A decision on whether to put CoreLogic Inc. up for sale has yet to be made, but the Santa Ana-based data and analytics company appears to be making strides toward becoming a more attractive takeover candidate by shrinking operations and boosting profits.
The company provides consumer, financial and property data for real estate, mortgage and other businesses. It’s in the midst of strategic review that could result in the sale of all or parts of the company.
Last week, Core-Logic raised its financial outlook for the remainder of the year, increasing expectations on profits by about 10%.
The news, disclosed as part of the com-pany’s third-quarter earnings report, pushed the company’s stock to its highest level in about three months.
CoreLogic, which was spun off from Santa Ana-based First American Corp. last year, now counts a market value of about $1.5 billion.
CoreLogic had about $348 million in revenue last quarter, up 5.5% from a year ago. It expects about $370 million in revenue this quarter.
The improving outlook for the remainder of the year is thanks in large part to increased business related to mortgage refinancing, as well as “aggressive actions” on cost-containment, according to Chief Executive Anand Nallathambi.
Expect to see more cost cutting going forward at CoreLogic, which is estimated to employ about 750 people in Orange County and plans to move its headquarters to the Irvine Spectrum next year.
The company shed about 5% of its domestic work force last quarter, Chief Financial Officer Frank Martell said during a call with analysts last week.
Job Cuts
CoreLogic’s expecting another 5% cut to its domestic work force this quarter.
All told, the company expects to see annual cost savings in the $80 million to $100 million range because of the staff reductions, productivity improvements, procurement savings and the sale of some real estate.
Some of the cost savings are related to five business lines that the company is in the process of shutting down or selling.
Business lines the company’s decided to exit include LeadClick, a marketing-related division that connects consumers with service providers in the financial services, automotive and real estate industries.
Other business lines the company plans to exit include a pair of credit monitoring services, an appraisal management business, and a driving and vehicle records business.
The five business lines combined for nearly $60 million in revenue last quarter, but had “relatively weak profit characteristics,” Nallathambi said.
“It’s too early to tell” an estimated sale price for any of those businesses, Nallathambi said. Some of the business lines could be shut down rather than sold, he said.
Revenue Down
· Headquarters: Santa Ana
· Business: data and analytics services for real estate, other industries
· Founded: 2010 (split off from First American Corp.)
· Ticker symbol: CLGX (NYSE)
· Market value: about $1.5 billion
· Notable: trimming operations as it considers sale; raised projection on profits for year by 10%
Closing or selling those businesses was a big reason CoreLogic last week lowered its revenue expectations for continuing operations by about $240 million for the year, to about $1.36 billion in revenue.
The increase in earnings is expected to come because of cost savings and more mortgage-related refinancing work. The 10% increase CoreLogic is now projecting for earnings before interest, taxes, depreciation and amortization would come to about $295 million for the year.
Las week’s improved stock performance is welcome news to title insurance company First American Financial Corp., which along with CoreLogic was created last year out of the split of First American Corp.
First American’s Stake
Santa Ana-based First American Fin-ancial still owns about an 8% stake in CoreLogic and is its largest shareholder, but has seen that investment struggle on Wall Street since the split.
First American Financial, which counts a market value of about $1.2 billion, recently reported taking a $72.3 million write-down in the value of its CoreLogic stock, according to regulatory filings.
Despite last week’s uptick, CoreLogic’s stock still is down by about 30% since the mid-2010 split.
In late August, CoreLogic said it was forming an independent committee to explore strategic options, including a possible merger or a sale.
Nallathambi said last week it was “not appropriate to speculate on the outcome” of the committee’s ongoing work.
“It’s a robust process,” he said.
First American Financial opposes an outright sale to a third party, coming amid a difficult real estate market and a rocky stock market that would likely result in a depressed sale price.
Instead, it has recommended that CoreLogic consider other options, such as selling some non-core businesses, some of which it would buy.
Standing Offer
In the event of a sale of the entire company, First American Financial said it has offered to buy CoreLogic.
“We’ve made our interest known,” Chief Executive Dennis Gilmore said during his company’s latest call with analysts.
“We’ve had significant discussions with our investment bankers, and we think we have alternatives to handle” an outright sale, or sale of individual assets, Gilmore said.
While not citing any specific CoreLogic business lines the company is eyeing, “we think they have certain assets that we’ve deemed to be non-strategic to them, and they have assets that would fit us,” Gilmore said.
“We know the people, we know the operations,” he said.
