Lender Processing Services Reports First Quarter 2013 Earnings

JACKSONVILLE, Fla., April 24, 2013 /PRNewswire/ -- Lender Processing Services, Inc. (NYSE:LPS), a leading provider of integrated technology and services to the mortgage and real estate industries, today announced first quarter 2013 GAAP net earnings of $53.9 million, or $0.63 per diluted share, an increase of 12.5% compared to $47.1 million, or $0.56 per diluted share in the first quarter 2012.  Revenue was $471.7 million in the first quarter 2013, a decrease of 2.9% from the prior year quarter.   

(Logo: http://photos.prnewswire.com/prnh/20120802/FL50731LOGO ) 

"LPS' strong first quarter results demonstrate the successful execution of our strategy to deliver technology-driven solutions that our clients need to address evolving mortgage industry requirements," said Hugh Harris, president and chief executive officer of LPS.  

First Quarter 2013

• Technology, Data & Analytics (TD&A) revenue increased 10.4% over the prior year fueled by growth in all sub-segments
• Origination Services revenue increased 12.0% from the prior year driven by strong refinance volumes
• EBITDA margin increased more than two percentage points over the prior year to 26.6%
• Adjusted earnings per diluted share from continuing operations increased 10.0% to $0.66 compared to the prior year,  reflecting add-back for purchase accounting amortization
• Completed previously reported settlements of many legal and regulatory matters related to legacy issues, while maintaining a strong financial position

"Strong results in TD&A and Origination Services drove an increase of more than two percentage points in our EBITDA margin year-over-year to 26.6%," Tom Schilling, chief financial officer, said. "TD&A is our growth platform and we expect it to deliver a growing share of LPS' future revenue and profitability.  We also remain focused on delivering high-value Transaction Services while managing for profitability in line with industry volumes." 

First quarter 2013 revenue was $471.7 million, a decrease of 2.9% compared to the prior year quarter, due to lower Default Services revenue that primarily resulted from a decline in industry foreclosure volume, partially offset by higher revenue in TD&A and Origination Services.  First quarter 2013 operating income increased 6.7% from the prior year quarter to $99.4 million due to higher contributions from TD&A and Origination Services.  

Net cash used in operating activities on a GAAP basis was $97.5 million in the first quarter 2013, compared to net cash provided by operating activities of $90.1 million in the prior year quarter.  This decrease was primarily due to the payment of previously announced settlements for legacy legal and regulatory matters in the first quarter 2013.  Excluding the impact of cash payments of previous non-GAAP items, primarily payments of legal and regulatory settlements, adjusted free cash flow was $49.5 million compared to $68.7 million in the prior year quarter.  The decrease in adjusted free cash flow primarily resulted from changes in working capital.  Adjusted free cash flow is defined as net cash provided by operating activities minus certain non-recurring expenses and additions to property, equipment and computer software.

The company maintained a strong balance sheet including cash of $88.4 million and credit facility availability of $398 million at the end of the first quarter 2013.  The legal and regulatory reserve was $61.1 million at the end of the first quarter 2013. 

Technology, Data and Analytics (TD&A)

Revenue for the first quarter increased 10.4% from the prior year to $193.6 million driven by growth in all sub-segments.  Revenue from Servicing Technology increased 6.8% primarily due to growth in loans and revenue per loan; Origination Technology increased 17.7% primarily due to higher industry origination volume which drove incremental transaction fees; Default Technology increased 16.0% primarily as a result of higher professional services revenue and market share gains partially offset by lower foreclosure referral volumes; and Data and Analytics increased 15.5% primarily due to contract wins.  Operating income increased 15.6% to $60.2 million in the first quarter 2013, while operating margin increased to 31.1% from 29.7% in the prior year quarter due to increased operating leverage. 

Transaction Services  

Revenue for the first quarter decreased 11.0% from the prior year period to $278.0 million as a result of a 31.4% decrease in Default Services revenue, which was partially offset by a 12.0% increase in Origination Services revenue.  Default Services revenue and operating income declined primarily as a result of lower industry foreclosure activity and strategic actions to reduce risk and enhance returns.  Origination Services revenue and operating income increased as a result of higher industry refinance volume.  Operating income was $50.5 million, down from $52.3 million in the prior year period, due to lower Default Services contributions, which were partially offset by higher Origination Services contributions.  Operating margin increased to 18.2% from 16.7% in the prior year quarter due to a revenue mix shift toward Origination Services.

Corporate and Other

Net corporate expenses in the first quarter 2013 were $11.3 million, about flat with the prior year period.   

Outlook

Based on the current environment, the company expects second quarter 2013 revenue to be in the range of $460 million to $480 million and adjusted net earnings per diluted share from continuing operations to be in the range of $0.63 to $0.67.   

Earnings Conference Call and Webcast

LPS will host a conference call tomorrow 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 our financial results presentation, 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 3, 2013, by dialing 888-203-1112 (access code: 6301734).

About Lender Processing Services

LPS (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. Lender Processing Services is a Fortune 1000 company headquartered in Jacksonville, Fla., employing 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); "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.

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 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 mortgage industry and the foreclosure process in particular; 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  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.

SOURCE Lender Processing Services, Inc.