Lender Processing Services (LPS)

Q1 2012 Earnings Call

May 03, 2012 10:00 am ET


Nancy Murphy - Vice President of Investor Relations

Hugh R. Harris - Chief Executive Officer, President and Director

Thomas L. Schilling - Chief Financial Officer and Executive Vice President


Darrin D. Peller - Barclays Capital, Research Division

Carter Malloy - Stephens Inc., Research Division

John Kraft - D.A. Davidson & Co., Research Division

Kevin D. McVeigh - Macquarie Research

Glenn Greene - Oppenheimer & Co. Inc., Research Division

Geoffrey M. Dunn - Dowling & Partners Securities, LLC

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Gregory Smith - Sterne Agee & Leach Inc., Research Division

Brett Horn - Morningstar Inc., Research Division

Ty M. Lilja - Feltl and Company, Inc., Research Division



Good day, and welcome to the Lender Processing Services' First Quarter 2012 Earnings Conference Call. Today's conference is being recorded. Your participation on this call is implied consent. If you do not wish to be recorded, then please disconnect at this time. At this time, I'd like to turn the conference over to Ms. Nancy Murphy, Vice President, Investor Relations. Please go ahead.

Nancy Murphy

Good morning, and welcome to Lender Processing Services' First Quarter 2012 Earnings Conference Call. With us today are Hugh Harris, President and CEO; and Tom Schilling, CFO, to review first quarter results and answer your questions.

Before we get started, I would like to remind you that our earnings release and the slide presentation we will use to facilitate today's discussion are available on the Investor Relations section of our website. In addition, I'd like to remind you that we may make forward-looking statements during today's call, and those statements are subject to various risks and uncertainties.

Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including our 10-K and our earnings release. We do not undertake any duty to update or revise those forward-looking statements including quarterly guidance.

In addition, our discussion today will contain references to non-GAAP results in an attempt to provide a more meaningful presentation in comparison to prior periods. Reconciliations between GAAP and non-GAAP results have been provided in the earnings release.

I would also like to point out that we made some changes to our financial reporting structure this quarter to provide better transparency into our business and provide better alignment with how we are managing the business. These reclassifications do not impact the consolidated results of the company.

We have provided exhibits to our financial statements, reclassifying prior periods to conform with the current presentation for your modeling purposes. Tom will provide details on these reclassifications in his remarks.

We're also providing greater visibility into our Technology, Data & Analytics segment. We're now reporting revenue for 4 categories rather than 2. These categories are Servicing Technology, Origination Technology, Default Technology and Data & Analytics. Exhibit E of our earnings release provides both past 9 quarters of revenue in the revised format and Page 6 of our supplemental material provides a description of each category.

Lastly, we have renamed the Loan Transaction Services segment, to simply Transaction Services and the Loan Facilitation Services subsegment to Origination Services. Now I'll turn the call over to Hugh.

Hugh R. Harris

Thank you, Nancy. Good morning, and thank you for joining our call today. I'm going to start with an overview of our progress and Tom Schilling, our CFO will walk you through our financial performance and then finally, we'll open it up to questions. We are very pleased that 2012 is off to a positive start for LPS. Although the operating environment remained challenging, we delivered first quarter results that exceeded our outlook, generating revenue of $506 million and adjusted net earnings of $49.5 million or $0.59 per diluted share.

Our Technology Data & Analytics segment posted another strong quarter of operating performance. Revenue in our Transaction Services segment was down overall. Although our Origination Services business was strong, fueled by the high refinance volumes, this was offset by declines in Default Services, which continue to be impacted by industry-wide foreclosure delays.

During the quarter, we expanded key customer relationships by continuing to deliver outstanding technology and services, enhancing the core drivers of our business, investing in our technology and focusing on resolving legal and regulatory issues related to past practices. We also continue to move forward with our commitment to achieving the goal standard in operational excellence. Although we have plenty of work ahead, we are beginning to realize the benefits of the changes we made in the last 2 quarters to position LPS as the most trusted and critical provider of technology and business services to the mortgage industry.

Technology is at the center of the LPS business model and we continue to make investments to expand our market leadership. We are seeing increasing demand for both our technology and expertise as the industry looks for solutions to reengineer the mortgage process in response to the evolving business improvement requirement and emerging national servicing standards.

As the leading provider of end-to-end integrated solutions, including origination, servicing and Default Technology, we believe LPS is best positioned to help lead the industry and work as a strategic partner to meet these evolving needs.

Let me briefly walk through the 4 areas where we are focusing our investments. Our Servicing Technology, MSP, with processes over 50% of the nation's mortgage loans had another solid quarter of growth. In the first quarter, we continued to see a flight to quality in response to regulatory changes and signed 2 new MSP customers representing approximately 125,000 loans.

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