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Corelogic (CLGX)

Filed: 7 May 21, 1:51pm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
  
          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to

Commission file number 001-13585
clgx-20210331_g1.jpg
CORELOGIC, INC.
(Exact name of registrant as specified in its charter)
 
Delaware95-1068610
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 
40 PacificaIrvineCalifornia92618
(Street Address)(City)(State)(Zip Code)
 
(949) 214-1000
(Registrant’s telephone number, including area code)
 
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class:Trading symbol(s)Name of exchange on which registered
Common Stock, $0.00001 par valueCLGXNew York Stock Exchange
Preferred Stock Purchase RightsCLGXNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes       No   
 
Indicate by check mark whether the registrant: is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes      No   

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

On May 4, 2021 there were 73,618,482 shares of common stock outstanding.



CoreLogic, Inc.
Table of Contents
 
 
Part I:Financial Information
  
Item 1.Financial Statements (unaudited)
  
 A. Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020
  
 B. Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020
  
 C. Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020
  
 D. Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020
  
 E. Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2021 and 2020
  
 F. Notes to Condensed Consolidated Financial Statements
  
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
  
Item 3.Quantitative and Qualitative Disclosures About Market Risk
  
Item 4.Controls and Procedures
  
Part II:Other Information
  
Item 1.Legal Proceedings
  
Item 1A.Risk Factors
  
Item 6.Exhibits




PART I: FINANCIAL INFORMATION
Item 1.  Financial Statements.

CoreLogic, Inc.
Condensed Consolidated Balance Sheets
(Unaudited) 
(in thousands, except par value)March 31,December 31,
Assets20212020
Current assets:  
Cash and Cash Equivalents$227,102 $167,422 
Accounts receivable (less allowance for credit losses of $8,636 and $9,838 as of March 31, 2021 and December 31, 2020, respectively)
320,609 303,202 
Prepaid expenses and other current assets66,148 82,794 
Assets of discontinued operations166,621 202,417 
Total current assets780,480 755,835 
Property and equipment, net401,552 406,114 
Operating lease assets80,724 82,459 
Goodwill, net2,319,411 2,315,495 
Other intangible assets, net310,226 320,921 
Capitalized data and database costs, net321,528 321,211 
Other assets114,502 81,187 
Total assets$4,328,423 $4,283,222 
Liabilities and Equity  
Current liabilities:  
Accounts payable and other accrued expenses$208,149 $177,606 
Accrued salaries and benefits57,698 57,499 
Contract liabilities, current478,074 411,821 
Liabilities of discontinued operations56,339 44,677 
Current portion of long-term debt9,003 43,230 
Operating lease liabilities, current14,833 15,566 
Total current liabilities824,096 750,399 
Long-term debt, net of current1,763,212 1,828,003 
Contract liabilities, net of current631,019 617,318 
Deferred income tax liabilities99,280 91,853 
Operating lease liabilities, net of current97,953 99,966 
Other liabilities156,778 172,421 
Total liabilities3,572,338 3,559,960 
Stockholders' equity:  
Preferred stock, $0.00001 par value; 500 shares authorized, 0 shares issued or outstanding
Common stock, $0.00001 par value; 180,000 shares authorized; 73,619 and 73,152 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
Additional paid-in capital
Retained earnings914,622 893,404 
Accumulated other comprehensive loss(158,538)(170,143)
Total stockholders' equity756,085 723,262 
Total liabilities and equity$4,328,423 $4,283,222 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CoreLogic, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended
March 31,
(in thousands, except per share amounts)20212020
Operating revenues$422,785 $352,920 
Cost of services (excluding depreciation and amortization shown below)162,559 144,525 
Selling, general and administrative expenses130,008 109,624 
Depreciation and amortization44,781 43,578 
Total operating expenses337,348 297,727 
Operating income85,437 55,193 
Interest expense:  
Interest income98 414 
Interest expense16,401 18,193 
Total interest expense, net(16,303)(17,779)
Loss on investments and other, net(502)(3,857)
Income from continuing operations before equity in earnings of affiliates and income taxes68,632 33,557 
Provision for income taxes13,689 9,785 
Income from continuing operations before equity in earnings of affiliates54,943 23,772 
Equity in earnings of affiliates, net of tax512 
Net income from continuing operations54,943 24,284 
Income from discontinued operations, net of tax3,907 9,535 
Loss from sale of discontinued operations, net of tax(5,288)
Net income$53,562 $33,819 
Basic income per share:
Net income from continuing operations$0.75 $0.31 
Income from discontinued operations, net of tax0.05 0.12 
Loss from sale of discontinued operations, net of tax(0.07)
Net income$0.73 $0.43 
Diluted income per share:  
Net income from continuing operations$0.73 $0.30 
Income from discontinued operations, net of tax0.05 0.12 
Loss from sale of discontinued operations, net of tax(0.07)
Net income$0.71 $0.42 
Weighted-average common shares outstanding:  
Basic73,228 79,028 
Diluted75,135 80,525 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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CoreLogic, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
For the Three Months Ended
March 31,
(in thousands)20212020
Net income$53,562 $33,819 
Other comprehensive income/(loss)  
Market value adjustments on interest rate swaps, net of tax13,330 (36,890)
Foreign currency translation adjustments(1,811)(38,690)
Supplemental benefit plans adjustments, net of tax86 187 
Total other comprehensive income/(loss)11,605 (75,393)
Comprehensive income/(loss)$65,167 $(41,574)
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CoreLogic, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended March 31,
(in thousands)20212020
Cash flows from operating activities:  
Net income$53,562 $33,819 
Less: Income from discontinued operations, net of tax3,907 9,535 
Less: Loss from sale of discontinued operations, net of tax(5,288)
Net income from continuing operations54,943 24,284 
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:  
Depreciation and amortization44,781 43,578 
Amortization of debt issuance costs1,237 1,235 
Amortization of operating lease assets3,660 3,656 
Provision for bad debt and claim losses5,089 3,357 
Share-based compensation9,634 7,961 
Equity in earnings of affiliates, net of taxes(512)
Deferred income tax2,942 2,092 
Loss on investments and other, net502 3,857 
Change in operating assets and liabilities, net of acquisitions:  
Accounts receivable(16,570)7,709 
Prepaid expenses and other current assets(5,755)3,538 
Accounts payable and other accrued expenses26,907 (15,459)
Contract liabilities79,954 24,457 
Income taxes20,749 4,930 
Dividends received from investments in affiliates185 
Other assets and other liabilities(39,936)(9,808)
Net cash provided by operating activities - continuing operations188,137 105,060 
Net cash provided by operating activities - discontinued operations1,156 7,804 
Total cash provided by operating activities$189,293 $112,864 
Cash flows from investing activities:  
Purchases of property and equipment$(12,447)$(12,344)
Purchases of capitalized data and other intangible assets(8,599)(8,540)
Cash paid for acquisitions, net of cash acquired(8,072)(11,760)
Purchases of investments(631)
Cash received from sale of discontinued operations49,838 
Proceeds from investments and other651 
Net cash provided by/(used in) investing activities - continuing operations20,720 (32,624)
Net cash used in investing activities - discontinued operations(1,694)(2,892)
Total cash provided by/(used in) investing activities$19,026 $(35,516)
Cash flows from financing activities:  
Repayment of long-term debt$(100,708)$(723)
Proceeds from issuance of shares in connection with share-based compensation3,109 2,932 
Payment of tax withholdings related to net share settlements(21,417)(8,051)
Shares repurchased and retired(2,431)
Dividends paid(24,140)(17,374)
Contingent consideration payments subsequent to acquisitions(6,448)
Net cash used in financing activities - continuing operations(149,604)(25,647)
Net cash used in financing activities - discontinued operations(41)
Total cash used in financing activities$(149,645)$(25,647)
Effect of exchange rate on cash, cash equivalents, and restricted cash(561)(4,690)
Net change in cash, cash equivalents, and restricted cash58,113 47,011 
Cash, cash equivalents, and restricted cash at beginning of period177,833 114,679 
Less: Change in cash, cash equivalents, and restricted cash - discontinued operations(579)4,912 
Plus: Cash swept from discontinued operations941 4,051 
Cash, cash equivalents, and restricted cash at end of period$237,466 $160,829 
Supplemental disclosures of cash flow information:  
Cash paid for interest$14,505 $16,391 
Cash paid for income taxes$3,827 $2,218 
Cash refunds from income taxes$156 $371 
Non-cash investing activities:
Capital expenditures included in accounts payable and other accrued expenses$13,017 $10,092 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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CoreLogic, Inc.
Condensed Consolidated Statement of Stockholders' Equity (Year-to-Date)
(Unaudited)
Common Stock SharesCommon Stock AmountAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
(in thousands)
For the Three Months Ended March 31, 2021
Balance as of December 31, 202073,152 $$$893,404 $(170,143)$723,262 
Net income— — — 53,562 — 53,562 
Shares issued in connection with share-based compensation467 — 3,109 — — 3,109 
Payment of tax withholdings related to net share settlements— — (13,156)(8,261)— (21,417)
Share-based compensation— — 10,103 — — 10,103 
Dividend on common shares— — (56)(24,083)— (24,139)
Other comprehensive income— — — — 11,605 11,605 
Balance as of March 31, 202173,619 $$$914,622 $(158,538)$756,085 
For the Three Months Ended March 31, 2020
Balance as of December 31, 201978,972 $$111,000 $1,006,992 $(166,783)$951,210 
Adoption of new accounting standards— — — 16,827 — 16,827 
Net income— — — 33,819 — 33,819 
Shares issued in connection with share-based compensation489 — 2,932 — — 2,932 
Payment of tax withholdings related to net share settlements— — (8,051)— — (8,051)
Share-based compensation— — 8,085 — — 8,085 
Shares repurchased and retired(50)— (2,431)— — (2,431)
Dividends declared— — (54)54 — 
Other comprehensive loss— — — — (75,393)(75,393)
Balance as of March 31, 202079,411 $$111,481 $1,057,692 $(242,176)$926,998 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Note 1 – Basis of Condensed Consolidated Financial Statements

CoreLogic, Inc., together with its subsidiaries (collectively “CoreLogic”, “the Company”, “we”, “us” or “our”), is a leading global property information, insight, analytics and data-enabled solutions provider operating in North America, Western Europe and Asia Pacific. Our combined data from public, contributory, and proprietary sources provides detailed coverage of property, mortgages and other encumbrances, property risk and replacement cost, location, hazard risk and related performance information. The markets we serve include real estate and mortgage finance, insurance, capital markets, and the public sector. We deliver value to clients through unique data, analytics, workflow technology, advisory and managed solutions. Clients rely on us to help identify and manage growth opportunities, improve performance, and mitigate risk.

Our condensed consolidated financial information included in this report has been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States (“US”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the condensed consolidated financial statements and accompanying notes. Actual amounts may differ from these estimated amounts. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The 2020 year-end condensed consolidated balance sheet was derived from the Company’s audited financial statements for the year ended December 31, 2020. Interim financial information does not require the inclusion of all the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020.

The accompanying unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of only normal recurring items which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full year or for any future periods.

Merger Agreement

In February 2021, we entered into an Agreement and Plan of Merger (“Merger Agreement”) with Celestial-Saturn Parent Inc., a Delaware corporation (“Acquirer”), and Celestial-Saturn Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of the Acquirer (“Acquisition Sub”). Pursuant to the Merger Agreement, and subject to the terms and conditions set forth therein, Acquisition Sub would be merged with and into CoreLogic (“Merger”), with CoreLogic continuing as the surviving corporation in the Merger and a wholly-owned subsidiary of the Acquirer. The Acquirer and Acquisition Sub are affiliates of Stone Point Capital Partners and Insight Partners. If the Merger is consummated, CoreLogic’s securities will be de-listed from the New York Stock Exchange and de-registered under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as soon as practicable following the effective time of the Merger (“Effective Time”).

In the event the Merger is completed, except as otherwise provided in the Merger Agreement, each share of common stock, par value $0.00001 per share, of CoreLogic issued and outstanding immediately prior to the Effective Time would be converted into the right to receive $80.00 per share in cash, without interest (“Merger Consideration”).

Consummation of the Merger is subject to customary closing conditions, including, among other things, (i) the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of our common stock (“Requisite Stockholder Approval”), and (ii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), and the expiration of applicable waiting periods or clearance of the Merger, as applicable, under the antitrust and foreign investment laws of certain other jurisdictions (“Regulatory Approvals”). The Requisite Stockholder Approval was obtained at a special meeting of the Company’s stockholders on April 28, 2021. In addition, the applicable waiting period under the HSR Act expired on March 22, 2021 and clearance to proceed was obtained from the New Zealand Overseas Investment Office on March 8, 2021. CoreLogic made the filing required in Australia in February 2021 and is awaiting approval from the Australian Foreign Investment Review Board.

The consummation of the Merger is not subject to a financing condition, and the Acquirer has obtained equity and debt financing commitments for the purpose of financing the Merger and the other transactions contemplated by the Merger Agreement. Certain debt financing arrangements have already been secured by Acquisition Sub and, subject to the consummation of the Merger, will become indebtedness of CoreLogic at the Effective Time.
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Either we or the Acquirer may terminate the Merger Agreement in certain circumstances, including if (i) the Merger shall not have been consummated on or before 5:00 p.m. (New York City time) on August 9, 2021, (ii) any of certain governmental authorities of competent jurisdiction has issued a final non-appealable law or order prohibiting the Merger, (iii) the Requisite Stockholder Approval is not obtained at the stockholders’ meeting duly convened therefor or (iv) the other party materially breaches, and does not cure, any representation or covenant that would cause the related condition to the other party’s obligation to consummate the Merger not to be satisfied, in each case subject to certain limitations set forth in the Merger Agreement. If we terminate the Merger Agreement because (i) the Acquirer or Acquisition Sub materially breaches, and does not cure, any representation or covenant that would cause any conditions to our obligation to consummate the Merger not to be satisfied or (ii) all conditions to the Merger have been and continue to be satisfied (subject to customary exceptions) and the Acquirer fails to consummate the Merger after receiving written notification from us, we would be entitled to receive a termination fee from the Acquirer of $330 million. If the Merger Agreement is terminated by us or the Acquirer under other certain circumstances specified in the Merger Agreement, we would be obligated to pay a termination fee of $165 million to the Acquirer. See the risk factor titled “If the Merger Agreement is terminated, under certain conditions, we may be obligated to pay the Acquirer a substantial termination fee, which could require us to incur additional debt or reduce the amount of cash we have available to fund our operations” under “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (“2020 10-K”) for further information about the termination fee we may be obligated to pay.

In March 2021, we filed a definitive proxy statement on Schedule 14A with the SEC (as supplemented, the “Definitive Proxy Statement”) related to the special meeting of stockholders called for the purpose of obtaining the Requisite Stockholder Approval. Please refer to the Definitive Proxy Statement for further information about the Merger, the Merger Agreement, and the other transactions contemplated thereby.

Rights Agreement Amendment

In February 2021, in connection with the execution of the Merger Agreement, we also entered into an amendment (“Rights Agreement Amendment”) to the Rights Agreement, dated as of July 6, 2020, by and between CoreLogic and Equiniti Trust Company, as rights agent (“Rights Agreement”), in order to (i) render the Rights Agreement inapplicable to the Merger and the transactions contemplated by the Merger Agreement, (ii) ensure that in connection with the transactions contemplated by the Merger Agreement, none of the Acquirer, Acquisition Sub, or any of their “Affiliates” or “Associates” (each as defined in the Rights Agreement) shall be deemed to be or become an “Acquiring Person” (as defined below) and (iii) provide that the “Expiration Date” (as defined in the Rights Agreement) shall occur immediately prior to the Effective Time.

Unsolicited Proposal and Proxy Contest Proposals

On June 26, 2020, we received an unsolicited proposal from Senator Investment Group, LP (“Senator”) and Cannae Holdings, Inc. (“Cannae”) to acquire the Company for $65.00 per share in cash, which initial proposal was increased by Senator and Cannae on September 14, 2020 by $1.00 per share to $66.00 per share in cash (the “Unsolicited Proposal”). In July 2020, our Board of Directors (“Board”), in consultation with its independent financial and legal advisors, unanimously determined to reject the Unsolicited Proposal. In July 2020, Senator and Cannae issued a press release announcing proposals to remove members of our Board and replace them with up to 9 individuals nominated by Senator and Cannae and to amend certain provisions of our Bylaws (“Proxy Contest Proposals”). In August 2020, the Board determined to call a special meeting of CoreLogic’s stockholders to allow our stockholders to consider and vote on the Proxy Contest Proposals. A special meeting of our stockholders to vote on the Proxy Contest Proposals was held in November 2020, with a record date of September 18, 2020, resulting in the removal of 3 members of our Board and the appointment of 3 of Senator and Cannae’s nominees to our Board, each with a term expiring at the Company’s 2021 annual meeting of stockholders. In connection with the Unsolicited Proposal, Proxy Contest Proposals, and related strategic transaction process we have incurred expenses of approximately $11.4 million for the three months ended March 31, 2021.

Reportable Segments

We have organized into the following 2 reportable segments: Property Intelligence & Risk Management (“PIRM”) and Underwriting & Workflow Solutions (“UWS”). Please refer to Note 13 - Segment Information for further information.




7


Discontinued Operations

In July 2020, we announced our intention to exit our reseller operations focused on mortgage credit and borrower verification and multi-family tenant screening. These businesses are comprised of our Rental Property Solutions (“RPS”) and Credit Solutions (“CS”) operations. Although market leaders in their respective business areas, these reseller businesses are not compatible with our long-term strategic imperatives. The divestiture of these operations is expected to improve our revenue growth trends and revenue mix, and significantly enhance profit margins. As a result of this strategic decision, the businesses have been reflected in our condensed consolidated financial statements as discontinued operations for all periods presented.

In October 2020, we sold a portion of our multi-family tenant screening business, which resulted in a gain on sale of discontinued operations of $2.7 million, net of tax. In February 2021, we sold the remainder of RPS for $51.2 million which resulted in a loss of $5.3 million, net of tax, for the three months ended March 31, 2021.

In connection with businesses we have previously discontinued, we retain certain contingent liabilities of the businesses that were disposed of. These contingent liabilities include, among other items, liability for certain litigation matters, indemnification obligations and potential breaches of representations or warranties. Please refer to Note 14 - Discontinued Operations for further information.

Client Concentration

We generate the majority of our operating revenues from clients with operations in the US residential real estate, mortgage origination, and mortgage servicing markets. Approximately 40% and 30% of our operating revenues for the three months ended March 31, 2021 and 2020, respectively, were generated from our top ten clients, who consist of the largest US mortgage originators and servicers. None of our clients individually accounted for greater than 10% of our operating revenues during these periods.

Cash, Cash Equivalents, and Restricted Cash

We deem the carrying value of cash, cash equivalents, and restricted cash to be a reasonable estimate of fair value due to the nature of these instruments. Restricted cash is comprised of deposits that are pledged for various letters of credit/bank guarantees secured by us, escrow accounts due to acquisitions and divestitures, as well as short-term investments within our deferred compensation plan trust. The following table provides a reconciliation of cash, cash equivalents, and restricted cash to amounts shown in the statement of cash flows:
(in thousands)March 31, 2021March 31, 2020
Cash and cash equivalents$227,102 $150,937 
Restricted cash included in other assets9,966 9,714 
Restricted cash included in prepaid expenses and other current assets398 178 
Total cash, cash equivalents, and restricted cash$237,466 $160,829 

Operating Revenue Recognition

We derive our operating revenues primarily from US mortgage lenders, servicers, and insurance companies with good creditworthiness. Operating revenue arrangements are written and specify the products or services to be delivered, pricing, and payment terms. Operating revenue is recognized when the distinct good or service (also referred as "performance obligation"), is delivered and control has been transferred to the client. Generally, clients contract with us to provide products and services that are highly interrelated and not separately identifiable. Therefore, the entire contract is accounted for as one performance obligation. At times, some of our contracts have multiple performance obligations where we allocate the total price to each performance obligation based on the estimated relative standalone selling price using observable sales or the cost-plus margin approaches.

For products or services where delivery occurs at a point in time, we recognize operating revenue when the client obtains control of the products upon delivery. When delivery occurs over time, we generally recognize operating revenue ratably over the service period once initial delivery has occurred. For certain of our products or services clients may also pay upfront fees, which we defer and recognize as operating revenue over the longer of the contractual term or the expected client relationship period.

8


Licensing arrangements that provide our clients with the right to access, or use, our intellectual property are considered functional licenses for which we generally recognize operating revenue based on usage. For arrangements that provide a stand-ready obligation, or, substantive updates to the intellectual property which the client is contractually or practically required to use, we recognize operating revenue ratably over the contractual term.

Client payment terms are standard with no significant financing components or extended payment terms granted. In limited cases, we allow for client cancellations for which we estimate a reserve.

See further discussion in Note 7 - Operating Revenues.

Comprehensive Loss

Comprehensive loss includes all changes in equity except those resulting from investments by stockholders and distributions to stockholders. Specifically, foreign currency translation adjustments, amounts related to supplemental benefit plans, unrealized gains and losses on interest rate swap transactions and investments are recorded in other comprehensive loss. The following table shows the components of accumulated other comprehensive loss, net of taxes, as of March 31, 2021 and December 31, 2020:
(in thousands)20212020
Cumulative foreign currency translation$(100,650)$(98,839)
Cumulative supplemental benefit plans(10,880)(10,966)
Net unrecognized losses on interest rate swaps(46,941)(60,271)
Reclassification adjustment for gain on terminated interest rate swap included in net income(67)(67)
Accumulated other comprehensive loss$(158,538)$(170,143)

Investment in Affiliates, net

Investments in affiliates are accounted for under the equity method of accounting when we are deemed to have significant influence over the affiliate but do not control or have a majority voting interest in the affiliate. Investments are carried at the cost of acquisition, including subsequent impairments, capital contributions and loans from us, plus our equity in undistributed earnings or losses since inception of the investment, less dividends received.

We have 1 investment in an affiliate that is fully impaired as of March 31, 2021 and December 31, 2020. For both the three months ended March 31, 2021 and March 31, 2020, we had insignificant revenue, expense, accounts receivable, and accounts payable related to our investments in these affiliates.

In January 2020, we completed the acquisition of the remaining 66% of Location, Inc. ("Location") for $11.5 million, subject to certain working capital adjustments. In connection with this transaction, we remeasured our pre-existing 34% investment balance of $5.6 million to fair value based on the purchase price, resulting in a $0.6 million step-up gain which is reflected within gain/(loss) on investments and other, net, in our condensed consolidated statement of operations for the three months ended March 31, 2020. Prior to the acquisition of the remaining interest, we accounted for Location under the equity method and received dividends of $0.7 million in the first quarter of 2020.

Leases

We determine if an arrangement contains a lease at inception and determine the classification of the lease, as either operating or finance, at commencement.

Operating and finance lease assets and liabilities are recorded based on the present value of future lease payments over the lease term which factors in certain qualifying initial direct costs incurred as well as any lease incentives received. If an implicit rate is not readily determinable, we utilize our incremental borrowing rate and inputs from third-party lenders to determine the appropriate discount rate. Lease expense for operating lease payments are recognized on a straight-line basis over the lease term, which, if applicable, may factor in renewal or termination options. Finance leases incur interest expense using the effective interest method in addition to amortization of the leased asset on a straight-line basis, both over the applicable lease term. Lease terms may factor in options to extend or terminate the lease.

9


If we abandon our right of use to a leased property prior to the lease termination date, and have no intention or ability to sublease the space, we reduce the remaining right of use asset and record an impairment charge in the period we vacate or otherwise cease to use the leased asset. For the three months ended March 31, 2021 and March 31, 2020, we had 0 impairment charges.

We adhere to the short-term lease recognition exemption for all classes of assets (i.e. facilities and equipment). As a result, leases with an initial term of twelve months or less are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term. In addition, for certain equipment leases, we account for lease and non-lease components, such as services, as a single lease component as permitted.

Dividends

We record cash dividends as reductions to retained earnings upon declaration, with a corresponding increase to current liabilities, based on common shares outstanding on the record date. In addition, as part of our share-based compensation program, the terms of our restricted stock units (“RSUs”) and performance-based restricted stock units (“PBRSUs”) stipulate that holders of these awards are credited with dividend equivalent units on each date that a cash dividend is paid to holders of common stock. These dividend equivalents are subject to the same vesting and performance requirements of the underlying units and therefore are forfeitable (i.e. non-participating). Upon declaration of a dividend, we record dividend equivalents as a reduction to retained earnings, derived from the number of eligible unvested shares, with a corresponding increase to additional paid-in-capital.

In December 2019, we announced the initiation of a quarterly cash dividend to common shareholders. CoreLogic paid a cash dividend of $0.22 per share of common stock in January 2020 and June 2020 to shareholders of record as of the close of business on January 10, 2020 and June 1, 2020, respectively. In July 2020, our Board announced a 50% increase in our cash dividend and declared a $0.33 per share cash dividend to common stockholders, which was paid in September 2020, December 2020, and March 2021 to stockholders of record as of the close of business on September 1, 2020, December 1, 2020, and March 1, 2021, respectively. Pursuant to the Merger Agreement, we agreed to refrain from declaring or paying any further dividends during the Interim Operating Period, subject to the terms, limitations and exceptions set forth in the Merger Agreement.

Tax Escrow Disbursement Arrangements

We administer tax escrow disbursements as a service to our clients in connection with our tax services business. Funds to be disbursed are deposited and maintained in segregated accounts for the benefit of our clients and totaled $7.4 billion and $0.5 billion as of March 31, 2021 and December 31, 2020, respectively. Because these deposits are held on behalf of our clients, they are not our funds and, therefore, are not included in the accompanying condensed consolidated balance sheets.

These deposits generally remain in the accounts for a period of 2 to 5 business days. We record credits from these activities as a reduction to related administrative expenses, including the cost of bank fees and other administration costs.

Under our contracts with our clients, if we make a payment in error or fail to pay a taxing authority when a payment is due, we could be held liable to our clients for all or part of the financial loss they suffer as a result of our act or omission. We maintained total claim reserves relating to incorrect disposition of assets of $27.8 million and $29.6 million as of March 31, 2021 and December 31, 2020, respectively. Within these amounts are $11.7 million and $11.4 million, respectively, which are short-term and are therefore reflected within accounts payable and other accrued expenses within our accompanying condensed consolidated balance sheets. The remaining reserves are reflected within other liabilities.

Recent Accounting Pronouncements

In January 2021, the Financial Accounting Standards Board (“FASB”) issued guidance to clarify that all derivative instruments affected by changes to interest rates used for discounting, margining or contract price alignment can apply certain optional expedients and exceptions mentioned in its reference rate reform guidance. We adopted the guidance in the first quarter of 2021, which has not had a material effect on our condensed consolidated financial statements.






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Note 2 - Property and Equipment, Net

Property and equipment, net as of March 31, 2021 and December 31, 2020 consists of the following:
(in thousands)20212020
Land$7,476 $7,476 
Buildings6,487 6,487 
Furniture and equipment62,186 60,433 
Capitalized software878,925 862,984 
Leasehold improvements50,076 50,477 
Construction in progress203 1,275 
 1,005,353 989,132 
Less accumulated depreciation(603,801)(583,018)
Property and equipment, net$401,552 $406,114 

Depreciation expense for property and equipment, net, was approximately $22.0 million and $21.6 million for the three months ended March 31, 2021 and 2020, respectively.

NaN impairment losses were recorded for the three months ended March 31, 2021 and 2020.

Note 3 – Goodwill, Net

A reconciliation of the changes in the carrying amount of goodwill and accumulated impairment losses, by reporting unit, for the three months ended March 31, 2021 is as follows:
 
(in thousands)PIRMUWSConsolidated
Balance as of January 1, 2021
Goodwill$1,106,816 $1,216,204 $2,323,020 
Accumulated impairment losses(600)(6,925)(7,525)
Goodwill, net1,106,216 1,209,279 2,315,495 
Acquisition4,641 4,641 
Translation adjustments(725)(725)
Balance as of March 31, 2021
Goodwill, net$1,110,132 $1,209,279 $2,319,411 
See Note 12 - Acquisitions for discussion of current year acquisition.

Note 4 – Other Intangible Assets, Net

Other intangible assets, net consists of the following:
March 31, 2021December 31, 2020
(in thousands)GrossAccumulated AmortizationNetGrossAccumulated AmortizationNet
Client lists$646,539 $(386,923)$259,616 $644,000 $(377,409)$266,591 
Non-compete agreements26,903 (22,905)3,998 26,763 (21,570)5,193 
Tradenames and licenses128,012 (81,400)46,612 127,718 (78,581)49,137 
 $801,454 $(491,228)$310,226 $798,481 $(477,560)$320,921 

Amortization expense for other intangible assets, net was $14.3 million and $14.2 million for the three months ended March 31, 2021 and 2020, respectively.

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For the three months ended March 31, 2021 and 2020, there were 0 impairments.

Estimated amortization expense for other intangible assets, net is as follows:
(in thousands) 
Remainder of 2021$39,927 
202252,347 
202344,541 
202435,848 
202532,267 
Thereafter105,296 
 $310,226 

Note 5 – Long-Term Debt

Our long-term debt consists of the following:
March 31, 2021December 31, 2020
(in thousands)GrossDebt Issuance CostsNetGrossDebt Issuance CostsNet
Bank debt:
Term loan facility borrowings due May 2024, weighted-average interest rate of 1.63% as of March 31, 2021$1,472,000 $(10,555)$1,461,445 $1,572,000 $(11,431)$1,560,569 
Revolving line of credit borrowings due May 2024, weighted-average interest rate of 1.63% as of March 31, 2021300,000 (4,570)295,430 300,000 (4,930)295,070 
Notes:    
 7.55% senior debentures due April 20289,531 (23)9,508 9,531 (23)9,508 
Other debt:    
 Various debt instruments with maturities through March 20245,832 5,832 6,086 6,086 
Total long-term debt1,787,363 $(15,148)1,772,215 1,887,617 (16,384)1,871,233 
Less current portion of long-term debt9,003 9,003 43,230 43,230 
Long-term debt, net of current portion$1,778,360 $(15,148)$1,763,212 $1,844,387 $(16,384)$1,828,003 

As of March 31, 2021 and December 31, 2020, we recorded $0.5 million and $0.3 million, respectively, of accrued interest expense on our debt-related instruments within accounts payable and other accrued expenses.

Credit Agreement

In May 2019, we amended and restated our credit agreement (the “Credit Agreement”) with Bank of America, N.A., as the administrative agent, and other financial institutions. The Credit Agreement provides for a $1.8 billion 5-year term loan facility (the “Term Facility”), and a $750.0 million 5-year revolving credit facility (the “Revolving Facility”). The Term Facility matures, and the Revolving Facility expires, in May 2024. The Revolving Facility includes a $100.0 million multi-currency revolving sub-facility and a $50.0 million letter of credit sub-facility. The Credit Agreement also provides for the ability to increase the Term Facility and Revolving Facility by up to $300.0 million in the aggregate; however, the lenders are not obligated to do so. As of March 31, 2021, we had a remaining borrowing capacity of $450.0 million under the Revolving Facility and we were in compliance with all financial and restrictive covenants under the Credit Agreement.

Debt Issuance Costs

In connection with the amendment and restatement of the Credit Agreement, in May 2019, we incurred approximately $9.7 million of debt issuance costs of which $9.6 million were initially capitalized within long-term debt, net of current, in the accompanying condensed consolidated balance sheets.
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In addition, when we amended and restated the Credit Agreement, we wrote-off previously unamortized debt issuance costs of $1.5 million within gain/(loss) on investments and other, net, in the accompanying condensed consolidated statements of operations, which resulted in a remaining $14.6 million of previously unamortized costs. We are amortizing these costs over the term of the Credit Agreement. For the three months ended March 31, 2021 and 2020, $1.2 million were recognized in the accompanying condensed consolidated statements of operations related to the amortization of debt issuance costs.

7.55% Senior Debentures

In April 1998, we issued $100.0 million in aggregate principal amount of 7.55% senior debentures due 2028. The indentures governing these debentures, as amended, contain limited restrictions on us.

Interest Rate Swaps

We have entered into amortizing interest rate swaps (“Swaps”) in order to convert a portion of our interest rate exposure on the Term Facility floating rate borrowings from variable to fixed. Under the Swaps, we agree to exchange floating rate for fixed rate interest payments periodically over the life of the agreement. The floating rates in our Swaps are based on the one-month LIBOR. The notional balances, terms and maturities of our Swaps are designed to have the effect of fixing the rate of interest on at least 50% of the principal balance of our senior term debt.

As of March 31, 2021, the Swaps have a combined remaining notional balance of $1.2 billion, a weighted average fixed interest rate of 2.68% (rates range from 2.61% to 2.98%), and scheduled terminations through December 2025. Notional balances under our Swaps are scheduled to increase and decrease based on our expectations of the level of variable rate debt to be in effect in future periods. Currently, we have scheduled notional amounts of approximately $1.2 billion through September 2021, then $1.1 billion through March 2022, $1.0 billion through August 2022, and approximately $500.0 million through December 2025. Approximate weighted average fixed interest rates for the aforementioned time periods are 2.66%, 2.78%, and 2.77%, and 2.64%, respectively.

We have designated the Swaps as cash flow hedges. The estimated fair value of these cash flow hedges are recorded in prepaid expenses and other current assets and/or accounts payable and other accrued expenses, as well as other assets and/or other liabilities in the accompanying condensed consolidated balance sheets. As of March 31, 2021, the estimated fair value of these cash flow hedges resulted in a liability of $63.7 million and an asset of $1.1 million. As of December 31, 2020, the estimated fair value of these cash flow hedges resulted in a liability of $80.4 million and an asset of less than $0.1 million.

Unrealized gain of $13.3 million (net of $4.4 million in deferred taxes) and unrealized loss of $36.9 million (net of $12.3 million in deferred taxes) for the three months ended March 31, 2021 and 2020, respectively, were recognized in other comprehensive loss related to the Swaps.

As a result of our Swap activity, for the three months ended March 31, 2021 and 2020, included within interest expense, on a pre-tax basis, we recognized interest expense of $6.6 million and $1.3 million, respectively. Estimated net losses included in accumulated other comprehensive loss related to the Swaps as of March 31, 2021, that will be reclassified into earnings as interest expense over the next 12 months, utilizing March 31, 2021 LIBOR, is estimated to be $30.7 million, on a pre-tax basis.

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Note 6 – Fair Value

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable.

The market approach is applied for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair value balances are classified based on the observability of those inputs.

A fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). Level 2 measurements utilize observable inputs in active markets for similar assets and liabilities, or, quoted prices in markets that are not active.

In estimating the fair value, we used the following methods and assumptions:

Cash and Cash Equivalents

For cash and cash equivalents, the carrying value is a reasonable estimate of fair value due to the short-term nature of the instruments.

Restricted Cash

Restricted cash is comprised of deposits that are pledged for various letters of credit/bank guarantees secured by us, escrow accounts due to acquisitions and divestitures, as well as short-term investments within our deferred compensation plan trust. We deem the carrying value to be a reasonable estimate of fair value due to the nature of these instruments.

Other Investments

Other investments are currently comprised of a minority equity investment in a foreign enterprise which we measure at cost and adjust to fair value on a quarterly basis when there are observable price changes in orderly transactions for the identical, or similar, investments. Changes in fair value are recorded within gain/(loss) on investments and other, net, in our condensed consolidated statement of operations.

Contingent Consideration

The fair value of the contingent consideration was estimated using the Monte-Carlo simulation method, which relies on significant assumptions and estimates including discount rates and future market conditions, among others.

Long-Term Debt

The fair value of long-term debt was estimated based on the current rates available to us for similar debt of the same remaining maturities and consideration of our default and credit risk.

Swaps

The fair value of the Swaps was estimated based on market-value quotes received from the counterparties to the agreements adjusted for credit-risk.

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The fair values of our financial instruments as of March 31, 2021 are presented in the following table:
(in thousands)Fair Value Measurements Using
As of March 31, 2021Level 1Level 2Level 3Fair Value
Financial Assets:
Cash and cash equivalents$227,102 $$$227,102 
Restricted cash8,683 1,681 10,364 
Other investments1,218 1,218 
Total$235,785 $2,899 $$238,684 
Financial Liabilities:
Total debt$$1,789,561 $$1,789,561 
Total$$1,789,561 $$1,789,561 
Derivatives:
Asset for Swaps$$1,064 $$1,064 
Liability for Swaps$$63,699 $$63,699 
As of December 31, 2020
Financial Assets:
Cash and cash equivalents$167,422 $$$167,422 
Restricted cash8,713 1,698 10,411 
Other investments3,523 3,523 
Total$176,135 $5,221 $$181,356 
Financial Liabilities:
Total debt$$1,889,812 $$1,889,812 
Total$$1,889,812 $$1,889,812 
Derivatives:
Asset for Swaps$$29 $$29 
Liability for Swaps$$80,426 $$80,426 
In connection with the 2019 acquisition of National Tax Search, LLC (“NTS”), we entered into a contingent consideration agreement for up to $7.5 million in cash based upon certain revenue targets in fiscal years 2020 and 2021. This contingent consideration has been assessed with no fair value as of March 31, 2021 using the Monte-Carlo simulation model.

Due to observable price changes in an inactive market, we recorded a fair value adjustment of $2.3 million to lower the carrying amount of a minority equity investment for the three months ended March 31, 2021, which amount was recorded within gain/(loss) on investments and other, net, in our condensed consolidated statement of operations. NaN adjustments were necessary for the three months ended March 31, 2020.
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Note 7 – Operating Revenues

Operating revenues by solution type consist of the following:
(in thousands)PIRMUWSCorporate and EliminationsConsolidated
For the Three Months Ended March 31, 2021
Property insights$130,234 $$$130,234 
Insurance and spatial solutions44,978 44,978 
Flood data solutions31,602 31,602 
Valuation solutions62,219 62,219 
Property tax solutions153,105 153,105 
Other2,395 (1,748)647 
Total operating revenue$175,212 $249,321 $(1,748)$422,785 
For the Three Months Ended March 31, 2020
Property insights$115,496 $$$115,496 
Insurance and spatial solutions46,840 46,840 
Flood data solutions27,603 27,603 
Valuation solutions61,247 61,247 
Property tax solutions101,991 101,991 
Other3,653 (3,910)(257)
Total operating revenue$162,336 $194,494 $(3,910)$352,920 

Property Insights

Our property insights solutions combine our patented predictive analytics with our proprietary and contributed data to enable our clients to improve customer acquisition and retention, detect and prevent fraud, improve mortgage transaction cycle time and cost efficiency, identify real estate trends and neighborhood characteristics, track market performance, and increase market share. Our data is comprised of real estate information, incorporating crime, site inspection, neighborhood, document images, and other information from proprietary sources. We also offer verification of applicant income, identity and employment services. We typically license data in one of two forms: bulk data licensing and transactional licensing. Operating revenue for bulk data licensing contracts that provide a stand-ready obligation or include substantive updates to the intellectual property which is recognized ratably over the contractual term; otherwise, operating revenue is recognized upon delivery. For transactional licensing, we recognize operating revenue based on usage.

Insurance and Spatial Solutions

Our insurance and spatial solutions provide originators and property and casualty insurers the ability to more effectively locate, assess and manage property-level assets and risks through location-based data and analytics. We also provide cloud-based property claims workflow technology for property and casualty insurers. The licensed intellectual property data is generally provided to our clients on a subscription or usage basis. For subscription contracts, operating revenue is recognized ratably over the contractual term once initial delivery has occurred. For contracts to provide a license to data which is delivered via report or data file, operating revenue is recognized when the client obtains control of the products, which is upon delivery.

Property Tax Solutions

Our property tax solutions are built from aggregated property tax information from over 20,000 taxing authorities. We use this information to advise mortgage lenders and servicers of the property tax payment status of loans in their portfolio and to monitor that status over the life of the loans. If a mortgage lender or servicer requires tax payments to be impounded on behalf of its borrowers, we can also facilitate the transfer of these funds to the taxing authorities and provide the lender or servicer with payment confirmation. Property tax processing revenues are primarily comprised of periodic loan fees and life-of-loan fees. For periodic fee arrangements, we generate monthly fees at a contracted rate for as long as we service the loan. For life-of-loan fee arrangements, we charge a one-time fee when the loan is set-up in our tax servicing system.
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Life-of-loan fees are deferred and recognized ratably over the expected service period of 10 years and adjusted for early loan cancellation. Revenue recognition rates of loan portfolios are regularly analyzed and adjusted monthly to reflect current trends.

Valuation Solutions

Our valuation solutions represent property valuation-related data driven services and analytics combined with collateral valuation workflow technologies which assist our clients in assessing risk of loss using both traditional and alternative forms of property valuation, driving process efficiencies as well as ensuring compliance with lender and governmental regulations. We provide collateral information technology and solutions that automate property appraisal ordering, tracking, documentation and review for lender compliance with government regulations. Revenue for the property appraisal service is recognized when the appraisal service is performed and delivered to the client. In addition, to the extent that we provide continuous access to the hosted software platform, we recognize operating revenue over the term of the arrangement.

Flood Data Solutions

Our flood data solutions provide flood zone determinations primarily to mortgage lenders in accordance with US Federal legislation passed in 1994, which requires that most lenders obtain a determination of the current flood zone status at the time each loan is originated and obtain applicable updates during the life of the loan if contracted to do so. We also provide flood zone determinations to insurance companies. We generally recognize operating revenue upon delivery of the initial determination. If contracted for life of loan monitoring, we recognize operating revenue over the estimated service period, as adjusted for early loan cancellation.
Contract Costs

Incremental costs to obtain or fulfill client contracts are recognized as an asset. As of March 31, 2021, we had $14.8 million of current deferred contract costs which are presented in prepaid expenses and other current assets, as well as $24.2 million of long-term deferred contract costs which are presented in other assets in our condensed consolidated balance sheet. As of December 31, 2020, we had $13.2 million of current deferred contract costs which are presented in prepaid expenses and other current assets as well as $24.2 million of long-term deferred contract costs which are presented in other assets in our condensed consolidated balance sheet. Our deferred contract costs primarily include certain set-up and acquisition costs related to property tax solutions, which amortize ratably over an expected 10-year life, adjusted for early loan cancellations. For the three months ended March 31, 2021 and 2020, we recorded amortization associated with deferred contract costs of $5.3 million and $3.7 million, respectively.

Contract Liabilities

We record a contract liability when amounts are invoiced, which is generally prior to the satisfaction of the performance obligation. For property tax solutions, we invoice upfront fees to clients for services to be performed over time. For property insights and insurance and spatial solutions we invoice quarterly and annually, commencing upon execution of the contracts or at the beginning of the license term, as applicable.

As of March 31, 2021, we had $1.1 billion in contract liabilities compared to $1.0 billion as of December 31, 2020. The overall change of $80.0 million in contract liability balances is primarily due to $281.3 million of new deferred billings in the current year, partially offset by $201.2 million of operating revenue recognized, of which $112.8 million related to contracts previously deferred, and other decreases of $0.1 million.

Remaining Performance Obligations

The majority of our arrangements are between 1 and 3 years with a significant portion being one year or less. For the remaining population of non-cancellable and fixed arrangements greater than one year, as of March 31, 2021 we had $1.3 billion of remaining performance obligations. We expect to recognize approximately 30% percent of this remaining revenue backlog in 2021, 24% in 2022, 16% in 2023 and 30% thereafter. See further discussion of performance obligations in Note 1 - Basis for Condensed Consolidated Financial Statements.

Note 8 – Share-Based Compensation

We currently issue equity awards under the CoreLogic, Inc. 2018 Performance Incentive Plan (the “Plan”), which was approved by our stockholders at our Annual Meeting held in May 2018. The Plan includes the ability to grant share-based instruments such as RSUs, PBRSUs, and stock options.
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Prior to the approval of the Plan, we issued share-based awards under the CoreLogic, Inc. 2011 Performance Incentive Plan, as amended, which was preceded by the CoreLogic, Inc. 2006 Incentive Plan. The Plan provides for up to 15,139,084 shares of the Company's common stock to be available for award grants.

We have primarily utilized RSUs and PBRSUs as our share-based compensation instruments for employees and directors. The fair value of any share-based compensation instrument grant is based on the market value of our common stock on the date of grant and is recognized as compensation expense over its vesting period.

Restricted Stock Units

For the three months ended March 31, 2021 and 2020, we awarded 188,475 and 552,262 RSUs, respectively, with an estimated grant-date fair value of $15.0 million and $17.6 million, respectively. The RSU awards will vest ratably over 3 years. RSU activity for the three months ended March 31, 2021 is as follows:
Number of SharesWeighted-Average
Grant-Date Fair Value
(in thousands, except weighted-average fair value prices)
Unvested RSUs outstanding at December 31, 20201,194 $38.01 
RSUs granted188 $79.55 
RSUs vested(429)$36.89 
RSUs forfeited(10)$42.52 
Unvested RSUs outstanding at March 31, 2021943 $46.57 

As of March 31, 2021, there was $28.9 million of total unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted-average period of 2.1 years. The fair value of RSU awards is based on the market value of our common stock on the date of grant.

Performance-Based Restricted Stock Units

For the three months ended March 31, 2021 and 2020, we awarded 66,448 and 181,365 PBRSUs, respectively with an estimated grant-date fair value of $5.4 million and $6.8 million, respectively. These awards are generally subject to service-based, performance-based, and market-based vesting conditions. In addition, we granted 227,781 and 111,488 as of March 31, 2021 and 2020, respectively, for changes in performance expectations under the corresponding plans.

The service and performance period for the 2021 PBRSU grants is from January 2021 to December 2023 and the performance metric is adjusted earnings per share, subject to modification based on relative total stockholder return, a market-based vesting condition. The performance and service period for the 2020 PBRSUs is from January 2020 to December 2022 and the performance metric is adjusted earnings per share, subject to modification based on relative total stockholder return, a market-based vesting condition.

The fair value of PBRSU awards are based on the market value of our common stock on the date of grant. For PBRSUs with market-based vesting conditions, we also use the Monte-Carlo simulation with the following weighted-average assumptions:
For the Three Months Ended March 31,
20212020
Expected dividend yield (1)
%%
Risk-free interest rate (2)
0.55 %0.60 %
Expected volatility (3)
33.92 %32.53 %
Average total stockholder return (3)
(18.49)%(21.47)%
(1) Since PBRSU participants are credited with dividend equivalent shares when dividends are paid, 0.00% was used in the Monte-Carlo simulation which is mathematically equivalent to paying dividend equivalents upon vesting. Please see Note 1 - Basis for Condensed Consolidated Financial Statements for further information regarding dividends.
(2) The risk-free interest rate for the periods within the contractual term of the PBRSUs is based on the US Treasury yield curve in effect at the time of the grant.
(3) The expected volatility and average total stockholder return are measures of the amount by which a stock price has fluctuated or is expected to fluctuate based primarily on our and our peers' historical data.

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Additionally, within our outstanding unvested PBRSUs shown in the table below, there are prior year grants which do not include market-based conditions, but instead have adjusted EBITDA margin or organic revenue growth rate as the performance metric.

PBRSU activity for the three months ended March 31, 2021 is as follows:
Number of SharesWeighted-Average
Grant-Date Fair Value
(in thousands, except weighted-average fair value prices)
Unvested PBRSUs outstanding at December 31, 2020671 $41.89 
PBRSUs granted due to change in units based on performance expectations228
PBRSUs granted66 $80.93 
PBRSUs vested(258)$46.04 
PBRSUs forfeited(12)$36.32 
Unvested PBRSUs outstanding at March 31, 2021695 $44.03 

As of March 31, 2021, there was $17.1 million of total unrecognized compensation cost related to unvested PBRSUs that is expected to be recognized over a weighted-average period of 1.9 years.

Stock Options

Prior to 2015, we issued stock options as incentive compensation for certain employees. Option activity for the three months ended March 31, 2021 is as follows:
(in thousands, except weighted-average price)Number of
Shares
Weighted-Average
Exercise Price
Weighted-Average
Remaining
Contractual Term
Aggregate
Intrinsic
Value
Options outstanding at December 31, 2020158 $27.26   
Options exercised$  
Options outstanding at March 31, 2021158 $27.26 0.0$8,221 

As of March 31, 2021, there was 0 unrecognized compensation cost related to unvested stock options.

There were no options exercised during the three months ended March 31, 2021. The intrinsic value of options exercised was $0.3 million for the three months ended March 31, 2020. This intrinsic value represents the difference between the fair market value of our common stock on the date of exercise and the exercise price of each option.

Employee Stock Purchase Plan

The employee stock purchase plan allows eligible employees to purchase our common stock at 85.0% of the lesser of the closing price on the first day or the last day of each quarter. Our employee stock purchase plan was approved by our stockholders at our 2012 annual meeting of stockholders and the first offering period commenced in October 2012. We recognize an expense for the amount equal to the estimated fair value of the discount during each offering period.

The following table sets forth the share-based compensation expense recognized for the three months ended March 31, 2021 and 2020:
(in thousands)20212020
RSUs$6,993 $5,687 
PBRSUs1,920 1,575 
Stock options
Employee stock purchase plan720 699 
 $9,633 $7,961 

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The table above includes $1.0 million and $0.5 million of share-based compensation expense within cost of services in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020.


Note 9 – Litigation and Regulatory Contingencies

We have been named in various lawsuits and we are from time to time subject to audit or investigation by governmental agencies arising in the ordinary course of business.

On March 5, 2021, a purported stockholder of CoreLogic filed a complaint in the United States District Court for the Southern District of New York, captioned Stein v. CoreLogic, Inc., et al., Case No. 1:21-cv-01948 (referred to as the “Stein Complaint”), naming as defendants CoreLogic and each member of the Board. The Stein Complaint was voluntarily dismissed on April 20, 2021. On March 15, 2021, a purported stockholder of CoreLogic filed a complaint in the United States District Court for the District of Colorado, captioned Morse v. CoreLogic, Inc., et al., Case No. 1:21-cv-00770 (referred to as the “Morse Complaint”), naming as defendants CoreLogic and each member of the Board. The Morse Complaint was voluntarily dismissed on April 20, 2021. On March 29, 2021, a purported stockholder of CoreLogic filed a complaint in the United States District Court for the Central District of California, captioned Morgan v. CoreLogic, Inc., et al., Case No. 8:21-cv-00581 (referred to as the “Morgan Complaint”), naming as defendants CoreLogic and each member of the Board. The Morgan Complaint was voluntarily dismissed on April 29, 2021. On March 30, 2021, a purported stockholder of CoreLogic filed a complaint in the United States District Court for the District of Delaware, captioned Kent v. CoreLogic, Inc. et al., Case No. 1:21-cv-00473 (referred to as the “Kent Complaint”), naming as defendants CoreLogic and each member of the Board. The Kent Complaint was voluntarily dismissed on April 29, 2021. On March 31, 2021, a purported stockholder of CoreLogic filed a complaint in the United States District Court for the Eastern District of Pennsylvania, captioned Justice v. CoreLogic, Inc., et al., Case No. 2:21-cv-01542 (referred to as the “Justice Complaint”), naming as defendants CoreLogic and each member of the Board. The Justice Complaint was voluntarily dismissed on May 3, 2021. On April 7, 2021, a purported stockholder of CoreLogic filed a complaint in the United States District Court for the Southern District of New York, captioned Sangster v. CoreLogic, Inc., et al., Case No. 1:21-cv-02982 (referred to as the “Sangster Complaint”), naming as defendants CoreLogic and each member of the Board. The Sangster Complaint was voluntarily dismissed on April 29, 2021. On April 7, 2021, a purported stockholder of CoreLogic filed a complaint in the United States District Court for the Eastern District of New York, captioned Carlson v. CoreLogic, Inc., et al., Case No. 1:21-cv-01879 (referred to as the “Carlson Complaint” and, together with the Stein Complaint, the Morse Complaint, the Morgan Complaint, the Kent Complaint, the Justice Complaint and the Sangster Complaint, the “Complaints”), naming as defendants CoreLogic and each member of the Board.

The Complaints allege, among other things, that the defendants violated Section 14(a) and Section 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 14a-9 promulgated thereunder. Specifically, one or more of the Complaints allege that the proxy statement filed by CoreLogic with the SEC on March 1, 2021 in connection with the Merger contains materially incomplete and misleading information concerning the Company’s financial forecasts, the financial analyses conducted by Evercore in support of its fairness opinion, services previously provided by Evercore to CoreLogic and/or Parent, the scope and terms of the non-disclosure agreements entered into between CoreLogic and potential bidders in connection with a potential strategic transaction involving CoreLogic and potential conflicts of interests of certain insiders of CoreLogic. The relief sought in one or more of the Complaints includes enjoining the consummation of the Merger unless and until the defendants disclose certain allegedly material information, rescinding, to the extent already implemented, the Merger Agreement or any of the terms thereof, granting rescissory damages, directing the defendants to disseminate a proxy statement that does not contain any untrue statements of material fact and that states all required or necessary material facts, directing the defendants to account for all alleged damages suffered as a result of the defendants’ alleged wrongdoing, declaring that defendants violated Sections 14(a) and/or 20(a) of the Exchange Act as well as Rule 14a-9 promulgated thereunder, and awarding the plaintiffs their respective costs and disbursements, including reasonable attorneys’ and expert fees and expenses. CoreLogic believes that the Complaints were (and, in the case of the Carlson Complaint, is) without merit.

On April 27, 2021, a purported stockholder of CoreLogic filed in the Delaware Court of Chancery a complaint seeking to compel inspection of certain of CoreLogic’s books and records under 8 Del. C. § 220, captioned Teamsters Local 677 Health Services & Insurance Plan v. CoreLogic, Inc., C.A. No. 2021-0360-JTL, which names CoreLogic as the defendant.

With respect to matters where we determine that a loss is both probable and reasonably estimable, we record a liability representing our best estimate of the financial exposure based on known facts. For matters where a settlement has been reached, we record the expected amount of such settlements. With respect to audits, investigations or lawsuits that are ongoing, although their final dispositions are not yet determinable, we do not believe that the ultimate resolution of such matters, either individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flows. The ability to predict the ultimate outcome of such matters involves judgments, estimates and inherent uncertainties.
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The actual outcome of such matters could differ materially from management’s estimates. We record expenses for legal fees as incurred. As of March 31, 2021 our accrual for litigation and regulatory contingencies was immaterial.

See Note 14 - Discontinued Operations for additional information on litigation matters within RPS and CS.

Note 10 – Income Taxes

The effective income tax rate for income taxes as a percentage of income from continuing operations before equity in earnings of affiliates and income taxes was 19.9% and 29.2% for the three months ended March 31, 2021 and 2020, respectively.

For the three months ended March 31, 2021, when compared to the same period for 2020, the decrease in the effective income tax rate was primarily due to tax benefits recorded in 2021 related to share-based compensation.     

We are currently under examination for the tax year 2016 by the Internal Revenue Service, our primary taxing authority, and for other years by various other taxing authorities. It is reasonably possible the amount of our unrecognized tax benefits as well as valuation allowance, with respect to certain tax attributes, could be significantly impacted which would have an impact on net income. In the next 12 months, we expect expirations of statutes of limitations on reserves of approximately $0.5 million.

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Note 11 – Earnings Per Share

The following is a reconciliation of net income per share:
For the Three Months Ended March 31,
 20212020
(in thousands, except per share amounts)  
Numerator for basic and diluted net income per share:  
Net income from continuing operations$54,943 $24,284 
Income from discontinued operations, net of tax3,907 9,535 
Loss from sale of discontinued operations, net of tax(5,288)
Net income$53,562 $33,819 
Denominator:  
Weighted-average shares for basic income per share73,228 79,028 
Dilutive effect of stock options and RSUs1,907 1,497 
Weighted-average shares for diluted income per share75,135 80,525 
Income per share  
Basic:  
Net income from continuing operations$0.75 $0.31 
Income from discontinued operations, net of tax0.05 0.12 
Loss from sale of discontinued operations, net of tax(0.07)
Net income$0.73 $0.43 
Diluted: 
Net income from continuing operations$0.73 $0.30 
Income from discontinued operations, net of tax0.05 0.12 
Loss from sale of discontinued operations, net of tax(0.07)
Net income$0.71 $0.42 

The dilutive effect of share-based compensation awards has been calculated using the treasury-stock method. For both the three months ended March 31, 2021 and 2020, an aggregate of approximately 0.1 million of RSUs and PBRSUs were excluded from the weighted-average diluted common shares outstanding due to their anti-dilutive effect.
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Note 12 – Acquisitions

In March 2021, we acquired 100% of the shares of ehouse Limited ("ehouse") for £6.9 million or approximately $9.7 million subject to certain working capital adjustments. ehouse delivers a full range of marketing services in the residential, commercial and leisure real estate sectors. ehouse is included as a component of our PIRM segment. The purchase price was allocated to the assets acquired and liabilities assumed using a variety of valuation techniques including discounted cash flow analysis, which included significant observable inputs. We have preliminarily recorded $1.3 million in proprietary technology and $3.1 million for client lists each with an estimated useful life of 9 years. We have also preliminarily recorded tradenames of $0.4 million with an estimated useful life of 10 years, noncompete agreements of $0.1 million with an estimated useful life of 2 years, deferred tax liabilities of $0.9 million and $4.6 million in goodwill.

In January 2020, we acquired the remaining 66% of Location for $11.5 million, subject to certain working capital adjustments. Location is a leading provider of geographic location indicators for crime and non-weather related events connected to underwriting risk assessment. This acquisition further progresses our long-term strategic plan by adding scale to our insurance and spatial businesses. Location is included as a component of our PIRM segment. The purchase price was allocated to the assets acquired and liabilities assumed using a variety of valuation techniques including discounted cash flow analysis, which included significant unobservable inputs. We have recorded proprietary technology of $6.0 million with an estimated useful life of 10 years, client lists of $0.3 million with an estimated useful life of 5 years, trademarks of $0.8 million with an estimated useful life of 8 years, non-compete agreements of $0.4 million with an estimated useful life of 5 years, and goodwill of $12.6 million. In connection with this acquisition, we remeasured our then-existing 34% investment ownership in Location which resulted in a $0.6 million step-up gain that we recorded within gain/(loss) on investments and other, net, in our condensed consolidated statement of operations for the three months ended March 31, 2020.

These business combinations did not have a material impact on our condensed consolidated statements of operations.

We incurred $0.3 million and $0.9 million of acquisition-related costs within selling, general and administrative expenses for the three months ended March 31, 2021 and 2020, respectively.

Note 13 – Segment Information

We have organized into 2 reportable segments: PIRM and UWS.

Property Intelligence & Risk Management Solutions. Our PIRM segment combines property information, mortgage information, and consumer information to deliver unique housing market and property-level insights, predictive analytics and risk management capabilities. We have also developed proprietary technology and software platforms to access, automate, and track this information and assist our clients with decision-making and compliance tools in the real estate industry and insurance industry. We deliver this information directly to our clients in a standard format over the web, through hosted software platforms, or in bulk data form. Our PIRM solutions include property insights and insurance and spatial solutions in North America, Western Europe, and Asia Pacific. The segment's primary clients are commercial banks, mortgage lenders and brokers, investment banks, fixed-income investors, real estate agents, MLS companies, property and casualty insurance companies, title insurance companies, government agencies, and government-sponsored enterprises.

The operating results of our PIRM segment included intercompany revenues of $1.4 million and $3.1 million for the three months ended March 31, 2021 and 2020, respectively. The segment also included intercompany expenses of $0.3 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively.

Underwriting & Workflow Solutions. Our UWS segment combines property, mortgage, and consumer information to provide comprehensive mortgage origination and monitoring solutions, including, underwriting-related solutions, and data-enabled valuations and appraisals. We have also developed proprietary technology and software platforms to access, automate, and track this information, and assist our clients with vetting and onboarding prospects, meeting compliance regulations and understanding, evaluating, and monitoring property values. Our UWS solutions include property tax solutions, valuation solutions, and flood data solutions in North America. The segment’s primary clients are large, national mortgage lenders and servicers, but we also serve regional mortgage lenders and brokers, credit unions, commercial banks, fixed-income investors, government agencies, and property and casualty insurance companies.

The operating results of our UWS segment included intercompany revenues of $0.3 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively. The segment also included intercompany expenses of $0.5 million and $1.0 million for the three months ended March 31, 2021 and 2020, respectively.

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We also separately report on our corporate and eliminations. Corporate consists primarily of corporate personnel and other expenses associated with our corporate functions and facilities, investment gains and losses, equity in earnings/(losses) of affiliates, net of tax, and interest expense. The results of our Corporate segment included intercompany expenses of $0.9 million for the three ended March 31, 2021 and $2.2 million for the three months ended March 31, 2020.

Selected financial information by reportable segment related to our continuing operations is as follows:
(in thousands)Operating RevenuesDepreciation and AmortizationOperating Income/(Loss)Equity in Earnings/(Losses) of Affiliates, Net of TaxNet Income/(Loss) From Continuing OperationsCapital Expenditures
For the Three Months Ended March 31, 2021
PIRM$175,212 $24,059 $20,152 $$18,441 $14,009 
UWS249,321 12,241 108,793 108,803 1,610 
Corporate8,481 (43,508)(72,301)5,427 
Eliminations(1,748)
Consolidated (excluding discontinued operations)$422,785 $44,781 $85,437 $$54,943 $21,046 
For the Three Months Ended March 31, 2020    
PIRM$162,336 $23,136 $14,353 $706 $15,267 $12,788 
UWS194,494 12,035 67,520 67,530 1,481 
Corporate8,407 (26,680)(194)(58,513)6,614 
Eliminations(3,910)
Consolidated (excluding discontinued operations)$352,920 $43,578 $55,193 $512 $24,284 $20,883 
(in thousands)
AssetsMarch 31, 2021December 31, 2020
PIRM$1,896,018 $1,892,424 
UWS2,026,550 2,013,089 
Corporate6,110,945 6,046,238 
Eliminations(5,871,711)(5,870,974)
Consolidated (excluding discontinued operations)$4,161,802 $4,080,777 
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Note 14 – Discontinued Operations

In July 2020, we announced our intentions to pursue the sale of our reseller businesses focused on mortgage credit and borrower verification and multi-family tenant screening. Although market leaders in their respective business areas, these reseller businesses are not compatible with our long-term strategic imperatives. The divestiture of these operations is expected to improve our revenue growth trends, revenue mix, and significantly enhance profit margins. In October 2020, we consummated the sale of a component of RPS for $9.0 million, which resulted in a gain on sale of discontinued operations of $2.7 million, net of tax. In February 2021, we sold the remainder of RPS for $51.2 million which resulted in a loss, net of tax, of $5.3 million for the three months ended March 31, 2021. We expect to sell the remainder of our reseller businesses to third parties by quarter ending September 30, 2021. RPS was included within the PIRM reporting unit and CS was included within the UWS reporting unit prior to the RPS and CS disposal groups being presented as discontinued operations.

For the three months ended March 31, 2021, we recorded $1.7 million in costs directly related to the sale of the remainder of RPS. Each of these businesses is reflected in our accompanying condensed consolidated financial statements as discontinued operations.

Summarized below are certain assets and liabilities classified as discontinued operations as of March 31, 2021 and December 31, 2020:

(in thousands)
As of March 31, 2021PIRMUWSAMPSELITotal
Cash and cash equivalents$381 $571 $$$952 
Accounts receivable and other assets2,634 55,801 26858,703 
Property and equipment, net25,998 25,998 
Goodwill, net79,931 79,931 
Capitalized data and database costs, net1,037 1,037 
Total assets$3,015 $163,338 $268 $$166,621 
Accounts payable and accrued expenses$11,457 $34,429 $240 $$46,126 
Deferred income tax and other liabilities18 9,802 393 10,213 
Total liabilities$11,475 $44,231 $240 $393 $56,339 
As of December 31, 2020
Cash and cash equivalents$971 $1,501 $$$2,472 
Accounts receivable and other assets4,063 42,806 268 47,137 
Property and equipment, net5,586 24,651 30,237 
Goodwill, net24,272 79,931 104,203 
Capitalized data and database costs, net17,377 991 18,368 
Total assets$52,269 $149,880 $268 $$202,417 
Accounts payable and accrued expenses$2,584 $24,048 $240 $$26,873 
Deferred income tax and other liabilities10,686 6,725 393 17,804 
Total liabilities$13,270 $30,773 $240 $394 $44,677 

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For the year ended December 31, 2020, in connection with our intent to exit our reseller businesses, we reclassified $29.3 million and $79.9 million of goodwill, net, from our PIRM and UWS segments, to the RPS and CS disposal groups, respectively. The allocated amounts were determined by calculating the relative fair values between the disposal group and its respective reporting unit using a combination of the income and market approaches. Determining the fair value of a disposal group and a reporting unit is judgmental and requires assumptions and estimates of many critical factors, including revenue growth rates, cost of services, selling, general and administrative expenses, market multiples, discount rates, and indicative fair market values from potential participants at the time of valuation. The estimated fair values supported the net book value of our disposal groups.

Summarized below are the components of our income/(loss) from discontinued operations, net of tax for the three months ended March 31, 2021 and 2020:

(in thousands)
For the Three Months March 31, 2021PIRMUWSAMPSELITotal
Operating revenues$2,867 $103,582 $$$106,449 
Cost of services (exclusive of depreciation and amortization)1,632 84,534 86,166 
Selling, general and administrative expenses10,382 4,854 15,236 
Gain on investments and other, net(159)(159)
Income/(loss) from discontinued operations before income taxes(9,147)14,353 5,206 
Provision/(benefit) for income taxes(2,282)3,581 1,299 
Income/(loss) from discontinued operations, net of tax$(6,865)$10,772 $$$3,907 
For the Three Months March 31, 2020
Operating revenues$9,239 $81,727 $$$90,966 
Cost of services (exclusive of depreciation and amortization)4,443 66,598 71,041 
Selling, general and administrative expenses2,664 2,118 (18)4,764 
Depreciation and amortization1,875 1,390 3,265 
Gain on investments and other, net(809)(809)
Income/(loss) from discontinued operations before income taxes257 12,430 18 12,705 
Provision/(benefit) for income taxes64 3,101 3,170 
Income/(loss) from discontinued operations, net of tax$193 $9,329 $$13 $9,535 
(in thousands)
Fair Value on Contingent Consideration

In connection with certain acquisitions in 2017 related to our discontinued operations, we entered into contingent consideration agreements for up to $17.5 million in cash by 2022 upon the achievement of certain revenue targets ending in fiscal year 2021. This contingent payment was originally recorded at a fair value of $4.4 million using the Monte-Carlo simulation model. The contingent payments are remeasured at fair value quarterly, and changes are recorded within income/(loss) from discontinued operations, net of tax, in our condensed consolidated statements of operations. During the three months ended March 31, 2021, we decreased the fair value of our contingent consideration by $0.2 million. During the three months ended March 31, 2020, we decreased the fair value of our contingent consideration by $0.8 million.

Litigation Matters

In the RPS sale transaction, we retained liabilities relating to pending litigation involving RPS.

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Fair Credit Reporting Act Class Actions

In July 2017, CoreLogic Rental Property Solutions, LLC (“RPS LLC”) was named as a defendant in Claudinne Feliciano, et. al., v. CoreLogic SafeRent, LLC, a putative class action lawsuit in the US District Court for the Southern District of New York. The named plaintiff alleges that RPS LLC prepared a background screening report about her that contained a record of a New York Housing Court action without noting that the action had previously been dismissed. On this basis, she seeks damages under the Fair Credit Reporting Act and the New York Fair Credit Reporting Act on behalf of herself and a class of similarly situated consumers with respect to reports issued during the period of July 2015 to the present. In July 2019, the District Court issued an order certifying a class of approximately 2,000 consumers. In June 2020, we reached an agreement to resolve the case. At a hearing on February 23, 2021, the District Court granted final approval of the settlement. The settlement amount was recorded during the quarter ended June 30, 2020.

In May 2020, RPS LLC was named as a defendant in Terry Brown v. CoreLogic Rental Property Solutions, LLC, a putative class action lawsuit filed in the US District Court for the Eastern District of Virginia. The named plaintiff alleges that RPS LLC prepared a background screening report about him that included a sex offender record that did not relate to him. He seeks damages under the Fair Credit Reporting Act on behalf of himself and a class of similarly situated consumers, as well as a subclass of consumers for whom misattributed sex offender records were removed following a dispute. Following a mediation on April 1, 2021, we reached an agreement in principle, subject to agreement on written terms, to settle the case. We have recorded the amount of the settlement for the quarter ended March 31, 2021.

In June 2020, CoreLogic Credco, LLC (“Credco”) was named as a defendant in Marco Fernandez v. CoreLogic Credco, LLC, a putative class action lawsuit filed in California Superior Court in San Diego County. The named plaintiff alleges that Credco provided a lender with a consumer report about him that erroneously indicated he is on the Office of Foreign Asset Control’s list of Specially Designated Nationals and Blocked Persons (“OFAC List”). He further alleges that Credco failed to provide him with a copy of the OFAC List designation upon request, failed to notify him of what entities had received such a notification in the past, and failed to respond to his effort to dispute the item. He seeks to represent three classes and four subclasses based upon these allegations, and asserts seven claims under the Fair Credit Reporting Act, the California Credit Reporting Agencies Act, and California’s Unfair Competition law. The Company has removed the case to the US District Court for the Southern District of California. The case has been stayed pending the U.S. Supreme Court’s decision in Trans Union, LLC v. Ramirez.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q and certain information incorporated herein by reference contain forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Quarterly Report, other than statements that are purely historical, are forward-looking statements. Words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “should,” “would,” “could,” “may,” and similar expressions also identify forward-looking statements. The forward-looking statements include, without limitation, statements regarding our future operations, financial condition and prospects, operating results, revenues and earnings liquidity, our estimated income tax rate, unrecognized tax positions, amortization expenses, impact of recent accounting pronouncements, our cost management program, our acquisition strategy and our growth plans, expectations regarding our recent acquisitions, share repurchases, the level of aggregate US mortgage originations, and the reasonableness of the carrying value related to specific financial assets and liabilities.

Our expectations, beliefs, objectives, intentions and strategies regarding future results are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by our forward-looking statements. These risks and uncertainties include, but are not limited to:

our ability to satisfy the remaining conditions to the closing of the Merger in a timely manner, or at all;
the potential impact of, and any potential developments related to, the proposed Merger;
the potential impact of, and any potential developments related to, activist shareholder activity;
compromises in the security or stability of our data and systems, including from cyber-based attacks, the unauthorized transmission of confidential information or systems interruptions, which could impair the delivery of our products and services;
changes in applicable government legislation, regulations and the level of regulatory scrutiny affecting our clients or us, including with respect to consumer financial services and the use of public records and consumer data;
reliance on our top ten clients for a significant portion of our revenue and profit;
intense competition in the market against third parties and the in-house capabilities of our clients;
risks related to the outsourcing of services and international operations;
potential impairment of our substantial goodwill and other intangible assets;
the potential impact that the COVID-19 pandemic, or the perception of its effects, may have on our business;
our ability to protect proprietary technology rights and avoid infringement of others’ proprietary technology rights;
the level of our indebtedness, our ability to service our indebtedness and the restrictions in our various debt agreements;
our ability to realize the anticipated benefits of certain acquisitions and the timing thereof;
the impact of our adoption of a shareholder rights plan;
difficult or uncertain conditions in the mortgage and consumer lending industries and the economy generally; and
our ability to attract and retain qualified personnel.

We urge you to carefully consider risks and uncertainties and review the additional disclosures we make concerning risks and uncertainties that may materially affect the outcome of our forward-looking statements and our future business and operating results, including those made in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020, as such risk factors may be amended, supplemented, or superseded from time to time by other reports we file with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the filing of this Quarterly Report on Form 10-Q.

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Business Overview

We are a leading global property information, analytics and data-enabled software platforms and services provider operating in North America, Western Europe, and Asia Pacific. Our combined data from public, contributory and proprietary sources provides detailed coverage of property, mortgages, other encumbrances, property risk and replacement cost, location, hazard risk, and related performance information. We have more than one million users who rely on our data and predictive decision analytics to reduce risk, enhance transparency, and improve the performance of their businesses.

We offer our clients a comprehensive national database covering real property and mortgage information, judgments and liens, building and replacement costs, parcel and geospatial data, and tax information, among other data types. Our structured property-specific data consisting of over 150 million parcel records covers over 99% of the US, includes both residential and commercial real estate data and is enriched by over one billion historical sales, mortgage, and pre-foreclosure transactions. Our consortium data covers loan-level mortgage performance, appraisal, as well as mortgage application data and is in excess of 300 million records. We are also the industry's first parcel-based geocoder and have developed a proprietary spatial database covering more than 150 million parcel polygons across the US. We believe the quality of the data we offer is distinguished by our broad range of data sources and our experience in aggregating, organizing, normalizing, processing, and delivering data to our clients.

With our data as a foundation, we have built strong analytics capabilities and a variety of value-added business services to meet our clients’ needs for property tax processing, property valuation, hazard risk, property risk and replacement cost, flood plain location determination, other geospatial data, analytics, and related services.

Reportable Segments

We have organized into the following two reportable segments:

Our PIRM segment combines property information, mortgage information, and consumer information to deliver unique housing market and property-level insights, predictive analytics and risk management capabilities. We have also developed proprietary technology and software platforms to access, automate or track this information and assist our clients with decision-making and compliance tools in the real estate industry and insurance industry. We deliver this information directly to our clients in a standard format over the web, through hosted software platforms or in bulk data form. Our solutions include property insights as well as insurance and spatial solutions in North America, Western Europe and Asia Pacific.

Our UWS segment combines property information and mortgage information to provide comprehensive mortgage origination and monitoring solutions, including underwriting-related solutions and data-enabled valuations and appraisals. We have also developed proprietary technology and software platforms to access, automate or track this information and assist our clients with vetting and on-boarding prospects, meeting compliance regulations and understanding, diagnosing and monitoring property values. Our solutions include property tax solutions, valuation solutions, and flood services in North America.

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Results of Operations

Overview of Business Environment and Company Developments

Merger Agreement

In February 2021, CoreLogic entered into the Merger Agreement with the Acquirer and Acquisition Sub providing for the Merger, subject to the terms and conditions set forth therein. The Acquirer and Acquisition Sub are affiliates of Stone Point Capital Partners and Insight Partners. In the event the Merger is completed, except as otherwise provided in the Merger Agreement, each share of common stock issued and outstanding immediately prior to the Effective Time would be converted into the right to receive the Merger Consideration.

Consummation of the Merger is subject to customary closing conditions, including, among other things, receipt of the Requisite Stockholder Approval and Regulatory Approvals. The Requisite Stockholder Approval was obtained at a special meeting of the Company’s stockholders on April 28, 2021. In addition, the applicable waiting period under the HSR Act expired on March 22, 2021 and clearance to proceed was obtained from the New Zealand Overseas Investment Office on March 8, 2021. CoreLogic made the filing required in Australia in February 2021 and is awaiting approval from the Australian Foreign Investment Review Board.

The consummation of the Merger is not subject to a financing condition, and the Acquirer has obtained equity and debt financing commitments for the purpose of financing the Merger and the other transactions contemplated by the Merger Agreement. Certain debt financing arrangements have already been secured by Acquisition Sub and, subject to the consummation of the Merger, will become indebtedness of CoreLogic at the Effective Time.

Either we or the Acquirer may terminate the Merger Agreement in certain circumstances, including if (i) the Merger shall not have been consummated on or before 5:00 p.m. (New York City time) on August 9, 2021, (ii) any of certain governmental authorities of competent jurisdiction has issued a final non-appealable law or order prohibiting the Merger, (iii) the Requisite Stockholder Approval is not obtained at the stockholders’ meeting duly convened therefor or (iv) the other party materially breaches, and does not cure, any representation or covenant that would cause the related condition to the other party’s obligation to consummate the Merger not to be satisfied, in each case subject to certain limitations set forth in the Merger Agreement. If we terminate the Merger Agreement because (i) the Acquirer or Acquisition Sub materially breaches, and does not cure, any representation or covenant that would cause any conditions to our obligation to consummate the Merger not to be satisfied or (ii) all conditions to the Merger have been and continue to be satisfied (subject to customary exceptions) and the Acquirer fails to consummate the Merger after receiving written notification from us, we would be entitled to receive a termination fee from the Acquirer of $330 million. If the Merger Agreement is terminated by us or the Acquirer under other certain circumstances specified in the Merger Agreement, we would be obligated to pay a termination fee of $165 million to the Acquirer. See the risk factor titled “If the Merger Agreement is terminated, under certain conditions, we may be obligated to pay the Acquirer a substantial termination fee, which could require us to incur additional debt or reduce the amount of cash we have available to fund our operations” under “Risk Factors” in Item 1A of Part I of our 2020 10-K for further information about the termination fee we may be obligated to pay.

Please refer to the Definitive Proxy Statement for further information about the Merger, the Merger Agreement, and the other transactions contemplated thereby.

Rights Agreement Amendment

In February 2021, in connection with the execution of the Merger Agreement, CoreLogic also entered into the Rights Agreement Amendment with Equiniti Trust Company, in order to (i) render the Rights Agreement inapplicable to the Merger and the transactions contemplated by the Merger Agreement, (ii) ensure that in connection with the transactions contemplated by the Merger Agreement, none of the Acquirer, Acquisition Sub, or any of their “Affiliates” or “Associates” (each as defined in the Rights Agreement) shall be deemed to be or become an “Acquiring Person” (as defined below) and (iii) provide that the “Expiration Date” (as defined in the Rights Agreement) shall occur immediately prior to the Effective Time.

Unsolicited Proposal and Proxy Contest Proposals

In connection with the Unsolicited Proposal, Proxy Contest Proposals, and related strategic transaction process, we have incurred expenses of approximately $11.4 million for the three months ended March 31, 2021.
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Please refer to Note 1 - Basis for Condensed Consolidated Financial Information under the heading “Unsolicited Proposal and Proxy Contest Proposals” for further information.

COVID-19

The global COVID-19 pandemic and the mitigation efforts by governments to attempt to control its spread have adversely impacted the global economy, leading to disruptions and volatility in the global financial markets. Most states and many countries have issued policies intended to stop or slow the further spread of the disease. Our first priority remains ensuring the safety and health of our employees, clients, and others with whom we partner in conducting our business. We have deployed risk-mitigation activities, safety practices, and business continuity strategies so that we can continue offering our clients consistent service offerings while continuing to protect our employees.

The volume of US mortgage loan originations serves as a key market driver for more than half of our business. We believe the volume and related volatility of real estate and mortgage transactions is primarily affected by real estate prices, the availability of funds for mortgage loans, mortgage interest rates, housing supply, employment levels, actions by the Federal Reserve, and the overall state of the US economy. Mortgage interest rates are extremely low by historical standards, and are resulting in higher demand for refinance activity, while the purchase market has been adversely impacted by reduced construction and sales of new and existing homes, and more recently, the COVID-19 pandemic and resulting economic instability. For the three months ended March 31, 2021, our continuing operations experienced unfavorable business and revenue impacts of approximately $0.8 million, respectively, related to the COVID-19 pandemic, exclusive of the increased mortgage refinance volumes. For the three months ended March 31, 2021, the COVID-19 pandemic has not had a significant impact on our financial condition, cash flows, control environment, or any related disclosures.

We will continue to monitor our business trends, financial condition, and liquidity, and are taking steps to manage our operating cash flows, by prioritizing our investments, and evaluating our capital needs and activities. Our liquidity as of March 31, 2021 consisted primarily of $227.1 million of cash and cash equivalents, and $450.0 million of unused committed capacity under our revolving credit facility, and we are in compliance with all financial covenants.

Business Environment

We believe mortgage origination unit volumes increased in the first quarter of 2021 relative to the same period in 2020, primarily due to higher mortgage refinance volumes resulting from lower interest rates which favorably impacted overall mortgage unit volumes. For 2021, we expect mortgage unit volumes to be relatively flat or decline slightly when compared to 2020 levels supported by a continued low interest rate environment.

We generate the majority of our operating revenues from clients with operations in the US residential real estate, mortgage origination, and mortgage servicing markets. Approximately 40% and 30% of our operating revenues for the three months ended March 31, 2021 and 2020, respectively, were generated from our top ten clients, who consist of the largest US mortgage originators and servicers. None of our clients individually accounted for greater than 10% of our operating revenues for the three months ended March 31, 2021 or 2020.

While the majority of our revenues are generated in the US, foreign exchange translation impacted our financial results from our international operating revenues favorably by $5.8 million for the three months ended March 31, 2021, respectively.

Capital Return

In July 2020, our Board of Directors authorized the repurchase up to $1.0 billion of outstanding shares of our common stock. The authorization has no expiration date and supersedes our previous share repurchase authorization. As of March 31, 2021, we had $500.0 million in value of shares (inclusive of commissions and fees) available to be repurchased under the share repurchase authorization. Pursuant to the Merger Agreement, we agreed to refrain from repurchasing shares of our common stock during the period between February 4, 2021 and the earlier of (i) the consummation of the Merger or (ii) the termination of the Merger Agreement (the “Interim Operating Period”), subject to the terms, limitations and exceptions set forth in the Merger Agreement.





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In December 2019, we announced the initiation of a quarterly cash dividend to common shareholders. CoreLogic paid a cash dividend of $0.22 per share of common stock in January 2020 and June 2020 to shareholders of record as of the close of business on January 10, 2020 and June 1, 2020, respectively. In July 2020, our Board of Directors announced a 50% increase in our cash dividend and declared a $0.33 per share cash dividend to common stockholders, which was paid in September 2020, December 2020, and March 2021 to stockholders of record as of the close of business on September 1, 2020, December 1, 2020, and March 1, 2021, respectively. Pursuant to the Merger Agreement, we agreed to refrain from declaring or paying any further dividends during the Interim Operating Period, subject to the terms, limitations and exceptions set forth in the Merger Agreement.

Acquisitions

In January 2020, we acquired the remaining 66% of Location for $11.5 million, subject to certain working capital adjustments. Location is included as a component of our PIRM segment.

In March 2021, we acquired 100% of the shares of ehouse for £6.9 million (or approximately $9.7 million), subject to certain working capital adjustments. ehouse is included as a component of our PIRM segment. See Note 12 - Acquisitions for further discussion.

Technology Transformation

In September 2018, we announced the adoption of the Google Cloud Platform (“GCP”) as a foundational element of our ongoing technology transformation program to further expand infrastructure capabilities and drive efficiencies. We successfully completed the initial transformation phase, and will continue transitioning our technology over the foreseeable future on an opportunistic basis. The transition to GCP allows us to leverage the capabilities of the cloud platform to achieve best-in-class system performance and reliability and to facilitate the deployment of unique business insights fueled by gold-standard data, information, and analytics. Additionally, we expect to realize cost efficiencies and enhanced security as we continue the transition.

Discontinued Operations

In July 2020, we announced our intention to exit our reseller operations focused on mortgage credit and borrower verification and multi-family tenant screening. Although market leaders in their respective business areas, these reseller businesses are not compatible with our long-term strategic imperatives. The divestiture of these operations is expected to improve the Company's revenue growth trends and revenue mix, and significantly enhance profit margins. As a result of this strategic decision, the businesses have been reflected in our condensed consolidated financial statements as discontinued operations for all periods presented. In October 2020, we sold a portion of our multi-family tenant screening business, which resulted in a gain on the sale of discontinued operations of $2.7 million, net of tax. In February 2021, we sold the remainder of RPS for $51.2 million which resulted in a loss, net of tax, of $5.3 million for the three months ended March 31, 2021. For the three months ended March 31, 2021, these businesses generated revenues of $106.4 million and operating income of $5.2 million. For the three months ended March 31, 2020, these business generated revenues of $91.0 million and operating income of $12.7 million. Please refer to Note 14 - Discontinued Operations for further information.

Unless otherwise indicated, the Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q relate solely to the discussion of our continuing operations.
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Consolidated Results of Operations

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

Operating Revenues

Our consolidated operating revenues were $422.8 million for the three months ended March 31, 2021, an increase of $69.9 million, or 19.8%, when compared to 2020, and consisted of the following:
(in thousands, except percentages)20212020$ Change% Change
PIRM$175,212 $162,336 $12,876 7.9 %
UWS249,321 194,494 54,827 28.2 
Corporate and eliminations(1,748)(3,910)2,162 (55.3)
Operating revenues$422,785 $352,920 $69,865 19.8 %

Our PIRM segment revenues increased by $12.9 million, or 7.9%, for the three months ended March 31, 2021, when compared to 2020. Excluding acquisition activity of $0.9 million, the increase of $12.0 million was primarily due to higher revenues of $7.0 million from property insights and insurance and spatial solutions due to increased market volumes, market-share gains and pricing. Additionally, included within our property insights and spatial solutions revenues is a favorable foreign exchange impact of $5.8 million.

Our UWS segment revenues increased by $54.8 million, or 28.2%, for the three months ended March 31, 2021, when compared to 2020. The increase was primarily due to higher property tax solutions revenues of $51.1 million, higher flood data solutions revenues of $4.0 million, and higher valuation solutions revenue of $1.0 million, primarily related to increased market volumes, market-share gains, and pricing. These increases were partially offset by lower other revenues of $1.3 million due to product wind-downs.

Our corporate and eliminations were comprised of intercompany revenue eliminations between our operating segments.

Cost of Services (excluding depreciation and amortization)

Our consolidated cost of services was $162.6 million for the three months ended March 31, 2021, an increase of $18.0 million, or 12.5%, when compared to 2020. Excluding acquisition activity of $0.5 million, the increase of $17.5 million was primarily due to higher revenue.

Selling, General and Administrative Expenses

Our consolidated selling, general and administrative expenses were $130.0 million for the three months ended March 31, 2021, an increase of $20.4 million, or 18.6%, when compared to 2020. Excluding acquisition activity of $0.1 million, the increase of $20.5 million was primarily due to higher costs as a result of the Unsolicited Proposal, Proxy Contest Proposals, and related strategic transaction process of $11.4 million, higher other external services costs of $4.9 million, and higher compensation costs of $6.5 million, partially offset by lower travel costs of $2.3 million.

Depreciation and Amortization

Our consolidated depreciation and amortization expense was $44.8 million for the three months ended March 31, 2021, an increase of $1.2 million, or 2.8%, when compared to 2020 due to asset additions made during the year.

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Operating Income

Our consolidated operating income was $85.4 million for the three months ended March 31, 2021, an increase of $30.2 million, or 54.8%, when compared to 2020, and consisted of the following:
(in thousands, except percentages)20212020$ Change% Change
PIRM$20,152 $14,353 $5,799 40.4 %
UWS108,793 67,520 41,273 61.1 
Corporate and eliminations(43,508)(26,680)(16,828)63.1 
Operating income$85,437 $55,193 $30,244 54.8 %

Our PIRM segment operating income increased by $5.8 million, or 40.4%, for the three months ended March 31, 2021, when compared to 2020. Excluding acquisition activity of $0.4 million, operating income increased by $5.4 million and margins increased by 247 basis points primarily due to higher revenue, favorable product mix and the impact of our ongoing operational efficiency programs.

Our UWS segment operating income increased by $41.3 million, or 61.1%, and margins increased by 892 basis points for the three months ended March 31, 2021, when compared to 2020 primarily due to higher revenues, improved product mix, and the impact of our ongoing operational efficiency programs.

Corporate and eliminations had an unfavorable variance of $16.8 million, or 63.1%, for the three months ended March 31, 2021, primarily due to higher costs associated with the Unsolicited Proposal, Proxy Contest Proposals, and related strategic transaction process.

Total Interest Expense, net

Our consolidated total interest expense, net, was $16.3 million for the three months ended March 31, 2021, a decrease of $1.5 million, or 8.3%, when compared to 2020. The decrease was primarily due to lower interest rates and debt levels.

Loss on Investments and Other, net

Our consolidated loss on investments and other, net, was $0.5 million for the three months ended March 31, 2021, a favorable variance of $3.4 million, when compared to 2020. The variance is primarily due to losses related to our supplemental benefit plan in 2020. This variance is partially offset by a loss due to a fair value adjustment of $2.3 million to lower the carrying value of a minority equity investment in 2021.

Provision for Income Taxes

Our consolidated provision for income taxes from continuing operations before equity in earnings of affiliates and income taxes was $13.7 million and $9.8 million for the three months ended March 31, 2021 and 2020, respectively. The effective tax rate was 19.9% and 29.2% for the three months ended March 31, 2021 and 2020, respectively. The decrease in the effective income tax rate was primarily due to tax benefits recorded in 2021 related to share-based compensation.

Equity in Earnings of Affiliates, net of tax

We had no consolidated equity in earnings of affiliates, net of tax for the three months ended March 31, 2021. Our consolidated equity in earnings of affiliates, net of tax for the three months ended March 31, 2020 was $0.5 million. We have one investment in an affiliate that is fully impaired as of March 31, 2021.

Income/(Loss) from Discontinued Operations, Net of Tax

Our consolidated income from discontinued operations, net of tax was $3.9 million for the three months ended March 31, 2021, an unfavorable variance of $5.6 million when compared to 2020. The change is primarily due to a litigation settlement pertaining to a discontinued operating unit, for which we recorded additional liability of $8.3 million as of March 31, 2021, partially offset by higher gains from our reseller businesses related to increased market volumes. See Note 14 - Discontinued Operations for further information.


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Loss from Sale of Discontinued Operations, Net of Tax

Our consolidated loss from sale of discontinued operations, net of tax was $5.3 million for the three months ended March 31, 2021 due to the sale of the remainder of RPS.
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Liquidity and Capital Resources

Cash and cash equivalents as of March 31, 2021 totaled $227.1 million, an increase of $59.7 million from December 31, 2020. As of March 31, 2021, our cash balances held in foreign jurisdictions totaled $72.8 million and are primarily related to our international operations. We plan to maintain significant cash balances outside of the US for the foreseeable future.

Restricted cash of $10.4 million as of both March 31, 2021 and December 31, 2020 is comprised of deposits that are pledged for various letters of credit/bank guarantees secured by us, escrow accounts due to acquisitions and divestitures, as well as short-term investments within our deferred compensation plan trust.

Cash Flow

Operating Activities. Cash provided by operating activities reflects net income adjusted for certain non-cash items and changes in operating assets and liabilities. Total cash provided by operating activities was approximately $189.3 million and $112.9 million for the three months ended March 31, 2021 and 2020, respectively. Cash used in discontinued operating activities was $1.2 million and $7.8 million for the three months ended March 31, 2021 and 2020, respectively. The increase in cash provided by continuing and discontinued operations were primarily due to higher net income as adjusted for non-cash activities and favorable changes in working capital items.

Investing Activities. Total cash provided by investing activities was approximately $19.0 million during the three months ended March 31, 2021 and total cash used in investing activities was $35.5 million during the three months ended 2020. Cash used in discontinued operating activities was $1.7 million and $2.9 million for the three months ended March 31, 2021 and 2020, respectively.

Cash provided by investing activities in continuing operations during 2021 was primarily related to net cash received from the sale of RPS of $49.8 million, net of selling costs, partially offset by cash paid for investments in property and equipment and capitalized data of $12.4 million and $8.6 million, respectively. Additionally, we paid cash of $8.1 million, net of cash acquired, related to the ehouse acquisition.

Cash used in investing activities from continuing operations during 2020 was primarily related to investments in property and equipment and capitalized data of $12.3 million and $8.5 million, respectively. Additionally, we paid net cash of $11.8 million primarily related to the Location acquisition and made other investments of $0.6 million. These outflows were partially offset by proceeds from other investments of $0.7 million.

Financing Activities. Total cash used in financing activities was approximately $149.6 million for the three months ended March 31, 2021, which was primarily comprised of dividends paid of $24.1 million, net outflows from share-based compensation-related transactions of $18.3 million, and net repayments of long-term debt of $100.7 million. Total cash used in financing activities was approximately $25.6 million for the three months ended March 31, 2020, which was primarily comprised of dividends paid of $17.4 million, share repurchases of $2.4 million, net outflows from share-based compensation-related transactions of $5.1 million, and net repayment of long-term debt of $0.7 million.

Financing and Financing Capacity

We had total debt outstanding of $1.8 billion as of March 31, 2021 and December 31, 2020. Our significant debt instruments and borrowing capacity are described below.

Credit Agreement

The existing Credit Agreement provides for a $1.8 billion term loan facility (the “Term Facility”), and a $750.0 million revolving credit facility (the “Revolving Facility”). The Term Facility matures and the Revolving Facility expires in May 2024. As of March 31, 2021, we had borrowing capacity under the Revolving Facility of $450.0 million and were in compliance with the financial and restrictive covenants of the Credit Agreement. See Note 5 - Long-Term Debt for further discussion.

In connection with the Merger, we expect to repay and discharge in full all amounts outstanding under the Term Facility and Revolving Facility and to terminate the existing Credit Agreement. At the time of the Merger, as contemplated by the Merger Agreement, we expect to enter into a new credit agreement (the “New Credit Agreement”) with a consortium of lenders pursuant to a debt commitment letter with such lenders. Please see the section titled “Financing of the Merger” in the Definitive Proxy Statement for more information regarding the financing commitments entered into in connection with the Merger.

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Senior Secured Notes

In anticipation of the Merger, Acquisition Sub issued 4.500% senior secured notes in the principal amount of $750,000,000 with a maturity date of May 1, 2028 (the “Senior Notes”, and together with the New Credit Agreement, the “New Financing Arrangements”). The Senior Notes issuance is part of the financing for the Merger. Substantially concurrently with the consummation of the Merger, Acquisition Sub will be merged with and into CoreLogic, with CoreLogic continuing as the surviving corporation and assuming all the obligations of Acquisition Sub with respect to the Senior Notes.

Interest Rate Swaps
 
We have entered into amortizing interest rate swaps (“Swaps”) in order to convert a portion of our interest rate exposure on the Term Facility floating rate borrowings from variable to fixed. Under the Swaps, we agree to exchange floating rate for fixed rate interest payments periodically over the life of the agreement. The floating rates in our Swaps are based on the one-month London interbank offering rate. The notional balances, terms and maturities of our Swaps are designed to have the effect of fixing the rate of interest on at least 50% of the principal balance of our senior term debt.

As of March 31, 2021, the Swaps have a combined remaining notional balance of $1.2 billion, a weighted average fixed interest rate of 2.68% (rates range from 2.61% to 2.98%), and scheduled terminations through December 2025. Notional balances under our Swaps are scheduled to increase and decrease based on our expectations of the level of variable rate debt to be in effect in future periods. Currently, we have scheduled notional amounts approximately $1.2 billion through September 2021, then $1.1 billion through March 2022, $1.0 billion through August 2022, and approximately $500.0 million through December 2025. Approximate weighted average fixed interest rates for the aforementioned time periods are 2.66%, 2.78%, 2.77%, and 2.64%, respectively.

Liquidity and Capital Strategy

We expect that cash flow from operations and current cash balances, together with available borrowings under our Revolving Facility (until the closing of the Merger) and under the New Financing Arrangements (following the closing of the Merger), will be sufficient to meet operating requirements through the next twelve months. Cash available from operations, however, could be affected by any general economic downturn, such as financial impacts related to COVID-19, or any decline or adverse changes in our business such as a loss of clients, challenges collecting payments from clients, competitive pressures, or other significant change in our business environment.

In July 2020, our Board of Directors canceled all prior repurchase authorizations and established a new share repurchase authorization of up to $1.0 billion. During the three months ended March 31, 2021, we did not repurchase any shares of our common stock. As of March 31, 2021, we had $500.0 million in value of shares available to be repurchased under the plan. Pursuant to the Merger Agreement, we agreed to refrain from repurchasing our capital stock during the Interim Operating Period, subject to the terms, limitations and exceptions set forth in the Merger Agreement.

For the three months ended March 31, 2021, we paid cash dividends of $24.1 million. In July 2020, our Board of Directors announced a 50% increase to the quarterly cash dividend, declaring a cash dividend of $0.33 per share of common stock which was paid in September 2020, December 2020, and March 2021. Pursuant to the Merger Agreement, we agreed to refrain from declaring or paying any further dividends during the Interim Operating Period, subject to the terms, limitations and exceptions set forth in the Merger Agreement.

We strive to pursue a balanced approach to capital allocation. Subject to the limitations during the Interim Operating Period on our ability to (i) make acquisitions or capital expenditures above certain thresholds, (ii) repurchase our capital stock, subject to certain exceptions, (iii) declare or pay dividends, and (iv) incur indebtedness in excess of certain thresholds, in each case pursuant to the Merger Agreement and subject to the terms, limitations and exceptions set forth therein, we will also continue to evaluate management of outstanding debt and pursuits of strategic acquisitions and investments on an opportunistic basis.

Availability of Additional Capital

Our access to additional capital fluctuates as market conditions change. There may be times when the private capital markets and the public debt or equity markets lack sufficient liquidity or when our securities cannot be sold at attractive prices, in which case we would not be able to access capital from these sources. Based on current market conditions and our financial condition (including our ability to satisfy the conditions contained in our debt instruments that are required to be satisfied to permit us to incur additional indebtedness), we believe that we have the ability to effectively access these liquidity sources for new borrowings.
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However, continued general economic instability, such as financial impacts resulting from COVID-19 which has caused, and may continue to cause, disruptions in the financial markets or a weakening of our financial condition, including a significant decrease in our profitability or cash flows or a material increase in our leverage, could adversely affect our ability to access these markets and/or increase our cost of borrowings.

Additionally, if the Merger is consummated, our capital structure will change, as our common stock will no longer be publicly traded and we will be subject to the New Financing Arrangements. Please refer to the section titled “Financing of the Merger” in the Definitive Proxy Statement for more information regarding the equity and debt financing commitments entered into in connection with the Merger.

Critical Accounting Policies and Estimates

For additional information with respect to our critical accounting policies, which are those that could have the most significant effect on our reported results and require subjective or complex judgments by management, see Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2020. Management believes there have been no material changes to this information.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

Our primary exposure to market risk relates to interest-rate risk associated with certain financial instruments. We monitor our risk associated with fluctuations in interest rates and currently use derivative financial instruments to hedge some of these risks.

As of March 31, 2021, we had approximately $1.8 billion in gross, long-term debt outstanding, predominately all of which was variable-interest-rate debt. An increase in interest rates could increase the costs of our variable-interest-rate debt obligations. Rising interest rates could also limit our ability to refinance our debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness.

To manage our interest rate risk we have entered into Swaps in order to convert a portion of our interest rate exposure on the Term Facility floating rate borrowings from variable to fixed. Under the Swaps, we agree to exchange floating rate for fixed rate interest payments periodically over the life of the agreement. The notional balances, terms and maturities of our Swaps are designed to have the effect of fixing the rate of interest on at least 50% of the principal balance of our senior term debt. As of March 31, 2021, the combined remaining notional balance of the Swaps was $1.2 billion, with a weighted average fixed interest rate of 2.68% (rates range from 2.61% to 2.98%), and scheduled terminations through December 2025. Notional balances under our Swaps are scheduled to increase and decrease over their contract lengths based on our expectations of the level of variable rate debt to be in effect in future periods. After giving effect to the Swaps, a hypothetical 1% increase or decrease in interest rates would result in an approximately $1.4 million change to interest expense on our existing indebtedness as of March 31, 2021, on a quarterly basis.

Although we are subject to foreign currency exchange rate risk as a result of our operations in certain foreign countries, the foreign exchange exposure related to these operations, in the aggregate, is not material to our financial condition or results of operations.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer have concluded that, as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, were effective, based on the evaluation of these controls and procedures required by Rule 13a-15(b).

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during the quarter ended March 31, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II: OTHER INFORMATION

Item  1.  Legal Proceedings.

For a description of our legal proceedings, see Note 9 – Litigation and Regulatory Contingencies and our discussion of discontinued operations within Note 14 - Discontinued Operations of our condensed consolidated financial statements, which is incorporated by reference in response to this item.

Item  1A.  Risk Factors.

See section entitled “Risk Factors” in Item 1A of Part I of our 2020 10-K for a full description of material risks and uncertainties regarding us and our business. There have been no material changes to these risks and uncertainties disclosed in our 2020 10-K.

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Item 6.  Exhibits.
Exhibit
Number
Description
2.1
3.1
3.2
3.3
4.4
10.1
10.2
31.1
31.2
32.1
32.2
101
The following unaudited consolidated financial statements for the quarter ended March 31, 2021 included in this quarterly report on Form 10-Q formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Stockholders' Equity, and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.ü
104
Cover Page Interactive Data File (formatted in Inline XBRL and included in the interactive data files submitted as Exhibit 101).ü
üFiled herewith.
**Furnished herewith.
Indicates a management contract or compensatory plan or arrangement in which any director or named executive officer participates.
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 CoreLogic, Inc.
 (Registrant)
  
 By: /s/   Frank D. Martell
 Frank D. Martell
 President and Chief Executive Officer
 (Principal Executive Officer)
  
 By: /s/  James L. Balas
 James L. Balas
 Chief Financial Officer
(Principal Financial Officer)
By: /s/  John K. Stumpf
John K. Stumpf
Controller
(Principal Accounting Officer)
Date:May 7, 2021 

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