JACKSONVILLE, Fla. – October 22, 2009 – Lender Processing Services, Inc. (NYSE:LPS), a leading provider of integrated technology and services to the mortgage and real estate industries, today reported consolidated revenues of $619.4 million for the third quarter of 2009, an increase of 32.7% compared to the third quarter of 2008, and net earnings of $75.5 million or 78 cents per diluted share.
Adjusted net earnings for the third quarter of 2009 were $80.2 million, or 83 cents per diluted share, compared to $57.8 million, or 61 cents per diluted share, in the third quarter of 2008. Adjusted net earnings in the current quarter include an adjustment for purchase amortization of 5 cents per diluted share while the prior year quarter included a similar adjustment of 7 cents per diluted share.
“LPS delivered strong results in the third quarter despite an ongoing difficult business environment. LPS with its broad-based, technology-driven end-to-end solutions for the mortgage and real estate industries, remains well positioned for the fourth quarter and to continue to grow profitably in the years ahead,” said Lee A. Kennedy, Executive Chairman of LPS. “All our business segments continued to gain market share in the third quarter. Our Mortgage Processing and other technology businesses posted solid earnings while our Default Services business continued to deliver very strong results. Also, our Loan Facilitation business benefitted from a stronger year-over-year origination market”, added Jeff Carbiener, President and CEO of LPS.
Operating income of $143.6 million in the quarter improved 32.6% compared to the third quarter of 2008.
Year-to-date pro forma adjusted free cash flow (net cash provided by operating activities including pro forma interest expense for the first six months of 2008, minus additions to property and equipment and capitalized software) for 2009 of $231.6 million compared to $184.1 million for the first nine months of 2008.
Technology, Data and Analytics (TD&A)
Revenues for the segment were $186.3 million compared to $139.0 million in the third quarter of 2008 while operating income of $62.4 million compared to $49.2 million in the prior year quarter. Mortgage Processing revenues of $103.0 million were 23.2% above the third quarter of 2008, primarily due to the conversion of the JPMorgan Chase portfolio on to our mortgage servicing platform. Other TD&A revenues increased by 50.5% to $83.3 million compared to the prior year quarter, mainly due to strong growth in Data and Analytics services, our Desktop application, and the impact of the FNRES acquisition completed in the first quarter of 2009. Excluding the impact of FNRES, Other TD&A revenues were up a strong 32.4%. Overall operating income for TD&A was higher primarily due to higher contributions from Mortgage Processing and Data & Analytics.
Loan Transaction Services (LTS)
Revenues for the segment increased by 33.7% to $440.5 million compared to the third quarter of 2008 while operating income of $101.6 million compared to $74.7 million in the prior year period. Loan Facilitation Services revenues of $136.7 million were up 55.9% compared to the same period last year, mainly due to higher settlement services and increased appraisal volumes. Default Services revenues of $303.8 million increased 25.6% over the third quarter of 2008, primarily due to ongoing strength in the default market and our ability to continue to gain market share. Overall operating income for LTS grew due to higher income in loan origination related offerings, such as settlement services and appraisal, as well as in Default Services.
Corporate and Other
Net corporate expenses were $20.3 million compared to $15.6 million in the third quarter of 2008 and were higher primarily due to higher incentive compensation expenses in the current quarter driven by the strong operating results.
Outlook
“Third quarter and year-to-date 2009 results were very strong and while the broader macro-economic environment and some of our markets continue to present challenges, LPS with its solid market presence remains well positioned for a strong finish in 2009 and to continue to grow revenue and earnings in 2010,” said Jeff Carbiener. “Building on the robust year-to-date results, we expect fourth quarter adjusted earnings to be in the range of 77-79 cents per diluted share. For full year 2009, we now expect revenues to grow 26%-28% compared to 2008 and adjusted earnings to be in the $3.07-$3.09 per diluted share range.”
Use of Non-GAAP Financial Information
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 pro forma adjusted net earnings, pro forma adjusted net earnings per share and pro forma adjusted free cash flow. LPS provides these measures because it believes that they are helpful to investors in comparing year-over-year performance in light of our 2008 spin-off from Fidelity National Information Services, Inc., and to better understand our financial performance, competitive position and future prospects. The adjusted results exclude acquisition related amortization costs and include pro forma debt related interest expenses. 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 net earnings. A reconciliation of these non-GAAP measures to related GAAP measures is included in the attachments to this release.
Conference Call and Webcast
LPS will host a conference call to discuss these results on Friday, October 23, 2009, at 8:00 a.m. Eastern time. Interested parties are invited to listen to the live webcast by logging on to the Investor Relations section at www.lpsvcs.com. Supplemental materials will be available on the website. Those wishing to participate via the conference call may do so by calling 866.823.5035. 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 conference call will be available through October 30, 2009 by dialing 888.203.1112 (access code: 6402161).
To access a printer friendly version of this release and accompanying exhibits, go to http://www.lpsvcs.com/investor.
About Lender Processing Services
Lender Processing Services, Inc. (LPS) is a leading provider of integrated technology and services to the mortgage and real estate industries. LPS offers solutions that span the mortgage continuum, including lead generation, origination, workflow automation (Desktop), servicing, portfolio retention and default, augmented by the company’s award-winning customer support and professional services. Approximately 50 percent of all U.S. mortgages by dollar volume are serviced using LPS’ Mortgage Servicing Package (MSP). In fact, many of the nation’s top servicers rely on MSP, including eight of the top 10 and 14 of the top 20. LPS also offers proprietary mortgage and real estate data and analytics for the mortgage and capital markets industries. For more information about LPS, visit www.lpsvcs.com.
Forward-Looking Statements
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 elimination of existing and potential customers as a result of failures and consolidations in the banking and financial services industries; the impact of adverse changes in the level of real estate activity on demand for certain of our services; the effects of our substantial leverage on our ability to make acquisitions and invest in our business; 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; risks associated with our spin-off from Fidelity National Information Services, Inc., including those relating to our new stand-alone public company status and limitations on our strategic and operating flexibility as a result of the tax-free nature of the spin-off; 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, the Company’s subsequent reports on Form 10-Q and other filings with the Securities and Exchange Commission.
Investor Contact: Parag Bhansali, 904.854.8640, parag.bhansali@lpsvcs.com
Media Contact: Michelle Kersch, 904.854.5043, michelle.kersch@lpsvcs.com