CoreLogic, Inc.
Q1 2019 Earnings Call Transcript

Published: 25 Apr 2019

[Operator:]

Good day and welcome to the CoreLogic First Quarter 2019 Earnings Call. Today's conference is being recorded. And after today's presentation, there will be an opportunity to ask questions. [Operator Instructions] And I would now like to turn the conference over to Dan Smith. Please go ahead.

[Dan Smith:]

Thank you and good morning. Welcome to our investor presentation and conference call, where we present our financial results for the first quarter of 2019. Speaking today will be CoreLogic's President and CEO, Frank Martell; and CFO, Jim Balas. Before we begin, let me make a few important points. First, we 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 the 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. 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 2018. Finally, please limit yourselves to one question with a brief follow-up. We will take additional questions at the end of the call as time permits. Thanks. And now, let me introduce our President and CEO, Frank Martell.

[Frank Martell:]

Thanks, Dan, and good morning, everyone. Welcome to CoreLogic's first quarter 2019 earnings call. I'll lead off today with a recap of our first quarter operating performance and key takeaways. Jim will follow and summarize our financial results and provide guidance for the upcoming quarter. We'll wrap up the call today with a Q&A session. The CoreLogic team is off to a very strong start in 2019, both operationally and from a financial point of view, despite a double-digit contraction in U.S. mortgage loan volumes. Over the first three months of the year, we outperformed U.S. mortgage market unit volume trends and increased adjusted EBITDA margins versus a very strong prior year comp by driving favorable revenue mix, productivity and operating leverage. We also used our solid free cash flow to reduce debt levels and reinvest back into the business. Jim will elaborate further on cash flow conversion rates and capital allocation in a few minutes. First quarter revenues were down about 6% compared with a 10% to 15% estimated drop in overall U.S. mortgage market unit volumes. In terms of market volumes, both purchase and refinancing were down as continuing affordability pressures and a generally higher rate environment limited new loan production. In addition to reduced mortgage market activity, lower AMC revenues and the wind down of our legacy mortgage and default technology related platforms also impacted revenues. On the positive side, our insurance and spatial solutions businesses, and valuation platform teams delivered solid growth during the quarter. During the quarter, the company's core mortgage operations continued to outperform overall U.S. market trend, led by growth in our valuation platform business and strong performances from our flood zone determination and tax payment processing units. An increasingly important driver of our market outperformance is our scale and breadth of offerings. Integrated solutions packages which leverage the full range of our data driven insights, and unmatched service and quality, are progressively gaining traction in the marketplaces customers seek to build strategic relationships with key supplier partners. The U.S. housing ecosystem remains the largest consumer of residential property information in the world. Our continued market leadership positions us for significant operating and financial upside, coincident with the eventual return of mortgage market unit volume growth. Several years ago, we announced a long-term target of growing our non-U.S. mortgage volume sensitive revenues to at least 50% of total volumes. In Q1 2019, our non-mortgage unit volume sensitive solutions contributed approximately 40% of our total revenues, about 4 percentage points higher in the first quarter of last year, fueled by the expansion of our insurance and international footprints. A significant driver for this first quarter increase was the successful integration of Symbility, which was acquired in December 2018. Symbility is a leading provider of cutting-edge claims processing solutions. The combination of Symbility and our existing underwriting and geospatial data and analytics capabilities, as well as our property-related data assets allow CoreLogic to provide our clients in the insurance industry with new and unique insights into underwriting property in natural hazard risk coverage while effectively processing claims. CoreLogic's continuing growth into new verticals, as well as our global expansion has been enabled in part by the scale and market leadership of the company's core U.S. mortgage businesses. These businesses leverage common technology and back office infrastructure as well as data repositories. In December of 2018, we announced our intention to accelerate the transformation of our AMC operations, by increasing the use of data-driven analytics, further automating critical workflows and upping the utilization of our in-house staff appraiser panel. We also announce the wind-down of several non-core mortgage and default technology units. We expect to operationalize the acceleration of our AMC transformation program and wind-down the non-core units largely over the next four quarters. As communicated previously, we expect these programs will result in significant reductions in UWS revenues, and to a lesser degree, profits this year. Over the longer run, once implemented our AMC transformation program is projected to result in improved underlying organic growth trends and higher profit margins. Adjusted EBITDA totaled $98 million for the first quarter, compared to $103 million in 2018. In Q1, the flow through benefits of our past cost management programs, including more than $20 million during 2018 helped us to deliver modestly higher adjusted EBITDA margin despite the market headwinds and after covering elevated investment spending related to a number of key business initiatives. As our long-term investors know well, we have an established track record of successfully driving productivity and our push towards first quartile levels of operational excellence. We expect to lower run rate cost by at least another $20 million in 2019 by consolidating facilities, managing staffing levels, automating certain activities and other operational improvements. In terms of the first quarter, we ramped up our migration to the Google Cloud Platform or GCP. GCP migration was our largest single investment in the quarter and is expected to generate material savings in 2020. In addition to the GCP, we invested in existing and next generation capabilities with a particular focus on data quality, structures and visualization, as well as technology platforms and advanced automation techniques, which we expect will set the foundation for future growth and margin expansion. Finally, during the quarter, we also continue to aggressively centralize operations and consolidate our real estate footprint. The programs I'd just highlighted as well as other planned reductions support our goal of achieving at least 30% adjusted EBITDA margins during 2020 based on a stable U.S. mortgage market, and after accounting for the transformation of valuation solutions offerings and the wind-down of our legacy mortgage and default technology platforms. To sum it up, we are off to a strong start in 2019. We're excited about the many opportunities ahead of us to create value for our stakeholders. As market leader, we are building best-in-class solutions to provide our clients with unique insights and connect the totality of the real estate ecosystem. Our long-term focus remains on innovation, superior quality and service levels as well as profitable scale, which positions us to be a high impact strategic partner for our clients. I want to thank all of our employees, our clients and our shareholders for their continued support as the CoreLogic team successfully executes against our vision of creating a scaled, innovated, data-driven enterprise that delivers unique must-have solutions. Thanks very much for joining us today. Jim will now discuss our financial results.

[Jim Balas:]

Thanks, Frank, and good morning, everyone. Today I am going to discuss our first quarter financial results and then provide an outlook for the second quarter. As Frank mentioned, CoreLogic delivered a strong operating and financial performance in the first quarter of 2019. Financial highlights included

[Operator:]

And we will now begin our question-and-answer session. [Operator Instructions] And our first question will come from Bill Warmington with Wells Fargo. Please go ahead.

[William Warmington:]

Good morning, everyone.

[Frank Martell:]

Good morning.

[William Warmington:]

So first question for you is I want to ask about the appraisal business. Back in July 2017, you guys had announced 10 new VSG customers. And I wanted to ask if you're handling a meaningful portion of their volume today and also to ask about whether you still consider the appraisal market to be an opportunity for secular growth in terms of consolidation and market share capture?

[Frank Martell:]

Hey, Bill. This is Frank. Good morning and thanks for the question. Yeah, so I think, as you may know, when we put - assemble the appraisal company, it was opportunistic. And we saw an opportunity to expand in what was projected to be an expanding market. The market has turned around and contracted. And we've had - some of our major clients have experienced some challenges in the market, which have been more accelerating the market trends itself. So there has been a bit of a noise in the equation there. I think we still see a lot of opportunity in the appraisal valuation area. We have a great platform business, which is now about half of the revenue. I think the challenge on the AMC portion is to drive greater value for the offering. We had intended to automate and drive technology into that process. What we're trying to do is accelerate that. Revenue is flowing through from all the clients that you mentioned, although we're still concentrated in the two founder clients to a large degree. I think this transformation program that we are accelerating will result in a more rapid diversification. And as I mentioned in my remarks, a more automated and faster turn time model. So it's a different model. It will not appeal to every lender in the marketplace would be my estimate at this juncture. But it will appeal to those folks that are looking for high quality, high value and speedy turn times. The other thing I would say, which is not unimportant is that the appraisal operations have generated tremendous amount of data. It's probably the most current and highest value data on properties that's been set into our repository. So there is a tremendous value that's been derived through having those operations and assimilating that data. So I think it's a change in the market. I think it's resulted in moving forward our plan on automation and I think probably going to even more automated model. I think it will grow with the secular market shift. Eventually, the market will grow. I think we'll grow along with it. It probably - I don't think we're going to be looking for earth shattering growth if you will through that. We're more focused on hot premium - premium value higher margin revenues.

[William Warmington:]

Got it. And then for my follow-up question, we noted the tick up in CapEx. Just wanted to ask what was driving that, whether that was Google Cloud Platform or something else there?

[Frank Martell:]

Yeah, I think it's - as I mentioned, it's the largest - by far and away largest single investment is the Google platform. And what we're trying to do is we're trying to - we've moved up some spending actually, so it's even more than we had originally planned, largely due to trying to get as much on the GCP as possible to derive as much savings as possible for 2020 and beyond. So that's really by far and away the biggest chunk of it. I would say the other spending is related to - we're doing a lot more R&D on the data repository. So as I mentioned again, we spend on visualization structures, et cetera. So that would be the other part of it.

[William Warmington:]

Got it. Thank you very much. I appreciate the insight.

[Frank Martell:]

Next.

[Operator:]

And our next question will come from Bose George with KBW. Please go ahead.

[Unidentified Analyst:]

Hey, guys. This is [Tommy] [ph] on for Bose. I noticed that the PIRM margins dropped a little bit year-over-year. How much of that is attributed to Symbility acquisition?

[Frank Martell:]

Really, de minimis. I think a lot of the margin, as we said on past calls, there is a lot of investments, Tom, going into that segment. So if you look at our - the investments that we just talked about with the previous caller, quite a bit of our investment focus hits PIRM as well. And then I think the - you had market slowdown. Market slowdown in PIRM tends to hit higher margin areas as well. So that's again a little bit of the rotation there, it's causing little bit of margin. But it's primarily the investment spending that we're making with a lesser amount coming from the market.

[Unidentified Analyst:]

Okay. Thanks. And then, separately, there was a headline in March about Equifax and FICO partnering up to sell data directly to banks. Do you expect that to have any impact on your credit solutions business?

[Frank Martell:]

No.

[Unidentified Analyst:]

Okay. Thanks, guys.

[Operator:]

And our next question will come from Kevin Kaczmarek from Zelman Associates. Please go ahead.

[Kevin Kaczmarek:]

Hey, guys. Thanks for taking the questions. I guess, we've noticed significant pickup in the iBuyer trend in recent quarters with a number of companies starting to buy homes remotely based on automated valuation models with an eye to eventually automate much of that design making process including limiting in-person site visits. I guess, where can you guys benefit from this and are you already seeing demand from these types of home buyers in your - either in your data or in your services?

[Frank Martell:]

I would say, it's still fairly nascent, Kevin, I would say, in the grand scheme of the volumes in the U.S. However, I think technology in this area and more broadly is accelerating. That's one of the reasons, frankly, that you're seeing an acceleration in our spending. I think that the home buying experience is a big focus in fintech. It's a big focus of ours. We picked up HomeVisit last year, which is around visualization of the property. So it's definitely going to emerge I think over the next several years as a much more significant force. We'll see how it evolves from a lending perspective. But certainly from a home buying experience perspective, I think you're going to see a fair amount of change. And I think we play very nicely in that space with our realtor platform and our solutions around the property and the home-buying experience.

[Kevin Kaczmarek:]

Okay, great. And then on international revenue, can you give us a sense of the growth either with or - hopefully without acquisitions? And with some of the markets like Australia maybe slowing a bit, can you give us a sense of the impact you're seeing on your businesses there?

[Jim Balas:]

Yeah, hey, on the international front in Australia, we are starting to see some decline. They've had a multi-decade bull run in that market. Volumes are expected to be down about 10% in 2019, so we did see that hit the number. Coupled with that, we also had some FX for about $3 million to $3.5 million that impact the international business as well.

[Kevin Kaczmarek:]

And when you see - I guess, when you say volumes are down or - and you're seeing that hit the numbers, is most of this revenue subscription and you're seeing that impact subscription levels or you have volume sensitive revenue there?

[Jim Balas:]

We have both.

[Frank Martell:]

Yeah, obviously, Kevin, the volume impact is more on the - we have a very large valuation platform that has kind of a dual revenue characteristic to it. But obviously, when these volumes there are slowing you see a little bit of that. I mean, in the grand scheme of a company it's a small number. But as Jim mentioned probably FX is as big an issue in the market. But they've had two things in Australia. One is the - they've had - I think it's 20 years of GDP expansion and housing is going along with it. Tremendous run up in prices, so at some point that slowdown would be expected. But they also had this Royal Commission that looked at the banks and some of the practices of banks. And that certainly has caused a, say, a bit of a pause in some of the discretionary spending as they focus a lot on the repercussions of that, which were very significant for I think the larger institutions down there.

[Kevin Kaczmarek:]

Okay. All right, thanks for taking my questions.

[Operator:]

And our next question will come from Darrin Peller with Wolfe Research. Please go ahead.

[Darrin Peller:]

Thanks, guys. All right, thank you. Guys, I just want to start off, Frank, maybe higher levels, look, when we think of the business' growth potential, these non-mortgage, just mortgage sensitive growth, I mean, we kind of looked at it being mid-single-digits, maybe mid to high in good times. And the reality is the international side is facing more mature markets that are a little bit tougher. Insurance is still growing well. The data analytics side doesn't seem like it's really showing much growth and it may just be the backdrop of a tough market. Can you give us a sense of what you see being the right organic profile of the business in sort of mortgage neutral environment going forward and what the drivers would be?

[Frank Martell:]

Yeah, I don't think - Darrin, I think first of all, I think we have continued to make the right investments. I talked a lot about evolving to non-mortgage adjacencies. I think we've had great success there. I think that the emphasis is on platforms, which are more recurring revenue streams and volume sensitive. So I think those are introducing greater stability. If you look at our revenues vis-à-vis the mortgage cycle that held up really well, both inorganically and organically, I think the reality is - I think our - this year and certainly last year and the year before has been significantly down markets. And I think we've held up well. I think going forward I don't see any reason why to change the outlook. I think we're still kind of a single digit grower. And with an acceleration, should the market cycle change, eventually, there will be growth in the mortgage market in the U.S. Most people are projecting this downtrend to moderate, and then turn positive the next couple years. So I think, we're really well-positioned to capitalize on that with high flow-through rate. So I think, you're still - we should still see that. I think, right now, you're just seeing a lot of pressure on the lenders. And when that happens, they are not really anxious to spend a lot of money. And then frankly, we talked about we've had some friction on the - certainly on the AMC side. And I think, just reflects our client constituency more than anything else. So I think we'll also get into those factors. You're going to see that mid-single-digit be more consistent. And I think that's the right kind of - as you look at the business, that's the right way to look at it with again some acceleration as the cycle clears.

[Darrin Peller:]

Okay. All right. Thanks. Just as a quick follow-up. The cost takeout plans continue to progress well. And obviously, that came in well. So I guess, first of all, how are you thinking about your trajectory around your EBITDA guidance? I know you didn't update it, typically you don't this quarter, but just curious what your thoughts are there, especially in the backdrop of the app data we've seen in the mortgage areas, same you know the better, anything in that?

[Frank Martell:]

Yeah. I think, as you look at this year, as Jim talked about, we're going to see the normal selling season, I mean, everybody is looking at what the spring season look like to see the ramp. And so far, I think, it's okay. Rates have bumped around. I think the market is more sensitive right now to rates than - it makes a lot of sense. But a couple of basis points here and there seem to make a lot of change. But I think, we're going to be, I think, fine this year as a - and kind of consistent with the seasonality patterns we normally see. I think the wildcard this year for us is the operationalization, that's a long word, but the - of the AMC transformation, because we are going to - as we said earlier, we're going to be setting revenue that's not productive for the company. And I think, as we get to a more automated offering. That's going to be - that's a lot of intricate operational planning. Clearly, most of that's going to hit the back half of this year, second half of the year and probably driven into the first quarter of next year. So that's really the biggest wildcard I think we have. The rest of the company really is operating very strongly, in my view, and the cost takeouts are all structured programs that have been implemented or in-flight. We're not looking for some magic bullet out there to top-up, we've got everything in-flight. The mortgage market, since we launched the 30% mortgage target, the mortgage market has declined 40%. So we've actually - if you look at what we've done on the cost side is a lot more than we were looking at back - way back when. But good teams rally, and that's what we did. So I think, we are in good shape going into next year. And I think the big wildcard that is really the AMC piece of it. It's still a lot of the wind-down impact of the technology - legacy technology stuff happening in the first quarter with a fairly chunky drop. And you'll see that peter off, so it's really the AMC piece.

[Darrin Peller:]

Okay. All right, guys. Thank you very much.

[Operator:]

And our next question comes from Ashish Sabadra from Deutsche Bank. Please go ahead.

[Ashish Sabadra:]

Yeah. Thanks for taking my question. So my question was on the flood and property and tax, you saw some good growth there. Was there in share gains? Can you talk about what's driving that and the sustainability of the share gains going forward?

[Frank Martell:]

Yeah. So - good morning. So the - both the tax and flood businesses had strong, of course, and have been consistently outperforming. I mentioned in my prepared remarks, we're having a lot of success with integrating our offerings across, not only tax and flood, but other capabilities. So that solution set and pricing have driven our success in those areas. I'd say in the case of flood, we've also had a flurry of product enhancements and new products, which has also added to the revenue streams and supported their growth as well. So I think, it's been a combination of those factors.

[Ashish Sabadra:]

Okay. That's helpful. And then just on the property and site front that - the revenue there have been declining for a couple of quarters now. How should be think about the growth in that business? As that the mortgage volumes starts to come back, would that be a catalyst for that particular business line going forward?

[Frank Martell:]

Certainly, we'll be a catalyst for growth, I mean, that particular unit is subject to market volume pressure. Things like our fraud service, for example, would be directly related to that. But - so as those volumes turn, we will see a pickup there. In addition, we spend a fair amount of money on improving some of the service levels and offerings in that area. I expect that to be impacting probably towards the back half of the year, but impacting our revenue trajectory as well in a positive way.

[Ashish Sabadra:]

That's helpful. Thanks.

[Operator:]

And our next question comes from Stephen Sheldon with William Blair & Company. Please go ahead.

[Stephen Sheldon:]

Hi, guys, good morning. First, within credit solutions seem to pull back more than the broader industry headwinds. Just any color you can provide on trends in that business and maybe a high level view on outlook going forward?

[Jim Balas:]

Hey, Steve. This is Jim. On the credit side, on the credit solution, we saw a few things. One, obviously the market impact, we also had some share shifting going on there's a lot of price pressure in that particular part of the business with clients due to fallout rates. And then the other thing we had was automotive volumes. If you look at the average age of vehicles, it's extending and you have fewer volumes. So that impacted us as well during the quarter.

[Stephen Sheldon:]

Got it. That helps. And then, I guess, for the follow-up, within the appraisal platforms, you talked some before about expanding the type of solutions that can be tied into FNC and Mercury like title orders. So I guess in that context, can you help us frame the opportunity there and where the company might be in terms of driving that opportunity within the appraisal platforms?

[Frank Martell:]

Yeah. I mean, it's - that's been a great add for us, and we're adding more clients there as the capabilities have been put on the platform. So I think that will be an opportunity - a good margin opportunity for us as well. We're really only starting to see, we operationalized in the second half of last year. We're starting to see decent volume ramp in the first quarter. So I think that will progressively add, it's not, I'd say, material to the total company. But certainly, it's supporting high margin growth and that area did grow in the first quarter, and one of those reasons was the title operation there. The other area there is that - those platforms are helping us with the program on the AMC piece of it too, because they provide us with, I guess, some support on the automation front and the analytics front as well there, so that's also been help for us.

[Stephen Sheldon:]

Great. Thank you.

[Operator:]

And our next question will come from Chris Gamaitoni from Compass Point. Please go ahead.

[Chris Gamaitoni:]

Hi, guys. I wanted to follow-up on the CapEx spending. You noted you accelerated something to the first quarter. I was wondering if you had an estimate of kind of what the remainder of the year would look like and what the 2020 levels would look like relative to 2019?

[Frank Martell:]

Yeah. Hey, Chris, how are you doing? Yeah. We don't guide on CapEx, obviously, but I think that - you should see numbers similar year-over-year. It's probably a little bit - it could be a little bit more, but we're targeting a similar level to last year. So that's kind of the headline there on CapEx.

[Chris Gamaitoni:]

So it's similar number to last year. Sorry, I'm confused. It was similar level of growth over last year? Is that what you're thinking about?

[Frank Martell:]

Yeah. Chris, on the CapEx you saw the list in the third quarter and fourth quarter of last year. And then, Q1 was a little bit higher, we expect that to continue into the second quarter. And then as we exit 2019, it should start to descend somewhat. It could be H1 more heavy ultimately.

[Chris Gamaitoni:]

Okay. That's very helpful. Thank you. And then do you have an estimated - you gave us an impact or an estimated impact on revenue and EBITDA for AMC optimization and exiting legacy plan. I was wondering if you give us the impact that occurred in the first quarter.

[Frank Martell:]

Yeah. First quarter was pretty modest. We saw the revenue decline, obviously more on the technology assets. So it's still early stages, pretty modest amount, I would say.

[Chris Gamaitoni:]

Okay. Thank you. I hop back in the queue.

[Operator:]

And our next question comes from the Andrew Jeffrey with SunTrust. Please go ahead.

[Andrew Jeffrey:]

Hi, guys. Good morning.

[Frank Martell:]

Good morning.

[Andrew Jeffrey:]

I guess, kind of a two-part question, high level strategic. I appreciate the goal and the desire to diversify way, I guess, if you think about it that way from mortgage exposure. Do you get there sort of just mechanically by virtue of the strategic changes that you're making in your valuation business? And I guess, as a corollary, when you look at the business sort of pro forma for the strategic shift? Do you feel like you've got the right assets, is that kind of the go forward composition of businesses, which you're comfortable for sustainable top and bottom line growth?

[Frank Martell:]

Yeah. So - this is Frank. First of all, I think, the composition of company will ebb and flow, depending on, obviously, such factors as the mortgage market volumes and other things, but - so the 50%, what we're trying to do is to have balance across the verticals, so we're not - that 50% will come in, frankly, the company was dominated by mortgage revenues. So we pull that back dramatically. And so that's why 50-50 is kind of a theoretical goal. I'd say that, that feels right to me. The non-mortgage pieces and a great number of the mortgage pieces are high margin even in the low cycle. So I think that's the engine to go off of. The data repository and the tech stack and the infrastructure of the company is increasingly integrated. So we can use that same foundation to drive new products and services into different verticals. So that's really what we're trying to do there with things like public sector, things like insurance and then others. So I'd expect, we're in a better position to do that than we've ever been from a capabilities perspective. I don't think the current mix is good. We talked about - we look at international as an opportunity longer term. Is there anything that is specifically out there at the moment, not so much, but I think, as we look at it, we have a lot of opportunities. I think, we've got a great set of capabilities and revenue streams, tremendous client set. It's more diversified. I think, diversification of verticals is good. Just because mortgage has been so challenged coming out - really out of the great recession, it's quite unusual that three years of negative mortgage volumes in any cycle, frankly. So - and especially when you got full employment and a strong economy. So we just have to work through that. That's not to be negative forever, obviously, so I think, you have a reasonable chance of getting to growth in the next couple of years. So I kind of like our position. We're not going to shrink our way, I think, maybe your first part of your question alluded to, is the AMC going to shrink us down to 50-50. That's not the intention. So I think on the - just to reiterate on the AMC. It's about higher value as it is across all of our offerings, and where we think we can add more value of our clients. And if the value is just not there for the client in the traditional product offering, we're not going to sit there and ride that. We're going to try to take proactive action, and that's what we've done on the AMC piece of it. And it's going to be a different offering and it's going to be, I think, for those clients have want that more premium offering. I think, it's going to be compelling versus the more traditional model, which is frankly what we put together back in 2016, 2017. So I feel good about the AMC strategy.

[Andrew Jeffrey:]

Okay. That's helpful. Thank you.

[Operator:]

And our next question comes from John Campbell with Stephens Inc. Please go ahead.

[John Campbell:]

Hey, guys. Good morning.

[Frank Martell:]

Good morning.

[John Campbell:]

Just on the product wind-down and business transformation, you guys called out, I think, the $70 million to $100 million of the revenue impacted guidance. I just want to make sure, I'm getting this down right. That's a range for this year only, and you also expect a rev impact in 1Q 2020. And then it sounds like you're not going to see much of a negative impact in 2Q with most of this hitting in the second half of this year, is that right?

[Frank Martell:]

I don't think, we've commented on 2020 in terms of the wind-down, the $70 million to $100 million is a 2019 figure, and it's a combination of the software assets. And you saw the drop off of about $7 million of the software assets, a modest amount on the AMC and that will progress over time. But it's hard to predict the exact amounts, because we're working with our clients through this process. But we still feel that range is about right.

[John Campbell:]

Okay. But I think you said, you expected to roll off over the next four quarters, so that would, I guess, technically take you into 1Q 2020. So are you expecting some of this to roll into the first part of 2020?

[Frank Martell:]

The AMC. Yeah, John, it's really - so just think of a two pieces of it, AMC is, as I mentioned earlier, is the more - is the bigger variable just because we have a lot of volume. These are important products and services to the clients involved. So the switching of that volume to other vendors takes a while. So that's probably going to be - there will be a runoff in the first quarter. It's my best estimate at this juncture. I think on the [NMTS] [ph], so the mortgage technology and default area, basically, we're - it's a sharper ramp down. But there will be some, I'd say, de minimis stub revenues across really all the quarters in 2020. But that's just very, very small. So really, what we're really talking about is the AMC transition. Again, it's hard to project, but I would say, clearly at this juncture based on all our planning, it's safe to say that the majority, not all, but the majority will really be centered around third and fourth quarters, I'd say, particularly third quarter. And maybe the second quarter ramp - will ramp up in the second quarter and the third quarter, and then ramp - start to ramp down.

[John Campbell:]

Okay. That's great color. And then as my follow-up, this is a little bit of kind of lessor question. But can you guys talk to your plans around the project upstream - of the upstream margin and what you guys are up to there. What they're looking to achieve and whether that's going to be a needle moving opportunity?

[Frank Martell:]

Yeah. I think, I prefer not for competitive reasons, actually. But just to say that we're working on it. I think, it's just better not to get to that level detail.

[John Campbell:]

Okay. And I guess, can you maybe just talk to exactly what it is you're doing. I mean, is it something with [MOS] [ph] system without, I guess, showing your hands, so to speak.

[Frank Martell:]

We're working on data management and facilitation with our clients on the real estate area. To make better use of the data and to manage the data in a better way is the biggest focus area there for us.

[John Campbell:]

Okay, great. We look for further updates in the future. Thanks, guys.

[Operator:]

And our next question comes from Glenn Greene with Oppenheimer. Please go ahead.

[Glenn Greene:]

Thank you. Hey, Frank, could you maybe qualitatively talk about the AMC transformation efforts at this point, how it sort of running versus your internal expectations and any kind of early client feedback, you're hearing or saying at this point.

[Frank Martell:]

Yeah. I think, Glenn, the feedback from the client is variable by client. We've got, I'd say, runs the gamut from, no, thank you to, it's great, love it. And so I think it's really - and that's I think to be expected. I think that we are in test with a number of clients on different aspects of the new service. So we are in the field with some of the new service. I feel really good about that, the capability. So I think where clients see it, they like it. But I think, they're just a number of our traditional clients that they're okay with value of the traditional, and there's a lot of - I mean, value compression, honestly, I think, that as we look forward, I would expect to happen in that market and - or at least certainly cap on the price of appraisals. You guys hear that in the news. So we need to offer different services, I think, we've done. I think, in terms of the actual rollout of the service. It's complicated, because you've got origination workflows that are embedded in new clients overall workflows. And even when you diversify your vendor network you have a lot of operational technology change, operational change, QC, et cetera. So it takes a while that figure out. And then, we are one of the few national level providers. So we're in all these counties, so they're also - it's a geographic aspect to it as well. So there is just a lot of moving parts. I don't think anything is rocket science as it relates to ramping down, but it takes time. And you have to do it carefully to make sure that your - your processes are safe and sound and producing the right quality.

[Glenn Greene:]

Okay. And then, the interesting thing in the quarter was the valuations revenues at least relative to our expectations was the big upside in the quarter. I guess, as you haven't - as you suggested you haven't seen much impact from revenue perspective from the transformation yet. But did the diversification efforts of the two big clients slowed down or is any explanation for - I wouldn't call it strength, because it was down year-over-year, but certainly, much better than we would have thought? And also could you just update us on the profitability of evaluations business at this point?

[Frank Martell:]

Yeah. We actually grew - as I mentioned in my prepared remarks, we grew the platform business in the first quarter, which was good. In terms of the actual diversification effort, not a big change, I'd say that the acceleration of transformation did affect our revenue. We honestly - if you talk about quarterly split at this juncture, it's hard to tell. But I wouldn't say that - that's certainly - I'd say the revenue trajectory there wasn't the reason why we had the estimations, honestly. I think it was just - it's a little slower than I thought. But I guess, when you look at it, it's complex. So - but we definitely [indiscernible]. And I think it will - as I mentioned will ramp up the attrition as we go forward into June and then in the third quarter. So it's certainly going with not the reason why we were better on revenue.

[Glenn Greene:]

Okay. Thank you.

[Operator:]

And our next question comes from Jeff Meuler with Baird. Please go ahead.

[Jeffrey Meuler:]

Yes, thank you. Let me just - thank you, let me just pick up on that last point, which is - so what is the growth profile of the platform business in this environments and what margin are you running it at. And then, can you just remind us, when you're talking about the platform business, it's built through several acquisitions. So what's integrated, what's standalone? Like, are there couple of different related businesses in platform? If you could just let us know what's integrated or how it's operated. Thank you.

[Frank Martell:]

Yeah, so from a management and a business perspective it's integrated. So essentially, if you look at the - we have an end-to-end solution for order entry and fulfillment for valuations. And - not title. And I think what you've seen in the acquisitions is more of a different market constituencies for the service and also a little bit of a different, it's like Chevrolet, Buick and Cadillac type of thing. It's gradation of offerings. The margin profile of businesses is well above 30% I would say. And the growth profile, we were growing - it's a business that is over $100 million of revenue and growing. I would say that, right now, it's - the growth power for the year, I think it's - it should grow - and if you look in the context, we said the market will be down 5%. We're still growing in a down market. So I think it's a great business and one that is really complementary to other capabilities. So we're really stoked about that. And it's become and it will become really more than 50% of the total revenue in that area as we get out of this year.

[Jeffrey Meuler:]

And what's driving the growth like - what's driving the growth between new clients, clients pushing more volume through your platform, clients by initial services? Can you break it down kind of along those lines?

[Frank Martell:]

Yeah, I would say, definitely, we've had a lot of share gain, so new clients have been a factor. I would say that, that and the addition of new service, I think, Jeff, has been the two way biggest drivers.

[Jeffrey Meuler:]

Okay. That's helpful. And then just last, I think it'll be in the Q at the segment level. But is it possible to give us the acquisition contribution to at least the segments in the quarter for revenue, if not, the sub-segment revenue ones? Thank you.

[Jim Balas:]

Yeah, Jeff. This is Jim. On the M&A, we had about $12 million in the PIRM segment. The bulk of that was Symbility. But we had two smaller acquisitions that had some revenue contribution as well. And then on the UWS, we had about $5 million to $6 million.

[Jeffrey Meuler:]

Very helpful. Thank you.

[Operator:]

And our next question comes from Nick Johnson with Piper Jaffray. Please go ahead.

[Jason Deleeuw:]

Hello. This is actually Jason Deleeuw. Thanks for taking the question. I'm just trying to get a sense for new market opportunities for the property data business, new market opportunities in new products. I'm just trying to get a sense. Can we drive growth for the property data business outside of the customers by moving into new markets? Are there new products that you can roll out?

[Frank Martell:]

Hey, Jason, this is Frank. So, yeah, I mean, for example, the R&D, the R&D spending, we're doing a lot of work. Work is with the public sector. We have great revenues with outfits like FEMA. We have a growing portfolio of revenue with like the U.S. Department of Agriculture. So taking the datasets and producing more real time and more granular costs, et cetera have opened up the public sector more so. And these are big client relationships that I think will be a growth area for us in the future. State and local also been a growth area for us as well. So I think those investments. Lot of growth in areas like, of the data, on the visualization of the data. We talked about home business. That is well ahead of our buy plan. And I think it reflects the demand for visual data around properties. Things like virtual staging, visual tours, marketing of properties, et cetera. So I think there is tremendous demand there. A lot around - there are tremendous emphasis, even on the traditional lenders and then lending community know your property, it's been a - it's a big mantra right now in the industry, that involves obviously, you have property data. And so, I think that's where we have an advantage in quality and scope of data. And what we're trying to do is making sure that the delivery systems and the usability of the data to maximize and that has through some of these different techniques that were - we have reckoned the company today and are investing behind. So I think there is no end of demand for property information. The scale of it varies obviously. But to me the biggest demand centers around the public sector, energy, telco is a big area of demand and I think internationally as well. And then, I think as somebody mentioned earlier in the call, I think fintech area, there is a lot of - we partner with a lot of fintechs that are trying to get started around. They're really powered by our data in a number of cases. So I think from that standpoint, small numbers now obviously and they come and go pretty quickly a lot of them, but as far as I'm concerned, some of them will gain more traction. And we're right there at the table. So there are a lot of opportunity areas.

[Jason Deleeuw:]

And then, just quickly, any sense of how much that increases the size of your addressable market for the property data business? I mean, is it like 50% increase or, I don't know, if you don't want to use percentages, maybe just - is it a meaningful increase? I'm just trying to get a sense of like how much of a needle mover this opportunity could be.

[Frank Martell:]

I think clearly like, things like the public sector are needle movers. That's an area again that - when you get into the public sector, obviously, contracting, there are other things. You got longer cycles and different factors, but certainly, big dollars there, depending on where you play. So it's really - that's a question more by market and vertical. But I would say that, there is significant - in terms of addressable market, I've seen numbers all over the place. We had a study done a number of years ago. You got $20 billion - it's hard to tell what the total size of the prize is, but it's significant enough to be material to our business. And we're a [$1 billion, so $1.8 billion] [ph] revenue. So I'd say, yes, with these - all those opportunities represents collectively and some on an individual level, very significant opportunities.

[Jason Deleeuw:]

All right, very helpful. Thank you.

[Operator:]

And we will take our final question from Ashish Sabadra from Deutsche Bank. Please go ahead.

[Ashish Sabadra:]

Sorry, yeah, this is Ashish again. I just had a quick model question about the organic growth in the quarter. I know you gave a lot of different thesis. But I was just wondering if you had organic growth in the quarter. Thanks.

[Jim Balas:]

Yeah, so this is Jim. On the organic growth, it was essentially flat. And the way you get there is the market - overall, we were down about 6%. And the market impacted us by about 7%. M&A was a plus 4%. And then, write-downs and FX were about 3%. And that - so therefore, organic growth was essentially flat. Now, that includes the AMC. If you take that out, we were up about 1 point.

[Ashish Sabadra:]

Thanks a lot, Jim.

[Jim Balas:]

Great.

[Operator:]

And we will now conclude today's conference. Thank you for your participation and you may now disconnect.