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CoreLogic, Inc (NYSE:CLGX)

Q3 2011 Earnings Call

November 3, 2011 02:00 pm ET

Executives

Dan Smith - SVP, IR

Anand Nallathambi - President and CEO

Frank Martell - CFO

Analysts

Carter Malloy - Stephens

Kevin McVeigh - Macquarie

Geoffrey Dunn - Dowling & Partners

Bill Warmington - Raymond James

Brett Horn - Morningstar

Operator

Good day, ladies and gentlemen and welcome to the third quarter 2011 CoreLogic incorporated earnings conference call. My name is Kiana and I will be your coordinator today. At this time all participants are in a listen-only mode and we will accept your questions at the end of this conference. (Operator Instructions) As a reminder today's call is being recorded and I will now turn the call over to Mr. Dan Smith, Senior Vice President of Investor Relations. Please proceed, sir.

Dan Smith

Thank you and good afternoon. Welcome to our investor presentation and conference call where we present our financial results for the third quarter of 2011. Speaking today will be CoreLogic's President and CEO, Anand Nallathambi, and Chief Financial Officer Frank Martell. Before we begin, let me make a few important points. First, we have posted our slide presentation which includes additional details on 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 subsequently filed 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 the GAAP equivalent is included in the appendix to today's presentation. Finally, unless specified, 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 2010. Thanks. And now let me introduce our President and CEO, Anand Nallathambi.

Anand Nallathambi

Thank you, Dan, and good morning everyone. Welcome to our third quarter earnings conference call. During the third quarter, CoreLogic took aggressive actions to enhance our business model to deliver high-revenue growth at significantly improved EBITDA margins.

Specifically, we took five keys steps. We invested in new and innovative products to strengthen our core growth areas in the data and analytic segment. We achieved significant cost savings in corporate and support functions. We increased operating leverage into business and information services segment. We exited non-core businesses that lack significant data, intellectual property, returns to scale or profitability and finally we managed our capital structure to provide financial flexibility.

As a result of our progress in these areas and strong mortgage refinancing volumes, CoreLogic generated better than expected revenues and adjusted EBITDA in the third quarter. We expect the benefit from these trends into fourth quarter as well. So we have raised our guidance for full-year results.

In other key development in the third quarter was the hiring of our Chief Financial Officer, Frank Martell. We’re excited to have him on board. Frank will play a pivotal role in overseeing and managing the cost actions which will be the near-term impetus for increasing profits and margins.

I will outline our go-forward strategy and the actions we took in the quarter. Then I will hand it over to Frank for the details from the third quarter results, our guidance and the outlook on the efficiency initiatives going forward.

Slide four, shows our core businesses following the exit of five areas in the third quarter. As we can see, we have sharpened our focus on businesses that benefit from a leading market presence. Unique data assets or intellectual property, differentiated analytical abilities, high operating leverage and a long-term client relationship.

If you look at our core areas, it is clear that the combination of deep and unique set of public records, consortium data and proprietary data basis provides CoreLogic with strong competitive advantages. The infrastructure to interact with 22,000 taxing authorities, process $58 billion in property taxes and having the most accurate and complete flood and other hazard information have made our financial results resilient over the past five years.

These competitive strengths wrapped with the world class domain expertise of our staff provide us a solid foundation for future growth.

Slide 5 lays out our strategy for the future. CoreLogic’s value proposition is to provide high-value financial, property and consumer information to the real estate and financial services industries.

Supporting our data and analytic assets are the suite of mortgage services that possess high operating leverage. This was clearly illustrated in how increased refinance volumes drove higher third quarter results. Leveraging these assets, we help our clients reduce risk and improve their financial performance by providing decision support and insights into their most complex business problems.

First we will continue to invest in growth areas of data and analytics. We made headway here in the third quarter by developing new fraud tools, launching new analytical products and solidifying our competitive position in the MLF space.

We recently announced our new supplemental credit bureau solution and [corescore] our partnership with FICO to offer new alternative credit scores. These steps integrate our property, mortgage loan and alternative credit data into comprehensive solutions that will greatly enhance our customer’s view of financial risks.

We also announced the acquisition of TaraSoft, the best-in-class provider of technology and software solutions to the real estate market. This deal should accelerate innovation and our market length MLS business, increase the value proposition to our customers and improve profit margins.

Second, we will focus on improving operating efficiency and fixed cost leverage in the business and installation services segment. In addition to improving near-term profitability, we believe this will position CoreLogic to fully capitalize on the eventual rebound and the mortgage industry.

We have talked in the past quarters about re-cooling our service infrastructures to fit to the new norms of mortgage lending. During the third quarter, we made significant progress in standardizing and automating our tax servicing business, streamlining our field services organization and continuing to expand our flood data services business into the P&C and energy industries.

Third, we will continue to right size the corporate costs and shared services infrastructure. Frank will discuss this in more detail but we believe we can take out about $80 million to $100 million in costs through the end of 2013. This number is an improvement from our previously discussed cost savings target.

Finally, as a result of these actions, we believe CoreLogic can improve the EBITDA to free cash flow conversion from its current level.

Slide 6 shows the financial impact of improved focus and cost efficiencies. Starting with the year-to-date EBITDA margin of about 16%, you can see that we add about seven points of margin by exiting five non-core businesses that collectively generated about $59 million in revenue and negative $15.6 million in EBITDA for the third quarter.

Moving to the right, you can see that we plan to add another seven points of margins through cost initiatives targeted in 2011 to 2013. In the past we have discussed these actions separately. We are now combining them into one broad initiative called Project 30.

The combination of exiting non-profitable businesses, improving efficiencies and continuing to invest in product innovations should drive us to our goal of 30% EBITDA margins through 2013 without significant improvements in the real estate market. We haven’t changed our view that the long-term norm will be closer to 1.5 trillion in originations. But in the near term we are taking steps to thrive in a much lower environment. That way when the origination market rebounds, we will be ready to generate significantly higher profitability with improved operating leverage.

Slide 7 sums it all up. We believe that our core businesses present a compelling value proposition in the market place with differentiated competitive positions and good long term growth prospects.

The improved efficiencies and continued investment in our core growth areas will allow us to achieve significant cost savings and higher margins over the next two years.

Finally, we are already starting to see the impacts of these steps in our financial performance with an increase in our full year 2011 guidance. So, all of this makes CoreLogic a great partner for our clients and the value growth opportunity for long-term investors.

With that, I will pass it over to Frank.

Frank Martell

Thanks, Anand, and good morning everyone. Today I will be addressing four topics. First, our third quarter result; second, specific aspects related to the exit of five non-core businesses; third, our cost reduction and productivity initiatives, and finally revised guidance for 2011.

As Anand outlined, CoreLogic made significant strides in improving its operations during the third quarter. Specifically, we exited non-core businesses, invested in a number of high potential growth areas, accelerated our cost reduction efforts and capitalized on the stronger mortgage origination market.

Slide 8 summarizes our third quarter results. In general, our core business in data analytics and mortgage origination services benefited from the recent refinancing wave and cost reductions related to our ongoing efficiency programs. Q3 adjusted revenue and EBITDA from continuing operations was $362 million and $85 million respectively. These figures were ahead of our internal forecast and the quarterly numbers implicit in our previous full year guidance for our continuing operations.

Moving to slide 9, you can see that CoreLogic’s adjusted revenues increased 3% compared with the third quarter of 2010. Revenues in the data and analytics segment were up 13% over Q3 2010 primarily as a result of the acquisition of RP Data and continued success in signing new capital market advisory projects.

During the quarter, we continued to invest in new products and services and close the (inaudible) acquisition TaraSoft to support future growth in this segment.

On the business and information services side, third quarter revenues were off 6% from 2010 levels. We believe this performance compares favorably to the overall market where total origination of volumes were down about 23% and problem loan balances were off approximately 9%.

On a sequential basis, adjusted third quarter revenues were up $21.8 million or 6% fueled primarily by higher refinancing related revenues and our tax servicing, flood data services and credit reporting businesses, as well as the acquisitions of RP Data and Dorado Network Solutions.

Adjusted EBITDA for the third quarter from continuing operations was down 12% from last year. This decline resulted principally from a year-over-year contraction of the mortgage origination in default markets which negatively impacted volumes in our specialty finance and business information services businesses. This market related pressure was partially offset by cost reductions, increased revenues and our risk and fraud and field services businesses and the RP Data and Dorado acquisitions.

As Anand referred to in his remarks, during the third quarter we continued to investment in future growth of our data analytics segment. We expect to continue to investment significant amounts to drive organic growth in future periods and plan to offset these investments through cost savings.

Compared with the second quarter of this year, adjusted EBITDA was up $13.3 million or 18% reflecting improved performances by most of CoreLogic’s business lines and the impact of our cost reduction program.

Quarter-on-quarter we achieved approximately 60% incremental margins on higher revenues reflecting the high operating leverage characteristics of our mortgage origination related data and servicing businesses as well as improvements in the cost structure of our tax servicing business and a downward trajectory in corporate costs.

Adjusted EBITDA margins from continuing operations for the third quarter aggregated 24% compared with 24.1% for Q2 2011 and 28% for the third quarter of last year. The sequential improvement was driven by mortgage refinancing upsize and cost eliminations. The year-over-year margin trend is primarily attributable to the contraction of the mortgage origination and default market activity discussed earlier.

For additional details on segment and sub-segment results for the third quarter, please refer to Appendix of third quarter 2011 financial results presentation which is also on our website. For the third quarter, adjusted pre-tax income totaled $41 million and adjusted earnings per share was $0.23, significantly ahead of expectations.

The adjustments to revenue in pre-tax income for the third quarter are outlined on slide 10. As you can see, efficiency investments, severance and impairments represent the majority of these adjustments.

As we enter into 2012, our intent is to simplify our financial presentation by changing our adjusted financial metrics to align them more closely with reported GAAP figures. We will share additional details on our plans in the Q4 call in February 2012.

In terms of liquidity our cash on hand at September 30, 2011 totaled $139 million. Improving operating performance, proceeds from the sale of certain minority owned investments as well as several other non-operating cash inflows since the end of the third quarter have increased CoreLogic’s total cash on hand to more than $200 million as of yesterday.

Our total debt was $911 million as of September 30 of 2011. We reduced our overall debt $22 million from June 30th, to the scheduled term loan principle amortization and the retirement of $17 million pension note. Based on anticipated improvements in current cash position, our future free cash flow from certain one-time items and improved cash conversion rates going forward, the company will consider the repurchase of common shares and/or the retirement of outstanding debt on an opportunistic basis.

The balance of my remarks today will focus on the exit of certain non-core businesses, the companies expanded cost savings initiatives and our improved full year 2011 guidance. As you heard earlier in the call, we decided to exit active five non-core businesses. The businesses being exited are LeadClick, Consumer Credit Monitoring Services, Appraisal Management Services, American Driving Records and CompuNet Credit Services.

LeadClick was closed during September. The rest of these businesses are held for sale and will be designated as discontinued operations from the third quarter onward. Exiting these units with the result of a review of the medium-to-longer term prospects for these businesses and their fit with the company’s strategic direction. Exiting these businesses should reduce complexity and facilitate a greater focus of management time and resources on the core areas of the firm.

From a financial point of view, exiting these businesses which had relatively weak profit characteristics boosted CoreLogic’s adjusted EBITDA margins for the third quarter of 2011 by approximately 700 basis points.

Total pretax charges associated with exiting these businesses were $161.3 million, the majority of which related to the non-cash impairment charges of $140 million related to LeadClick. CoreLogic expects to realize approximately $60 million of future tax benefits due to the closing of LeadClick collect. In addition, the company expects to receive positive cash proceeds on the sale of the four businesses. The cash inflow impacts related to these items is expected to benefit our 2012 results.

During the past three months, CoreLogic intensified its focus on cost reductions. During the third quarter, we completed the sale of our captive off shoring platform to Cognizant and reduced our U.S.-based workforce by approximately 5%. We also took steps to improve efficiency in our IT and corporate shared services functions. Over the balance of 2011, we expect to further reduce our U.S. workforce by approximately 5%.

As we head into 2012, we have specific and detailed plans supporting our cost reduction efforts. Over the next 24 months, we will focus on further rightsizing our technology spend in line with best-in-class benchmarks, reducing the size of our corporate functions, improving the effectiveness of our procurement process and finally, lowering real estate expenses by consolidating offices and selling several underutilized facilities owned by the company.

The financial targets in our cost program, which as Anand mentioned is dubbed Project 30 appear on slide 12. Ultimately we are targeting to deliver $80 million to $100 million in runrate savings during 2013. We expect these savings will be a key driver for achieving CoreLogic’s target of 30% adjusted EBITDA margins during 2013. The final topic I would like to cover today relates to our increase in guidance for the full year of 2011 which is shown on slide 13.

For the full year we are projecting revenues from continuing operations of $1.35 billion to $1.37 billion compared to our previous guidance of $1.575 billion to $1.625 billion. The decrease is attributable to the exit of the five businesses discussed previously offset partially by upsides related to increased mortgage refinancing activity.

In terms of adjusted EBITDA we are increasing our 2011 forecast from continuing operations from $260 million to $280 million to $290 million to $300 million. The majority of the improvement in adjusted EBITDA guidance was attributable to the benefits of the mortgage refinancing activity coupled with accelerated cost reduction.

We are also raising our full-year adjusted EPS guidance to $0.75 to $0.80 per share based on our forecasted improvement and adjusted revenues and EBITDA generated from continuing operations.

In closing we are pleased with the progress we made on many fronts during the third quarter. We are heading into the remainder of 2011 and 2012 with positive momentum from a more focused set of businesses and an expanded cost reduction program. These upsides together with the recent rebound in mortgage origination market support a significant increase in our liquidity position and our full-year 2011 financial guidance.

We believe that CoreLogic is well positioned to execute on the strategic vision on and articulated earlier and to generate significant shareholder value over the long term. I will now turn the call back over to Anand for some closing remarks before Q&A.

Anand Nallathambi

Thanks Frank. Before we turn to your questions let me provide a brief update on our Board’s review of strategic alternatives. Since the board announced the review the independent committee has been working closely with its advisors in a robust process to evaluate many different alternatives. I am sure you can appreciate that while this review is ongoing it would be not be appropriate for us to speculate on the potential outcome of the committee’s work.

As a result we will not be addressing questions related to the strategic review on today’s call. With that I will turn it over to the operator for the first question.

Question-and-Answer Session

(Operator Instructions). And our first question comes from the line of Carter Malloy with Stephens.

Carter Malloy - Stephens

So first of the revenues on the four non-core businesses outside of LeadClick and you think about disposing those assets, any sense, any ballpark is what you think those four were just in very rough terms.

Anand Nallathambi

It’s too early to tell. These businesses needless to say didn’t fit our strategic profile going forward and for the various reasons that Frank outlined on the call on the script we said we are going to put this as a held for sale and discontinue that. We are going through the process, we will find out the answers to your questions soon enough.

Carter Malloy - Stephens

But those businesses are more likely businesses where there is enough technology there has some value as opposed to just shutting them down. Is that a safe assumption.

Anand Nallathambi

Some of them do, some of them don’t. So it is too early to tell.

Carter Malloy - Stephens

And then being out of the AMC business, on the JV side of the house, are you also deemphasizing those or if not what’s inside of this JVs at this point?

Anand Nallathambi

On the JV side of the business, we are partners with the major market makers out there and those businesses really perform well and it’s very evident in terms of high refis there, incremental margins are terrific in that side of the business. If the appraisal management function that we weren’t comfortable with and we’ve been signaling to the market in our previous calls about the challenges that we have had and that’s the piece the appraisal management piece is the one that we getting our of.

Carter Malloy - Stephens

But isn’t there a significant appraisal management component of those JV’s?

Anand Nallathambi

But it’s not totally on a contractor basis, there is a better mix of staff to contract or mix in the JVs because of continued commitments from the major players.

Carter Malloy - Stephens

And lastly and looking out into 2012, MBA is probably a little overly bullish or it feels like they are in the forecast, but can you give us any of your sense of directional look either macro or your business specific as we step into 2012?

Anand Nallathambi

It’s very difficult to predict that, the numbers are all over the place. What we’re focusing on is, let’s just try to rightsize the business and be very efficient and drive more operating leverage and everything to operate in an environment of 1 trillion to 1.2 trillion.

Going forward into 2012, we see a little bit of positive momentum in terms of refis sticking for a while and also the recent announcements of [Hart II] and some of the government actions give us some enthusiasm, but it is too early to tell. We will address those things in the next quarter call when we give guidance.

Carter Malloy - Stephens

Okay and just on a technicality, can you guys actually buyback stock while you are in process? Are you legally allowed to buy back stock right now?

Frank Martell

We are not planning to buy back stock while we are in process.

Anand Nallathambi

I think Frank mentioned it in his script. We remain flexible and we have the flexibility but obviously these will be things -- these are divisions that we will make with the board in concert.

Operator

Our next question comes from the line of Kevin McVeigh with Macquarie please proceed.

Kevin McVeigh - Macquarie

I just hope you can help us understand a little bit what drove the sequential increase on the specialty finance side? Anywhere from 11% to almost 25% EBITDA margins and then on the mortgage origination side, they’re kind of 20% to 33.3%. How much of that was result of discontinued operations versus improvements in the Core business?

Anand Nallathambi

Kevin, thank you for the question. That’s a clear demonstration of the operating leverage that is evident in our businesses with type fix cost and a lot of scale. Those are the businesses that benefitted from the increased refinance volumes, in terms of [Credco] and credit reports, and JVs and flood data businesses.

Kevin McVeigh - Macquarie

And then again, was that all the function of the mortgage [refi] boost or did you get some benefit from the businesses that were discontinued?

Anand Nallathambi

I think definitely the volume component to it but we’re also, I think, we’re running more efficiently with the cost reduction activity that has been going through the business.

Kevin McVeigh - Macquarie

Right. And Frank, if you think about those incremental margins, I mean, are you getting 60% to 70% incremental margin was run rate basis through the balance this year?

Frank Martell

We would expect probably those rates to continue, the run rates as we continue.

Kevin McVeigh - Macquarie

And how should we think about free cash flow conversion on as related to EBITDA, as we think about 2012 just on percentages and 2011 as well.

Frank Martell

I think on that score, it’s not where we wanted to be this year. There’s a lot of noise this year as you can tell from the activity. We expect our conversion rates to improve. I think it’s a little too early to talk about specifics there, Kevin, just because we’re not talking guidance for the ‘12 yet. But clearly we have an expectation that those will come up, and as we take the noise out of the system and run more efficiently.

Kevin McVeigh - Macquarie

Got it and then just on the 2012, 13, is the base line assumption for originations that 1 trillion to -- think about the business, Frank, is that the run rate we should think about or is it higher than that to achieve those margin targets?

Frank Martell

I think, Kevin as Anand talked about, basically we’re focused on is really to drive the efficiency through the business lines and be positioned. We want to drive improved margins at the $1 trillion, $1.2 trillion level. So that’s kind of where we’re focused on right now. We hope it gets better, but it’s a little too early to tell at this point what 2013 will look like.

Operator

And our next question comes from the line of Geoffrey Dunn with Dowling & Partners. Please proceed.

Geoffrey Dunn - Dowling & Partners

Thank you, good morning. For the targeted $80 million to $100 million of expense saves, you did mention that there is going to be ongoing reinvestment in the business. So are we looking for 100% of that 80 to 100 to drop at the bottom line or is there a reinvestment offset?

Frank Martell

No, that’s what we believe, Geoff, will be the full impact of online, $80 million to $100 million.

Geoffrey Dunn - Dowling & Partners

To the net impact. And then obviously there’s a lot of different lines in margins that are volatile given the marketplace. With the targeted savings that you have, what are the primary business lines you expect to benefit the most from the expense reduction efforts?

Anand Nallathambi

Actually, because we’re really focused, the big numbers coming out of information technology as well as the corporate functions, and those will benefit all of the lines. As you can see from slide 12, you know we have more or less 90% of the savings during those two areas, which are spread across the business.

Geoffrey Dunn - Dowling & Partners

Okay. And then lastly, obviously there is a lot going around with the origination volumes that can influence the business, and I believe Anand said that the expense targets are based not really on revenue improvement, but what about the existing MBA forecast where we see originations declined potentially next year, and maybe not as strong of a market in 2013. Do your expectations for margin improvement hold up under the existing MBA forecast?

Frank Martell

Yeah, I think as Anand talked about, you know, if you look at that slide, we are really going to extend margins through the efficiency irrespective of the volumes. Obviously, you know, we think – that barring a significant down draft, but I think all else being equal we would expect a significant margin expansion through the cost reductions end of itself.

Geoffrey Dunn - Dowling & Partners

Okay. And then lastly when you think about your potential for opportunistic debt repurchase, are you focused on the notes in the marketplace, which I don’t think are trading at too much of a big discount to par or would you just be looking at the pay down the line of credit?

Anand Nallathambi

Yeah, I think you know, as I said, it’s always an ongoing analysis, you know and then so we are really looking at it from an opportunistic perspectives, so if their is dislocations in the market, that we can take advantage of, you know the notes have been trading over a range recently and you know certainly right now its tightened up, so we’ll look at it constantly and see what's the best economic choice.

Operator

And our next question comes from the line of Bill Warmington with Raymond James. Please proceed.

Bill Warmington - Raymond James

I wanted to ask about data analytics and it grew 6% organically in the third quarter, but that was again pretty tough comp in the third quarter 2010. So what do you think you can grow that business at organically going forward?

Anand Nallathambi

Bill this is Anand. We will be consistent around that number in terms of organic growth. Obviously, the first quarter was a little higher. Second quarter was just about that same 6% and then this quarter 6%. It’s growing well. The new products and the solutions that we are rolling out are well received. The growth is coming from the capital markets and advisory services area and the good thing is in comparison to our direct competitors while they are contracting, we are putting on 6% plus organic growth. So I expect to see that to continue and we’ll continue to build on it.

Bill Warmington - Raymond James

And then a housekeeping question, on the 16% EBITDA margin that’s used as a starting point for the Project 30 ramp; what's I guess the revenue EBITDA there that you are using for that or you can just point me to it?

Anand Nallathambi

The 16 I think we are using year-to-date September.

Frank Martell

Yes, year-to-date Bill. So if you take the continuing operation, you bridge it back with the numbers that Anand gave you for the third quarter.

Bill Warmington - Raymond James

So the third quarter numbers before the impact of the divestitures?

Dan Smith

Correct, yes, it’s footnoted on that slide I think.

Bill Warmington - Raymond James

And then I wanted to ask also about the Tarasoft acquisition and how large a contributor is that going to be in terms of revenue and EBITDA going forward?

Anand Nallathambi

We didn’t disclose that, but in terms of – in terms of what it would do for us, it brings new functionality to our suite of offerings. It bring complementary market share build in key areas that we didn’t have before, bring state-of-the-art technology. This was the company that had deceptive technology towards their traditional competitors which is us being one of them. And it also have the business model and I can tell you this, that their margins are higher, lot higher than where we are and it’s a business model that we acquire and gravitate towards. So it’s still early to see how we are going to import that technology and shut down some of the systems and development that we had.

Operator

And our next question comes from the line of Brett Horn with Morningstar. Please proceed.

Brett Horn - Morningstar

I wanted to ask about the default business; that’s obviously not on the list of areas you are looking exit, but it’s also one that you’ve talked about in the past as being non-core. So I just wonder, if you give me some color and how you look at that business going forward?

Anand Nallathambi

Yes, hi, Brett. This is Anand our out look towards the default business has not changed. It is the business that we feel the volumes have been stagnant over a period of time recently and we also feel like the volumes or the performance on the default side is going to be plateauing. We are continuing to take an opportunistic view towards that business. We don’t think it’s a long-term strategic business for us, but right now it’s a good contributor and we continue to have a lot of active discussions in the market space; A because of the flow starting to happen and B because of competitive pressures that we see amongst our direct competitors.

Operator

And we have a follow-up question from the line of Carter Malloy with Stephens. Please proceed.

Carter Malloy - Stephens

I just wanted to circle back on the EBITDA line going forward. I know you’re not looking on ‘12 much, but if we take your current run rate EBITDA and then layer any good portion of your cost savings for next year; is it safe to say that you could be in low to mid 300 on EBITDA next year borrowing any top-line pressures?

Frank Martell

I think certainly, I think as we said on this call, we expect the cost savings to be incremental and to be delivered, so we expect to be and finish the year somewhere between 290 and 300 for this year.

Carter Malloy - Stephens

And then again there is some natural cost inflation there plus you got I think a little bit of cost from the Cognizant deal; so should we think about those things as offsetting the absolute dollar cost savings next year?

Frank Martell

No.

Operator

And we also have a follow-up question from the line of Kevin McVeigh with Macquarie. Please proceed.

Kevin McVeigh - Macquarie

Tarasoft acquisition, where is that being captured in the segment data?

Anand Nallathambi

It would be in specialty finance, because it’s part of the market length MLS business, Kevin.

Kevin McVeigh - Macquarie

And do that contribute anything in Q3 at all?

Anand Nallathambi

Now we closed that deal and the decision was made by the acquisition committee well in the middle of summer and then I think we close a deal on 15th of September, so really nothing in the third quarter.

Kevin McVeigh - Macquarie

And Frank, not belabor this, but assuming your originations coming in 900 billion, can you reach that 30% EBITDA and $900 billion run rate?

Frank Martell

Yeah I think as Anand talked about, we’re gearing the company on a kind of $1 trillion to $1.2 trillion basis to deliver the 30 margin. We’re not at this point looking at 900 million market.

Kevin McVeigh - Macquarie

900 billion rather than 900 million, okay. Thank you.

Operator

If there are no further questions, that conclude today’s conference. Thank you for your participation. You may now disconnect and have a great day.

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