior year period adjusted.
Adjusted EBITDA margin was 40% an increase of approximately 800 basis points.
Increase in adjusted EBITDA and margin was principally attributable to revenue growth operating leverage improved business mix and the benefits of ongoing cost productivity.
[noise] you Ws adjusted EBITDA was $140 million compared to $85 million for the prior year quarter, reflecting operating leverage benefits driven by higher revenues favorable mix and continued productivity gains.
You Ws adjusted EBITDA margins grew by approximately 12 percentage points to 53%.
PRM adjusted EBITDA totaled $49 million up from $46 million.
Higher PRM adjusted EBITDA margins were driven by growth in insurance and spatial and international as well as the benefit of lower costs, which more than offset the impacts of gold at 19.
PRM adjusted EBITDA margins totaled 28% an increase of approximately 100 basis points.
In terms of capital return as we announced in July we increased our quarterly dividend payout by 50%, which resulted in a return of $26 million to our shareholders also.
Also with our growing earnings profile, we lowered our covenant lap that leverage to 2.5 times.
Finally, we generate strong levels of free cash flow for the 12 months ending September 32020, free cash flow totaled $403 million, a 73% conversion rate of last 12 months adjusted EBITDA parking.
Our continued strong cash generation performance allowed us to build our cash balance to approximately $300 million by quarter end.
Given the strength of our earnings profile and increasing strong cash flow generation. We continue to have high conviction in our ability to execute our previous previously announced $1 billion share repurchase with at least 500 million and 2020 $300 million in 2021, and the remaining $200 million in 2022.
Yeah.
Regarding our financial guidance based on our strong third quarter results and the continued positive business momentum we are seeing in the fourth quarter. We believe we will finish 2020 at the upper end of our full year 2020 guidance ranges, which include revenues of $1.55 billion to $1.575 billion.
Callers adjusted EBITDA of $560 million to $575 million and adjusted EPS of $3.50 to $3.65.
Our full year 2020 us mortgage market volumes outlook remains unchanged at approximately 35% higher than 2019 levels also.
Also we have reflected our share repurchase of $500 million in our 2020 adjusted EPS ranges into.
In terms of COVID-19, our outlook for full year 2020, COVID-19 impacts for continuing operations is expected to be approximately $20 million to $25 million in both revenue and adjusted EBITDA as.
As we highlighted in both the first and second quarter, our tenant screening auto credit and alternative credit businesses. All now reflected as discontinued operations were very much impacted by the onset of cobot and.
And finally, our continuing operations financial guidance includes stranded costs of approximately $36 million relating to the reclassification of the reseller businesses to discontinued operations of which costs are expected to be reduced by approximately $10 million in 2021, and an additional $10 million.
In 2022.
Longer term, we have high conviction, achieving the targets, we set out for 2021 and beyond our two.
Our 2021 forecast is supported by a high and ramping rate of contract wins in both of our operating segments net.
You contracted wind account for over 60% of our forecasted growth in 2021 in addition to pay.
In addition, the purchase market continues to strengthen and grow in all major forecasts.
In terms of refinance volumes the outlook continues to strengthen as we get closer to 2021, historically low rates, which are forecasted to continue through at least 2023 in the significant population of existing loans that are in the money and the broad based eligibility criteria for refinance support elevated.
Levels of refinance volumes for the next several years.
To summarize the Corelogic team delivered strong results in the third quarter, and we are well positioned to drive revenue growth and expand profitability this year and beyond thanks.
Thanks for your support I will now turn the call back over to Frank for some concluding thoughts before we go into Q on that.
Thanks, and great job Jim I'd.
I want to close out our prepared remarks today with some comments on our laser focused on anemia, and unyielding commitment to driving shareholder value creation.
We believe that our publicly announced 2020 2021, and 2022 financial forecasts and operational plans are achievable and supported by demonstrably facts and or visible trends.
Our track record of delivering on our forecast and commitments speaks for itself.
Corelogic is firing on all cylinders, we are exiting 2020 with accelerating momentum and believe that we're well positioned to capitalize on the many value creation opportunities to drive continuous organic growth and margin gains.
Our strong and recurring revenue growth and in flight cost management programs provide us with a high degree of confidence in our ability to achieve our operational and our financial objectives for 2021 and 2022.
I'd like to thank all of our shareholders for their ongoing dialogue and input, particularly since the hostile proposal for center and connect was launched.
To be Crystal clear, our board remains open to all pathways to create value that.
Appropriately values the company and provides certainty of closing.
Senator and conveys continuing shifting stream of misinformation and supported their opportunistic attempt to acquire core logic.
Deliberately ignores the facts.
We plan to continue to provide significant transparency into our business such that all of our shareholders can fully appreciate corelogics substantial current and potential value creation.
Today management through their controlled and our affiliated companies in the housing finance space, no very very well the robust dynamics underlying the residential housing market and its bright prospects for the foreseeable future.
Again, thank you for your time and support today.
While we understand that there may be some questions about the hostile proposal and the upcoming special meeting. This calls about the company's third quarter results and we would appreciate it if we could keep today's questions focused on our financials and our performance for the quarter.
With that I will now turn the call over to the operator to open up today.
We will now begin the question and answer session to ask a question. Please press Star then one on your Touchtone phone.
If you are using a speaker phone, we do ask that you pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Our first question today comes from Andrew Jeffrey with true best.
Hi.
Thanks for taking the question guys appreciate it.
Certainly good to see the business cleaning up I think it's it's helpful for investors.
Hi, a couple of questions I have I guess or sort of broadly on organic revenue growth and then specifically as a follow up on insurance.
Insurance and spatial considering.
8% growth in third quarter, which is a good number.
60% of which I think you said came from.
It was up 30% from new wins.
And given that the roll on of those wins shouldn't we expect organic revenue growth next year to be faster or is there a bit of conservatism in your outlook I'm, just trying to maybe drill down on that a little bit.
Hey, Andrew It's Jim No I think you're reading it right. We're onboarding those those larger clients.
The impact in the third quarter was significant we expect that trend to continue in the fourth quarter and I think it lines up for a very strong first half of next year as we continue to to board those those clients get those volumes.
Expand that business and then also add other clients in the making.
Okay. So maybe it's a little bit of tough comps in the back half is.
To think about it.
And then.
With regard to insurance and spatial in particular.
Which this quarter doesn't seem to have shown the benefits of.
Of the Liberty mutual win yet in particular I Wonder if you could just help us with the cadence.
From from new business as well as what you think the long term organic revenue growth from that business in that.
Sub segment in particular can be.
Yes theater, it's Frank so yes.
Yes look I think we.
Yeah sure Christian Liberty, we have onboarded the client.
We are booking revenue in the third quarter, it's small and it's.
And it will ramp up in the fourth quarter, but the significant ramp will be next year. So part of the lift that you're kind of alluding to an acceleration organic growth next year will come from the ramp up in the revenue profile at Liberty, but also other insurance when we've announced things like Veeva, which is a major player in Canada, and there is others as well so.
Actually the prospects and the insurance.
Vertical are are quite bright and but.
But I think we called out the strategic implications of having a top five player have the confidence to pick up our full solution set.
Which I think is a great catalyst for.
A significant acceleration, which the team is driving hard at.
Your point about what's the long term prospects I talked in my prepared remarks, so I think that business.
Could could double in the next three to five years.
Insurance footprint.
Wihd wins like Liberty and others.
As well.
Interestingly I think if you look at our announcement of Liberty. Its also we talk about a kind of an innovation partnership with those with that that from.
And I think it's a great endorsement of the innovative nature of our our team and what we bring to the market as well. So it's it's the claims business.
But also an innovative partnership is very exciting as we kind of try to create other other products and services.
I appreciate it thank you.
Our next question comes from Darrin Peller with Wolfe Research.
All right Hey, guys bags.
I mean kind of jumping off of the prior questions around 21 in your expectation for what looks like about a 5% organic growth embedded in guidance versus the run rate recently.
Maybe you guys can just give us a little more color on the building blocks beyond the new business that you've already won which was I guess the churn side primarily.
What do you think is going to really come incremental products and pricing.
And I guess I'm, just curious I mean, again youre going from that 8% now and I know you do face tough comps in the second half versus a 5%.
Slide guidance for next year, maybe you could just give us the building blocks with a little more granularity than you did in the slide that showed what was new business what was mortgage.
Yes, so I think.
First of all just to be clear so our organic growth rate was worth about 4% in the first half and 8% in the in the third quarter and we expect a very strong fourth quarter as well. So there is not going to be.
A drop off in the fourth quarter it should be a very strong in the fourth quarter Darren So I think.
Clearly the trajectory coming out of first half second half. This year is markedly higher as we as we exit the year.
I think in terms of you know we have roughly an $80 million. If you look at 5.5% of our our revenue stream organically, it's about $80 million.
Yeah, we have well we talked about on the on the second quarter call. We had 60% identified and secured through contracted wind that that's a really really good visibility.
We continue to add to that visibility. So we're you know we hope to exit this year with pretty much pushing a 100% visibility into the organic growth profile.
And that $80 million target.
The reason why I talked a little bit more about liberty and Mr. Cooper, because you know that at a high.
At $160 million of total contract value.
We're going to pick up.
About a third of that organic growth that may a little less than a third of that organic growth total and those two contracts alone. So yes, we've had probably a dozen wins in tax and many many more in the other business units. So so we've got a great visibility into the organic growth trends.
And.
And I'd say the other the other thing that not to.
Not to Miss it, but if you look at 2021 from a.
A housing market activity perspective, you know the MBS come out with a big upgrade and their view of the trajectory of the purchase market.
And a less than our view of of.
Of Rifai.
So they're actually it they're above two trillion and I think if you look at the rate assumptions, they're using they're still pretty pretty much out of market.
On the high side. So so plenty, we believe there's room on the refi side and their forecast a move up.
And they're already in the animal and the above two trillion. So I think the mortgage markets looking pretty good, especially purchase and I've always talked about purchase as being a strong indicator of the fundamental health health and housing.
At a purchase goes up we're also going to benefit and PRM, because we got a very significant business platform with the realtors and that's where home visit.
And one home those products service the home buying cycle, so with purchase going up.
We should do well on the PR PRM side as well.
Because of the collateral benefit to that so I think the organic growth trend next year is pretty well in sight.
So hopefully that gives you more visibility.
But we've and we've been announcing for transparency purposes, a number of our wins. So you can go and look at our.
Our analysis over the last couple of months, but some pretty big wins. In addition to the ones I focus on today.
Frank We also noticed that just two more quick ones all grouped together, but we noticed that the property insight segment did accelerate I think it was up 5%. So what drove that and what do you think that inability is and then just last question for me would be around your newfound sensitive mortgage given the mix of the after the divestitures what are you.
What do you think you would be if you want to go through something like every hundred point of originations would drive what kind of EBITDA in our revenue and EBITDA.
Okay Yeah.
Yeah look I think great question.
So first of all.
I'll take the first part of that maybe Jim can talk about the second part the discontent stuff, but but look for PRM you know we've got.
You know and that's an area that if you look back.
Four quarters ago had to slow down but that we had.
FX and other nonoperating things and.
The market was tough and people were cotton and all that kind of stuff. So we've seen an acceleration and we're seeing a pickup there. If you look at this past quarter.
Great News is we've had a a resurgence in our data licensing business, which.
Which is super high margin and it's very sticky business, so really feel great about that in the prospects for that going forward. We're also seeing some.
Pick up in the analytics area.
You know, that's where we're doing fraud analysis, so with a lot of the activity fraud.
Fraud fraud detection is important and then I'd say the other area that kind of stands out is is helping around you know forbearance in some of the other activities around loan mods and stuff that that we do on the analytic side in that segment and I'd say finally, if you look on the future.
We just announced that is the launch of a.
Our new ATM.
Which is the first to my knowledge. The first artificial intelligence driven now we're a little it literally revaluing every property in the U.S.
On a monthly basis, so that is a tremendous step forward for us and the evaluation site, which we believe will help accelerate growth as well, but thats a little bit more forward looking but right now the third quarter Super key was the licensing business.
And I think the analytics business as well.
The real litter business is is actually holding its own fairly well I mean, you're seeing a snap back in the.
The home the marketing and sales area as you know.
As you know we have most the real is using our workflow platform. So so.
So thats another area that's been good and then now and then the final thing I'd say is not so the properties into the international piece.
Everything was frozen is now kind of on frozen. So we've got great business is making a lot of money in international markets. So those are those are coming back as well. So it's a pretty good news picture and PRM and I'll, let Jim talk about the disco piece.
Enter into in terms of your question.
In terms of your question there and on the sensitivity as you know we always cited a 25 to 30 on the topline.
With a 40, 50% contribution.
In terms of where we are now on a continuing operations basis, when you take credit out our sensitivity reduced it by about a third so that is now that new metric is now around 17 to 20 on the top line with a slightly better margin on the pull through given their higher margin profile businesses would be about 50%.
55%, so that would be our go forward sensitivities would be reduced by a lot.
Given the the exit of credit and that was all variable type of revenue volume.
Okay. That's very helpful. Thanks, guys.
Our next question comes from Jeff Mueller with Baird.
Yes. Thank you just as we think about I guess modeling out property tax solution revenue going forward I'll.
167 million this quarter.
How much of that is from origination activity.
Over the last quarter or so versus kind of the annuity stream that you have and then roughly is there.
Is there a way to give us like what that annuity stream is growing by from all of the growth that you've seen over the last I guess year year and a half.
Hey, Jeff it's Jim on the tax business, obviously had a great quarter. The answer to that is in short it had contributions both from the current activity and then also from the run off from the the large deferred revenue our contract liability balance. So when you look at that $60 million increase.
You've got probably about $25 million from first year recognition.
Probably another 25 on from the run off and then you fill in with some of the other products and services and solutions that we have in there like commercial and other other property.
Property estimation and so forth for the balance of the other 10.
The other bit of good news is you're still seeing a buildup in contract liabilities. If you look back to where we were at the beginning of the year. Our contract liabilities are up almost another $100 million. So we're approaching almost $1 billion now as a company with the larger portion being from the tax business. So it's really.
Really demonstrating strength across the board in terms of current activity in terms of building up the balance sheet in terms of.
Also getting the benefits of past work.
Okay, and then if I look at I don't know if you call them prop tech companies or what could you would go up but the firms that are out there that are.
Kind of making offers to buy houses almost like sight unseen I guess do you partnerships there with your.
The M. models or just anything you can talk to in that space I would think you'd be well positioned to be the <unk> the data provider into it. Thanks.
Yes, yes, definitely we actually we do have a significant.
Data provision and other other relationships with quite a number of those players as well. So yeah, I mean, I think as they expand where there you know Joe.
Generally I think we're we're a preferred supplier for a lot of them.
So depending what their needs are obviously, but.
Okay. Thank you.
Our next question comes from John Campbell with Stephens.
Hey, guys good afternoon.
Hey, John Hey, Hey, I'm, just first question I'm, just curious from a reseller businesses is that an official sell process or is that something that you did you might just potentially just shut down and move on.
They're there and active act.
Back to sell mode. So.
They are they're in a cell process.
Okay any I don't know if you can answer this but any sense for what you might be able to test for that and then you know as that kind.
Influx of capital comes in what you might be willing to do with that.
Yes, so yeah I guess your first.
Yeah I guess your first question is I I wouldn't speculate I can't speculate on a on the proceeds but you know it's these are the credit business. In particular is a is a significant business.
So.
In terms of the capital and how we would use that business.
Or that that those proceeds in general.
Yes, they would be for a kind of general corporate purposes for Capex, and then debt management et cetera, so kind of that general corporate purposes.
Okay and then for next year, you guys have talked a couple of different ways about the 60% of the organic growth kind of in the bag. It sounds like that almost all of that is the 160 million of HCV from the Mega trends, but Frank you also talk to the pricing.
It was another driver potentially next year. So I don't know if you could maybe talk to some of the other growth drivers outside of Mega wins, maybe where you see low hanging fruit for price and then what were you know a couple of other levers you might point to.
Yeah, I'd say that we're getting we're getting I mean, Jim talked about like tax for example, where we have our our property tax liability estimation service, which is a which is syndicated solution. I mean, that's a business that approaching $20 million of revenue is growing very nice.
Italy.
And that's just an example of that a couple of years ago that was negligible. So we've seen good growth in that kind of analytics area. We use the exhaust off of the tax data to do this estimation, which is required as part of the underwriting process that that that's one example, I'd say a product solution one home.
You know I talked about that Thats launched it end market, that's an enhancement to.
Our real litter platform that allows consumers to do much more targeted sales.
Search for properties and helps them to integrate with the.
With the lenders and insurance carriers and home vendors as well so thats kind.
So that's kind of a leap frog in terms of efficiency and product and process, which is really exciting and we're and we're rolling that out we expect to have most of the realtors using that by year end a home visit I think we've talked about in the past as another example that said we have a strong base in the mid Atlantic win in four states that we.
Good market share position.
We have plans to roll that out by major major Metropolitan area is really kind of the key thing there, but that's that's a pretty.
Photography imagery marketing solutions.
That's several hundred million dollars of Tam.
That's really a cottage industry today, so we're trying to kind of roll that up that's a good example.
Of where I think that we've got product related on pricing. Yeah. We've got we've got a per center a percent and a half.
Yes, nothing is coterminous. So this is all kind of a cumulative impact but.
But I think we have that rolling through.
The Mega win I, just brought that up because you had a $160 million the total contract value.
That's not the annual value so, but they provide as I said about $80 million. They provide a nice chunky bass for that $80 million target for next year.
Which I think I, just I just provide that because its a to me as I look and say well gosh. It you get to $80 million that seems like a lot, but if I got you know if I got 25 or 30 million of that with just two customers and I've got a whole ton of other.
Customer wins and I'm, just trying to give you guys very transparent clarity that you know the 80 million is.
Pretty high visibility and where we're sitting here in the a and a and a kind of.
Kind of the fourth quarter early stage the fourth quarter. So that's pretty good I think with that with all the product rollouts.
Et cetera, I think we're we're looking pretty good for that organic growth target and I think as was alluded to earlier could we do better yeah. That's our goal.
Obviously.
And I think we have we have a foundation that brings that goal into more reality.
Okay. Thanks for all the details right. Thanks.
Thanks.
Our next question comes from Geoffrey Dunn with Dowling.
Thanks, David.
I wanted to revisit the tax segment, obviously driving a lot of the growth of new WMS.
Rob.
I acknowledge in the explanation of the $16 million incremental can you just look at the aggregate result for 167 how.
How does that break down with respect to.
Realize existing deferred liability.
Accelerated revenue associated with re Fi and then the incremental new business and is there a way you can kind of break out that structure going forward. It seems very difficult to model since it's not.
Typically overly sensitive to volume, but it's obviously ramping very quickly.
Hey.
Jeff This is Jim so in terms of the tax business, it's kind of what I indicate if I break up that 60.
Current volume.
Was about 25 falling to the to the revenue line in the current quarter and that was on the run off we built about 52 to that contract the liability balance, but then pulled down and an extra 25 on a year over year basis. So thats 50 of the 60 and then the rest.
As we indicated was really as a result of things that aren't in that modeled revenue like the periodic revenue, which is kind of month to month. The commercial piece of the business. Other services like Frank talked about on the property estimation. So it's really a function of wins over the course of the year.
Volumes.
If you look at the new business.
I cited that 30% of the organic growth rate came from the Mega wins, while large probably about half of that 30% was in the tax area. Because we had the big Mr. Cooper win and some other wins that.
Represent market share so hope.
So hopefully that's helpful.
Okay. So just.
Just round numbers 100 million from deferred liability 25 first year, new business 25 accelerated print 10 million.
Other.
Okay, I'm, sorry, I see what you're trying to do okay. So its just theres three three or sell components for components here and I'm trying to I'm, having a lot of trouble modeling. This because I think it has at least in how I am looking at companies. It has a lot to do with how your guidance plays out over the next two years.
And it's very difficult to kind of put.
Put some structure around those expectations I'm trying to get a better feel for how the accounting components can flow over the course of 21 to 22.
Generally on the tax business. The the good rule of thumb is you've got about 30% recognition in the first year.
In terms of volumes that you get in terms of the overall revenue from the business about two thirds of it flows off the balance sheet and one one third is really current your activity. That's another way of looking at it.
Okay, and then can you give us any idea with respect to the exist.
Go ahead Im sorry.
Can you give us any idea of the existing deferred liability how much how much is expected to flow through in 21 22.
[noise].
[noise] it should be.
For 2021, the run off should be similar we've done that extra size it should be similar to 2020 levels [noise].
[noise] and I don't know if we can back into that with your balance sheet can what does not expect the number.
Yeah, I think we should probably take this offline with down there.
Hi, I guess I would I would ask if maybe you guys would consider adding a little bit more.
Color or thoughts on how to how to look at that business just because.
It's ramping against so significantly and that seems to play a big part of your outlook any help around that line forecast you. It will be definitely appreciate it.
Sure, let's get feedback.
Yeah, and I'd say, Jeff in terms of two to two big picture items, one is as Jim alluded to I mean deferred revenue balances is massive.
So as he gave that that that steer that 30% of that typical per share recognition. So we're going to have a good year next year and tax plus you know we've had a a minister Cooper's just ramping up and.
And this year and if you take the you know the contract value, there, which is over $100 million yes.
You're going to have a big ramp up from Mr. Cooper alone. In addition to that kind of a dozen or so other wins at the tax group has gotten so.
Certainly next year, you're going to see a strong performance in tax.
I think you're going to see a strong performance at and across most of the other business lines as well, but but that no doubt there's gonna help next year.
And 2021.
Okay. Thanks, what we'll take that up or we'll try to give you get your bit more information.
Our next question comes from Kevin Kaczmarek, with the Zelman and associates.
Hey, guys M. A question on repurchases, they're a bit lower than actually much lower than I had expected for the quarter given the guidance for 500 million for the full year.
But I guess only.
9 million year to date, I guess why why wait until the fourth quarter are you waiting for the vote in November how should we think about the timing of those repurchases.
The timing what we've assumed in the guidance range is kind of a Q4 execution and I would.
And I would probably model kind of a bit corner convention.
Okay.
And I guess on the four Mega Wendy you called you just mentioned there 40 have caught up to that have been announced what can you tell us about the nature and timing of the other two and are they end the third quarter results at all and was if you put one of those.
Yeah. So.
I think one is a date is a data driven spatial win.
And.
And that one it will be over a couple of years.
Including this quarter, but more so going forward.
And the other one is it is into valuation space.
And that that is ramping up.
The second half and we expect a significant growth into next year. So.
Those two we havent realized.
The same quantum a benefit at the moment.
So the seven similar to what we were discussing before that will be.
That will be a contributor to our organic growth rate next year.
More so than this year.
Okay.
And maybe one last one if I could just back to tax processing I guess can you give us to kind of Oh, the loan count as of the ended the quarter on the platform, maybe the growth year over year.
Yeah, we have about 37 million.
Loans.
And how much was that up year over year or sequentially even.
You know, we don't get into that level of detail, but I think it's up around it's up over 1 billion.
And the last year.
All right. Thank you very much.
As a reminder, if you would like to ask a question. Please press Star then one.
Our next question comes from Tommy Nick joined with KBW.
Hey, guys. Thanks for taking my question. So you get a nice exhibit showing the roll forward of revenues from 2020 to 2021. So I don't think it's going up from 21 to 22, what's embedded in your your mortgage market expectations. There and then I assume the plug is new car.
Attract wins and are any of those already secured.
Yes for 2022, Tommy you're asking that's right.
Got you Okay, Yeah for 2022, the market assumption is.
Is a 5% decline versus 2021 levels.
And then for the organic growth rate, we've assumed a similar 5% as we've been demonstrating here over the past several quarters and the confidence that we have into 2021.
So that's what we've assumed in the 2022 roll foreign for revenue.
And in terms of what's.
What's been secured to date, obviously, that's a fairly long timeframe.
Oh, but.
No a lot some of that will trickle, obviously as we secured new wins in the coming quarters, and so forth you might get a little bit of pickup on the longer term.
Ramp ups in Onboarding of some of the larger clients, but I'm not we're not at the 60% level, but we have high confidence given the momentum we have currently.
Okay, Yeah, I wasn't sure of anything was coming onboard in the second half of 21 that can lead to some ramp.
You got it fully in contribution in 2022.
And then switching over so you've announced some some major wins in the end chain space can you characterize kind of how you've gone to market need and offered your solution. I know you guys offering something that's not in the market currently.
Are your clients and I'm satisfied with their current offerings or their in house solutions could you kind of characterize how you guys are going to market there.
Yeah, I think that the property casualty insurance space you know obviously, we've been a leader for quite some time that Tommy in the.
Tommy in the in the underwriting portion.
Yes, the Madison underwriting portion of that so it's really been.
It's really been the claims area that's been.
That's been a bigger opportunity that so that's obviously, where liberty is coming in and supporting our service I'd say that I don't want to get inside their head, but I think that what I've heard most is the our expertise to route property. The fact that we have census level coverage. The most accurate coverage of all properties include.
Thing.
100.
150 characteristics and visual imagery et cetera, et cetera. So I think it's the intimate knowledge of the property that that really stands out I think are the other thing that stands out is our integrated solution, where we can connect the data. So if you get into things like.
Pre filling information and providing analysis and et cetera. So I think I think it's that ability to provide that end to end connections the property expertise.
I think those are resonating and I'd say the other thing is our claims processing platform is quite quite a well regarded from a technological perspective.
So I also hear that that it's new technology. It's it's a it's good and then look I think the final things I think we've got a we've got a hungry and aggressive and good team on the ground.
Getting closer Clos, our clients in general I think we have a high reputation with our clients because of our people.
And our solutions and are not.
I think that also differentiates us.
Okay, and just last one if I could sneak it and so the originators are reporting record profitability right now obviously able to capture such widespread or are there any of your products that you guys are able to capture any advantageous pricing given that demand is so strong.
Well the good news is you know we have a long long term contractual relationships with all the major players.
So from that standpoint, we have.
We have rate cards. We have you know we are deeply embedded their workflows et cetera. So I think the good news is we have we have the operating leverage from that.
The volumes.
I think in terms of the basic solution like a credit report or a flood zone determination. That's on a rate card. There is pricing activity that goes in but you don't you know that's not you're not able to toggle that with daily volumes go up and therefore I'm in charge more.
But but I think obviously, we have tremendous operating leverage.
So so we we gain on the ball on the top line, but also on the bottom line even more so so.
'cause it most of our mortgage businesses are really platforms. If you look at tax you'll get flood you look at credit those are automated platform businesses just the way.
Just the one in the credit business. The one that Alan why we're we're moving away from that is is because it just that the resell or the other ones. We have a lot of contributed values. So the margins are much much better but in the credit side you benefit from the volume, but you don't pick up as much incremental margin because of the.
The fact that this is all bureau costs.
Okay makes sense. Thanks.
[laughter].
This concludes our question and answer session as well as our conference call for today. Thank you for attending the presentation you may now disconnect.