Corelogic Inc (CLGX) Management Discusses Q2 2013 Results - Earnings Call Transcript

Jul.25.13 | About: CoreLogic, INC. (CLGX)

Corelogic Inc (NYSE:CLGX)

Q2 2013 Earnings Call

July 25, 2013 11:00 am ET

Executives

Dan Smith

Anand K. Nallathambi - Chief Executive Officer, President, Director and Member of Acquisition Committee

Frank D. Martell - Chief Financial Officer

Analysts

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

Darrin D. Peller - Barclays Capital, Research Division

Lauren Slabaugh - Stephens Inc., Research Division

Carter Malloy - Stephens Inc., Research Division

Brett Horn - Morningstar Inc., Research Division

Ryan O'Steen - Keefe, Bruyette, & Woods, Inc., Research Division

Kevin D. McVeigh - Macquarie Research

Operator

Good day, ladies and gentlemen, and welcome to the Q2 2013 CoreLogic Incorporated Earnings Conference Call. My name is Allison, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I'd now like to turn the call over to Mr. Dan Smith, Vice President, Investor Relations. Please proceed, sir.

Dan Smith

Thank you, and good morning. Welcome to our investor presentation and conference call where we present our financial results for the second quarter of 2013. Speaking today will be CoreLogic's President and CEO, Anand Nallathambi; and CFO, Frank Martell.

Before we begin, let me make a few important points. First, we have posted our slide presentation, which includes additional details of our financial results on our website. Second, please note that during today's presentation, we may make forward-looking statements within the meaning of the federal securities laws, including statements concerning our expected business and operational plans, 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 SEC filings including the most recent annual report on Form 10-K and the subsequent 10-Q. Our forward-looking statements are based on information currently available to us, and we do not intend to undertake 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 equivalence is included in the appendix to today's presentation. Finally, unless specifically identified, comparisons to second quarter financial results to prior periods should be understood on a year-over-year basis that is in reference to the second quarter 2012. Thanks.

And now let me introduce our President and CEO, Anand Nallathambi.

Anand K. Nallathambi

Thanks, Dan, and good morning, everyone. Welcome to CoreLogic's second quarter earnings call. I will begin my remarks today with an overview of our second quarter and first half operating results. I will then discuss our focus for the balance of 2013, and the progress we're making against our strategic growth initiatives. Frank will then cover our financial results, and we will end the call with Q&A.

CoreLogic delivered outstanding financial results in the second quarter in the first half of 2013. Our Mortgage Origination Services and Data and Analytics segments continue to grow at double-digit rates through a combination of product and service innovation, operating leverage and market share gains. We believe all 3 of our operating segments have outperformed their respective markets so far in 2013.

Through the first half of 2013, CoreLogic has delivered strong growth in revenues, operating and net income, adjusted EBITDA and adjusted EPS. We also exceeded our Project 30 targets, generated adjusted EBITDA margins of 30% and repurchased about 3% of our common shares. Importantly for the future, we continue to aggressively reinvest in key strategic growth areas and our Technology Transformation Initiative, or TTI. The recently announced acquisitions of Marshall & Swift/Boeckh or MSB, DataQuick and the flood and tax processing operations of Bank of America are important catalysts to help us accelerate progress against our strategic goals. I'll talk more about these transactions in a few minutes.

Second quarter revenues were up 9.7%. MOS and D&A segment revenues increased 25% and 11%, respectively, as we gained market share in several business units and capitalized on higher demand for our must-have property information, analytics and services. These high-margin segments accounted for approximately 83% of our total second quarter revenues. Our MOS segment continued to benefit from elevated levels of refinancing, as well as shared gains in our flood, credit and tax servicing businesses in the second quarter. We also benefited from a trend among current and prospective clients to outsource critical functions to partners with strong or internal controls and processes in response to an increasingly complex and difficult regulatory environment.

As a result of our strong operating performance over the past 2 years and the purchase of BofA's flood and tax processing operations, we expect our MOS segment to continue to outperform overall market volume trends for the balance of this year and into 2014. D&A revenue growth accelerated during the second quarter in response to increase purchase market activity and our clients' need for help in navigating through today's evolving regulatory environment.

Our geospatial business also expanded at double-digit rates. Revenues in our Asset Management and Processing Solution segments, or AMPS, contracted about 15% in the second quarter compared to an estimated 20% decline in industry volumes. In addition to contracting market volumes, the decline in revenues was also partially attributable to our exit of certain marginally profitable product lines over the past year. In the face of likely continued double-digit declines in market volumes, our focus on AMPS remains on service quality and margin expansion.

CoreLogic's second quarter adjusted EBITDA increased by 6%. Year-to-date, adjusted EBITDA was up 10%. Through the first 6 months of 2013, adjusted EBITDA margins were 30%. Our relentless focus on shifting CoreLogic's business mix towards high margin D&A and MOS revenues and on cost reduction and productivity has resulted in continued outperformance of our profitability targets.

In line with our ongoing commitment to return capital to our shareholders, we recently increased our 2013 share repurchase program to 8 million shares. This reflects our belief that our share price remains below its longer-term strategic value, and therefore, relatively high levels of capital return remains an effective way to reward our shareholders.

The rest of my prepared remarks today will cover our focus areas for the rest of 2013 and progress against our strategic growth initiatives. As we head into the second half of 2013, our focus will remain on: one, D&A and Mortgage Origination Services organic growth; two, mitigating the impact of declining volumes and improving margins in AMPS; three, wrapping up Project 30 and progressing TTI; four, integrating MSB, DataQuick and the tax and flood operations of BofA; and finally, completing our share repurchase program.

As we look to the future, we expect the continued successful execution of our strategic plan will drive sustained stakeholder value creation. As you know from past calls, our plan calls for 4 key elements. This is our credo at CoreLogic. We live by it everyday. First, grow the D&A segment to over 50% of total revenues in 3 years via organic growth and scaling property data, analytics, insurance and spatial solutions. Second, drive operating leverage and margin expansion and position the mortgage origination and AMPS segments to outperform their respective markets. Third, complete the TTI and achieve best-in-class cost productivity. And fourth, deliver free cash flow at targeted levels and build financial flexibility.

Our #1 priority is to drive profitable organic revenue growth. Year-to-date, revenues are up 10%, driven primarily by product and service innovation and market share gains in our high operating leverage businesses. We're also benefiting from the gradually improving housing market. The acquisition of MSB, DataQuick and Bank of America's tax and flood operations is expected to accelerate our progress against each of our strategic imperatives. MSB and DataQuick meaningfully expand our D&A segment in line with our stated goal to aggressively grow this segment. These firms benefit from data driven subscription-based business models and add unique complementary data sets and analytical capabilities that will help us create a scaled market-leading insurance solutions group.

Pursuing growth opportunities in the insurance vertical should reduce CoreLogic's sensitivity to mortgage origination volume trends over the medium to longer term. The gold standard replacement cost model of MSB will also help enhance our risk analytics solutions to the mortgage industry. Having access to real-time rebuilding cost and location-specific natural hazard-related risk models will add a new dimension to our portfolio evaluation solutions.

We have successfully completed the integration of CDS Business Mapping and Case-Shiller. We expect to aggressively integrate MSB and DataQuick into our operations and realize cost synergies and growth opportunities once we have completed this work over the next 9 to 12 months. We're also excited to be able to provide flood impact processing services to Bank of America and their services agreement that started on July 1, 2013. This arrangement is in line with our imperative of driving scale in Mortgage Origination Services. Adding scale in this high operating leverage segment should help us to mitigate refinancing-driven market volatility.

By almost any measure, CoreLogic delivered a strong second quarter. Over the second half of the year and into 2014, we believe that the company is well positioned for growth and additional value creation as the housing market continues to recover and transition from a refinanced driven to a purchase-lead -- purchase-led market.

In closing, CoreLogic has now delivered 8 quarters of strong revenue and profit growth. Our progress has been driven by a focused strategy that leverages the company's unique data assets as well as the market-leading position and scale of our servicing businesses.

I'd like to thank our clients, employees and shareholders for their continued support. The entire CoreLogic team is excited about the future and our ability to deliver on our business plans and generate outstanding results for all our stakeholders in 2013 and beyond.

With that, I'll turn the call over to Frank.

Frank D. Martell

Thanks, Anand, and good morning, everyone. Today, I'm going to review our second quarter financial results and provide relevant updates on the TTI, our cost-reduction programs and capital allocation. I will conclude with a brief discussion on our 2013 financial guidance.

As Anand mentioned, CoreLogic delivered record financial results in the second quarter and over the first half of 2013. Our success is the result of a singular focus on executing a business plan centered around profitable growth, margin expansion and free cash flow generation. We continue to build on our core strength in D&A and our service businesses while we pursue a strategic plan, which we believe will fundamentally transform CoreLogic's financial and business model over the next several years.

From a financial perspective, the major highlights for the second quarter were strong top line growth fueled by our MOS and D&A segments; record levels of adjusted EBITDA and adjusted EPS; continued progress on the rollout of the TTI; and finally, the announcement of MSB, DataQuick and BFA flood and tax transactions.

Second quarter revenues were up 9.7% to $427 million. MOS segment revenues jumped 24.6% year-over-year to $184.4 million. This $36.4 million increase was driven mainly by higher refinancing volumes, share gains and the in-sourcing of certain credit reporting and other services previously provided by the company's Rels joint venture.

D&A revenues totaled $169 million for the second quarter, which was 11.2% higher than last year. Increased demand for advisory services and core property Data & Analytics were the primary growth drivers. Our spatial solutions business also grew at double-digit rates, partially bolstered by the acquisition of CDS Business Mapping in December of 2012. AMPS generated total second quarter revenues of $80 million, a 14.5% decline from prior year. As Anand mentioned, this decline was due, in large part, to compressing market volumes of seriously delinquent mortgage loans and foreclosure starts. In addition, revenues in this segment have been reduced due to the exit of several noncore product lines.

Operating income totaled $68.4 million for the second quarter, including a $6.4 million in TTI cost and a $4.2 million in transaction fees related to our recently announced acquisitions.

Operating income totaled $67.6 million in the year ago period and included a $7 million gain related to the settlement of intellectual property claims asserted by CoreLogic, which were primary, partially offset by $3 million of onetime cost related to the launch of TTI. After normalizing for these items, the increase in operating income was approximately 24%. This growth was driven primarily by revenue gains, favorable mix and the benefits of cost-reduction programs.

Second quarter 2013 operating income margin was 16%. The impact of the TTI and acquisition costs in the second quarter represented roughly 250 basis points of operating margin. Operating margin in the second quarter of 2012 was 17.4%, which included 100 basis points of operating income benefit related to the IP settlement net of TTI launch cost I discussed previously.

Second quarter adjusted EBITDA totaled $132.7 million, up 6% from prior year levels. Adjusted EBITDA margins were 31% compared to 32% in the second quarter of 2012. Adjusted EBITDA and EBITDA margin in the second quarter of 2012 included the benefit of the IP settlement gain discussed earlier.

Mortgage Origination Services margins were 39.7% in the second quarter, down 410 basis points compared to the second quarter of 2012. This reduction is primarily a result of in-sourcing certain credit reporting and other services previously provided by the company's Rels joint venture that had been reflected as equity in earnings. In addition, the company increased its investment in the loan origination platform development during the second quarter.

D&A-adjusted margins were down 390 basis points to 31% in the second quarter compared to 2012 results, which again included the onetime IP settlement of $7 million. D&A adjusted EBITDA margins were up 80 basis points, excluding this impact. AMPS margins were 23.5%, modestly above prior year period. We continue to focus on operational and cost efficiency in this segment.

Project 30 continues to be an important driver for margin expansion. Through the first 6 months of this year, we achieved $10.6 million of our full year targeted savings of $20 million. Since Project 30 was initiated in mid-2011, this enterprise-wide effort has reshaped our cost structure and delivered a total of $92.6 million in cost savings.

In terms of the TTI, the main focus in 2013 is on consolidating processing platforms and transitioning current legacy data centers and applications to a private cloud-based environment. We expect this work will continue for the next 18 to 24 months. Ultimately, we expect this multiyear initiative will provide the company with an updated technology, infrastructure, with new functionality, increased performance and an overall reduction in application management and development costs. The transformation of CoreLogic's IT infrastructure is an integral part of our long-term strategic technology plan and is expected to substantially lower our cost profile. Importantly, the TTI will also provide a platform that enables and supports future growth.

Second quarter net income from continuing operations totaled $44.9 million compared with $41.1 million in the same prior year period. This 9% increase was attributable primarily to revenue growth and cost productivity benefits, which more than offset 2013 acquisition and TTI-related cost and the favorable 2012 IP settlement. Diluted EPS from continuing operations totaled $0.46 in the second quarter compared with $0.39 in 2012. Adjusted EPS for the second quarter was $0.56, which was 22% higher than last year.

EPS growth reflects improved financial results and the impact of share repurchases in 2012 in the first quarter of 2013. Free cash flow for the quarter was $48.9 million or 37% of adjusted EBITDA. This figure was below our targeted conversion rate of at least 50%, principally because of the timing of certain tax, interest and other payments and receipts, year-to-date free cash flow aggregate of $114.4 million or 46% of adjusted EBITDA. We expect to achieve our full year targeted conversion rate of, at least, 50% in 2013.

As of June 30, the company had unrestricted cash of $176.6 million and total debt of $788.8 million with $500 million available on our revolving credit facility. The company expects to enter into a new secured credit facility in conjunction with the pending acquisition of MSB and DataQuick. Rates and terms are expected to be substantially equivalent to those in our current arrangements.

As we progress through 2013, CoreLogic will continue to apply a balanced capital allocation strategy. Our priorities for 2013 are to fund discipline reinvestments in the business to support future profitable growth and to return significant capital to repurchase of our common shares. As Anand mentioned earlier, our expenditure repurchase program reflects our belief that at current price levels, our common stock remains below its long-term strategic value. Our new 2013 share repurchase target of, at least, 8 million shares, represents almost 8% of our outstanding share count. So far in 2013, we have repurchased 2.9 million shares.

I will conclude my remarks today and cover 2013 financial guidance. Consistent with our financial guidance issued on January 31, for the full year, we reaffirm that we expect to generate revenues of between $1.575 billion and $1.6 billion and adjusted EBITDA of $460 million to $475 million. As a result of our expanded share repurchase program, we are increasing our adjusted EPS guidance by $0.05 a share to $1.70 to $1.80. These guidance ranges represents solid growth over 2012 actual results.

Our 2013 guidance reflects the following key assumptions: First, a $1.55 trillion originations market. After a strong start in 2013, we believe that the second half will be characterized by lower levels of mortgage originations as the growth in purchase activity is more than offset by lower refinancing activity; second, a 15% decline in problem loans and foreclosures starts; third, Project 30 savings of at least $20 million; and fourth and finally, repurchase 8 million shares.

Specifically in terms of the third quarter of 2013, based on current revenue and volume trends within our businesses, our latest review -- our latest view of Project 30 and TTI, as well as seasonality, we believe that adjusted EBITDA and adjusted EPS in the third quarter should approximate first quarter 2013 levels.

The guidance ranges I've just discussed on this call exclude the impact of the provision of flood and tax services to BofA and the pending acquisition of MSB and DataQuick. The company plans to issue updated guidance reflecting the impact of these items following the closing of the acquisition of MSB and DataQuick.

In summary, CoreLogic has delivered a very strong set of results so far in 2013. Our success is the result of executing strongly against the business plan centered on profitable growth, margin expansion and cash flow generation. We will continue to build on our core strength in the immediate term while we pursue a strategic plan, which we believe will fundamentally transform CoreLogic's underlying financial business model.

Thanks for your time today. I'll now turn the call back over to the operator for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Brandon Dobell of William Blair.

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

I was hoping to get a little more color on the D&A growth this quarter. And maybe a little more specifically on some of the drivers, and whether or not there's any kind of either, let's call it, price or kind of value for data component that you're seeing going in your favor. And how you think about the sustainability of those growth drivers near term, obviously excluding what's going to happen with the acquisitions closing?

Frank D. Martell

Brandon, this is Frank. I'm not sure we heard the entire question, but I'll talk about the D&A growth drivers and then if I missed it, the first part of your question, chime in. But the growth in D&A is being driven by the core property Data & Analytics side, as well as document solutions, which is on the advisory side. We're seeing good growth there. And that's really driven by, I think the improvement in the market conditions and market activity, per se in the adoption of analytics more broadly across the industry. I think in terms of safe -- our tenant screening business and our teletech business, those are flat to modest -- modestly declining from prior year levels. A little bit of an offset there and that's more of just the market conditions in those respective areas. And I think on the Teletrac side, it reflects a little bit of the regulatory situation. We feel pretty good about the growth acceleration in the second quarter versus the first quarter. We picked up a couple of percentage points of growth rate, which is pretty good. And then I think the last thing, just -- while not a big thing is the Australian dollar took a dip in the second quarter versus the U.S. dollar. So the RP Data revenues came down a little bit as a result of that. The company's still growing pretty significantly in local dollar terms, but the translation effect knocked off a little bit of couple basis points off the growth rate there.

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

That's helpful. Maybe sticking with D&A for a second. This quarter with the consolidation of all of those joint ventures, how do we think about the impact of those in the back half of the year? I know there's not a whole lot of net impact, but just trying to get the revenue and margin profile a little more accurately set up in our model for second half of the year. How do you think about the impact there?

Anand K. Nallathambi

Yes, we really consider those to be market share. We used to recognize those through equity earnings. Primarily -- it's primarily the credit. We had a venture called, Rels credit, which supplied credit reporting. And so those were essentially taken back in-house. And I think that reflects what Anand talked about, which is the trend around finding partners that can provide these services that can invest in regulatory compliance themselves and under management consideration. So I think that reflects that trend. So obviously, when we supported equity earnings, you don't have the revenue components, so right in the revenue component, pinched the margins a little bit. But I'll say in the main, it's not -- it's a couple of hundred basis points. It's not that significant. And when you get in the second half of the year, because this occurred in the middle of last year, that will normalize.

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

All right. And then final one for me. The past couple of quarters, you guys have talked about the opportunity in the mid-market from a variety of points of view. How do you feel about the traction you're getting there from kind of data and delivery systems point of view? Is there anything upcoming from a technology perspective or sales organization perspective that you view as kind of a decent mile marker or a hump you need to get over to, to see some acceleration in that adoption?

Anand K. Nallathambi

Brandon, this is Anand. That's been a specific focus for us with our form -- newly formed GTM [ph] function heading into this year. We are very happy to see the pipeline that's very strong in the mid and mass market. There are no specific comps to accelerate it. It's a natural growth, and we have to just see how the market trends impact that market. We think that it enables us to put some market share gains in Data and Analytics specifically and also in Mortgage Origination Services.

Operator

Your next question comes from the line of Darrin Peller from Barclays.

Darrin D. Peller - Barclays Capital, Research Division

Just quickly start off, would you just remind us again the organic growth rate in the Data & Analytics segment this quarter, I think, was in the high-single digits, 7% or 8%. How does that compare again to last quarter? And just maybe you can remind us of what your expectations from an organic standpoint for D&A growth would be for the rest of the year?

Frank D. Martell

Yes. I think the growth rate, you're right, it was about 7.5%. It was about 100 bps lower than that in the first quarter, so the same type of overall acceleration would have fit with organic as well.

Darrin D. Peller - Barclays Capital, Research Division

Okay. And the expectation is still the high-single digits for the, remaining the year or...

Frank D. Martell

Yes, I think we're targeting that level.

Darrin D. Peller - Barclays Capital, Research Division

All right. On your adjusted EBITDA margin, I think you mentioned in the release about the $7 million benefit in second quarter of '12 last year. So if we back that out, I think your margin would have been up -- again, adjusted EBITDA would have been up almost 100 basis points. But I think there's also -- you mentioned earlier investments in the D&A business, which dragged that margin down this quarter. Can you just give us -- I think you started to mention them in your prepared remarks. But if you can list those again just to help us understand and quantify what they were to their margin, really, what's recurring there versus what may not be recurring going forward?

Frank D. Martell

Yes, we mentioned the same thing on the last call so it's really the investment ramping up the dock solutions platform or the volume. Ahead of our ability to service them properly. So I think we signaled that in the last call that, that was going to run into the second quarter, which it did. It's several million dollars. It's not a phenomenal amount of money, but it is a few million dollars.

Darrin D. Peller - Barclays Capital, Research Division

Okay. Is that -- and that's pretty much completed now?

Frank D. Martell

Yes, I think the heavy lifting is on the first half of this year.

Darrin D. Peller - Barclays Capital, Research Division

All right. So going onto the free cash flow. I think, again, you had a 37% conversion of EBITDA to free cash in the quarter. Again, you had certain payments this quarter that probably are nonrecurring around, I think, it was tax and bond payments. Do you still expect 50% for the full year, which would imply almost 60% conversion in the latter, in the second half of this year? Is that a normal run rate that we can count on, even with refi down going forward?

Anand K. Nallathambi

We said pretty consistently -- we've actually run higher than that last year, for example. And so -- but we sit pretty consistently in the 50% to 55%-ish range. I think that's going to hold true. The big impact on free cash flow in the second quarter was we had 2 tax payments and then we had a big slug of collections actually on July 1, come in that we're really attributable, should we expected to come in, in June. So we missed the cut-off by a day or 2 there.

Darrin D. Peller - Barclays Capital, Research Division

Okay, okay. All right, that's helpful. Just to wrap it up for me, and I'll turn back to the queue. But on the overall concept of free cash, I mean with the consummation of these deals and other than accretion in cash flow generation, should we be expecting other impacts to your models that could change the way you think about CapEx or R&D spending or even just capital allocation into the next year, when considering the combination of these businesses and likely drop and refis impacting your model? I know we're not talking in depth around 2014, but should we expect you to still be able to deliver free cash flow conversion at 50% or more as part of -- and really ingrained in your model even pro forma for these deals?

Frank D. Martell

First of all, these deals have cash flow conversions, these companies that are higher than 50% range that we talk about, so there should be a benefit there, number 1. Number 2 is they are high-margin businesses for the most part. So we expect the margin benefit as well. And then the operating leverage. Once they're fully assimilated and you get the synergies, I would expect that we'll have further benefits. From a CapEx perspective, there's not a significant CapEx associated with these businesses, so there won't be any drag from that type of spend. So I think net-net, I mean it's a very encouraging -- from a margin and a cash flow conversion perspective, very encouraging. And from a capital-allocation perspective, we'll continue to pursue the same strategies that we have, which is balanced approach with significant return of capital as the key component of that.

Operator

Your next question comes from the line of Carter Malloy of Stephens, Inc.

Lauren Slabaugh - Stephens Inc., Research Division

This is Lauren Slabaugh on for Carter Malloy. First one is in AMPS. I know you all said that, how you expect it be down double digits over the rest of this year. Could you talk about how you think about that segment more longer term in terms of -- is there any reason that, that decline stops or flattens out in coming years?

Anand K. Nallathambi

From a market standpoint -- this is Anand. It's difficult to tell. What we are trying to focus on is just, as I've said in our remarks, that we work on service delivery and margin expansion in that business. The one big thing that's impacting that segment is the growth of sub services. And that's actually shifting business away from AMPS into the Mortgage Origination Services segment. This is actually good for us because these are the high operating leverage businesses. The losses that we are seeing is actually on the AMPS back end fuel services-type businesses.

Carter Malloy - Stephens Inc., Research Division

Okay, great. That's helpful. And like you said, margin did increase nicely. Any specific commentary on where margins in that segment can go or we should see them to get much more from here?

Anand K. Nallathambi

I think that the margins where we're seeing now will be good to kind of keep them. Our expectation for the future is that's always going to be a segment in the mid-20s.

Operator

[Operator Instructions] Our next question comes from the line of Brett Horn of Morningstar.

Brett Horn - Morningstar Inc., Research Division

On the BofA flood and tax acquisition, should we look at this as kind of a one-off, or do you see more opportunities to make acquisitions, in-house units at the banks?

Anand K. Nallathambi

Yes, Brett. The BofA deal was probably one of the last reasonably sized deals out there. Obviously, the in-source market is opening up, and that has helped us in our market share gains over the last year. I'm not sure if that's going to continue. We're also very careful about picking up scale where it really makes sense for us. BofA is really recommitting to the mortgage space and their plans over the next few years match what we want to do for them, and our relationship is also growing with them. So it's a natural to go after this business. Going forward, we have to just look at it one by one if it comes up.

Operator

Your next question comes from Bose George of KBW.

Ryan O'Steen - Keefe, Bruyette, & Woods, Inc., Research Division

Actually this is Ryan O'Steen for Bose. Just to clarify in the BAC acquisition, do those operation provide services only to Bank of America or to other third parties?

Anand K. Nallathambi

That is only to Bank of America.

Ryan O'Steen - Keefe, Bruyette, & Woods, Inc., Research Division

Is there any opportunity to trail [ph] that to provide that services outside of BAC?

Anand K. Nallathambi

Well, our existing business has really good market share in the industry, and we touch a significant piece of the tax service market and also a significant piece of the flood services market. So we've already had that. What we're getting from them is to service the Bank of America, which is a significant strategic and growing business for us.

Ryan O'Steen - Keefe, Bruyette, & Woods, Inc., Research Division

Okay, great. That's much more clear. I mean you mentioned that, that acquisition should help the company outperform overall market trends. Any kind of commentary that you can give us just in terms of the revenue opportunity there or on the margin side? Is it reasonable to assume margins should come in line with the rest of the segment?

Anand K. Nallathambi

To the extent, these businesses add scale. And now the businesses that we're getting are tax and flood. Tax is a high-scale business, and flood is the same way. And these are all our, part of our high-margin segments. So that should help going forward.

Frank D. Martell

Yes. As I said in my remarks, we'll provide specific guidance once the MSB and DataQuick transaction closed on BofA. But they're very good margin business opportunities for CoreLogic and should be helpful in terms of our overall goal to expand our margins as we go forward.

Operator

And your next question comes from Kevin McVeigh of Macquarie.

Kevin D. McVeigh - Macquarie Research

Wonder, given kind of -- as we think about the origination market into '14, you folks are doing a real nice job diversifying the portfolio more towards the D&A. Depending upon the outlook for the originations, would you become more aggressive on the acquisition side on the D&A and maybe push up some of the target jab in terms of the percentage of the revenue and the contribution? That's number 1. And if you do that, is it still kind of the same scope in terms of size and type of acquisitions?

Anand K. Nallathambi

I would say that we're going to stick to what we talked about. We have a very disciplined way of looking at deals and if they are going to really add to us. But from a market standpoint, we also look to get -- put on market share gains through organic growth, and that's been -- like I said, it's our #1 priority right now. And if you look at the market, the current forecast, MBA forecast is about, just about a $1.55 trillion that we have assumed for 2013. And if you really look at the incoming credit volumes, which is the leading indicator, it shows the recent decline in the high-single digits. So it's still a ways to go to see any doomsday projections out there. We're watching trends pretty carefully. On the acquisition front, it's going to be more of a very careful, methodical, disciplined investment with high attention pay to accretion and margin expansion.

Kevin D. McVeigh - Macquarie Research

Understood. And then, Anand, as you think about kind of the current mix on the origination side, can you remind us where that is kind of purchase versus refinance? And as the business naturally shifts more towards the purchase market, do you capture an incremental share of that? Is there anything you've done that kind of positions you to capture more of that? And just any comments on your relationships with the larger banks? And obviously, there's talk of LPS being acquired. Does that present more of an opportunity for you to capture some share, or how should we think about that?

Anand K. Nallathambi

The refi was this purchased share as -- it's always shifting around 65%, 70%. But if you really look at it, the one thing that I watch very closely is on future trends, they are talking about refis dropping down 60% and purchase picking up by 17% or 20%. So it's really -- means that there's going to be a pretty significant drop to the total originations market. We feel comfortable that in a declining mortgage environment, the major market players, the client relationships that we have, they tend to retain share better. That has proven in the last cycles. And I believe that it will prove in the future, too. In addition to it, we are also seeing some opportunities for D&A growth, especially in the mid-market. And the pipeline looks great as I've said before.

Kevin D. McVeigh - Macquarie Research

Great. And then just any thoughts on kind of LPS relative to FNF. And does that present more opportunity for you from a purchase perspective as we integrate that or...

Anand K. Nallathambi

No. We don't look at that, and we don't pay too much attention to that. I think it's a -- we're focused on what we're trying to do. We're moving in a different direction. As you know, we're focused on building this insurance solutions group. So that's our main focus right now.

Operator

We have no further questions at this time. And ladies and gentlemen, I'd like to thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and good day.

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