Lender Processing Services, Inc. Reports Strong Second Quarter Earnings

Lender Processing Services, Inc. Reports Strong Second Quarter Earnings

Year-over-year operating income increases 3.3%

Year-over-year adjusted EPS increases 7.2% to 89 cents per diluted share

PR Newswire -- July 22, 2010





JACKSONVILLE, Fla., July 22 /PRNewswire-FirstCall/ -- Lender Processing Services, Inc. (NYSE: LPS), a leading provider of integrated technology and services to the mortgage and real estate industries, today reported consolidated revenues of $599.1 million for the second quarter of 2010, a decrease of 2.3% compared to the second quarter of 2009; however, net earnings of $80.4 million or 85 cents per diluted share in the second quarter of 2010 increased from $75.2 million or 78 cents per diluted share in the prior year quarter.



Adjusted net earnings for the second quarter of 2010 were $84.0 million, or 89 cents per diluted share, compared to $79.8 million, or 83 cents per diluted share in the second quarter of 2009. Adjusted net earnings in the current quarter include an adjustment for purchase price amortization of 4 cents per diluted share while the prior year quarter included a similar adjustment of 5 cents per diluted share.



"LPS had a strong quarter despite very difficult conditions in both the origination and default markets and a sustained challenging macro-economic environment. LPS, with its comprehensive end-to-end solutions for the mortgage and real estate industries, remains well positioned for a solid 2010 and to continue to grow profitably in 2011 and beyond," said Lee A. Kennedy, Executive Chairman of LPS. "Our Mortgage Processing business delivered another strong quarter and while our Loan Facilitation and Default Services businesses were both impacted by sluggish industry trends, we continued to expand market share in both areas," added Jeff Carbiener, President and CEO of LPS.



Operating income of $148.4 million in the quarter increased from $143.7 million in the second quarter of 2009 and operating margins improved by 140 basis points to 24.8%.



Adjusted free cash flow (net cash provided by operating activities minus certain non-recurring expenses and additions to property, equipment and computer software) for the first half of 2010 was $149.5 million compared to $160.2 million in the first half of 2009 primarily due to higher capital expenditures as well as from timing differences in our working capital components.



Technology, Data and Analytics (TD&A)



Revenues for the segment were $185.2 million compared to $171.9 million in the second quarter of 2009 while operating income of $64.8 million compared to $55.1 million in the prior year period. Mortgage Processing revenues of $102.4 million were 14.3% above the second quarter of 2009 primarily due to higher activity-based fees as well as professional services and license revenues. Other TD&A revenues of $82.9 million compared to $82.3 million in the same period last year. Overall operating income for TD&A grew 17.6% primarily due to higher contributions from Mortgage Processing somewhat offset by lower contributions from our Desktop business due to investments in key implementations for top-tier financial institutions and also from our Data & Analytics businesses.



Loan Transaction Services (LTS)



Revenues for the segment were $415.5 million compared to $448.0 million in the second quarter of 2009 and operating income of $101.6 million compared to $109.6 million in the prior year quarter. While Loan Facilitation Services revenues of $140.5 million declined 5.4% year-over-year, they compared favorably to the Mortgage Bankers Association's (MBA) estimate of overall originations being lower by 20% year-over-year. This positive variance was primarily due to market share gains in our settlement services and appraisal offerings. Default Services revenues of $275.0 million declined 8.2% compared to the second quarter of 2009, due to a decline in industry foreclosure starts of 16.0% for the same period, per LPS's Mortgage Monitor report, which were driven by a broader industry slowdown. Overall operating income for LTS was lower mainly due to lower contributions from Default Services partly offset by higher income in Loan Facilitation services.



Corporate and Other



Net corporate expenses in the second quarter of 2010 were $18.0 million compared to $21.0 million in the prior year quarter primarily due to lower incentive compensation costs.



The company noted that it had repurchased 1.6 million shares for $57.4 million in the second quarter. Following these purchases, $68.8 million remained available under the previous authorization. Also, the company announced that its Board of Directors had authorized a new share repurchase program of $150 million for a one year period that replaced the previous authorization.



Outlook



"Second quarter and first half 2010 results were solid given the challenges in our specific markets and the broader economic environment. LPS with its market-leading presence remains well positioned to grow revenue and earnings in the second half of 2010 as well as in 2011," said Jeff Carbiener. "Based on trends in the first half of 2010 and the outlook for the remainder of the year for the origination and default markets, we now expect full year 2010 revenues to grow 3%-6% compared to 2009. Also, we continue to expect full year 2010 adjusted earnings to be in the $3.49-$3.56 per diluted share range with third quarter adjusted earnings in the 88-90 cents per diluted share range."



Use of Non-GAAP Financial Information



Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, LPS reports several non-GAAP measures, including "adjusted net earnings" (GAAP net earnings adjusted for the impact of certain non-recurring adjustments, if applicable, plus the after-tax purchase price amortization of intangible assets added through acquisitions), "adjusted net earnings per diluted share" (adjusted net earnings divided by diluted weighted average shares), and "adjusted free cash flow" (net cash provided by operating activities less additions to property, equipment and computer software, as well as non-recurring adjustments, if applicable). LPS provides these measures because it believes that they are helpful to investors in comparing year-over-year performance in light of certain non-recurring charges, and to better understand our financial performance, competitive position and future prospects. Non-GAAP measures should be considered in conjunction with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net earnings. A reconciliation of these non-GAAP measures to related GAAP measures is included in the attachments to this release.



Conference Call and Webcast



LPS will host a conference call to discuss these results on Friday, July 23, 2010, at 8:00 a.m. EDT. Interested parties are invited to listen to the live webcast by logging on to the Investor Relations section at www.lpsvcs.com. Supplemental materials will be available on the website. Those wishing to participate via the conference call may do so by calling 866-823-5035. A replay of the webcast will be available on the website shortly after the call where it will be archived for one month. A replay of the conference call will be available through July 30, 2010 by dialing 888-203-1112 (access code: 7113478).



To access a printer friendly version of this release and accompanying exhibits, go to http://www.lpsvcs.com/investor.



About Lender Processing Services



Lender Processing Services, Inc. (LPS) is a leading provider of integrated technology andservices to the mortgage and real estate industries. LPS offers solutions that span the mortgage continuum, including lead generation, origination, workflow automation (Desktop), servicing, portfolio retention and default, augmented by the company's award-winning customer support and professional services. Approximately 50 percent of all U.S. mortgages by dollar volume are serviced using LPS's Mortgage Servicing Package (MSP). LPS also offers proprietary mortgage and real estate data and analytics for the mortgage and capital markets industries. For more information about LPS, visit www.lpsvcs.com.



Forward-Looking Statements



This press release contains forward-looking statements that involve a number of risks and uncertainties. Those forward-looking statements include all statements that are not historical facts, including statements about our beliefs and expectations. Forward-looking statements are based on management's beliefs, as well as assumptions made by and information currently available to management. Because such statements are based on expectations as to future economic performance and are not statements of historical fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties to which forward-looking statements are subject include, but are not limited to: our ability to adapt our services to changes in technology or the marketplace; the impact of adverse changes in the level of real estate activity on demand for certain of our services; our ability to maintain and grow our relationships with our customers; the effects of our substantial leverage on our ability to make acquisitions and invest in our business; changes to the laws, rules and regulations that regulate our businesses as a result of the current economic and financial environment; changes in general economic, business and political conditions, including changes in the financial markets; the impact of any potential defects, development delays, installation difficulties or system failures on our business and reputation; risks associated with protecting information security and privacy; and other risks and uncertainties detailed in the "Statement Regarding Forward-Looking Information," "Risk Factors" and other sections of the Company's Form 10-K, the Company's subsequent reports on Form 10-Q and other filings with the Securities and Exchange Commission.







Exhibit A

LENDER PROCESSING SERVICES, INC. AND SUBSIDIARIES Consolidated Statements of Earnings (Unaudited)

Three months Six months ended ended June 30, June 30,