CoreLogic posts higher earnings, hikes guidance in wake of hostile bid
CoreLogic's management took a number of steps to enhance its position in the eyes of its shareholders as it plays defense against a hostile takeover offer by Senator Investments and Cannae Holdings.
The company used its second-quarter results to announce an increase in dividends, divesting some of its business and a second increase in 16 days to its full-year earnings guidance.
During its earnings call, President and CEO Frank Martell spoke about the company's "laser focus on, and unyielding commitment to, shareholder value creation," addressing the Senator/Cannae bid.
"We believe that our publicly announced 2020, 2021 and 2022 financial forecasts and operational plans are very achievable and are supported demonstrable facts and visible trends. We plan to continue to provide significant transparency into our business so that all shareholders can fully appreciate CoreLogic's substantial current and potential value creation," Martell stated.
"Cannae's management, through their controlled and/or affiliated companies in the housing finance space, know well the rapidly improving dynamics underlying the residential property/housing market and its bright prospects for the foreseeable future."
Cannae's chairman is William Foley, who is also the executive chairman of Black Knight and the chairman of Fidelity National Financial.
Martell invited Senator/Cannae to raise its bid, saying CoreLogic "remains open to all paths to create value and would consider an offer that appropriately values the company."
However, CoreLogic declined to address any questions about the hostile offer on the call that called for comment beyond its prepared remarks.
Representatives for Senator/Cannae referred to their previous statements regarding their bid when contacted.
The latest earnings guidance for the rest of 2020 brings adjusted earnings per share up to a range of $3.60 to $3.75 from the July 7 announcement of $3.40 to $3.60. The forecast for adjusted EBITDA rose to $580 million to $600 million from $565 million to $585 million.
CoreLogic also committed to the previously announced $1 billion share repurchase authorization, expecting to repurchase at least $500 million this year, $300 million in 2021 and the remainder in 2022. It added the share repurchase program is expected to be more than 10% accretive to next year's earnings per share; when the program ends, it should reduce outstanding shares by more than 15%.
Besides the share repurchase, CoreLogic boosted its dividend to $0.33 per share from $0.22.
The divestitures involve its reseller businesses in tenant screening, credit verifications and borrower verifications. Exiting these businesses raises CoreLogic's nonmortgage revenue to 45%; during the call, Martell noted that 10 years ago, when CoreLogic was spun out of First American Financial, 90% or more of its revenue was mortgage and default related.
"While these businesses are market leaders, they are volume sensitive and do not possess growth … in line with our strategic plans and long-term financial targets," Martell said. "We've radically reshaped the company."
Previously as part of its appraisal management transformation, CoreLogic got rid of noncore businesses like the Dorado loan origination system unit.
As for the most recent divestitures, Martell said the company had looked at them as part of their 2020 business plan, but had put them on hold because of COVID-19.
"The goal is still the same, to push the nonmortgage piece of the company and grow [it] upwards better than 50%" of CoreLogic's revenue, he said.
Investors initially reacted positively to the announcements, boosting CoreLogic's stock price by $1.12 per share to $69.50 when the market opened on July 23. However, much of that gain evaporated in the first half hour of trading and by 10 a.m. CoreLogic was trading at $68.73.