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CoreLogic (NYSE:CLGX)

Q3 2013 Earnings Call

October 24, 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

Darrin D. Peller - Barclays Capital, Research Division

Brett Huff - Stephens Inc., Research Division

Brett Horn - Morningstar Inc., Research Division

Bose T. George - Keefe, Bruyette, & Woods, Inc., Research Division

Kevin D. McVeigh - Macquarie Research

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2013 CoreLogic Inc. Earnings Conference Call. My name is Gwen, and I'll be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host today, Mr. Dan Smith, Senior Vice President, Investor Relations.

Dan Smith

Thank you, and good morning. Welcome to our investor presentation and conference call, where we present our financial results for the third 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 subsequent 10-Qs. Our forward-looking statements are based on information currently available to us, and we do not intend, and 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 equivalents is included in the appendix to today's presentation. Finally, unless specifically identified, comparisons of third quarter financial results to prior periods should be understood on a year-over-year basis, that is in reference to the third quarter of 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 third quarter earnings call. I will lead out the call today with an overview of our third quarter operating results. I'll then discuss the progress against our near-term business priorities and strategic growth initiatives, as we conclude 2013, and head into 2014. Frank will then cover our financial results and we will end the call with Q&A.

As you already know, the third quarter proved to be a challenging time for the housing and mortgage markets. I'm pleased to report to you today that despite these headwinds, CoreLogic delivered very strong operating results in the third quarter of 2013. We reported revenue growth in our core business lines and increased operating and net income and adjusted EPS. We also hit our Project 30 targets, generated adjusted EBITDA and EBITDA margins in line with strong 2012 results, and repurchased a significant number of our common shares.

Third quarter revenues were essentially in line with last year. Importantly, our Mortgage Origination Services and Data and Analytics segments, which accounted for 85% of our total third quarter revenues, continued to deliver growth, meaningfully outperforming overall mortgage origination volumes, which we estimate declined by more than 30% year-over-year. Growth in Mortgage Origination Services and D&A was generated through a combination of product and service innovation, operating leverage and market share gains in the MOS segment. Revenues in our Asset Management and Processing Solutions segment, or AMPS, declined about 24% in the third quarter, reflecting lower market volumes in field services revenues. In the face of likely continued double-digit declines in market volumes, our focus on AMPS remains on service quality and margin expansion. Operating and net income and adjusted EPS were up year-over-year. Our relentless focus on shifting CoreLogic's business mix towards higher-margin D&A and MOS revenues, and lowering costs, were the major drivers of continued outperformance of our profitability targets.

Through the first 9 months of 2013, CoreLogic has delivered 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 5% of our common shares. Over the final months of 2013, we are focusing on profitable revenue growth in our core business lines and expect to further lower our costs to help offset the market challenges I discussed earlier. In addition, we will continue to progressively move our technology platforms to Dell under the TTI, and focus on closing and integrating our recently announced acquisitions.

The rest of my prepared remarks today will cover our progress against our strategic business plan, which has been our roadmap over the past 2 years. We believe that continued focus and successful execution of that plan will drive sustained value creation.

As you know from past calls, our plan has 4 key elements: first, grow the D&A segment to over 50% of total revenues within 3 years; second, drive operating leverage and scale in Mortgage Origination Services; third, deliver operational and technology excellence; and fourth, generate free cash flow at targeted levels and build financial flexibility.

In terms of growing D&A and scaling Mortgage Origination services, we continue to focus on product and service innovation and market share gains in our high operating leverage businesses. This focus has allowed us to grow revenues in these segments despite an overall contraction in loan originations and falling delinquency and foreclosure rates. 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 each of our strategic goals.

MSB and DataQuick meaningfully expand our D&A segment. These firms benefit from data-driven, subscription-based business models and add unique and complementary data sets and analytical capabilities that will help us to create scaled, market-leading insurance solutions group. Growing CoreLogic's footprint in the insurance vertical should reduce our sensitivity to mortgage origination volume trends over the medium to longer term. In line with our imperative of driving scale in MOS, the acquisition of Bank of America's flood and tax operations further augments the impact of other market share gains over the past year. Adding scale in this high operating leverage segment should help us to mitigate refinancing-driven market volatility.

With regard to achieving operational and technology excellence, we have successfully completed Project 30, and TTI is progressing as expected. We have more to do in this area, but I'm pleased to confirm that our efforts to-date have been a major driver of the 800-basis-point increase in CoreLogic's adjusted EBITDA margins since 2011. Lastly, with regard to building financial flexibility, we're continuing to generate free cash flow at targeted levels. We have put that cash flow to work by funding growth and efficiency-related investments and repurchasing our shares. Since 2012, we have repurchased almost 14% of our outstanding shares for just over $360 million.

In closing, CoreLogic has continued to deliver growth and consistent shareholder returns over the past 9 quarters. Our progress has been driven by a focused strategy that leverages the company's unique data assets and 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 opportunities presented by our ongoing business transformation, and by the prospect of delivering outstanding results for all of our stakeholders in 2013 and beyond.

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

Frank D. Martell

Thank you, Anand. Good morning, everyone. Today, I'm going to review our third quarter financial results and provide relevant updates on the TTI, our cost reduction programs and capital allocation. I will conclude with comments on our recent acquisitions, our newly announced 2014 cost reduction plan and finally, our full-year guidance.

As Anand mentioned, CoreLogic delivered strong financial results in the third quarter and over the first 9 months of 2013. Our success is the result of a singular focus on executing a business plan centered on profitable growth, margin expansion and free cash flow generation. We continue to get more productive and build on our core strength in D&A and MOS, while we pursue a strategic plan which we believe will fundamentally transform CoreLogic's financial and business model over the next several years. The successful implementation of our strategic plan over the past 2 years is the reason CoreLogic was able to continue to deliver growth in our core businesses in the third quarter, especially in the face of stiff market headwinds.

From a financial point of view, the major highlights in the third quarter were: one, MOS and D&A growth, fueled by market share gains and growth in new verticals; second, achievement of our profit, free cash flow and adjusted EPS targets; third, continued progress on the rollout of the TTI; fourth, commencement of the integration of BofA's tax and flood operations; and fifth, the repurchase of over 2 million of our shares.

Third quarter revenues totaled $405.5 million, down 1% from prior year levels, as the impact of lower mortgage origination volumes and delinquent loan counts were largely offset by gains from increased market share, organic growth and acquisition-related revenues. MOS revenues grew 9% to $184.3 million, as the benefit of market share gains, including the Bank of America acquisition, more than offset the impact of lower mortgage market activity. Our tax servicing business was a particularly strong performer in the third quarter, as it has been throughout 2013.

The Q3 revenue contribution from the Bank of America acquisition was $12.9 million. D&A revenues totaled $159.3 million for the quarter, up 3% from last year, as higher sales of geospatial solutions, Australian property information and advisory services more than offset the impact of the slowdown in refinancing demand on certain data query, analytical and valuation products. Foreign currency translation and RP Data and declines in specialty credit revenues also negatively impacted growth in the quarter. We expect D&A growth rates, which were below our target levels in the third quarter, to accelerate during 2014, as mortgage market becomes less refinance-dependent and we realize the benefits of our strategic investments in this segment.

AMPS revenues of $68.3 million were down $21 million or 24% from prior year levels, reflecting a double-digit drop in market volumes of delinquent loans, lower field services revenues and the exit of several unprofitable product lines. Operating income from continuing operations totaled $72 million for the third quarter, compared to $61.4 million in 2012. The 17% increase was due, principally, to revenue gains in MOS and D&A, lower TTI-related costs and cuts in general and administrative expenses, which more than offset the impact of lower AMPS revenues, as well as integration costs attributable to the BofA acquisition.

Third quarter operating income margin increased to 17.8% from 15% in 2012. Positive margin trends reflect the benefit of favorable shift in business mix and the impact of cost savings programs, including Project 30. Adjusted EBITDA totaled $118.4 million in the quarter, in line with prior year levels, despite lower market volumes and costs related to the integration of BofA's tax and flood operations.

Third quarter 2013 adjusted EBITDA margin was 29.2%, which is in line with prior year levels. MOS-adjusted EBITDA decreased 9% to $64.7 million compared with prior year levels, driven primarily by lower market volumes and integration costs related to BofA acquisition. In this regard, Q3 EBITDA associated with the acquisition was a negative $2.6 million, including onetime integration costs totaling $7.4 million.

D&A adjusted EBITDA totaled $48 million, a 2% decrease from prior year, as the impact of lower mortgage market volumes, declines in specialty credit and unfavorable currency translation were partially offset by higher advisory services, property information sales in Australia and geospatial solutions revenues. Adjusted EBITDA attributable to AMPS was $14.6 million, 17% below prior year, as cost reduction programs partially offset the impact of lower revenues.

As Anand mentioned, one of our strategic pillars is moving the company towards best-in-class operational and technological excellence. Project 30 has been a great start in this journey and it continues to be an important driver of margin expansion. Year-to-date, we achieved $15 million against the full-year savings target of $20 million. Since Project 30 was initiated in the middle of 2011, this enterprise-wide effort has reshaped our cost structure and delivered more than $97 million in savings. As we move forward, we will continue to become more efficient through our recently announced 2014 cost-reduction program of $25 million, and in the medium- to longer-term by implementing the TTI.

Our 2014 cost-reduction program is centered around workforce reductions in operations and corporate shared services, streamlining certain IT and business processes and lowering spending on real estate and outside services. The majority of the actions required to secure these savings are expected to be completed over the next several months. In terms of the TTI, the main focus in 2013 and 2014 is on consolidating processing platforms and transitioning current legacy data centers and applications to a private cloud-based environment. We expect this work to continue for the next 1.5 years. 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 beginning in 2015. Importantly, the TTI will also provide a platform that enables future growth.

Third quarter net income from continuing operations totaled $50 million compared with $36.2 million in the same prior-year period. This 38% increase was mainly attributable to operating upsides and the net benefit of certain nonoperating gains in the third quarter of 2013 and a onetime charge in the third quarter of 2012. Diluted EPS from continuing operations totaled $0.52 in the third quarter, compared with $0.35 in 2012. Adjusted EPS for the third quarter was $0.48, 7% higher than last year. EPS growth is largely reflective of the improvement in the company's profitability characteristics, as well as the impact of share repurchases.

Free cash flow for the quarter was $70 million, just over 59% of adjusted EBITDA. Year-to-date, free cash flow aggregated $184.4 million or 50.2% of adjusted EBITDA. On a trailing 12-month basis, CoreLogic generated $266 million of free cash flow or approximately 56% of adjusted EBITDA. As of September 30, the company had unrestricted cash of $135.6 million and total debt of $789.4 million, with $500 million available on our revolving credit facility. We continue to apply a balanced capital allocation strategy. Our priorities remain to fund disciplined reinvestment in the business to support future growth, as well as operational efficiencies and to return significant capital through repurchase of our shares. Regarding our 2013 repurchase program, I'm pleased to report that we're well on our way towards achieving our full-year target of 8 million shares. During the third quarter, we repurchased 2.1 million shares, bringing our year-to-date tally to 5 million.

My final remarks today will deal with 2013 financial guidance. The company expects to generate revenues of between $1.575 billion and $1.6 billion, and adjusted EBITDA of $460 million to $475 million, based on current market trends. These ranges are consistent with the guidance we provided in conjunction with the company's second quarter earnings release. We expect to deliver adjusted EPS at, or modestly above, the top end of our guidance range of $1.70 to $1.80. These guidance ranges represent solid growth over 2012 actual results, despite substantial year-over-year declines in mortgage origination volumes and delinquent loan counts. We believe these results clearly demonstrate the benefits of CoreLogic's long-term strategic plan.

Specifically in terms of the fourth quarter, based on historical seasonality and a projected 50% plus decline in refinancing volumes compared to 2012, we believe that adjusted EBITDA in the fourth quarter should approximate 90% to 95% of fourth quarter 2012 levels. Importantly, the guidance figures I just discussed exclude the impact of the BofA acquisition and the pending acquisition of MSB and DataQuick. Revenues and adjusted EBITDA contributions from the BofA acquisition for 2013 are expected to be approximately $20 million and $7 million before onetime integration costs, respectively. Onetime integration costs are expected to aggregate about $18 million. The company plans to issue guidance related to the MSB and DataQuick acquisition, as appropriate, upon the closing of that transaction.

In summary, CoreLogic has delivered strong results in 2013 because of our relentless execution against a plan focused on growth, cost management and cash flow generation. We will continue to build on our core strengths in the immediate term while we pursue a strategic plan which, we believe, will fundamentally transform CoreLogic's underlying business model.

Thanks very much 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] Our first question comes from the line of Darrin Peller with Barclays.

Darrin D. Peller - Barclays Capital, Research Division

Just want to start off, first, on that front, on the mortgage -- on the MOS business, really. I mean, if you can give us a little bit more granularity on the market share gains you're having here and really, what's driving that and where that's coming from and really, the outperformance in that market for you guys versus the trends we're seeing? And if that can actually have room to continue even further in the next couple of quarters? What exactly is going on there that's allowing you to grow so much better than the market? Just more clarity.

Frank D. Martell

Yes, I would say, Darrin, it's a couple of factors. Number one, it's -- as we've been talking about, there's been a flight to quality over the last 1 year, 1.5 years, driven by the regulatory environment. So we're seeing gains from that area. We're also seeing gains as MSR shift, we're -- have been the beneficiary of that. I think our continued excellence, in terms of operations, has allowed us to win new business away from the competition. So those are the 3 primary areas where we're seeing growth outside of, of course, the BofA acquisition, which is -- we call it an acquisition but essentially, it's a market share gain. They've traditionally done the work in-house and has shifted that to CoreLogic. We would -- to answer the second part of your question, I think there's still a healthy pipeline out there and we're going to be positioned to capitalize on it going forward.

Darrin D. Peller - Barclays Capital, Research Division

All right, that's great. I guess just moving to the Data and Analytics business at a high level, for me at least, I mean, the growth rate obviously came in lower than the market and I think, even you guys had expected previously with 4% constant currency growth. What exactly was -- maybe if you could parse out the percentage of that revenue that is tied to originations? And looking forward, obviously, what should we be counting on for growth to normalize to in that rate, maybe next year? I mean, is it a matter of the market itself being more stable? Even if it's at a lower trough level in terms of refis, should we -- is that what we need to see for the Data and Analytics growth rate to reaccelerate?

Frank D. Martell

We expect, going into '14, that the growth rate will rebound closer to our targeted levels. That's our expectation in the medium to longer term. I think similar to all the other players, I think the sharpness of the drop in refi activity, we need a little time to rebound in terms of resizing the cost structure and just regrouping a little bit from that. But I think the team did a good job. We have some new management in that area as well, which we think is great. So I would expect, to answer your question, that growth rates will return to our targeted levels as we get into '14. And that is the right long-term growth trajectory for that business from an organic perspective.

Darrin D. Peller - Barclays Capital, Research Division

Okay. And just to kind of hone in on that a little more, I mean, when you break down that segment, the percentage of your business that is not tied to originations is still probably, what, 50%, 60% of the Data and Analytics business, with -- you have 15% or so that might be tied. You also have your tenant screening business and your MLS business that might be on it. So what were -- the 50%, what was the growth profile if you break down the business a bit in the sense of the part of the business that may have been less sensitive to the data -- originations market? What did that grow by that obviously more than offset the weakness in the origination side?

Frank D. Martell

Yes, so as I mentioned in my prepared remarks, one of the issues we had in the quarter was FX in Australia. The Australian dollar had a significant weakening year-over-year, so that's one element. Underlying in RP, had a very, very strong local currency growth rate in the quarter. So we're pleased about that. Tenant screening and the payday lending business, it's about 1/3 of that segment, little less than 1/3. And as we mentioned, that's a business that's been pretty much stagnant on the tenant screening for some period of time as tenant turnover has been relatively flat. Where we've seen, actually, a decline is in the specialty credit area or the payday lending data area, where as you know, the regulatory pressure in the payday lending industry has put that whole industry under pressure. And we've -- our performance has kind of mirrored that pressure. So that's certainly been a drag. The core property records area obviously is growing faster than the aggregate numbers that we presented. So we feel good about that. We feel good about where that business is positioned and we're investing. The sharp decline in the activity, the air pocket that kind of hit in June, July because of the rates, that affected the data query business and the analytical businesses, where people were running analytics on loan applications. But that is stabilizing, so we -- the shock value of that is going to moderate as we go forward.

Darrin D. Peller - Barclays Capital, Research Division

All right. That's very helpful. And just a last question for me and I'll turn it back to the queue. But when we look at the next quarter, in your implied guidance, you have mortgage volumes that are sequentially down another $100 billion (sic) [million] quarter-over-quarter. So I guess that would equate similarity to what you had previously said, was $12 million to $15 million of EBITDA we can touch on, if that actually still the same sensitivity or not. You have another slight decline in the AMPS division. But I mean, we're coming to about $105 million to $110 million of EBITDA, including BAC, the Bank of America business, I guess about $0.41. Is that -- are we thinking about your implied guidance correctly, and can we say that, that's sort of a trough run rate to use for about how low is we think we're likely to get around originations and underlying profitability of the business going into next year?

Frank D. Martell

I think our guidance obviously implies it. We did about $106 million last year. So 90% to 95% of that, $96 million to $102 million, so we're not far off. Obviously, the AMPS business has been declining at a higher rate, so I think that's a little bit of a wildcard. But I don't -- I think our guidance is directionally correct. Obviously, there's a seasonality. Historically, the fourth quarter is a low one for us, but we feel pretty good about hitting our guidance ranges. And obviously, we're taking a lot of action on the cost side as well. And then, in terms of your comment on the BofA, I'm not sure if your numbers include or exclude the integration costs. But...

Darrin D. Peller - Barclays Capital, Research Division

No, I'm excluding integration costs right now, I'm just saying, sort of normalized once you finish through that.

Frank D. Martell

Yes, because what we're trying to do on the integration is to try to go as quickly as we can in '13 to clear the decks for '14. So we're not going to 100% integrate in such a short period of time, but to the extent that we can do things more quickly, that's a benefit to '14. So but yes, excluding -- clearly, there's a benefit there that's not implicit in our guidance.

Darrin D. Peller - Barclays Capital, Research Division

Right. So to wrap it up, I mean, you have a fourth quarter that's sort of likely to be sort of at a trough. I mean, you have building blocks off that level, which include the $25 million incremental cost cuts. MSB and DataQuick, as well as some organic growth in D&A, all pushing numbers materially. Is there anything else we're missing or are those the main blocks we should just keep in mind?

Frank D. Martell

I think you hit most of them. I think we're doing everything we can to build a good trajectory for '14. We'll guide in January.

Operator

Your next question comes from the line of Brett Huff with Stephens Inc.

Brett Huff - Stephens Inc., Research Division

I wanted to follow up just on the -- how the business reacts to the decline in mortgage. You gave us some good data on that. But in practice, as those mortgage volumes come down, can you just sort of go through, at least, a couple of the key businesses and the kind of cost reductions that you're doing? Is it mostly people? Is it shutting offices? Is it more long term? Can you just, at least, give us more of a flavor for the kind of reductions that you're doing when you see that kind of dropoff?

Frank D. Martell

Sorry, Brett, are you talking about the 2014 program?

Brett Huff - Stephens Inc., Research Division

No, I'm talking about the -- just what happened this quarter, the things that you said you started doing this in 2Q and then the 3Q, the cost reductions.

Frank D. Martell

I'm not quite sure I follow.

Brett Huff - Stephens Inc., Research Division

I guess I'm asking is this -- I mean, are the reductions that you guys are looking at to help offset the mortgage volume declines, is that mostly people that are -- from a cost reduction point of view or is it more of a fixed cost kind of change?

Frank D. Martell

Yes, I would say it's a 60%-ish, 60% to 70% staffing and the balance, pretty much outside services and lower real estate spend.

Brett Huff - Stephens Inc., Research Division

Okay. That's helpful. And then, the only follow-up I had was, is on the MOS segment, you said that there was -- you see some additional pipeline for share taking. Is that pipeline composed, similarly as in the past, a little bit of kind of buying things like the BofA deal, as well as taking share I guess, sort of, one by one or deal by deal? Or is it weighted more towards what I think of as organic share taking versus buying?

Frank D. Martell

Yes. So essentially, it will be more of a traditional win or transfer of business to us. The BofA transaction was fairly unique because it was a -- it's a big chunk of the market and it's -- we're essentially buying the operating platforms versus a "company," which is allowing us to then process the volumes that they -- on an ongoing basis.

Operator

Your next question comes from the line of Brett Horn with Morningstar.

Brett Horn - Morningstar Inc., Research Division

Yes, you discussed this, I just want to make sure I understood you correctly. The $25 million in cost savings in 2004 (sic) [2014], is that all new cost savings under Project 30 or does any of that relate to TTI?

Frank D. Martell

Yes, that's all new. So we're not calling it Project 30, because Project 30 is kind of done as of the end of this year. But it's a new program and it's not related to TTI.

Brett Horn - Morningstar Inc., Research Division

Okay. So the way to look at it would be the $25 million in 2014, then, plus the TTI savings in 2015?

Frank D. Martell

Correct.

Operator

Your next question comes from the line of George Bose (sic) [Bose George].

Bose T. George - Keefe, Bruyette, & Woods, Inc., Research Division

This is Bose. Actually, a couple of things. First, do you think your customers are ready for the upcoming QM rule, and do you think that's creating some of the market share growth opportunities that you guys are seeing?

Anand K. Nallathambi

Bose, this is Anand. I think it's a lot -- I think they are -- by and large, they are getting ready for it. But there's a lot of discussions between them and the regulators about exactly how they're going to execute it. And there's a lot of discussion in the marketplace. So it's -- I would say that the final touches on that on timing and implementation of it and the standards that's to be established are going to be -- is still to be seen.

Bose T. George - Keefe, Bruyette, & Woods, Inc., Research Division

But is it fair to say that it could create some opportunities for you guys?

Anand K. Nallathambi

I think this whole market transition, I'd like to mention a couple of things. One is we've been calling for this market or, at least, anticipating this market for the last 2 years, and that's why we organized this effort under Project 30. And so we know that the mortgage market could be in the $1.2 trillion, $1.3 trillion range, and the additions that Frank just talked about for 2014, is for us to get ahead of that market, say, if it's going to be $1 trillion to $1.1 trillion, what would we do? So this is something that we've been kind of preparing for. And the other thing is, specifically talking about the new environment and where our opportunities are, in the shift between refis and purchase, we see special emphasis in terms of customer acquisition and in borrower qualification. And in the flight back to quality, I think marketing services that CoreLogic can provide and also, verification services in aiding borrower qualifications is going to be great opportunities for us.

Bose T. George - Keefe, Bruyette, & Woods, Inc., Research Division

Okay, great. And there's actually one quick follow-up. Just on the $20 million in revenue and the $7 million in EBITDA guidance for BAC for this year, if we think of that for like a quarter, and 1.5 quarters, can we extrapolate from that for 2014, where there are sort of other synergies, et cetera, that could get that number higher next year?

Frank D. Martell

Yes. I don't think that extrapolates to a full year.

Bose T. George - Keefe, Bruyette, & Woods, Inc., Research Division

So I mean, we should take the -- this is for 1.5 quarters, so we should add something onto the extrapolation, there should be more -- there are opportunities for that number to be higher than just extrapolating from the 1.5 quarters?

Frank D. Martell

Yes, potentially. I mean, I think you have to look at what BofA is saying in terms of their strategy around mortgage. I think that will give you a -- but clearly, this is a -- if you just take those numbers, you've got seasonality in kind of a low point in the fourth quarter. So I think it's reasonable that it could be higher than just [indiscernible].

Operator

Comes from the line of Kevin McVeigh with Macquarie.

Kevin D. McVeigh - Macquarie Research

I know it's a little early to start talking 2014. But Anand, it sounds like your comment back of the envelope sounds like a $1.1 trillion to $1.2 trillion origination market overall. If that is right, how are we thinking about the split between refinance and purchase?

Anand K. Nallathambi

Well, there's a lot of different estimates out there, Kevin, but right now they're saying that purchase is going to be a lot higher. But it's not going to equate to what refis were. So if the refis were somewhere in the neighborhood of 65% to 70% and then, it going down and purchase coming up, it's -- you're still looking at a correction in the marketplace out there. MBA today is at probably around $1 trillion and the GSEs are still around $1.4 trillion. So there's still quite a bit of variance. It will all settle down probably over the fourth quarter. But we're just trying to get ahead of it as aggressive as we can be and to be ready for it.

Kevin D. McVeigh - Macquarie Research

And then as you think about that $25 million in incremental cost cuts, how does that layer into '14? Is it all kind of front end of the year or is that the run rate, Frank, towards the back end of the year?

Frank D. Martell

Yes, I think, Kevin, it's roughly 40% first half, 60% second half. There'll be some implementation work through the first 3, 4 months of '14, as you would expect, so I think 40/60 is reasonable.

Kevin D. McVeigh - Macquarie Research

Sure. Okay. And then, just any update on Marshall & Swift in terms of the timing on that, expected to close?

Frank D. Martell

We're working hard with the government authorities, cooperating. It's really in their hands, but I think we're doing everything we can and believe that, certainly, it's just a matter of their time. But it's really their scheduling versus ours. Obviously, the shutdown didn't help a lot in that regard. That's one area that, specifically, the shutdown didn't help in terms of a couple weeks of distraction. But we're working hard to get it closed as quickly as possible.

Kevin D. McVeigh - Macquarie Research

Got it. And then, just any update on the buybacks? It seems like you're working through nicely, kind of, the targeted 8 million. As we think about '14, should we expect a similar pace? Or just any thoughts on that would be helpful.

Frank D. Martell

We're committed to the 8 million this year. And in terms of '14, we've talked publicly about a 3 million target. And as we've done in the last 2 years, we'll assess that as we get into the year. But I think -- I would assume that the 3 million target for '14 would be, for lack of a better thing, kind of equally distributed by quarter.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.

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Source: CoreLogic Management Discusses Q3 2013 Results - Earnings Call Transcript
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