CoreLogic Inc CLGX
Q1 2013 Earnings Call Transcript
Transcript Call Date 04/25/2013

Operator: Good day, ladies and gentlemen and welcome to the Quarter One 2013 CoreLogic Inc. Earnings Conference Call. My name is Julian and I will be your operator today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. As a reminder, this call is being recorded for replay purposes.

I would like to turn the call over to Mr. Dan Smith, Senior Vice President, Investor Relations. Please proceed, sir.

Dan L. Smith - Sr. VP - Information Solutions Group: Thank you and good morning. Welcome to our investor presentation and conference call where we present our financial results for the first 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 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 included in the most recent annual report on Form 10-K. 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 first quarter financial results to prior periods should be understood on a year-over-year basis, that is, in reference to the first quarter of 2012.

Thanks. Now let me introduce our President and CEO, Anand Nallathambi.

Anand K. Nallathambi - President and CEO: Thank you, Dan, and good morning, everyone. Welcome to CoreLogic’s first quarter earnings call. I will begin my remarks today with an overview of our first quarter operating results. I will then recap the progress we're making against our 2013 business plan, as well as our strategic growth initiatives. Frank will then cover our financial results, and we will end the call with Q&A.

CoreLogic delivered double-digit revenue growth with significantly higher levels of operating and net income, earnings per share and adjusted EBITDA in the first quarter. Our high-margin Mortgage Origination and Data & Analytics segments delivered strong topline growth in the quarter. Importantly, all three of our operating segments outperformed their respective markets.

For the first three months of 2013, we are ahead of our targets for Project 30 cost reductions, free cash flow conversion and repurchases of our common stock. We also continue to make significant progress on the technology transformation initiative. Our first quarter revenues were up about 11%. Revenues in our Mortgage Origination Services and Data & Analytics segments increased about 25% and 10%, respectively, as we gained market share and capitalized on higher demand for our must-have property information, analytics and services. These high-margin segments accounted for approximately 85% of our total first quarter revenues.

During the quarter, revenues in our Asset Management and Processing Solution segment contracted by almost 11% compared to an estimated 15% decline in overall market volumes. We also exited certain low or unprofitable product lines over the past 12 months. During the first quarter, our Mortgage Origination Services segment continued to benefit from elevated levels of refinancing, as well as market share gains in the tax servicing business. We are benefiting from an increasingly complex regulatory environment, and a trend by client and prospective clients to seek out partners who offer stronger internal controls and processes. As a result of this trend and our strong underlying operating performance, we expect to continue to outperform market volumes over the balance of the year in this segment.

We continued to expand our D&A footprint during the first three months of 2013. We grew data licensing and analytics revenues, and expanded our advisory services business in response to our clients’ need to navigate through today's evolving regulatory and compliance environment. We also grew our geospatial business, which leverages CoreLogic’s unique property-related data assets at double-digit rates.

As the housing and mortgage industries continue to strengthen, and we extend the reach of our property data analytical tools and services into new verticals, we expect to continue to deliver high single to double-digit growth in D&A revenues. In addition to delivering double-digit topline growth, CoreLogic also expanded profitability during the first quarter. Year-over-year, adjusted EBITDA increased almost 16%. Boosted by Project 30 savings and a favorable revenue mix, adjusted EBITDA margins were up 130 basis points from the first quarter of 2012. We believe we're solidly on track to reach sustained 30% EBITDA margins as we exit 2013.

CoreLogic’s increased profitability and efficient management of working capital resulted in continued strong free cash flow generation in the first quarter. We used a significant portion of this cash flow to repurchase our common shares. Our continued, aggressive share repurchase program reflects our view that in addition to reinvesting for profitable growth and operating efficiency, this remains an attractive avenue for rewarding our shareholders.

By almost any measure, the first quarter was a strong start for CoreLogic from a financial perspective. Our focus in highly integrated business model built around industry-leading data, analytics and services positions us well to capitalize on the opportunities presented by an improving housing market.

Over the past two years, CoreLogic has delivered progressively stronger operating results. Our consistent track record of delivering strong revenue and profit growth and significant margin expansion is a result of our relentless focus on the following strategic imperatives. First, growth the Data & Analytics segment at double-digit rates. Second, drive operating leverage and margin expansion, and position the Mortgage Origination and AMPS segment to outperform their respective markets. Third, achieve Project 30 cost reduction targets. And fourth, deliver consistent free cash flow in excess of 50% of adjusted EBITDA and build financial flexibility.

The balance of my remarks today will focus on our strategic growth initiatives, specifically how we are expanding our D&A footprint, as well as the progress we're making towards building scale and operating leverage in our must-have mortgage services.

As we have discussed on past earnings calls, our goal is to grow our D&A segment to greater than 50% of the company's total revenues within the next three years. We're solidly on track to achieve this goal. Our gold standard data and patent-protected analytics are the foundation of this segment, and are deeply embedded in the workflows of the major financial institutions and other market participants that we serve.

This segment is characterized by long-term subscription-based contracts, and has grown at a compounded rate of approximately 11% since 2009. Just three years ago, the D&A segment was about one-third of our revenues. That figure climbed to 40% in 2012 and for the most recent quarter. As we move forward, we see significant growth opportunities in the following areas.

One, expanding existing services to middle-market clients; two, scaling our geospatial solutions business in P&C insurance and other verticles; three, continuing development of innovative valuation and fraud tools; and four, building out our advisory services business with a focus on assisting clients with regulatory compliance matters. The recent acquisitions of CDS Mapping and Case-Shiller provide additional catalyst for future growth.

CDS Mapping provides important scale in the fast-growing spatial solutions market and new growth opportunities through greater linkage with existing CoreLogic datasets and analytics. Case-Shiller, one of the most widely recognized brands in home price and trends and property valuation services, is a highly complementary addition to CoreLogic’s existing residential property insights platform. Case-Shiller also has preferred relationships with the key rating agencies. This acquisition underscores CoreLogic’s commitment to supplement our unparalleled data with the best-in-class analytical insights and provide preferred valuation solutions to the housing, real estate and related industries.

The CDS Mapping and Case-Shiller acquisitions represent somewhat of a preferred template for future M&A activity by CoreLogic. We will remain highly targeted and seek out assets to augment our leading positions in core property data and analytics, as well as scaling plays in tax and flood services.

Our MOS and AMPS segments continued to outperform their respective markets in the first quarter, as they did in 2012. These businesses provide must-have services for the origination and servicing of mortgage loans. In MOS, our credit, tax service and flood zone determination businesses, benefit from significant scale and market positions. To build on our market leadership, we continue to invest in workflow automation and operational excellence. Over the past 18 months these factors, together with ongoing industry consolidation and a flight to quality driven by the emerging regulatory environment, have fueled significant market share gains and margin expansion for CoreLogic. We expect this positive momentum in MOS to continue.

In closing, CoreLogic has now delivered seven 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 would like to thank our clients, employees and shareholders for their continued support. The entire CoreLogic team is excited about the future and in our ability to deliver on our business plans and generate outstanding results for all our stakeholders in 2013 and beyond.

With that, I will turn the call over to Frank.

Frank Martell - CFO: Thanks, Anand. Good morning everyone. Today I’m going to review our first quarter financial results. I’ll also provide an update on our cost reduction programs and the Technology Transformation Initiative or TTI. I'll conclude with a brief discussion on free cash flow, our plans for capital return to our shareholders and 2013 financial guidance.

As Anand just mentioned, CoreLogic delivered a strong set of financial results in the first quarter. Our success is a result of a singular focus on a consistent business plan centered on profitable growth, margin expansion and free cash flow generation. We continue to build on our core strengths in Data & Analytics and our must-have services businesses, while we pursue a strategic plan, which we believe will fundamentally transform CoreLogic’s underlying financial and business model over the next several years.

From a financial point of view, the main highlights for the first quarter were; first, double-digit revenue growth fueled by MOS and D&A segments; second, significant market expansion driven by favorable mix and Project 30; third, continued solid progress on the roll-out of the TTI; and finally, the repurchase of 2.9 million of our common shares.

First quarter revenues were up 10.9% to $397.2 million. MOS segment revenues jumped 24.5% year-over-year to $276.5 million. This $34.7 million increase was principally attributable to higher refinancing volumes, market share gains, and increases in pricing in some units. D&A revenues totaled $161.1 million in the first quarter, 9.5% higher than last year. Growth in the quarter was driven primarily by higher demand for advisory services, core property data and analytics and realtor workflow solutions. Our spatial solutions business also grew at double-digit rates, bolstered by the acquisition of CDS Mapping in December 2012.

AMPS generated total first-quarter revenues of $66.8 million, a 10.9% decrease from prior year. The decline primarily reflects lower field services revenues in the quarter and the exit of unprofitable business lines. We also estimate that overall market volumes of delinquent loans and foreclosure starts declined at double-digit rates in the quarter.

Operating income totaled $55.3 million for the first quarter, compared with $45.2 million in the year-ago period. This 22.3% increase was primarily driven by revenue gains in the benefit of cost reduction programs, including Project 30. Operating income margins were up 130 basis points to 13.9% compared with the first quarter of 2012. Before TTI investments, operating margin for the quarter was 15.8%.

First quarter adjusted EBITDA totaled $116.2 million, up 15.9%. Adjusted EBITDA margins were 29.3% compared with 28% in the first quarter of 2012. Before TTI cash-related investments, adjusted first quarter 2013 EBITDA margins were 29.8%. MOS margins increased 300 basis points to 41.1% in the first quarter. D&A adjusted EBITDA margins were down 70 basis points to 28.4% in the first quarter, reflecting continued reinvestments made during the quarter to ramp up our capacity to meet growing client demand for advisory services, tied to regulatory matters. AMPS margins fell 340 basis points from prior levels, reflecting lower revenues and unfavorable mix.

In terms of Project 30, we achieved $4.8 million in savings during the quarter towards our full year savings target of $20 million. Since Project 30 was initiated in mid-2011, this enterprise effort has reshaped our cost structure and delivered a total of $87 million in cost savings.

As many of you know, we launched the Technology Transformation Initiative in mid-2012. The TTI is a natural extension of Project 30, and we expect that this multiyear initiative will provide the Company with an upgraded technology infrastructure with new functionality, increased performance and an overall reduction in application management and development costs. The main focus of the TTI over the next 24 months is on consolidating our processing platforms and transitioning our current legacy data centers to a cloud-based environment.

The transformation of CoreLogic’s IT infrastructure is an integral part of our long-term strategic technology plan and is expected to substantially lower cost profile. Importantly, the TTI will also provide a platform that enables and supports future growth. During the first quarter, our total investment in the TTI was $7.4 million.

First quarter net income from continued operations totaled $34.2 million, compared with $29 million in the same prior year period. This 18% increase was primarily attributable to revenue growth and cost productivity, which more than offset TTI related costs. Diluted EPS from continuing operations totaled $0.35 in the first quarter compared with $0.27 in 2012. Adjusted EPS for the first quarter was $0.45, which was 40.6% higher than last year. EPS growth reflects improved financial results, and the impact of share repurchases during 2012 and 2013.

Continued focus on driving profitable revenue growth and increasing margin in the first quarter translated into strong free cash flow, totaling $65.4 million. This figure represented approximately 56% of adjusted EBITDA ahead of our conversion target of at least 50%.

As of 31st of March, the Company had unrestricted cash of $125.6 million and total debt of $788 million, with $500 million available on our revolving credit facility. As we progress to 2013, CoreLogic will continue to pursue a balanced capital allocation strategy as we did in 2012. Our priorities for 2013 are to fund disciplined reinvestments in the business to support future revenue growth in line with our business plans and to return significant capital through the repurchase of our common shares.

Regarding capital return, we've increased our full year 2013 share repurchase target from 3 million to 5 million shares. Upon completion, this will bring the total number of shares repurchased in 2012 and ‘13 to 15 million. Since CoreLogic became an independent publicly traded company in June 2010, we have repurchased over $500 million worth of our common shares.

As Anand mentioned, we view an aggressive share repurchase program as an attractive avenue for rewarding our shareholders. The continuing repurchases of significant numbers of our shares reflects our belief that the current price of our common stock remains below as long-term strategic value.

I will now wrap up my prepared remarks with a few comments on financial guidance. Consistent with our 2013 financial guidance issued in January 31 for the full year, we expect to generate revenues of between $1.575 billion and $1.6 billion; adjusted EBITDA of $460 million and $475 million; and adjusted EPS of the $1.65 to $1.75. These ranges represent growth over 2012 actual results. Our 2013 guidance reflects a $1.45 trillion to $1.55 trillion origination markets.

Based on our internal projections and other publicly available forecast, we expect the level of refinancing activity will begin to trend down in the second half of 2013, partially offset by increases in level of purchase activity. We are also assuming a 10% or more reduction in the market volumes of delinquent loans and foreclosure starts in 2013.

Finally, our 2013 guidance also factors in our current view of revenue prospects for each of our business segments, Project 30 savings of $20 million and the repurchase of 3 million common shares. Specifically in terms of the second quarter of 2013, based on current revenue and volume trends within our businesses, our latest view of Project 30 and TTI costs as well as seasonality, we believe that adjusted EBITDA and adjusted EPS in the second quarter should be in the range of our second and third quarter 2012 results. As a reminder, our second quarter 2012 adjusted EBITDA included $7.3 million benefit related to settlement of certain intellectual property claims, which is not expected to have a 2013 counterpart.

In summary, CoreLogic delivered a very strong set of financial business results in the first quarter. With a streamlined and higher margin set of businesses and a strong focus on achieving a best-in-class cost structure and building financial flexibility, we believe we are well-positioned to execute on our strategic vision and generate significantly higher shareholder value over the medium to long-term.

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

Transcript Call Date 04/25/2013

Operator: Darrin Peller, Barclays Capital.

Darrin Peller - Barclays Capital: Just want to start off with the – when you look at the actual run rate, your EBITDA for the first quarter was about $116 million. When you think about that relative to your guidance for the full year, I mean, I understand first quarter was better than normal would be the case seasonality wise. However, when you consider the – in fact, you are spending more frontloaded-wise on TTI in the year and there still are some seasonality, seasonal implications in the quarter versus other parts of year would be. Your EBITDA guidance of $460 million to $475 million, it just makes me wonder a little bit, given that you first quarter alone extrapolating off that number gets you to the midpoint. So can you just explain, is there anything that we should expect that’s going to sort of depress EBITDA in the next few quarters? Maybe it’s around technology spending or anything else that I’m thinking about properly.

Frank Martell - CFO: Darrin, this is Frank. First of all, you have to factor in the refinancing trends, which has somewhat muted the normal seasonal patterns on the origination side. I think you also have to factor the – in the default area, foreclosure starts and delinquent loan volumes continue to drop at double-digit rate. So we want to make sure we’re not over our skis in terms of projecting anything out of line with the market trends in that area. So I think those are the two biggest drivers if you look at patterns in the business. Obviously, we feel pretty good about the start of the year, but I think it’s a little early to talk about changing our guidance for the full year.

Darrin Peller - Barclays Capital: Let me just follow-up on the Data & Analytics growth. I mean, again, you’re trending near 10% overall. The margin was, obviously, down and I know some of that was tax spending. I think – or you guys had mentioned earlier something to the effect of – it was really mostly just TTI initiatives. But can you explain what the growth rate of the EBITDA – D&A EBITDA would have been? Maybe if I missed that on the call earlier, I’m sorry. But what would have been without the sort of one-time or unusual items, would have been more similar to revenue growth?

Frank Martell - CFO: So, I think in the final quarter of last year the EBITDA margin was a little over 26.5%. So we’ve climbed in the first quarter of this year and, obviously, we’re down just marginally from the first quarter of last year. The big drivers really are the TTI spend that you talked about, Darrin. But also as I mentioned in my remarks, we are spending a fair amount of money as we did in the fourth quarter of last year on ramping up our capacity in Doc Solutions business, and that's one of the things. As Anand talked about, we’re seeing a lot of demand from clients for services related to compliance matters. So we – the good news is the demand is outstripping the supply. The bad news is, we’ve to put in the capacity to handle the demand. So we expect that investment over the first half of this year will continue to make sure that we have the right capacity, and frankly the right product and service offering in that area. The other area that’s been a little weak for us, which is a smaller business, is the Teletrack, especially credit business, where we’ve had regulatory issues in a number of states, and that whole market has been under stress in the brick-and-mortar payday lending area. So that’s been a little soft for us coming out of the year. So those are the big drivers of the current pattern in the D&A margins. I’d say that we haven’t changed our long-term perspective, and this is a 30 margins business.

Darrin Peller - Barclays Capital: I think if I remember the document, was that the Southeast – this is an actual plant you’re adding, right?

Frank Martell - CFO: We – yeah, actually it’s in the Charlotte.

Darrin Peller - Barclays Capital: Just a last question on cash flows. You have, again, $65 million, or 57%, or 56% of your EBITDA. Just help us understand, I mean, is that – should we just assume that now we’re in the 55% plus, is that going to stay consistent as a conversion? It’s generally thought of as 50%, but it’s obviously continuously been coming in better than that. Any moving parts in the quarter that should not be reflective of future quarters?

Frank Martell - CFO: The big thing is the timing of tax payments pretty much. So the second quarter we’ll have our estimated tax payments will kick-in. So that’s the big moving part. Now that we’re through a lot of the heavy restructuring that we were in certainly 2011, the tax rates are normalizing around 40%. So that will also make sure that that’s more consistent. The other thing we do have that’s a little bit different is the pattern on a TTI spending, which will be I think a little – it will fluctuate marginally. It’s not a major impact, but it will fluctuate marginally by quarter.

Darrin Peller - Barclays Capital: Just last question and I’ll turn it back to the queue, Frank. Can you help frame for us – or maybe, Anand, you can help us with this as well. The deal sizes with – it’s probably in Data & Analytics primarily, but what types of deals are you actually looking for in terms of scale?

Anand K. Nallathambi - President and CEO: That’s difficult to say. Obviously, there is – we look at a lot of different sizes, but one of the things that we’re very careful of is the accretion and to make sure that something that really takes us to the next level in terms of leveraging our dataset. So maybe if you look at CDS Mapping, that was in a different price scale and Case-Shiller was in a different level. So it’s very difficult to put a number on it.

Operator: Kevin Mcveigh, Macquarie.

Kevin Mcveigh - Macquarie: Frank, as we think about taking the buyback up to 5 million from 3 million, just any thoughts around that relative to acquisitions? I mean, obviously, with the stock at the level it is, probably makes sense to deploy more capital there. But how should we think about buyback versus acquisitions? Any thoughts on that would be helpful.

Frank Martell - CFO: We’re not constrained, I think, either way. So we’re going to be, as we have been, really aggressive on the share repurchase front, and we can afford to do that with our cash flow and with careful management. So I don't see – it’s not a mutually exclusive thing. We feel we can do both. As Anand mentioned though, I think on the acquisition front we just want to make sure that our acquisitions are disciplined and that they are focused on the D&A segment, as well as tax and flood on the MOS side.

Kevin Mcveigh - Macquarie: Then just it sounds like we're taking a pragmatic conservative approach to the guidance, but we did take the buyback up and didn't change EPS at all. Is that just conservative, or is that the mechanics of when it will be deployed? Because I know ultimately when you buy, it will ultimately impact the impact from an EPS perspective.

Frank Martell - CFO: Yeah, it's more – we just spread it into the second half of the year, so that's why it had more of a marginal impact.

Kevin Mcveigh - Macquarie: And then just any – I know – on the refinance range, any change in amount that's kind of origination versus – or rather purchase versus refinance, or how are we thinking about the $1.45 trillion to $1.55 trillion based on what we've seen to-date, year-to-date?

Frank Martell - CFO: It's still pretty consistent. We were happy to see the HARP program extended to 2015 from a refi support perspective, but the percentages of total volumes remain the same. They are expected to tick down from the low-70s to the mid-60% range as we move forward. But right now we're still seeing kind of a 70/30 split, although purchase activity defiantly has been picking up, as you probably know.

Operator: Brandon Dobell, William Blair.

Brandon Dobell - William Blair & Company: Frank, maybe looking for a little more – I don’t know – help or color on the pacing of the D&A revenues through the balance of 2013. I know there’s been some things that are going to move back and forth the past several quarters, which can move the growth rate around by a couple of, call it, percentage points. As we think about moving forward from Q2 to the back half the year growth rate wise, should we expect a modest acceleration? Is there some stuff that happened in back half of ‘12 when you (indiscernible), it could depress the growth rate because of tough comps, whatever kind of help you can give us, looking how to model that out would be helpful?

Frank Martell - CFO: I think from a comp perspective, fourth quarter we had a rush of the advisory service type revenue. So that’s probably a tougher comp in the fourth quarter from a revenue perspective. But I’d say you would see the same kind of growth pattern that you saw in the first quarter, fairly consistent.

Brandon Dobell - William Blair & Company: Within the MOS segment, you guys consistently have talk in the past especially three or four quarters about taking market share, and maybe a little more color behind, A, what does that mean for you guys? Is it just more transactions or is it not more stuff per mortgage file at the same customers, and maybe some comments around the sustainability of that trend, how much higher do you think you can push the share and maybe kind of within that if you separate out the large customers from the rest of the market? How do you think about market share opportunities in those two larger buckets?

Frank Martell - CFO: I would say from my perspective, there is incrementally more opportunity on the share gain front. I think it comes from a couple of factors. One is people still do this type of work inhouse. And there is some fragmentation in smaller players, so I think as Anand talked about earlier the flight to quality has definitely been favoring CoreLogic. Our services and our ability to meet SLAs in these businesses I think are pretty darn good. So, we think we got an industry reputation. As clients look to move away from small vendors that perhaps are not able to what provide assurance on the compliant front that favors CoreLogic. So I think we are seeing that those types of trends favor us. And then frankly, the automation and then just the ability to take this volume on efficiently, effectively has also helped us to a great degree across each of the major MOS businesses.

Anand K. Nallathambi - President and CEO: This is Anand, Just to add to what Frank is saying, we are also seeing that the growth of sub-services is really actually helping us. Where we have seen volume losses are in the AMPS segment and where we have seen the gains are is where our high-scale, high operating leverage businesses like (Track). So the trade-off so far has been really profitable for us.

Brandon Dobell - William Blair & Company: Final thing within, I guess, the broader business, should we think about TTI or the kind of the platform changes are making as opportunities to maybe drive more kind of pure subscription or true subscription revenue through the business? Or do you think it is just going to be the TTI will allow you to serve a different customer set with the same kind of contracts or kind of transaction set ups you already have?

Frank Martell - CFO: I think it’s going to do both, probably the bigger dollar opportunity in the near term is around penetrating markets that we haven't been able to do with the kind of distribution platforms that we have. Things like the middle market is an example there where you have an Internet type delivery mechanism, where you can reach more people. You have alerts and you have other types of products that make the data more consumable. I think that in the near term, but I think at the long-term it helps facilitate a shift toward the D&A, as Anand talked about the 50% target, because I think it does allow us to reach more folks with the data sets and the analytical tools versus the servicing businesses where you have a lots of throughput and those are big industrial size throughput engines.

Operator: Brett Horn, Morningstar.

Brett Horn - Morningstar: You mentioned TTI being a multi-year program. I just wondered, if you could give some color on the structure of your spending. Should we expect significant spending on TTI past 2013? Then also when should we expect to see the cost saving structure show up?

Frank Martell - CFO: Sure Brett. So basically, when we talked about – there is cash. There is two elements to the cost. One is cash and one is non-cash. The cash costs relate primarily to the transition of the data center infrastructure as it relates to the software platform. So we have to re-platform our software to make it compatible with the cloud-based environment, as well as we have a contract with Dell, so they are providing certain services. So the cash has been there primarily around Dell support and the re-platforming of the software. And then if you look on the hardware side and the non-cash side and the infrastructure side, there is more around accelerated depreciation and that type of thing. In 2013, I’d characterize broadly speaking the expense levels is similar level to 2012. Although it was more concentrated in because we kicked off the initiative in the middle of the year. So you'll see a more disperse spending. We will spend the money throughout '13 and '14, because the plan is in early '15 we will have both of our legacy data centers transitioned to a cloud based environment in a Dell facility. So the spending will be primarily '12, '13 and '14. I'd say '14 relatively less than '13, is the way it should happen and then the savings is about $35 million to $40 million per year against current run rate beginning in 2015. So you will see that kind of savings beginning in '15.

Operator: Carter Malloy, Stephens Inc.

Lauren Slabaugh - Stephens: This is Lauren Slabaugh in for Carter. My question is on the advisory services revenue. When you look sort of project base, could you guys give any guidance on how we think about modeling it going forward or how sustainable that revenue stream is over the next few years?

Frank Martell - CFO: I'd say right now that revenue stream is in a rapid growth phase where people are – because the regulations themselves, the overall regulatory environment is still evolving. So regulations are being written, etc. So I think this year we will see a rapid growth phase. Next year we believe likely to be at kind of a similar growth phase with the following year perhaps smoothing out a bit as people get through the initial reviews and audits and put their compliance infrastructure in place based on (indiscernible) set of rules frankly. So this year, next year probably good solid high growth and then the following year probably flattening out as you get out there, but that's hard to tell in the out years.

Lauren Slabaugh - Stephens: I know you all have spoken a good bit about AMPS, but should we assume it decelerates from here on top line and we hold margin?

Frank Martell - CFO: Yeah, so last year we actually grew 2% versus the market decline in the double digits. A lot of that growth is related to – I think as you may remember too, we did a lot of loss mitigation work for several large clients around things like loan modification. As that work tails off a bit, we'll be more subject to the overall market trends then we were last year. So, I think the first quarter pattern where we're kind of anticipating will be one that will continue certainly in the near term in that business.

Operator: Thank you. You have no questions at this time. Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.