JACKSONVILLE, Fla. – May 3, 2012 – Lender Processing Services, Inc. (NYSE:LPS), a leading provider of integrated technology and services to the mortgage and real estate industries, today announced financial results for the first quarter 2012.
• Revenue of $506 million
• GAAP net earnings of $47.1 million or $0.56 per diluted share
• Adjusted net earnings of $49.5 million or $0.59 per diluted share reflecting the add back of purchase amortization
• Adjusted free cash flow of $68.7 million
• Signed 2 new MSP Servicing Technology customers
“LPS is off to a positive start in 2012. We delivered results that exceeded our outlook, continued to expand key customer relationships by delivering outstanding technology and service solutions, and moved forward with our commitment to operational excellence,” said Hugh Harris, president and chief executive officer of LPS. “We will continue to leverage and invest in our comprehensive technology solutions to help our customers address evolving servicing and regulatory standards and position LPS for long-term growth.”
“Although the operating environment remained challenging, we generated strong profitability, margins and cash flow,” commented Tom Schilling, chief financial officer. “Our Technology, Data and Analytics segment had another solid quarter of revenue growth and our Origination Services benefited from strong refinance volumes, while Default Services continued to be negatively affected by industry-wide foreclosure delays.”
Consolidated First Quarter Performance
First quarter 2012 revenue was $506.0 million, a decrease of 5.8% from the same period in the prior year due to a decline in Default Services revenue. Adjusted operating income was $94.3 million compared to $129.7 million in the first quarter 2011, while GAAP operating income was $94.3 million compared to $110.4 million in the first quarter of 2011. Adjusted net earnings were $49.5 million, or $0.59 per diluted share, compared to $71.1 million, or $0.81 per diluted share, in the first quarter 2011. Adjusted net earnings includes a purchase price amortization add-back of $0.03 per share in the current quarter and $0.04 per diluted share in the first quarter 2011. In addition, first quarter 2011 adjusted net earnings exclude a charge of $0.14 per diluted share related to cost reduction initiatives.
Net cash provided by operating activities was $90.1 million compared to $120.4 million in the first quarter of 2011. Adjusted free cash flow (net cash provided by operating activities minus certain non-recurring expenses and additions to property, equipment and computer software) was $68.7 million in the first quarter of 2012 compared to $101.3 million in the same period last year. During the quarter, the company reduced debt by $17.3 million, paid regular dividends of $8.4 million and ended the first quarter with cash of $103.7 million, up $26.4 million from the prior quarter.
Technology, Data and Analytics Segment
Revenue for the Technology, Data and Analytics segment was $178.1 million, a 5.7% increase from first quarter 2011. Servicing Technology (MSP) revenue was $108.4 million, a 4.9% increase; Origination Technology revenue was $21.4 million, a 13.7% increase; Default Technology revenue was $31.6 million, an 8.3% increase; and Data and Analytics revenue was $16.9 million, a 2.6% decrease. Operating income was $54.0 million, a decrease of 4.7% from first quarter 2011, primarily as a result of lower income from Origination Technology driven by higher expenses related to growth initiatives, partially offset by higher income from Servicing Technology.
Transaction Services Segment
Revenue for the Transaction Services segment was $329.6 million, a decrease of 10.9% from first quarter 2011. Origination Services revenue was $146.8 million, a 13.8% increase from the first quarter of 2011 as a result of a higher refinance origination volumes. Default Services revenue was $182.9 million, a 24.2% decrease from the first quarter 2011, primarily due to the continued slowdown in the initiation of industry-wide mortgage foreclosure proceedings. Operating income for the segment was $51.5 million, a decrease of 38.8% from the same period in the prior year, primarily due to lower income from the Default Services business.
Corporate and Other
Adjusted net corporate expenses in the first quarter of 2012 were $11.1 million compared to $11.0 million in the prior year quarter.
Based on the current environment, the company expects second quarter 2012 revenue to be in the range of $500 million to $520 million and adjusted net earnings per diluted share to be in the range of $0.58 to $0.62.
Financial Reporting Reclassification
The company made minor reclassification adjustments to its financial reporting structure effective in the first quarter 2012. The reclassifications resulted in the transfer of revenue, expenses and operating income between reporting segments; the allocation of certain corporate costs into the segments; and a change in the cost and expense presentation in the consolidated statement of earnings. All prior periods included in this release and related financial statement exhibits have been reclassified to conform to the current period presentation. The reclassifications do not impact previously reported consolidated revenues, operating income, net earnings or earnings per share of LPS.
Earnings Conference Call and Webcast
LPS will host a conference call today at 10:00 a.m. ET with a live webcast on the Investor Relations section of its website at www.lpsvcs.com. Earnings information including this press release and supplemental material is available on the website. A replay of the webcast will be available on the website shortly after the call where it will be archived for one month. A replay of the call will be available until May 10, 2012, by dialing 888-203-1112 (access code: 2865489).
To view the complete release with tables, click here
for a PDF for the 5/3/2012 filing date.
About Lender Processing Services
Lender Processing Services (NYSE: LPS) delivers comprehensive technology solutions and services, as well as powerful data and analytics, to the nation’s top mortgage lenders, servicers and investors. As a proven and trusted partner with deep client relationships, LPS offers the only end-to-end suite of solutions that provides major U.S. banks and many federal government agencies the technology and data needed to support mortgage lending and servicing operations, meet unique regulatory and compliance requirements and mitigate risk.
These integrated solutions support origination, servicing, portfolio retention and default servicing. LPS’ servicing solutions include MSP, the industry’s leading loan-servicing platform, which is used to service approximately 50 percent of all U.S. mortgages by dollar volume. The company also provides proprietary data and analytics for the mortgage, real estate and capital markets industries.
LPS is headquartered in Jacksonville, Fla., and employs approximately 8,000 professionals. For more information, please visit www.lpsvcs.com.
Use of Non-GAAP Financial Information
U.S. Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, LPS reports several non-GAAP measures, including “EBITDA” (GAAP operating income plus depreciation and amortization); “EBITDA, as adjusted” (EBITDA adjusted for the impact of certain non-recurring adjustments, if applicable); “EBIT, as adjusted” or “adjusted operating income” (GAAP operating income adjusted for the impact of certain non-recurring adjustments, if applicable); “adjusted net earnings” (GAAP net earnings adjusted for the impact of certain non-recurring adjustments, if applicable, plus the after-tax purchase price amortization of intangible assets added through acquisitions); “adjusted net earnings per diluted share” or “adjusted EPS per diluted share” (adjusted net earnings divided by diluted weighted average shares); and “adjusted free cash flow” (net cash provided by operating activities less additions to property, equipment and computer software, as well as non-recurring adjustments, if applicable). LPS provides these measures because it believes that they are helpful to investors in comparing year-over-year performance in light of certain non-recurring and other charges, and to better understand our financial performance, competitive position and future prospects. Non-GAAP measures should be considered in conjunction with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP measures. A reconciliation of these non-GAAP measures to related GAAP measures is included in the attachments to this release.
This press release contains forward-looking statements that involve a number of risks and uncertainties. Those forward-looking statements include all statements that are not historical facts, including statements about our beliefs and expectations. Forward-looking statements are based on management's beliefs, as well as assumptions made by and information currently available to management. Because such statements are based on expectations as to future economic performance and are not statements of historical fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties to which forward-looking statements are subject include, but are not limited to: our ability to adapt our services to changes in technology or the marketplace; the impact of adverse changes in the level of real estate activity (including among others, loan originations and foreclosures) on demand for certain of our services; our ability to maintain and grow our relationships with our customers; the effects of our substantial leverage on our ability to make acquisitions and invest in our business; the level of scrutiny being placed on participants in the foreclosure process; risks associated with federal and state enforcement proceedings, inquiries and examinations currently underway or that may be commenced in the future with respect to our default management operations, and with civil litigation related to these matters; the impact of continued delays in the foreclosure process on the timing and collectability of our fees for certain of our services; changes to the laws, rules and regulations that regulate our businesses as a result of the current economic and financial environment; changes in general economic, business and political conditions, including changes in the financial markets; the impact of any potential defects, development delays, installation difficulties or system failures on our business and reputation; risks associated with protecting information security and privacy; and other risks and uncertainties detailed in the “Statement Regarding Forward-Looking Information,” “Risk Factors” and other sections of the Company’s Form 10-K and other filings with the Securities and Exchange Commission.