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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019

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
cllogovcmyk20printjpg003a06.jpg
CORELOGIC, INC.
(Exact name of registrant as specified in its charter)

 
Delaware
95-1068610
 
 
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 

 
40 Pacifica
Irvine
California
92618
 
 
(Street Address)
(City)
(State)
(Zip Code)
 

(949) 214-1000
(Registrant’s telephone number, including area code)

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 value
CLGX
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes No

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 filer
 
Accelerated filer
Non-accelerated filer
 
Smaller 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 Act).

Yes   No   

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 28, 2019, the last business day of the registrant's most recently-completed second fiscal quarter was $3,312,766,221.

On February 24, 2020, there were 78,981,054 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement with respect to the 2020 annual meeting of the stockholders are incorporated by reference in Part III of this report. The definitive proxy statement or an amendment to this Form 10-K will be filed no later than 120 days after the close of the registrant’s fiscal year.
 





CoreLogic, Inc.
Table of Contents


2

Table of Contents

PART I

Item 1. Business

The Company

We are a leading global property information, analytics, data-enabled software platforms, and services provider operating in North America, Western Europe, and Asia Pacific. Our vision is to deliver unique property-level insights that power the global real estate economy. Our mission is to empower our clients to make smarter decisions through data-driven insights.

With our data as a foundation, we provide software platforms and value-added business services that address the unique needs of the mortgage, real estate, insurance, capital, public sector, and rental property markets. The quality of our software platforms and services is distinguished by our broad range of data assets and our experience in aggregating, organizing, normalizing, processing, and delivering data on a large-scale basis. Our structured property-specific data, consisting of over 150 million parcel records, covers 99% of the United States ("US"), includes both residential and commercial real estate data and is enriched by over 1 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. These databases enable our clients to access detailed property insights, current and historical mortgage data, involuntary property liens and encumbrances, building construction and replacement costs, consumer credit, tenancy, location intelligence, hazard, and other natural risk factors as well as mortgage risk and portfolio performance data.

We have more than one million end-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, criminal background records, eviction information, non-prime lending records, credit information, and tax information, among other data types. Using these robust datasets, we have built strong value-added analytical capabilities and business services to meet our clients’ needs for property tax processing, property valuation, mortgage and automotive credit reporting, tenancy screening, hazard risk, property risk and replacement cost, flood plain location determination, geospatial data, analytics, and related services.

We became a stand-alone public company on June 1, 2010, when we completed a transaction in which we separated from the financial services businesses of our predecessor company, The First American Corporation ("FAC") (referred to as the "Separation"). To effect the Separation, we entered into a Separation and Distribution Agreement (“Separation and Distribution Agreement”) that governs the rights and obligations of us and First American Financial Corporation ("FAFC") regarding the distribution. It also governs the on-going relationship between us and FAFC subsequent to the completion of the Separation and provides for the allocation of assets and liabilities between us and FAFC. In addition, we also entered into a Tax Sharing Agreement (“Tax Sharing Agreement”) with FAC and FAFC. FAC was incorporated in California in 1894, and as part of the Separation, we reincorporated in Delaware on June 1, 2010, changed our name to CoreLogic, Inc. and began trading on the New York Stock Exchange under the symbol “CLGX.” As used herein, the terms "CoreLogic," the "Company," "we," "our" and "us" refer to CoreLogic, Inc. and our consolidated subsidiaries, except where it is clear that the terms mean only CoreLogic, Inc. and not our subsidiaries. Our executive offices are located at 40 Pacifica, Irvine, California, 92618-7471, our telephone number is (949) 214-1000, and our website is www.corelogic.com.

Corporate Events

Dividend

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 on January 24, 2020 to shareholders of record on the close of business January 10, 2020.

Business Exits & Transformation

In December 2018, we announced our intent to exit a loan origination software unit and its remaining legacy default management related platforms, as well as accelerate an appraisal management company ("AMC") transformation program. We believe these actions will expand our overall profit margins and provide for enhanced long-term organic growth trends. In September 2019, we divested our default management related platforms and received proceeds of $3.8 million. The AMC

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transformation was concluded in December 31, 2019. For the year ended December 31, 2019, operating revenues decreased by $61.9 million attributable to the aforementioned business exists and strategic transformation compared to 2018. We also recorded non-cash impairment charges of $47.8 million and severance expense of $5.3 million in 2019 relating to the AMC transformation program.

Acquisitions

We opportunistically acquire companies, businesses, products, and services to grow market share in the mortgage, real estate, insurance, capital, public sector, and rental property markets. We also identify opportunities that complement our strengths and/or diversify our exposure from the mortgage and real estate market.

During 2019, we completed the acquisition of National Tax Search, LLC ("NTS") for total net cash of approximately $13.2 million. This acquisition included contingent consideration of up to $7.5 million to be paid in cash by 2022, contingent upon the achievement of certain revenue targets in fiscal years 2020 and 2021. NTS is a leading provider of commercial property tax payment services and specializes in identifying potential collateral loss related to unpaid property tax, homeowner's association fees, and inaccurate flood zone determinations. The NTS acquisition increases the Company's commercial property tax offerings and is expected to drive future growth in the US. See Note 17 - Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further discussion.

Financing Activities

In May 2019 we amended our credit agreement (as amended, 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 five-year term loan facility (the "Term Facility"), and a $750.0 million five-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 multicurrency 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. See Note 8 - Long Term Debt of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K 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 expect to complete the initial deployment of GCP over the next 12 months. Once implemented, CoreLogic plans 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 significant cost efficiencies and enhanced security upon implementation.

Our Data

Our data is the foundation of many of our products, platforms, and services, and can generally be categorized as property information, mortgage information, and consumer information. We obtain our data from a variety of sources, including but not limited to, data gathered from public sources, data contributed by our clients, and data obtained from other industry leading data aggregators.

We gather a variety of data from public sources, including electronic data and documents from federal, state, and local governments and enhance this information through advanced analytics, artificial intelligence, and machine learning, leveraging data we collect from non-public sources. This allows us to create comprehensive textual and geospatial views of each property within our coverage areas, including physical property characteristics, boundaries and tax values, current and historical ownership, voluntary and involuntary liens, tax assessments and delinquencies, replacement cost, property risk including environmental, flood, and hazard information, criminal data, building permits, local trends, and nationwide summary statistics.

Specific agreements exist which govern data contributed to our consortium data assets by our clients. These contractual arrangements provide the necessary permissions to enable us to deliver solutions across several vertical markets using the client contributed data. We structure end-user agreements to consortium data solutions to acknowledge the specific uses of the data and to provide the required levels of data privacy and protection for the consortium contributors’ data. Consortium data

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includes loan performance information, appraisal information, information regarding property rental and under-banked loan applications, and rental property information.

We gather property listing and tenant/landlord rental information from Boards of Realtors®, real estate agents, brokers, landlords, and owners of multi-tenant properties. We acquire appraisal and property valuation from appraisers, and license consumer credit history information from nationwide credit reporting agencies.

Business Segments

We have organized our business into the following two segments: Property Intelligence & Risk Management Solutions ("PIRM") and Underwriting & Workflow Solutions ("UWS").

We believe that we hold the leading market position for many of our solutions, including:

property tax processing, based on the number of loans under service;
flood zone determinations, based on the number of flood zone certification reports issued;
credit and income verification services to the US mortgage lending industry, based on the number of credit reports issued;
property valuation and technology platform solutions, based on the number of in-house staff appraisers and inquiries received; and
multiple listing services ("MLS"), based on the number of active desktops using our technology.

In addition to our two reporting segments, we also have a corporate group, which bears costs and expenses not allocated to our segments. More detailed financial information regarding each of our business segments is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations as well as Note 18 - Segment Information of the Notes to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data of Part II of this report.

Solutions

Property Intelligence & Risk Management Solutions

Our PIRM segment delivers 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, as well as assist our clients with decision-making and compliance tools in the real estate industry, insurance industry, and the single and multifamily 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 and insurance and spatial solutions in North America, Western Europe, and Asia Pacific.

Our property insights 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 using Internal Revenue Service ("IRS") and Social Security Administration databases, as well as third-party employment data providers. Further, we maintain the leading market share of real estate listing software systems, with provisioning to more than 50% of all US and Canadian real estate agents. We also provide a full range of professional services to listing organizations and assist our clients in identifying revenue opportunities and improving member services.

Our insurance and spatial solutions provide property and casualty insurers, energy, and other markets the ability to more effectively locate, assess, and manage property-level assets and risks through location-based data, property content, proprietary workflow solutions, and analytics. In addition to the industry's first parcel-based geocoder and an industry-leading parcel database covering more than 150 million parcels across the US, we maintain critical and up-to-date information across multiple hazard databases including information on storm, land-based, fire, and even non-weather-related hazards.

Underwriting & Workflow Solutions

Our UWS segment provides 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, as well as assist our clients with vetting and on-boarding prospects, meeting

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compliance regulations, and understanding, evaluating, and monitoring property values. Our UWS solutions include property tax solutions, valuation solutions, credit solutions, and flood data solutions in North America.

Our property tax solutions are built from aggregated property tax information from over 20,000 taxing authorities. We use this information to advise mortgage originators 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 requires tax payments to be impounded on behalf of its borrowers, we can also monitor and oversee the transfer of these funds to the taxing authorities and provide the lender with payment confirmation.

Our valuations 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, and ensuring compliance with lender and governmental regulations. We have been building collateral risk management models for more than 20 years and provide collateral information technology and solutions that automate property appraisal ordering, tracking, documentation, and review for lender compliance with government regulations.

Our credit solutions have access to one of the largest consumer and business databases, which enables us to provide credit, income, and employment verification services to the mortgage and automotive industries. We provide comprehensive information about credit history, income verification, and home address history. We normalize our data to provide a broad range of advanced business information solutions designed to reduce risk and improve business performance.

Our flood data solutions provide flood zone determinations in accordance with the US Federal legislation passed in 1994, which requires that most mortgage 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. We provide flood zone determinations primarily to mortgage lenders.

Clients

Our clients are predominantly financial services institutions in the mortgage and insurance industries. We provide our solutions to national and regional mortgage lenders, servicers, brokers, credit unions, commercial banks, investment banks, fixed-income investors, real estate agents, MLS companies, property management companies, real estate investment trusts, property and casualty insurance companies, government agencies, and government-sponsored enterprises.

Our more significant client relationships tend to be long-term in nature and we typically provide a number of different solutions to each client. Because of the depth of these relationships, we derive a significant portion of our aggregate revenue from our largest clients, with 29.8% of our 2019 operating revenues being generated by our ten largest clients. None of our clients individually accounted for greater than 10% of our operating revenues for the year ended December 31, 2019.

Competition

We offer a diverse array of specialized products and services that compete directly and indirectly with similar products and services offered by national and local providers. We believe there is no single competitor who offers the same combination of products and services that we do. Therefore, we believe that we compete with a broad range of entities.

Our PIRM segment competes with entities that provide access to data or data-based analytics products and services as part of their product offerings, including Black Knight, Inc., which provides real estate information, analytics, valuation-related services, and other solutions; ATTOM Data, which provides public records data; FAC, which provides real estate, home ownership and property data; Verisk Analytics, Inc., which provides data and risk assessment in the insurance and financial services industries, as well as RealPage, Inc. and Yardi Systems, Inc., which provide services in the multifamily residential industry. We also compete with departments within financial institutions that utilize internal resources to provide similar analytics and services on a captive basis. We compete based on the breadth and quality of our data sets, the exclusive nature of some of our key data sets, the quality and effectiveness of our products, and the integration of our platforms into client systems. We believe the data we offer is distinguished by quality, the broad range of our data sources (including non-public sources), the volume of records we maintain, and our ability to provide data spanning a historical period of time that exceeds comparable data sets of most of our competitors.

Our UWS segment competes with third-party providers such as Black Knight, Inc. and Lereta LLC, which provide tax and flood solutions, as well as credit and screening solutions providers such as Equifax, Inc., Credit Plus, Kroll Factual Data, Clear Capital, Solidifi, and ServiceLink, which provide valuation-related services. For these services, we compete largely based on

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the quality of the products and services we provide, our ability to provide scalable services at competitive prices, and our ability to provide integrated platforms. We also compete with departments within financial institutions that utilize internal resources to provide similar services on a captive basis. We generally compete with captive providers based on the quality of our products and services, the scalability of our services, cost efficiencies, and our ability to provide some level of risk mitigation.

Sales and Marketing

Our sales strategy is client-focused, and resources are primarily assigned based on client size and complexity. Several of our sales team members and subject matter experts specialize in specific solutions, products, and services. Each of our sales executives develops and maintains key relationships within each client’s business units and plays an important role in relationship management as well as developing new business. Our sales executives understand the current marketplace environment and demonstrate extensive knowledge of our clients’ internal operating structure and business needs. The depth and breadth of our relationships with our clients allows us to develop and implement solutions that are tailored to the specific needs of each client in a prompt and efficient manner.

Smaller clients, measured by revenue or geographic coverage, are primarily managed through our inside sales operations function which is responsible for working with mortgage and real estate brokers, smaller property and casualty insurance companies, fixed-income investors, appraisers, real estate agents, correspondents, and other lenders.

Several of our product and service lines have sales teams and subject matter experts who specialize in specific solutions, products, and services. These sales teams and subject matter experts work collaboratively with our sales executives and our inside sales operations to assist with client sales by combining our data, products, and data-enabled services to meet the specific needs of each client and may be assigned to assist with sales in targeted markets for certain categories of clients or for particular service groups.

Our marketing strategy is to accelerate growth by building trusted relationships with our clients and delivering superior value through unique property-related data, analytics, and data-enabled solutions. We use the most efficient methods available to successfully identify, target, educate, and engage potential and existing clients through their preferred channel of communication. Employing client-centric marketing initiatives and campaigns, we clearly articulate our value proposition to build awareness, familiarity and interest in our business solutions, demand for our products and services, as well as increase volume, quality, and velocity of sales opportunities. Our marketing activities include direct marketing, advertising, public relations, event marketing, digital marketing, social media, and other targeted activities.

Acquisitions and Divestitures

Historically, we have increased the scale of our existing businesses and entered new markets, products, and services through selective acquisitions that we believe strengthen our overall solution offerings and value proposition to clients. We continually evaluate our business mix and opportunistically seek to optimize our business portfolio through acquisitions and divestitures.

Intellectual Property

We own significant intellectual property rights, including patents, copyrights, trademarks, and trade secrets. We consider our intellectual property to be proprietary and we rely on a combination of statutory (e.g., copyright, trademark, trade secret, and patent) and contractual safeguards in an intellectual property enforcement program to protect our intellectual property rights.

We have more than 50 issued patents in the US covering business methods, software, and systems patents, principally relating to automated valuation, fraud detection, data gathering, flood detection, MLS technology, and property monitoring. We also have at least 19 patent applications pending in these and other areas in the US. In addition, we have a number of issued patents and pending patent applications internationally, including in Canada and Australia. The protection of our proprietary technology is important to our success and we intend to continue to protect those intellectual property assets for which we have expended substantial research and development capital and are material to our business.

In addition, we own more than 300 trademarks in the US and foreign countries, including the names of our products and services as well as our logos and tag lines, many of which are registered. Many of our trademarks, trade names, service marks, and logos are material to our business, as they assist our clients in identifying our products and services and the quality that stands behind them.


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We own more than 1,000 registered and unregistered copyrights in the US and foreign countries, covering computer programs, reports, and manuals. We also have other literary works, including marketing materials, handbooks, presentations, and website content that are protected under common law copyright. We believe our written materials are essential to our business as they provide our clients with insight into various areas of the financial and real estate markets in which we operate.

Our research and development activities focus primarily on the design and development of our analytical tools, software applications, and data sets. We expect to continue our practice of investing in the development of new software applications and systems in response to the market and client needs we identify through client input collected in meetings, phone calls, and web surveys. We also assess opportunities to integrate existing data sets to enhance our products' effectiveness.

In order to maintain control of our intellectual property, we enter into license agreements with our clients, granting rights to use our products and services, including our software and databases. We also audit our clients from time to time to ensure compliance with our agreements. This helps to maintain the integrity of our proprietary intellectual property and to protect the embedded information and technology contained in our solutions. As a general practice, employees, contractors, and other parties with access to our proprietary information enter into agreements that prohibit the unauthorized use or disclosure of our proprietary rights, information, and technology.

Information Technology

Information technology is a significant focus area and we maintain a long-term strategic technology plan which is reassessed annually. Our existing technology infrastructure is a private, dedicated cloud-based computing environment hosted in primary and secondary technology centers owned and managed by the NTT Data Corporation ("NTT"). Additionally, we have begun the process of modernizing a number of our legacy solutions to take full advantage of the dynamic scaling offered by the Google Cloud Platform using the Pivotal Cloud Foundry ("PCF") Platform as a Service ("PaaS") capability to ensure we maintain the flexibility to operate our products and services on any public cloud platform in the future.

We maintain an innovation development center ("IDC") to develop, enhance and expand our next generation cloud-agnostic IDC platform on which new products can be rapidly built, scaled, modified, and deployed. In addition, the IDC plays a leading role in research and development in the areas of employing hardware advancements, data and analytics, mobility, voice, and the application of artificial intelligence and machine learning ("AI/ML"). We supplement the IDC with a number of strategic alliances.

Technology Operations

In conjunction with NTT and Google, we operate a computing technology environment intended to allow us to provide flexible systems at all times, enabling us to deliver increased capacity as needed or when client needs demand increased speed of delivery. Our current mainstream private, dedicated cloud computing environment hosted by NTT is designed to enable us to deliver secure and compliant data, analytics, and services to support client needs. We have also completed the development of an advanced cloud operating model that provides a fully automated, tightly controlled, and highly secured environment for the products and services we will be operating on GCP as we transition to the Google public cloud. This network of systems, combined with enterprise-level service operations, positions us as a leading property insights provider to the financial services market. Our platforms store, process, and deliver our data and proprietary technologies that are the foundation of our business and critical to the development of our solutions. Additionally, our unified network architecture allows us to operate multiple systems as a single resource capable of delivering subsets of our applications, data, and analytics as compelling combined solutions to our clients.

Security

Leveraging the National Institute of Standards and Technology and Cybersecurity Framework, we have deployed a wide range of physical and digital security measures, along with a formal governance program to protect the security of our information technology infrastructure, personnel, and data. Our security team is responsible for establishing corporate information security policies, performing 24/7 security operations, maintaining information security awareness, and ensuring enterprise IT compliance. Both our technology managers and NTT’s technology infrastructure managers are Information Technology Infrastructure Library ("ITIL") certified. NTT is contractually obligated to comply with our information security policies and procedures, and our new cloud operating model that we use for those products and services that have already been refactored to operate on GCP automatically enforces compliance with our information security policies. Our digital security framework for both our NTT and GCP computing environments provides layered protection designed to secure both active and inactive virtual machines in the data centers we use. This approach enables dedicated virtual machines to regularly scan all of our systems. These measures help to detect and prevent intrusions, monitor firewall integrity, inspect logs, catch and quarantine malware,

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and prevent data breaches. Our physical and digital security solutions run in tandem, enabling us to better identify suspicious activities and implement preventive measures

Regulation

We are subject to a number of US federal, state and local, and foreign laws and regulations that involve various aspects of our businesses. Failure to satisfy those legal and regulatory requirements, or the adoption of new laws or regulations, could have a significant negative impact on our ability to provide certain products and services or could result in the imposition of fines or penalties or the incurrence of damages. US federal, state and local, and foreign laws and regulations are evolving and can be subject to significant change. There are also a number of legislative proposals pending before the US Congress, various state legislative bodies, and foreign governments concerning consumer and data protection that could affect us. In addition, the application and interpretation of these laws and regulations are often uncertain. These laws are enforced by regulatory agencies or other enforcement bodies in the jurisdictions where we operate and, in some instances, also through private civil litigation. Among the more significant areas of regulation for our business are the following:

US Consumer Financial Regulations and Data Protection

Our US operations are subject to numerous laws and regulations governing the collection, protection and use of consumer data and other information, and provide for sanctions for the misuse of such information or unauthorized access to data. The laws and regulations that affect our US operation include, but are not limited to, the following:

Fair Credit Reporting Act (“FCRA”). The FCRA governs the practices of consumer reporting agencies that are engaged in the business of collecting and analyzing certain types of information about consumers, including credit eligibility information. The FCRA also governs the submission of information to consumer reporting agencies, the access to and use of information provided by consumer reporting agencies, and the ability of consumers to access and dispute information held about them. Some of our services are subject to regulation under the FCRA. Violation of the FCRA can result in civil and criminal penalties and the FCRA contains an attorney fee shifting provision to provide an incentive for consumers to bring individual or class action lawsuits for violations of the FCRA. Regulatory enforcement of the FCRA is under the purview of the US Federal Trade Commission, the Consumer Financial Protection Bureau (“CFPB”), and state attorneys general, acting alone or in concert with one another. Many states have also enacted laws with requirements similar to the FCRA. Some of these state laws impose additional, or more stringent, requirements than the FCRA.

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). The Dodd-Frank Act gave the CFPB supervisory authority over “larger participants” in the market for consumer financial services, as the CFPB defines by rule. In July 2012, the CFPB finalized its regulation regarding larger participants in the consumer reporting market. Under the regulation, certain of our credit services businesses are considered larger participants. As a result, the CFPB has the authority to conduct examinations of the covered credit services businesses and we expect that we will continue to be examined by the CFPB as part of this authority. In addition, the CFPB serves as the principal federal regulator of providers of consumer financial products and services. As such, the CFPB has significant rulemaking authority under existing federal statutes that regulate many of our products and services, as well as the authority to conduct examinations of certain providers of financial products and services, including our tax services business. The CFPB also has the authority to initiate an investigation of our other businesses if it believes that a federal consumer financial law is being violated. In addition to transferring authority under certain existing laws to the CFPB and providing it with examination and supervisory authority, the Dodd-Frank Act also prohibits unfair, deceptive or abusive acts or practices (“UDAAP”) with respect to consumer financial products and provides the CFPB with authority to enforce those provisions. The CFPB has stated that its UDAAP authority may allow it to find statutory violations even where a specific regulation does not prohibit the relevant conduct, or prior published regulatory guidance or judicial interpretation has found the activity to be in accordance with law.

Gramm-Leach-Bliley Act ("GLBA"). The GLBA regulates the sharing of non-public personal financial information held by financial institutions and applies indirectly to companies that provide services to financial institutions. In addition to regulating information sharing, the GLBA requires that non-public personal financial information be safeguarded using physical, administrative, and technological means. Certain of the non-public personal information we hold is subject to protection under the GLBA.

Privacy Laws. The privacy and protection of consumer information remains a developing area and we continue to monitor legislative and regulatory developments at the federal, state, and local levels. In addition to the GLBA, we expect that there will continue to be enhanced state and/or federal regulation in the area of financial and consumer data privacy, including regulation similar to the California Consumer Privacy Act (“CCPA”). Such regulation may impose additional registration

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requirements and/or require us to make new disclosures to consumers about our data collection, use, and sharing practices and afford consumers new abilities to opt out of certain data sharing with third parties. Any such additional regulation could significantly impact some of our business practices.

Data Security. Federal and state laws also impose requirements relating to the security of information held by us. For our businesses that involve the collection, processing, and distribution of personal public and non-public data, certain of their solutions and services are subject to regulation under federal, state, and local laws in the US and, to a lesser extent, foreign countries. These laws impose requirements regarding the collection, protection, use, and distribution of some of the data we have, and provide for sanctions and penalties in the event of violations of these requirements. In addition, certain state laws may impose breach notice responsibilities in the event of the loss of data due to third-party security breaches, employee error, or other events resulting in persons gaining unauthorized access to our data (including, in some cases, for losses that are incurred through our clients’ errors or systems). Some of these laws require additional data protection measures over and above the GLBA data safeguarding requirements. If data within our system is compromised by a breach, we may be subject to provisions of various state security breach laws. All states have adopted data security breach laws that require notice be given to affected consumers in the event of a breach of personal information, and in some cases the provision of additional benefits such as free credit monitoring to affected individuals. In addition, the CCPA provides consumers with a private right of action under certain circumstances if their personal information is subject to a breach. If data within our system is compromised by a breach, we may be subject to provisions of these various state security breach laws.

Real Estate Settlement Procedures Act (“RESPA”). RESPA is enforced by the CFPB and generally prohibits the payment or receipt of fees or any other item of value for the referral of real estate-related settlement services. RESPA also prohibits fee shares or splits or unearned fees in connection with the provision of residential real estate settlement services, such as mortgage brokerage services and real estate brokerage services. Notwithstanding these prohibitions, RESPA permits payments for goods furnished or for services actually performed, so long as those payments bear a reasonable relationship to the market value of the goods or services provided. Our mortgage origination-related businesses that supply credit reports, flood and tax solutions, valuation products, and all other settlement services to residential mortgage lenders are structured and operated in a manner intended to comply with RESPA and related regulations.

Real estate appraisals and automated valuation models (“AVMs”) are subject to federal and state regulation. The Dodd-Frank Act implemented rules and guidance thereunder, and inter-agency guidance jointly issued by the federal financial institution regulators have expanded regulation of these activities. Regulations address appraisals, AVMs, and other forms of property value estimates, which are subject to explicit and detailed regulations including licensing, pricing, and quality control requirements. In addition, creditors are required to disclose information to applicants about the purpose, and provide consumers with a free copy, of any appraisal, AVM or other estimate of a home's value developed in connection with a residential real estate mortgage loan application.

In addition to the foregoing areas of regulation, several of our other businesses are subject to or impacted by additional regulation, including our tenant screening business, which is subject to certain landlord-tenant laws and insurance agency laws, and our activities in foreign jurisdictions are subject to the requirements of the Foreign Corrupt Practices Act (“FCPA”) and comparable foreign laws.

International Consumer Financial Regulations and Data Protection

We are subject to consumer and data protection laws and regulations in the foreign countries where we conduct business. We conduct business in several international jurisdictions, including Australia, New Zealand, Canada, United Kingdom, and various countries in Europe. Principal regulatory bodies and regulatory laws that impact our international operations include the Office of the Australian Information Commissioner, the agency with direct responsibility for administering the Australian Privacy Principles and Part IIIA of the Privacy Act 1988, and the Office of the Privacy Commissioner of New Zealand, which issued the Credit Reporting Privacy Code 2004. We are also subject to the European Union Data Protection Regulation, commonly known as GDPR, which places certain obligations on companies processing and controlling data on individuals in the EU and prohibits the transfer of personal information from the EU to other countries whose laws do not protect personal data to an adequate level of privacy or security. In Canada, we are subject to the Personal Information Protection and Electronic Documents Act of 2000, as well as substantially similar provincial laws enacted in Alberta, British Columbia, and Quebec. In addition to the above-mentioned regulations, we are subject to a variety of international consumer protection, privacy, data security and notification laws and regulations in each foreign jurisdiction in which we operate that may relate to our business or affect the demand for our products and services.


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Compliance with current and future laws and regulations relating to our businesses, including consumer protection laws and regulations and international regulations, could have a material adverse effect on us and activities related to ongoing compliance will likely increase our compliance costs.

Employees

As of December 31, 2019, we had approximately 5,100 employees, of which approximately 4,200 were employed in the US and 900 outside the US.

Available Information

We are required to file annual, quarterly and current reports, proxy statements, and other information with the US Securities and Exchange Commission ("SEC"). The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us, at http://www.sec.gov.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), are also available free of charge through the "Investors" page on our Internet site at http://www.corelogic.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC.

Item 1A. Risk Factors.

Risks Related to Our Business

A cyber-based attack, data corruption, network security breach, or inability to secure the electronic transmission of sensitive data could have a material adverse effect on our business and reputation.

We are highly dependent on information technology networks and systems, including the Internet, to securely process, transmit, and store electronic information. We have experienced cyber-based attacks and security breaches of varying degrees to our infrastructure, including physical or electronic break-ins, computer viruses, attacks by hackers, spoofed or manipulated electronic communications and similar breaches, which have in the past, and may in the future, create system disruptions, shutdowns or unauthorized disclosure of confidential information, including non-public personal information and consumer data, or loss of other company assets. Unauthorized access, including through use of fraudulent schemes such as "phishing", could jeopardize the security of information stored in our systems. In addition, malware or viruses could jeopardize the security of information stored or used in a user's computer. Insider or employee cyber and security threats are also a significant concern. Despite our physical security, implementation of technical controls and contractual precautions to identify, detect, and prevent the unauthorized access to and alteration and disclosure of our data, we cannot protect the systems that access our services and databases from all compromises or disruptions, whether as a result of criminal conduct, distributed denial of service attacks or other advanced persistent attacks by malicious actors, including hackers, nation states and criminals, breaches due to employee error or malfeasance, or other disruptions. Several highly publicized data incidents and cyberattacks have heightened consumer awareness of this issue and may embolden individuals or groups to target our systems. Cyber attackers are also developing increasingly sophisticated systems and means to not only attack systems, but also to evade detection or to obscure their activities. If we are unable to protect against, mitigate, or timely respond to cyber-based attacks or other security or privacy breaches, our operations could be disrupted, or we may suffer loss of reputation, financial loss, lawsuits, or other regulatory restrictions or penalties.

Data security and integrity concerns have caused a growing number of legislative and regulatory bodies to impose consumer notification and other requirements in the event that consumer information is accessed by unauthorized persons and additional regulations regarding the use, access, accuracy, and security of such data are possible. In the US, federal and state laws provide for a regulatory landscape of disparate notification regimes and, therefore, regulatory compliance in the event of unauthorized access would be expensive and difficult. Failure to comply with these regulations could subject us to regulatory scrutiny and additional liability through federal or state enforcement, reputational harm, or private class actions. Likewise, our clients are increasingly imposing more stringent contractual obligations on us relating to our information security protections. If we are unable to maintain protections and processes at a level commensurate with that required by our clients, it could negatively affect our relationships with those clients or increase our operating costs.


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We rely on the ability to access data from external sources at reasonable terms and prices.

We rely extensively upon data from a variety of external sources to maintain our proprietary and non-proprietary databases, including data from third-party suppliers, various government and public record sources and data contributed by our clients. Our data sources could cease providing or reduce the availability of their data to us, increase the price we pay for their data, or limit our use of their data for a variety of reasons, including legislatively or judicially-imposed restrictions on use. If a significant supplier is no longer able or is unwilling to provide us with certain data, or if our public record sources of data become unavailable or too expensive, we may need to find alternative sources. If we are unable to identify and contract with suitable alternative data suppliers and efficiently and effectively integrate these data sources into our service offerings, we could experience service disruptions, increased costs, and reduced quality and availability of our services. Moreover, some of our data suppliers compete with us in certain product offerings, which may make us vulnerable to unpredictable price increases from them and they may elect to stop providing data to us. Significant price increases could have a material adverse effect on our operating margins and our financial position, in particular if we are unable to arrange for substitute replacement sources of data on favorable economic terms. There can be no assurance that we would be able to obtain data from alternative sources if our current sources become unavailable. Loss of such access or the availability of data in the future on commercially reasonable terms or at all may reduce the quality and availability of our services and products, which could have a material adverse effect on our business, financial condition, and results of operations.

Some of our data suppliers face similar regulatory requirements as we do and, consequently, they may cease to be able to provide data to us or may substantially increase the fees they charge us for this data, which may make it financially burdensome or impossible for us to acquire data that is necessary to offer our products and services. Many consumer advocates, privacy advocates, and government regulators believe that existing laws and regulations do not adequately protect privacy or ensure the accuracy of consumer-related data. As a result, such advocates and regulators are seeking further restrictions on the dissemination or commercial use of personal information to the public and private sectors as well as contemplating requirements relative to data accuracy and the ability of consumers to opt to have their personal data removed from databases such as ours. Any future laws, regulations, or other restrictions limiting the dissemination or use of personal information may reduce the quality and availability of the data necessary for our products and services, which could have a material adverse effect on our business, financial condition, and results of operations.

Systems interruptions may impair the delivery of our products and services.

We depend on reliable, stable, efficient, and uninterrupted operation of our technology network, systems, and data centers to provide service to our clients. System interruptions may impair the delivery of our products and services, resulting in a loss of clients and a corresponding loss in revenue. Our technology infrastructure runs primarily in a private dedicated cloud-based environment hosted in NTT's technology center in Quincy, WA and we are in the process of transitioning to a cloud-based environment hosted by GCP. We cannot be sure that certain systems interruptions or events beyond our control, including issues with NTT's technology center or our third-party network and infrastructure providers, in connection with our upgrading or changing key systems, or the transition to the GCP, will not interrupt or terminate the delivery of our products and services to our clients. These interruptions also may interfere with our suppliers' ability to provide necessary data to us and our employees' ability to attend to work and perform their responsibilities. Any of these possible outcomes could result in a loss of clients or a loss in revenue, which could have a material adverse effect on our business or results of operations.

We are subject to significant government regulations.

Our business is subject to various federal, state, local, and foreign laws and regulations. See Item 1. Business - “Regulation” in this Form 10-K for a summary of the material US and foreign consumer and data protection laws and regulations to which we are subject. These laws and regulations are complex, change frequently and may become more stringent over time. Our failure to comply with applicable laws and regulations could restrict our ability to provide certain services or result in the imposition of fines and penalties, substantial regulatory and compliance costs, litigation expense, adverse publicity, and loss of revenue. We incur, and expect to continue to incur, significant expenses in our attempt to ensure compliance with these laws.

Public concern is high with regard to the collection, use, accuracy, correction, and sharing of personal information, including Social Security numbers, dates of birth, financial information, and other behavioral data. In addition, many consumer advocates, privacy advocates, legislatures, and government regulators believe that existing laws and regulations do not adequately protect consumer privacy and have become increasingly concerned with the collection and use of personal information. Highly publicized data incidents have resulted in significantly increased legislative and regulatory activity at the federal and state levels as lawmakers and regulators continue to propose a wide range of further restrictions on the collection, dissemination or commercial use of personal information, information security standards, data security incident disclosure standards. Because our databases include certain public and non-public personal information concerning consumers, we are

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subject to government regulation and potential adverse publicity concerning our use of consumer data. We acquire, store, use, and provide many types of consumer data and related services, some of which are subject to regulation under the FCRA, the GLBA, the CCPA and the Driver's Privacy Protection Act and, to a lesser extent, various other federal, state, and local laws and regulations. These laws and regulations are designed to protect the privacy of consumers and to prevent the unauthorized access and misuse of personal information in the marketplace. The CCPA, for example, which became effective January 1, 2020, imposes new obligations on certain companies doing business in California with respect to the personal information of California residents. This includes new notice and privacy policy requirements, and new obligations to respond to requests to know and access to personal information, to delete personal information, and to say no to the sale of personal information. We expect that there will be enhanced state and/or federal regulation in the area of financial and consumer data privacy, including regulations similar to the GDPR, a data protection and privacy law in the European Union that became effective in 2018, and the CCPA. Compliance with these laws may impose significant regulatory burdens and costs on us. Further, a growing number of legislative and regulatory bodies have adopted consumer notification and other requirements in the event that consumer information is accessed by unauthorized persons and additional regulations regarding the use, access, accuracy, and security of such data are possible. In the US, state laws provide for disparate notification regimes. In addition, if our practices or products are deemed to be an invasion of privacy, whether or not consistent with current or future regulations and industry practices, we may be subject to public criticism, private class actions, reputational harm, or claims by regulators, which could disrupt our business and expose us to increased liability. Our failure to comply with these laws, or any future laws or regulations of a similar nature, could result in substantial regulatory penalties, litigation expense, and loss of revenue.

Our businesses are subject to an increasing degree of compliance oversight by regulators and by our clients. Specifically, the CFPB has authority to enact rules affecting the business of consumer reporting agencies and also to supervise, conduct examinations of, and enforce compliance with federal consumer financial protection laws and regulations with respect to certain “larger participants” that offer consumer financial products and services. Two of our credit businesses-CoreLogic Credco and Teletrack-are subject to the CFPB non-bank supervision program and the CFPB or other regulatory bodies could attempt to assert authority over other products or services. The CFPB and the prudential financial institution regulators such as the Office of the Comptroller of the Currency (“OCC”) also have the authority to examine us in our role as a service provider for certain services, including for tax services, to large financial institutions. In addition, several of our largest bank clients are subject to consent orders with the OCC and/or are parties to the National Mortgage Settlement, both of which require them to exercise greater oversight and perform more rigorous audits of their key vendors such as us. The CFPB may pursue administrative proceedings or litigation to enforce the laws and rules subject to its jurisdiction. In these proceedings the CFPB can obtain cease and desist orders, which can include orders for restitution to consumers or rescission of contracts, as well as other types of affirmative relief, and monetary penalties ranging from $5,000 per day for ordinary violations and up to $1.0 million per day for knowing violations.

These laws and regulations as well as laws and regulations in the various states or in other countries could limit our ability to pursue business opportunities we might otherwise consider engaging in, impose additional costs or restrictions on us, result in significant loss of revenue, impact the value of assets we hold, or otherwise significantly adversely affect our business. Any failure by us to comply with applicable laws or regulations could also result in significant liability to us, including liability to private plaintiffs as a result of individual or class action litigation, or may result in the cessation of our operations or portions of our operations or impositions of fines and restrictions on our ability to carry on or expand our operations. Our operations could also be negatively affected by changes to laws and regulations and enhanced regulatory oversight of our clients and us. These changes may compel us to change our prices, may restrict our ability to implement price increases, and may limit the manner in which we conduct our business or otherwise may have a negative impact on our ability to generate revenues, earnings, and cash flows. If we are unable to adapt our products and services to conform to the new laws and regulations, or if these laws and regulations have a negative impact on our clients, we may experience client losses or increased operating costs, and our business and results of operations could be negatively affected.

Our revenue is affected by the strength of the economy, interest rate environment and the housing market generally.

A significant portion of our revenue is generated from solutions we provide to the mortgage, consumer lending, and real estate industries and, as a result, a weak economy or housing market or adverse changes in the interest rate environment may adversely affect our business. A large portion of our client base suffers when financial markets experience volatility, illiquidity, and disruption, which has occurred in the past and which could reoccur, and any future disruptions of the financial markets presents considerable risks to our business and revenue. The volume of mortgage origination and residential real estate transactions is highly variable. Reductions in these transaction volumes have had, and will continue to have, a direct impact on certain portions of our revenues and may materially adversely affect our business. Negative economic conditions or increasing interest rate environments has resulted, and may continue to result, in fluctuations in volumes, pricing, and operating margins for our services. If our clients in the mortgage consumer lending and real estate industries experience economic hardship, in

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particular if these clients go bankrupt or otherwise exit certain businesses, it may negatively impact our revenue, earnings, and liquidity.

We rely on our top ten clients for a significant portion of our revenue.

Our ten largest clients generated approximately 29.8% of our operating revenues for the year ended December 31, 2019, although none of our largest clients individually accounted for greater than 10% of our operating revenues for that period. We expect that a limited number of our clients will continue to represent a significant portion of our revenues for the foreseeable future, and that our concentration of revenue may continue to be significant or increase. These clients face continued pressure in the current economic and regulatory climate. Many of our relationships with these clients are long-standing and are important to our future operating results, but there is no guarantee that we will be able to retain or renew existing agreements or maintain our relationships on acceptable terms or at all. In addition, in response to increased regulatory oversight, clients in the mortgage lending industry may have internal policies that require them to use multiple vendors or service providers, thereby causing a diversification of revenue among many vendors. Deterioration in or termination of any of these relationships, including through vendor diversification policies or merger or consolidation among our clients, could significantly reduce our revenue and could adversely affect our business, financial condition, and results of operations. In addition, certain of our businesses have higher client concentration than our company as a whole. As a result, these businesses may be disproportionately affected by declining revenue from, or loss of, a significant client.

We operate in a competitive business environment that is impacted by technology advancements or new product development.

The markets for our products and services are intensely competitive. Our competitors vary in size and in the scope and breadth of the services they offer. We compete for existing and new clients against both third parties and the in-house capabilities of our clients. Many of our competitors have substantial resources. Some have widely-used technology platforms that they seek to use as a competitive advantage to drive sales of other products and services. In addition, we expect that the markets in which we compete will continue to attract new competitors and new technologies. These competitors and new technologies may be disruptive to our existing technology or service offerings, resulting in operating inefficiencies and increased competitive pressure. In order to compete with current and future technologies, we must continuously improve our network operating systems, programming tools, programming languages, operating systems, data matching, data filtering, and other database technologies. These improvements, as well as changes in client preferences or regulatory requirements, may require changes in the technology used to gather and process our data and deliver our services. Our future success will depend, in part, upon our ability to internally develop and implement new and competitive technologies, respond to changing client needs and regulatory requirements, and transition clients and data sources successfully to new interfaces or other technologies.

In addition, many of our products and services compete within markets characterized by frequent new product and service introductions and changing industry standards. Without the timely introduction of new products and services, our products and services could become commercially obsolete over time, in which case our revenue and operating results would suffer. The success of our new products and services will depend on several factors, including our ability to properly identify client needs; innovate and develop new technologies, services, and applications; successfully commercialize new products and services in a timely manner; produce and deliver our products in sufficient volumes on time; differentiate our offerings from competitor offerings; price our products competitively, including taking into account changes in sales and use tax laws; and anticipate our competitors’ development of new products, services, or technological innovations.

We cannot provide assurance that there will be market demand for our future product offerings or that we will successfully implement new technologies, cause clients or data furnishers to implement compatible technologies or adapt our technology to evolving client, regulatory and competitive requirements. We also cannot guarantee that we will be able to effectively allocate capital to new product development to create competitive products, as compared to our peers and new market entrants. Failure to launch new and differentiated products will have an adverse effect on our growth and our business. If we fail to respond, or fail to cause our clients or data furnishers to respond, to changes in technology, regulatory requirements or client preferences, the demand for our services, the delivery of our services or our market reputation could be adversely affected.

Our reliance on outsourcing arrangements subjects us to risk and may disrupt or adversely affect our operations.

We have outsourced various business process and information technology services to third parties, including the technology infrastructure management services agreement we entered into with NTT and the outsourcing arrangements we entered into with a subsidiary of Cognizant Technology Solutions and an affiliate of EPAM Systems. Although we have service-level arrangements with our providers, we do not ultimately control their performance, which may make our operations vulnerable to their performance failures. In addition, the failure to adequately monitor and regulate the performance of our third-party vendors could subject us to additional risk. Reliance on third parties also makes us vulnerable to changes in the vendors’

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business, financial condition, and other matters outside of our control, including their violations of laws or regulations which could increase our exposure to liability or otherwise increase the costs associated with the operation of our business. The failure of our outsourcing partners to perform as expected or as contractually required could result in significant disruptions and costs to our operations and to the services we provide to our clients, which could materially and adversely affect our business, client relationships, financial condition, operating results, and cash flow.

Certain outsource arrangements contemplate the utilization of lower-cost labor outside the US in countries such as India, Poland, Ukraine, Mexico, and the Philippines. It is possible that the countries where our outsourcing vendors are located may be subject to higher degrees of political and social instability than the US and may lack the infrastructure to withstand political unrest or natural disasters. Such disruptions could impact our ability to deliver our products and services on a timely basis, if at all, and to a lesser extent could decrease efficiency and increase our costs. Fluctuations of the US dollar in relation to the currencies used and higher inflation rates experienced in these countries may also reduce the savings we planned to achieve. Furthermore, the practice of utilizing labor based in foreign countries has come under increased scrutiny in the US and, as a result, many of our clients may require us to use labor based in the US. We may not be able to pass on the increased costs of higher-priced US-based labor to our clients, which ultimately could have an adverse effect on our results of operations.

In addition, the US or the foreign countries in which we have service provider arrangements or operate could adopt new legislation or regulations that would adversely affect our business by making it difficult, more costly or impossible for us to continue our foreign activities as currently being conducted. Furthermore, in many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by laws and regulations applicable to us, such as the FCPA. Any violations of the FCPA or local anti-corruption laws by us, our subsidiaries or our local agents could have an adverse effect on our business and reputation and result in substantial financial penalties or other sanctions.

Our acquisition and integration of businesses may involve increased expenses and may not produce the desired financial or operating results.

We have acquired and expect to continue to acquire, on an opportunistic basis, companies, businesses, products and services. These activities may increase our expenses, and the expected results, synergies, and growth from these initiatives may not materialize as planned. While management believes that acquisitions will improve our competitiveness and profitability, no assurance can be given that acquisitions will be successful or accretive to earnings. For a description of our recent acquisitions, see Note 17 - Acquisitions of the Notes to the Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

We may have difficulty integrating our completed or any future acquisitions into our operations, including implementing controls, procedures, and policies. If we fail to properly integrate acquired businesses, products, technologies, and personnel, it could impair relationships with employees, clients and strategic partners, distract management attention from our core businesses, result in control failures and otherwise disrupt our ongoing business and harm our results of operations. We also may not be able to retain key management and other critical employees after an acquisition. Although part of our business strategy may include growth through strategic acquisitions, we may not be able to identify suitable acquisition candidates, obtain the capital necessary to pursue acquisitions or complete acquisitions on satisfactory terms in the future.

In addition, we have substantial investments in recorded goodwill as a result of prior acquisitions, and an impairment of these investments would require a write-down that would reduce our net income. Goodwill is assessed for impairment annually or sooner if circumstances indicate a possible impairment. Factors that could lead to impairment of goodwill include significant under-performance relative to historical or projected future operating results, a significant decline in our stock price and market capitalization and negative industry or economic trends. In the event that the book value of goodwill is impaired, any such impairment would be charged against earnings in the period of impairment. Possible future impairment of goodwill may have a material adverse effect on our business, financial condition, and results of operations.

We operate our business in international markets.

In 2019, we derived approximately 10% of our revenues from our operations outside of the US and we intend to continue to expand our international operations. We expect to continue to add personnel internationally to expand our abilities to deliver differentiated services to our international clients. Expansion into international markets may require significant resources and management's attention and will subject us to new regulatory, economic, and political risks. There can be no assurance that our products or services will be accepted in any particular international market and we cannot provide assurance that our international expansion efforts will be successful. The results of our operations and our growth rate could be adversely affected by a variety of factors arising out of international commerce, some of which are beyond our control, including currency rate fluctuations, foreign laws and regulatory requirements, trade protection measures, increased data privacy and consumer

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protection regulations, difficulty in staffing and managing widespread operations, restrictions on the import and export of technologies, political and economic conditions in foreign countries, and reduced protection for intellectual property rights.

We could infringe on the proprietary rights of others.

As we continue to develop and expand our products and services, we may become increasingly subject to infringement claims from third parties such as non-practicing entities, software providers, and suppliers of data. Likewise, if we are unable to maintain adequate controls over how third-party software and data are used, we may be subject to claims of infringement. Any claims, whether with or without merit, could:

be expensive and time-consuming to defend;
cause us to cease making, licensing or using applications that incorporate the challenged intellectual property;
require us to redesign our applications, if feasible;
divert management's attention and resources;
require us to enter into royalty or licensing agreements in order to obtain the right to use necessary technologies; and
subject us to significant damages, penalties, fines, and costs associated with an adverse judgment or settlement.

We rely upon intellectual property rights to protect our, proprietary technology and information.

Our success depends, in part, upon our intellectual property rights. We rely primarily on a combination of patents, copyrights, trade secrets, and trademark laws and nondisclosure and other contractual restrictions on copying, distribution and creation of derivative products to protect our proprietary technology and information. This protection is limited, and our intellectual property could be used by others without our consent. In addition, patents may not be issued with respect to our pending or future patent applications, and our patents may not be upheld as valid or may not prevent the development of competitive products. Any infringement, disclosure, loss, invalidity of, or failure to protect our intellectual property could negatively impact our competitive position, and ultimately, our business. Moreover, litigation may be necessary to enforce or protect our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. Such litigation could be time-consuming, result in substantial costs and diversion of resources and could harm our business, financial condition, results of operations, and cash flows.

Our level of indebtedness could adversely affect our financial condition and prevent us from complying with our covenants and obligations under our outstanding debt instruments.

As of December 31, 2019, our total debt was approximately $1.7 billion and we had unused commitments of approximately $750.0 million under our Revolving Facility. Subject to the limitations contained in the Credit Agreement governing our credit facilities and our other debt instruments, we may incur additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other general corporate purposes. If we do so, the risks related to our level of debt could increase. Specifically, our level of debt could have important consequences to us, including increasing our vulnerability to adverse economic and industry conditions and compromising our flexibility to capitalize our business opportunities and to plan for, or react to, competitive pressures and changes in our business or market conditions.

The Credit Agreement governing our credit facilities imposes operating and financial restrictions on our activities. These restrictions include the financial covenants in our credit facilities, which require ongoing compliance with certain financial tests and ratios, including a minimum interest coverage ratio and maximum leverage ratio, and could limit or prohibit our ability to, among other things:

create, incur or assume additional debt;
create, incur or assume certain liens;
redeem and/or prepay certain subordinated debt we might issue in the future;
pay dividends on our stock or repurchase stock;
make certain investments and acquisitions, including joint ventures;
enter into or permit to exist contractual limits on the ability of our subsidiaries to pay dividends to us;
enter into new lines of business;
engage in consolidations, mergers and acquisitions;
engage in specified sales of assets; and
enter into transactions with affiliates.

These restrictions on our ability to operate our business could negatively impact our business by, among other things, limiting our ability to take advantage of financing, merger and acquisition, or other corporate opportunities that might otherwise be

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beneficial to us. Our failure to comply with these restrictions could result in an event of default which, if not cured or waived, could result in the acceleration of substantially all our debt.

We may not be able to generate sufficient cash to service all of our indebtedness.

Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory, and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations. If we cannot make scheduled payments on our debt, we will be in default and the lenders under our credit facilities could declare all outstanding principal and interest to be due and payable and could terminate their revolving commitments to loan money and foreclose against the assets securing their borrowings, and we could be forced into bankruptcy or liquidation.

We may not be able to attract and retain qualified management personnel.

We rely on skilled management personnel and our success depends on our ability to attract, train, and retain a sufficient number of such individuals. If our attrition rate increases, our operating efficiency and productivity may decrease. We compete for talented individuals not only with other companies in our industry, but also with companies in other industries, such as software services, engineering services, and financial services companies, and there is a limited pool of individuals who have the skills and training needed to grow our company, especially in the increasingly-regulated environment in which we operate. Increased attrition or competition for qualified management could have an adverse effect on our ability to expand our business and product offerings, as well as cause us to incur greater personnel expenses and training costs.

We share responsibility with First American for certain income tax liabilities for tax periods prior to and including the date of the Separation.

Under the Tax Sharing Agreement, by and between FAC and FAFC, dated as of June 1, 2010 we entered into in connection with the Separation transaction, we are generally responsible for taxes attributable to our business, assets and liabilities and FAFC is generally responsible for all taxes attributable to members of the FAFC group of companies and the assets, liabilities, or businesses of the FAFC group of companies. Generally, any liabilities arising from tax adjustments to consolidated tax returns for tax periods prior to and including the date of the Separation will be shared in proportion to each company's percentage of the tax liability for the relevant year (or partial year with respect to 2010), unless the adjustment is attributable to either party, in which case the adjustment will generally be for the account of such party. In addition to this potential liability associated with adjustments for prior periods, if FAFC were to fail to pay any tax liability it is required to pay under the Tax Sharing Agreement, we could be legally liable under applicable tax law for such tax liabilities and required to make additional tax payments. Accordingly, under certain circumstances, we may be obligated to pay amounts in excess of our agreed-upon share of tax liabilities.

If certain transactions, including internal transactions, undertaken in anticipation of the Separation are determined to be taxable for US federal income tax purposes, we, our stockholders that are subject to US federal income tax and FAFC will incur significant US federal income tax liabilities.

In connection with the Separation we received a private letter ruling from the IRS to the effect that, among other things, certain internal transactions undertaken in anticipation of the Separation will qualify for favorable treatment under the US Internal Revenue Code of 1986, as amended (the ‘‘Code’’), and the contribution by us of certain assets of the financial services businesses to FAFC and the pro-rata distribution to our shareholders of the common stock of FAFC will, except for cash received in lieu of fractional shares, qualify as a tax-free transaction for US federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. In addition, we received opinions of tax counsel to similar effect. The ruling and opinions relied on certain facts, assumptions, representations and undertakings from us and FAFC regarding the past and future conduct of the companies' respective businesses and other matters. If any of these facts, assumptions, representations or undertakings is incorrect or not otherwise satisfied, we and our stockholders may not be able to rely on the ruling or the opinions of tax counsel and could be subject to significant tax liabilities. Notwithstanding the private letter ruling and opinions of tax counsel, the IRS could determine on audit that the Separation is taxable if it determines that any of these facts, assumptions, representations or undertakings were not correct or have been violated or if it disagrees with the conclusions in the opinions that were not covered by the private letter ruling, or for other reasons, including as a result of certain significant changes in the stock ownership of us or FAFC after the Separation. If the Separation is determined to be taxable for US federal and state income tax purposes, we and our stockholders that are subject to income tax could incur significant income tax liabilities.

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In addition, under the terms of the Tax Sharing Agreement, in the event a transaction were determined to be taxable and such determination were the result of actions taken after the Separation by us or FAFC, the party responsible for such failure would be responsible for all taxes imposed on us or FAFC as a result thereof.

Moreover, the Tax Sharing Agreement generally provides that each party thereto is responsible for any taxes imposed on the other party as a result of the failure of the distribution to qualify as a tax-free transaction under the Code if such failure is attributable to post-Separation actions taken by or in respect of the responsible party or its stockholders, regardless of when the actions occur after the Separation, and the other party consents to such actions or such party obtains a favorable letter ruling or opinion of tax counsel as described above.

In connection with the Separation, we entered into a number of agreements with FAFC setting forth rights and obligations of the parties post-Separation. In addition, certain provisions of these agreements provide protection to FAFC in the event of a change of control of us, which could reduce the likelihood of a potential change of control that our stockholders may consider favorable.

In connection with the Separation, we and FAFC entered into a number of agreements that set forth certain rights and obligations of the parties post-Separation, including the Separation and Distribution Agreement, the Tax Sharing Agreement, and the Restrictive Covenants Agreement. We possess certain rights under those agreements, including without limitation indemnity rights from certain liabilities allocated to FAFC. The failure of FAFC to perform its obligations under the agreements could have an adverse effect on our financial condition, results of operations and cash flows.

In addition, the Separation and Distribution Agreement gives FAFC the right to purchase the equity or assets of our entity or entities directly or indirectly owning the real property databases that we currently own upon the occurrence of certain triggering events. The triggering events include the direct or indirect purchase of the databases by a title insurance underwriter (or its affiliate) or an entity licensed as a title insurance underwriter, including a transaction where a title insurance underwriter (or its affiliate) acquires 25% or more of us. The purchase right expires June 1, 2020. Until the expiration of the purchase right, this provision could have the effect of limiting or discouraging an acquisition of us or preventing a change of control that our stockholders might consider favorable. Likewise, if a triggering event occurs, the loss of ownership of our real property database could have a material adverse effect on our financial condition, business, and results of operations.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of December 31, 2019, our real estate portfolio of 1.1 million square feet is comprised of leased property throughout 20 states in the US totaling approximately 1.0 million square feet, with approximately another 170,000 square feet in the aggregate in Australia, Brazil, Bulgaria, Canada, France, Germany, India, New Zealand, and the United Kingdom. Our properties range in size from a small number of properties under 1,000 square feet to our large operations center in Irving, Texas totaling approximately 328,000 square feet. The lease governing our Irving, Texas property expires in March 2032. Our corporate headquarters are located in Irvine, California, where we occupy approximately 123,000 square feet and the lease governing the property expires in July 2021. In addition, we have total land holdings of approximately 40 acres located in Texas and Mississippi.

All properties are primarily used as offices and the agreements governing the properties have varying expiration dates. The office facilities we occupy are, in all material respects, in good condition and adequate for their intended use.

Item 3. Legal Proceedings

For a description of our legal proceedings, see Note 14 - Litigation and Regulatory Contingencies and our discussion of discontinued operations within Note 2 - Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K, which disclosures are incorporated by reference in response to this item.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock Market Prices and Dividends

Our common stock is listed on the New York Stock Exchange and trades under the symbol "CLGX". The approximate number of record holders of our common stock on February 24, 2020 was 2,375.

In December 2019, the Board of Directors initiated and declared a cash dividend of $0.22 per share, which was paid on January 24, 2020. We expect to make regular quarterly dividend payments for the foreseeable future. The timing, declaration and payment of future dividends, however, falls within the discretion of the Board of Directors and will depend upon many factors, including the Company’s financial condition and earnings, the capital requirements of our businesses, restrictions imposed by applicable law, and any other factors the Board of Directors deems relevant from time to time.

Unregistered Sales of Equity Securities

During the quarter ended December 31, 2019, we did not issue any shares of our common stock in any transaction that was not registered under the Securities Act of 1933, as amended.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

In October 2018, the Board of Directors established a new share repurchase authorization of up to $500.0 million. As of December 31, 2019, we have $391.3 million in value of shares (inclusive of commissions and fees) available to be repurchased under the plan. The stock repurchase plan has no expiration date and repurchases may be made in the open market, in privately negotiated transactions, or pursuant to a Rule 10b5-1 plan.

Under our Credit Agreement, our stock repurchase capacity is restricted to $150.0 million per fiscal year, with the ability to undertake an additional amount of repurchases in such fiscal year provided that, on a pro forma basis after giving effect to the stock repurchase, our total covenant leverage ratio does not exceed 3.50 to 1.00. While we continue to preserve the capacity to execute share repurchases under our existing share repurchase authorization, going forward we will strive to pursue a balanced approach to capital allocation and will consider the repurchase of shares of our common stock, retirement of outstanding debt, and the pursuit of strategic acquisitions on an opportunistic basis.

The following table summarizes our repurchase activity under our Board-approved stock repurchase plan for the three months ended December 31, 2019:

Issuer Purchases of Equity Securities
 
 
 
 
 
 
Period
Total Number of Shares Purchased
 
Average Price Paid per Share (1)
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
October 1 to October 31, 2019
368,200

 
$
40.72

 
368,200

 
$
401,364,478

November 1 to November 30, 2019
256,800

 
$
39.23

 
256,800

 
$
391,289,906

December 1 to December 31, 2019

 
$

 

 
$
391,289,906

Total
625,000

 
$

 
625,000

 
 
 
 
 
 
 
 
 
 
(1)
Calculated inclusive of commissions.


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Stock Performance Graph

The following performance graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that it is specifically incorporated by reference into such filing.

The following graph compares the yearly percentage change in the cumulative total stockholder return on our common stock with corresponding changes in the cumulative total returns of the Russell 2000 Index and two peer group indices. The comparison assumes an investment of $100 at the close of business on December 31, 2014 and reinvestment of dividends. This historical performance is not indicative of future performance.

stkperf2019.jpg

The 2018 Peer Group, which was used by the Board's Compensation Committee for 2018 compensation decisions, consisted of: Black Knight Inc., Broadridge Financial Solutions, Inc., CSG Systems International Inc., Dun & Bradstreet Corporation, Equifax, Inc., Euronet Worldwide, Inc., Fair Isaac Corporation, Fidelity National Financial, Inc., First American Financial, Fleetcor Technologies, Inc., Gartner, Inc., Global Payments, Inc., Jack Henry & Associates, Inc., Paychex, Inc., TeraData Corporation, and Verisk Analytics, Inc. In 2019, the Compensation Committee adopted the 2019 Peer Group for use in 2019 compensation decisions, modifying the 2018 Peer Group to add Altisource Portfolio Solutions S.A., Fidelity National Information Services, Inc., Mgic Investment Corporation, Mr. Cooper Group, Inc., Pennymac Financial Services, Inc., Radian Group, Inc., Realogy Holdings Corporation, and Zillow Group as well as remove Broadridge Financial Solutions, Inc., Dun & Bradstreet Corporation, Paychex, Inc., and Teradata Corporation. The 2019 Peer Group more accurately and appropriately reflects our business and the industries in which we compete.


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Item 6. Selected Financial Data

The selected consolidated financial data for the five-year period ended December 31, 2019 has been derived from the consolidated financial statements. The selected consolidated financial data should be read in conjunction with the consolidated financial statements and notes thereto, “Item 1—Business—Corporate Events—Acquisitions” and “Item 7—Management’s Discussion and Analysis of Financial Condition and Consolidated Results of Operations.” The consolidated statements of operations data for the years ended December 31, 2016 and 2015 and the consolidated balance sheet data as of December 31, 2017, 2016, and 2015 have been derived from financial statements not included herein.

(in thousands, except per share amounts)
For the Year Ended December 31,
Income Statement Data:
2019
 
2018
 
2017
 
2016
 
2015
Operating revenue
$
1,762,235

 
$
1,788,378

 
$
1,851,117

 
$
1,952,557

 
$
1,528,110

Operating income
$
165,536

 
$
222,618

 
$
238,618

 
$
277,940

 
$
202,924

Equity in earnings/(losses) of affiliates, net of tax
$
555

 
$
1,493

 
$
(1,186
)
 
$
496

 
$
13,720

Amounts attributable to CoreLogic:
 
 
 
 
 
 
 
 
 
Income from continuing operations, net of tax
$
66,850

 
$
122,451

 
$
149,534

 
$
109,946

 
$
128,400

(Loss)/income from discontinued operations, net of tax
(17,470
)
 
(587
)
 
2,315

 
(1,466
)
 
(556
)
Gain/(loss) from sale of discontinued operations, net of tax

 

 
313

 
(1,930
)
 

Net income attributable to CoreLogic
$
49,380

 
$
121,864

 
$
152,162

 
$
106,550

 
$
127,844

Balance Sheet Data:
 

 
 

 
 

 
 

 
 

Assets of discontinued operations
$
6,286

 
$
629

 
$
383

 
$
662

 
$
681

Total assets
$
4,158,657

 
$
4,168,990

 
$
4,077,413

 
$
3,907,534

 
$
3,673,716

Total debt
$
1,666,560

 
$
1,779,176

 
$
1,753,570

 
$
1,602,047

 
$
1,336,674

Total equity
$
951,210

 
$
1,000,498

 
$
1,007,876

 
$
1,002,984

 
$
1,049,490

Dividends declared per common share of stock
$
0.22

 
$

 
$

 
$

 
$

Amounts attributable to CoreLogic:
 

 
 

 
 

 
 

 
 

Basic income/(loss) per share:
 

 
 

 
 

 
 

 
 

Income from continuing operations, net of tax
$
0.84

 
$
1.51

 
$
1.79

 
$
1.26

 
$
1.44

(Loss)/income from discontinued operations, net of tax
(0.22
)
 
(0.01
)
 
0.03

 
(0.02
)
 
(0.01
)
Gain/(loss) from sale of discontinued operations, net of tax

 

 

 
(0.02
)
 

Net income attributable to CoreLogic
$
0.62

 
$
1.50

 
$
1.82

 
$
1.22

 
$
1.43

Diluted income/(loss) per share:
 

 
 

 
 

 
 

 
 

Income from continuing operations, net of tax
$
0.83

 
$
1.49

 
$
1.75

 
$
1.23

 
$
1.42

(Loss)/income from discontinued operations, net of tax
(0.22
)
 
(0.01
)
 
0.03

 
(0.02
)
 
(0.01
)
Gain/(loss) from sale of discontinued operations, net of tax

 

 

 
(0.02
)
 

Net income attributable to CoreLogic
$
0.61

 
$
1.48

 
$
1.78

 
$
1.19

 
$
1.41

Weighted average shares outstanding
 

 
 

 
 

 
 

 
 

Basic
79,885

 
80,854

 
83,499

 
87,502

 
89,070

Diluted
81,021

 
82,275

 
85,234

 
89,122

 
90,564



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Item 7. Management’s Discussion and Analysis of Financial Condition and Consolidated Results of Operations

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K 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 Annual 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 growth plans, expectations regarding our recent acquisitions, dividends, 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.

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, “Risk Factors” in this 10-K, as such risk factors may be amended, supplemented, or superseded from time to time by other reports we file with the SEC. 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 Annual Report on Form 10-K.

Business Overview

We are a leading global property information, analytics, 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, consumer credit, tenancy, 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, criminal background records, eviction information, non-prime lending records, credit information, and tax information, among other data types. Our structured property-specific data consisting of over 150 million parcel records covers 99% of the US, includes both residential and commercial real estate data and is enriched by over 1 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, mortgage and automotive credit reporting, tenancy screening, hazard risk, property risk and replacement cost, flood plain location determination, other geospatial data, analytics, and related services.


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Table of Contents

Overview of Business Environment and Company Developments

Business Environment

The volume of US mortgage loan originations serves as a key market driver for more than half of our business. We believe the volume 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, and the overall state of the US economy. We believe mortgage origination unit volumes increased by approximately 10% in 2019 relative to 2018, primarily due to significantly higher mortgage refinance volumes in the second half of 2019, resulting from lower interest rates which favorably impacted overall mortgage volumes. Going forward, we expect 2020 mortgage unit volumes to be flat relative to 2019 levels as lower interest rates are expected to enable higher refinance volumes through the first half of 2020. Mortgage purchase volumes continue to be impacted by multiple factors such as tight inventory supply, insufficient supply of new housing stock, and affordability, all of which we expect to continue for the foreseeable future.

We generate the majority of our revenues from clients with operations in the US residential real estate, mortgage origination, and mortgage servicing markets. Approximately 29.8%, 31.3%, and 38.7% of our operating revenues for the years ended December 31, 2019, 2018 and 2017, respectively, were generated from our ten largest clients who consist of some of the largest US mortgage originators and servicers. None of our clients individually accounted for 10.0% or more of our operating revenues for the years ended December 31, 2019 and 2018. One of our clients, Bank of America, accounted for 11.1% of our operating revenues for the year ended December 31, 2017. Although both of our business segments report revenue from this client, on a relative basis, UWS has higher customer concentration.

Dividend

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 on January 24, 2020 to shareholders of record on the close of business January 10, 2020.

Business Exits & Transformation

In December 2018, we announced our intent to exit a loan origination software unit and its remaining legacy default management related platforms, as well as accelerate our AMC transformation program. We believe these actions will expand our overall profit margins and provide for enhanced long-term organic growth trends. In September 2019, we divested our default management related platforms and received proceeds of $3.8 million. For the year ended December 31, 2019, operating revenues decreased by $61.9 million attributable to the aforementioned business exists and strategic transformation compared to 2018. We also recorded non-cash impairment charges of $47.8 million and severance expense of $5.3 million in 2019 relating to the AMC transformation program which concluded in December 2019.

Acquisitions

During 2019, we completed the acquisition of NTS for total net cash of approximately $13.2 million, which was paid with available cash. This acquisition included contingent consideration of up to $7.5 million to be paid in cash by 2022, contingent upon the achievement of certain revenue targets in fiscal years 2020 and 2021. See Note 17 - Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further discussion.

Financing Activities

In May 2019 we amended 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 five-year Term Facility, and a $750.0 million five-year Revolving Facility. The Term Facility matures, and the Revolving Facility expires, in May 2024. The Revolving Facility includes a $100.0 million multicurrency 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. See Note 8 - Long Term Debt of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further discussion.


23

Table of Contents

Technology Transformation

In September 2018, we announced the adoption of the GCP as a foundational element of our ongoing technology transformation program to further expand infrastructure capabilities and drive efficiencies. We expect to complete the initial deployment of GCP over the next 12 months. Once implemented, CoreLogic plans 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 significant cost efficiencies and enhanced security upon implementation.

Productivity & Cost Management

In line with our on-going commitment to operational excellence and margin expansion, we achieved our cost reduction target of $20.0 million in 2019. Savings were realized through the reduction of operating costs, selling, general and administrative costs, outsourcing certain business process functions, consolidation of facilities, and other operational improvements.

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


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Table of Contents

Consolidated Results of Operations

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Operating Revenues

Our consolidated operating revenues were $1.8 billion for the year ended December 31, 2019, a decrease of $26.1 million when compared to 2018, and consisted of the following:

(in thousands, except percentages)
 
2019
 
2018
 
$ Change
 
% Change
PIRM
 
$
712,057

 
$
705,284

 
$
6,773

 
1.0
 %
UWS
 
1,062,864

 
1,093,846

 
(30,982
)
 
(2.8
)
Corporate and eliminations
 
(12,686
)
 
(10,752
)
 
(1,934
)
 
18.0

Operating revenues
 
$
1,762,235

 
$
1,788,378

 
$
(26,143
)
 
(1.5
)%

Our PIRM segment revenues increased by $6.8 million, or 1.0%, when compared to 2018. Acquisition activity contributed $46.2 million in 2019. Excluding acquisition activity, the decrease of $39.4 million was primarily due to lower property insights of $27.5 million as well as lower insurance and spatial solutions revenues of $4.2 million attributable to lower volumes. Property insights included unfavorable foreign exchange translation of $9.8 million and weaker market conditions in Australia which negatively impacted revenues by $8.9 million. Other revenues decreased by $7.7 million.

Our UWS segment revenues decreased by $31.0 million, or 2.8%, when compared to 2018. Acquisition activity contributed $13.2 million in 2019. Excluding acquisition activity, the decrease of $44.2 million was primarily due to lower credit solutions revenues of $21.8 million attributable to lower volumes. Additionally, our valuation solutions and other revenues reflect the impact of our business exits and transformation initiatives which lowered our segment revenues by approximately $61.9 million offset by higher market volumes of $24.9 million. Refer to "Business Exits & Transformation" for further details. Further, tax solutions was also impacted by a discrete prior year benefit of accelerated revenue recognition of approximately $23.7 million. These decreases were partially offset by higher market volumes, which increased flood data solutions revenues by $11.4 million and tax solutions revenue by $3.2 million.

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

Cost of Services (exclusive of depreciation and amortization)

Our consolidated cost of services was $880.1 million for the year ended December 31, 2019, a decrease of $41.3 million, or 4.5%, when compared to 2018. Acquisition activity contributed $26.8 million of additional cost in 2019. Excluding acquisition activity, the decrease of $68.1 million was primarily due to lower operating revenues and favorable product mix.

Selling, General and Administrative Expense

Our consolidated selling, general and administrative expenses were $480.9 million for the year ended December 31, 2019, an increase of $36.3 million, or 8.2%, when compared to 2018. Acquisition activity contributed an increase of $23.6 million in 2019. Excluding acquisition activity, the increase of $12.7 million was primarily due to higher productivity-related investments of $16.8 million, higher severance expense of $4.7 million, and higher personnel-related costs of $7.1 million, partially offset by lower outsourced services of $13.0 million, and lower other expenses of $2.9 million.

Depreciation and Amortization

Our consolidated depreciation and amortization expense was $187.7 million for the year ended December 31, 2019, a decrease of $4.3 million, or 2.2%, when compared to 2018. Excluding acquisition activity of $6.6 million, the decrease of $10.9 million is primarily due to assets that were fully impaired during the current year.


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Table of Contents

Impairment Loss

Our consolidated impairment loss totaled $47.9 million for the year ended December 31, 2019, an increase of $40.2 million when compared to 2018, representing current year write-offs of client lists of $32.3 million, software of $12.3 million, and licenses of $3.3 million related to the transformation of our AMC business in 2019, offset by prior year impairment charges related to software of $7.7 million.

Operating Income

Our consolidated operating income was $165.5 million for the year ended December 31, 2019, a decrease of $57.1 million, or 25.6%, when compared to 2018, and consisted of the following:

(in thousands, except percentages)
 
2019
 
2018
 
$ Change
 
% Change
PIRM
 
$
71,834

 
$
86,784

 
$
(14,950
)
 
(17.2
)%
UWS
 
220,421

 
239,219

 
(18,798
)
 
(7.9
)
Corporate and eliminations
 
(126,719
)
 
(103,385
)
 
(23,334
)
 
22.6

Operating income
 
$
165,536

 
$
222,618

 
$
(57,082
)
 
(25.6
)%

Our PIRM segment operating income decreased by $15.0 million, or 17.2%, for the year ended December 31, 2019, when compared to 2018. Excluding acquisition activity of $1.7 million, operating income decreased by $13.3 million and margins decreased by 120 basis points primarily due to lower operating revenues, partially offset by the impact of our ongoing operational efficiency programs.

Our UWS segment operating income decreased by $18.8 million, or 7.9%, when compared to 2018. Excluding acquisition-related activity of $4.1 million, operating income decreased $22.9 million and margins decreased by 127 basis points primarily due to our AMC transformation and a prior year benefit of accelerated revenue recognition, partially offset by higher market volumes, favorable product mix and the impact of our ongoing operational efficiency programs.

Corporate and eliminations had an unfavorable variance of $23.3 million, or 22.6%, primarily due to higher investments in data and technology capabilities.

Total Interest Expense, Net

Our consolidated total interest expense, net, was $76.2 million for the year ended December 31, 2019, an increase of $2.2 million, or 3.0%, when compared to 2018. The increase was primarily due to higher average outstanding principal balances in the current year. See Note 8 - Long-Term Debt for further discussion.

Tax Indemnification Release

In the current year, we recorded a $13.4 million loss related to the release of a tax indemnification receivable due to the expiration of the statutes of limitations in our principal state jurisdictions. Associated state tax reserves of $15.3 million were also released and recognized as income tax benefit through the provision for income taxes.

(Loss)/Gain on Investments and Other, Net

Our consolidated loss on investments and other, net, was $0.5 million for the year ended December 31, 2019, an unfavorable variance of $18.5 million when compared to 2018. The variance was primarily due to merger and acquisition activity totaling $17.1 million, a loss of $6.6 million related to a fair value adjustment on an equity investment, and $1.5 million of unamortized debt issuance cost write-offs due to financing activities in May 2019. The aforementioned items were partially offset by current year realized gains on our supplemental benefit plans of $6.7 million.


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Table of Contents

Provision for Income Taxes

Our consolidated provision for income taxes from continuing operations was $9.2 million and $45.7 million for the years ended December 31, 2019 and 2018, respectively. Our effective income tax rate was 12.2% and 27.4% for the years ended December 31, 2019 and 2018, respectively. The decrease in the effective income tax rate was primarily due to the tax benefit associated with the reversal of state tax reserves due to the expiration of the statute of limitations in our principal state jurisdictions and a prior year one-time charge for the transitions tax in connection with the Tax Cuts and Jobs Act.

Loss from Discontinued Operations, Net of Tax

Our consolidated loss from discontinued operations, net of tax was $17.5 million for the year ended December 31, 2019, primarily reflecting a $23.0 million legal settlement, prior to an associated tax benefit, resulting from an appellate court decision. The net loss of $0.6 million in 2018 results primarily from legal losses. See Note 2 - Significant Accounting Policies for further information.


27

Table of Contents

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

Operating Revenues

Our consolidated operating revenues were $1.8 billion for the year ended December 31, 2018, a decrease of $62.7 million when compared to 2017, and consisted of the following:

(in thousands, except percentages)
 
2018
 
2017
 
$ Change
 
% Change
PIRM
 
$
705,284

 
$
703,032

 
$
2,252

 
0.3
 %
UWS
 
1,093,846

 
1,157,432

 
(63,586
)
 
(5.5
)
Corporate and eliminations
 
(10,752
)
 
(9,347
)
 
(1,405
)
 
15.0

Operating revenues
 
$
1,788,378

 
$
1,851,117

 
$
(62,739
)
 
(3.4
)%

Our PIRM segment revenues increased by $2.3 million, or 0.3%, when compared to 2017. Acquisition activity contributed $21.8 million in 2018. Excluding acquisition activity, the decrease of $19.5 million was primarily due to lower property insights of $6.5 million from lower volumes, lower insurance and spatial solutions of $6.9 million from lower weather event-related revenues, the impact of unfavorable foreign exchange translation of $3.5 million within property insights, and lower other revenues of $2.6 million.

Our UWS segment revenues decreased by $63.6 million, or 5.5%, when compared to 2017. Acquisition activity contributed $37.7 million in 2018. Excluding acquisition activity, the decrease of $101.3 million was primarily due to lower valuation solutions of $85.9 million, credit solutions of $9.6 million, flood data solutions of $4.2 million, and other revenues of $1.6 million, mainly driven by lower mortgage market unit volumes and the impact of planned vendor diversification from key appraisal management clients. We also recorded the benefit of accelerated revenue recognition of approximately $23.7 million resulting from the amendment of a long-term contract in property tax solutions, which was entirely offset by lower mortgage market unit volumes.

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

Cost of Services (exclusive of depreciation and amortization)

Our consolidated cost of services was $921.4 million for the year ended December 31, 2018, a decrease of $53.4 million, or 5.5%, when compared to 2017. Acquisition activity contributed $22.3 million of additional cost in 2018. Excluding acquisition activity, the decrease of $75.7 million was primarily due to lower operating revenues.

Selling, General and Administrative Expense

Our consolidated selling, general and administrative expenses was $444.6 million for the year ended December 31, 2018, a decrease of $15.2 million, or 3.3%, when compared to 2017. Acquisition activity contributed an increase of $25.4 million in 2018. Excluding acquisition activity, the decrease of $40.6 million was primarily related to our ongoing operational efficiency programs, which reduced our personnel-related expenses by $36.0 million. In addition, we incurred lower legal settlement costs of $14.0 million and other expenses of $11.5 million. The decrease was partially offset by higher outsourced services of $20.9 million for initiatives and investments on data and technology capabilities.

Depreciation and Amortization

Our consolidated depreciation and amortization expense was $192.0 million for the year ended December 31, 2018, an increase of $14.2 million, or 8.0%, when compared to 2017. The increase was primarily due to acquisitions.

Impairment Loss

Our consolidated impairment loss increased $7.7 million when compared to 2017 which was due to impairment charges of software in 2018.


28

Table of Contents

Operating Income

Our consolidated operating income was $222.6 million for the year ended December 31, 2018, a decrease of $16.0 million, or 6.7%, when compared to 2017, and consisted of the following:

(in thousands, except percentages)
 
2018
 
2017
 
$ Change
 
% Change
PIRM
 
$
86,784

 
$
89,129

 
$
(2,345
)
 
(2.6
)%
UWS
 
239,219

 
233,366

 
5,853

 
2.5

Corporate and eliminations
 
(103,385
)
 
(83,877
)
 
(19,508
)
 
23.3

Operating income
 
$
222,618

 
$
238,618

 
$
(16,000
)
 
(6.7
)%

Our PIRM segment operating income decreased by $2.3 million, or 2.6%, when compared to 2017. Acquisition-related activity lowered operating income by $6.7 million in 2018 primarily due to investments on data and technology capabilities and the amortization of acquisition-related intangible assets. Excluding acquisition activity, operating income increased by $4.4 million and operating margins increased 101 basis points primarily due to lower legal settlement costs of $14.0 million, partially offset by lower operating revenues.

Our UWS segment operating income increased by $5.9 million, or 2.5%, when compared to 2017. Excluding acquisition-related activity of $6.1 million, operating income decreased $0.2 million primarily due to lower mortgage market unit volumes, unfavorable product mix and higher impairment charges on software of $7.7 million. The decrease was partially offset by the benefit of accelerated revenue recognition resulting from the amendment of a long-term contract in our property tax solutions operations. Operating margins increased 197 basis points compared to 2017.

Corporate and eliminations had an unfavorable variance of $19.5 million, or 23.3%, primarily due to higher investments on data and technology capabilities.

Total Interest Expense, Net

Our consolidated total interest expense, net was $74.0 million for the year ended December 31, 2018, an increase of $12.2 million, or 19.7%, when compared to 2017. The increase was primarily due to higher average outstanding principal balances and interest rates in 2018.

(Loss)/Gain on Investments and Other, Net

Our consolidated gain on investments and other, net was $18.0 million for the year ended December 31, 2018, a favorable variance of $25.9 million when compared to 2017. The variance is primarily due to higher 2018 gains including $13.3 million related to the purchase of the remaining interest of an equity-method investment, $3.3 million from the disposition of a long-term investment, and $1.7 million from the sale of a non-core business. Additionally, in 2017 we wrote-off unamortized debt issuance costs of $1.8 million in conjunction with financing activities as well as impaired equity method investments for $3.8 million, representing other-than temporary losses in value due to our expected inability to recover the carrying amount of the investments.

Provision for Income Taxes

Our consolidated provision for income taxes from continuing operations was $45.7 million and $18.2 million for the years ended December 31, 2018 and 2017, respectively. Our effective income tax rate was 27.4% and 10.8% for the years ended December 31, 2018 and 2017, respectively. The increase in the effective income tax rate was primarily due to the enactment of the Tax Cuts and Jobs Act ("TCJA"), which resulted in a one-time charge for the transition tax in 2018 of $12.5 million and a 2017 provisional benefit of $38.0 million for remeasuring of deferred taxes. The increase was partially offset by the lower income tax rate in effect under TCJA.

Loss from Discontinued Operations, Net of Tax

Our consolidated loss from discontinued operations, net of tax was $0.6 million for the year ended December 31, 2018, an unfavorable variance of $2.9 million, when compared to 2017, due primarily to a legal settlement gain in 2017.


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Liquidity and Capital Resources

Cash and cash equivalents totaled $105.2 million and $85.3 million as of December 31, 2019 and 2018, respectively, representing an increase of $19.9 million. As of December 31, 2019, our cash balances held in foreign jurisdictions totaled $39.8 million and are primarily related to our international operations. We plan to maintain significant cash balances outside the US for the foreseeable future.

Restricted cash of $10.5 million and $13.0 million at December 31, 2019 and 2018, respectively, 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 $364.2 million, $355.1 million and $385.9 million for the years ended December 31, 2019, 2018, and 2017, respectively. The increase in cash provided by operating activities in 2019 relative to 2018 was primarily due to favorable changes in working capital offset by lower net income from continuing operations, as adjusted for non-cash activities, and increased cash used in discontinued operations principally related to the impact of a 2019 legal settlement. See Note 2 - Significant Accounting Policies for further information.

The decrease in cash provided by operating activities in 2018 relative to 2017 was primarily due to unfavorable changes in working capital and a 2017 favorable legal settlement within our discontinued operations, partially offset by higher net income from continuing operations, as adjusted for non-cash activities.

Investing Activities. Total cash used in investing activities consisted primarily of capital expenditures, acquisitions, and dispositions. Cash used in investing activities was approximately $135.8 million, $308.9 million, and $268.9 million for the years ended December 31, 2019, 2018, and 2017, respectively.

Cash used in investing activities from continuing operations during 2019 was primarily related to investments in property and equipment and capitalized data of $91.6 million and $40.0 million, respectively. Additionally, we paid net cash of $13.3 million primarily related to the NTS acquisition and made other investments of $0.7 million. These outflows were partially offset by proceeds from investments of $5.6 million as well as $4.1 million in proceeds from the sale of a business-line.

Cash used in investing activities from continuing operations during 2018 was primarily related to net cash paid for acquisitions, including eTech for $21.2 million, a la mode for $120.3 million, HomeVisit for $12.6 million, and Symbility for $66.0 million. Further, we had investments in property and equipment and capitalized data of $62.3 million and $35.1 million, respectively, proceeds from the sale of investments of $4.7 million, and $3.2 million in proceeds from the sale of a business-line.

Cash used in investing activities from continuing operations during 2017 was primarily related to net cash paid for acquisitions, including Mercury Network, LLC for $153.0 million, Myriad Development, Inc. for $22.0 million and Clareity Security, LLC for $15.0 million. Further, we had investments in property and equipment and capitalized data of $40.5 million and $35.0 million, respectively, and purchases of investments of $5.9 million.

For the year ending December 31, 2020, we anticipate investing between $90 million and $110 million in capital expenditures for property and equipment and capitalized data. Capital expenditures are expected to be funded by a combination of existing cash balances, cash generated from operations, or additional borrowings under our Revolving Facility.

Financing Activities. Total cash used in financing activities was $211.2 million, $82.7 million, and $73.4 million for the years ended December 31, 2019, 2018, and 2017, respectively.

Net cash used in financing activities during 2019 was primarily comprised of repayment of long-term debt of $1.9 billion, share repurchases of $86.7 million, debt issuance costs of $9.6 million partially offset by proceeds from debt issuance of $1.8 billion, and net settlements from share-based compensation related transactions of $0.1 million.

Net cash used in financing activities during 2018 was primarily comprised of repayment of long-term debt of $173.2 million and share repurchases of $109.1 million, partially offset by proceeds from debt issuance of $191.3 million and net settlements from share-based compensation related transactions of $8.3 million.


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Net cash used in financing activities during 2017 was primarily comprised of repayment of long-term debt of $1.8 billion, share repurchases of $207.4 million, debt issuance costs of $14.3 million, and net settlements from share-based compensation related transactions of $4.4 million, partially offset by proceeds from debt issuance of $2.0 billion.

Financing and Financing Capacity

We had total debt outstanding of $1.7 billion and $1.8 billion as of December 31, 2019 and 2018, respectively. Our significant debt instruments are described below.

Credit Agreement. In May 2019, we amended our Credit Agreement. The Credit Agreement provides for a $1.8 billion Term Facility and a $750.0 million Revolving Facility. The Term Facility matures, and the Revolving Facility expires, in May 2024. The Revolving Facility includes a $100.0 million multicurrency 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/or Revolving Facility by up to $300.0 million in the aggregate; however, the lenders are not obligated to do so.

At December 31, 2019, we had borrowing capacity of $750.0 million under the Revolving Facility and were in compliance with all of our financial maintenance covenants under the Credit Agreement. However, if we have a significant increase in our outstanding debt or if our EBITDA (as defined by our Credit Agreement) decreases significantly, we may be unable to incur additional indebtedness and the lenders may be unwilling to permit us to amend the financial or restrictive covenants described above to provide additional flexibility. See Note 8 -Long Term Debt for further discussion.

During the year ended December 31, 2019, we made repurchases of $5.1 million on our debentures, exclusive of a $0.4 million premium paid which was recorded within (loss)/gain on investments and other, net, in the accompanying consolidated statement of operations.

As of December 31, 2019, and 2018, we recorded $0.4 million and $0.7 million, respectively, of accrued interest expense.

Interest Rate Swaps

We have entered into amortizing interest rate swaps (the "Swaps") in order to convert a portion of our interest rate exposure on the Credit Agreement 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 December 31, 2019, our Swaps have a combined remaining notional balance of $1.3 billion, a weighted average fixed interest rate of 2.07% (rates range from 1.03% to 2.98%) and scheduled terminations through December 2025. As previously indicated, notional balances under our Swaps are scheduled to increase and decrease over their contract lengths based on our expectations of variable debt levels. Currently, we have scheduled notional amounts of between $1.3 billion and $1.2 billion through December 2020, then $1.1 billion and $1.0 billion through August 2022 and $400.0 million thereafter until December 2025. Approximate weighted average fixed interest rates for the aforementioned periods are 2.44%, 2.64%, and 2.95%, respectively.

Liquidity and Capital Strategy

We expect that cash flows from operations and current cash balances, together with available borrowings under our Revolving Facility, 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 or any decline or adverse changes in our business such as a loss of clients, competitive pressures, or other significant change in business environment.

We strive to pursue a balanced approach to capital allocation and have recently initiated a dividend distribution. We will also continue to evaluate the repurchase of shares, management of outstanding debt, and pursuits of strategic acquisitions and investments on an opportunistic basis.

In October 2018, the Board of Directors established a new share repurchase authorization of up to $500.0 million of our common stock. Purchases may be made from time to time in the open market at prevailing market prices or in privately negotiated transactions. During the years ended December 31, 2019, 2018, and 2017, we repurchased approximately 2.0 million, 2.3 million, and 4.6 million shares of our common stock for $86.7 million, $109.1 million, and $207.4 million,

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respectively, including commission costs. As of December 31, 2019, we had $391.3 million in value of shares available to be repurchased under the plan.

In December 2019, we announced the initiation of a quarterly cash dividend to common shareholders. The Company paid a cash dividend of $0.22 per share of common stock on January 24, 2020 to shareholders of record as of January 10, 2020.

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. However, 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.

Contractual Obligations

A summary, by due date, of our total contractual obligations at December 31, 2019, is as follows:

(in thousands)
Less than 1 Year
 
1-3 Years
 
3-5 Years
 
More than 5 Years
 
Total
Operating leases
$
23,874

 
$
35,037

 
$
21,145

 
$
55,285

 
$
135,341

Long-term debt
56,022

 
177,974

 
1,444,359

 
9,524

 
1,687,879

Interest payments related to debt (1)
59,604

 
105,428

 
67,641

 
2,337

 
235,010

Total (2)
$
139,500

 
$
318,439

 
$
1,533,145

 
$
67,146

 
$
2,058,230

 
 
 
 
 
 
 
 
 
 
(1)
Estimated interest payments, net of the effect of our Swaps, are calculated assuming interest rates at December 31, 2019 over minimum maturity periods specified in debt agreements.
(2)
Excludes a net liability of $10.0 million related to uncertain tax positions including associated interest and penalties, and deferred compensation of $36.9 million due to uncertainty of payment period.


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Critical Accounting Policies and Estimates

Our significant accounting policies are discussed in Note 2 - Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data. We consider the accounting policies described below to be critical in preparing our consolidated financial statements. These policies require us to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses, and related disclosures of contingencies. Our assumptions, estimates, and judgments are based on historical experience, current trends, and other factors to be relevant at the time we prepare the consolidated financial statements. Although our estimates and assumptions are reasonable, we cannot determine future events. Consequently, actual results could differ materially from our assumptions and estimates.

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.

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 11 - Operating Revenues of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further discussion.

Purchase Accounting. The purchase method of accounting requires companies to assign values to assets and liabilities acquired based upon their fair values at the acquisition date. In most instances, there are not readily defined or listed market prices for individual assets and liabilities acquired in connection with a business, including intangible assets. The determination of fair value for assets and liabilities in many instances requires a high degree of estimation. The valuation of intangible assets, in particular, is very subjective. We generally obtain third-party valuations to assist us in estimating fair values. The use of different valuation techniques and assumptions could change the amounts and useful lives assigned to the assets and liabilities acquired and the related amortization expense.

Goodwill and Other Intangible Assets. We perform an annual impairment test for goodwill and other indefinite-lived intangible assets for each reporting unit every fourth quarter, or on an interim basis if an indicator of impairment is present. In assessing the overall carrying value of our goodwill and other intangibles, we could first assess qualitative factors to determine whether the fair value of a reporting unit is less than its carrying amount. Examples of such events or circumstances include the following: cost factors, financial performance, legal and regulatory factors, entity specific events, industry and market factors, macroeconomic conditions, and other considerations. For goodwill, if we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then quantitative impairment testing is performed utilizing a combination of the income and market approach. We could also elect to perform a quantitative impairment test without first assessing qualitative factors.

If the fair value of a reporting unit exceeds its carrying value, then goodwill is not considered impaired and no additional analysis is required. However, if the book value of a reporting unit is greater than the fair value, an impairment loss is recorded for the excess. The fair value of a reporting unit is judgmental and requires assumptions and estimates of many critical factors including revenue growth rates, operating margins, cash flows, market multiples, and discount rates.

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For other indefinite-lived intangible assets, if we determine that it is more likely than not that the fair value of the asset is less than its carrying value, then quantitative impairment testing is performed. In assessing the fair value of indefinite-lived intangibles, we compare the fair value of the asset to its carrying value to determine if there is an impairment. If the fair value of the asset is less than its carrying value, an impairment loss is recorded. See further discussion in Note 4 – Goodwill, Net of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further discussion.

As of December 31, 2019, our reporting units related to continuing operations are PIRM and UWS. During the fourth quarter of 2019, we elected to perform a quantitative impairment test on our reporting units without first assessing qualitative factors. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, cash flows, market multiples, discount rates, among others. Key assumptions used to determine the fair value of our reporting units in our testing were: (a) expected cash flows for the period from 2020 to 2025; and (b) discount rate of 9.0%, which was based on management's best estimate of an after-tax weighted average cost of capital. We noted no indicators of impairment on our reporting units through our quantitative analysis. It is reasonably possible that changes in the facts, judgments, assumptions, and estimates used in assessing the fair value of the goodwill could cause a reporting unit to become impaired.

Income Taxes. We account for income taxes under the asset and liability method, whereby we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as expected benefits of utilizing net operating loss and credit carry-forwards. We measure deferred tax assets and liabilities using enacted tax rates we expect to apply in the years in which we expect to recover or settle those temporary differences. We recognize in income the effect of a change in tax rates on deferred tax assets and liabilities in the period that includes the enactment date.

We recognize the effect of income tax positions only if sustaining those positions is more likely than not. We reflect changes in recognition or measurement of uncertain tax positions in the period in which a change in judgment occurs. We recognize interest and penalties, if any, related to uncertain tax positions within income tax expense. Accrued interest and penalties are included within the related tax liability line in the accompanying consolidated balance sheet.

We evaluate the need to establish a valuation allowance based upon expected levels of taxable income, future reversals of existing temporary differences, tax planning strategies, and recent financial operations. We establish a valuation allowance to reduce deferred tax assets to the extent it is more-likely-than-not that some, or all, of the deferred tax assets will not be realized.

Share-based Compensation. Our primary means of providing share-based compensation is granting restricted stock units (“RSUs”) and performance-based restricted stock units (“PBRSUs”). The fair value of any grant is based on the market value of our shares on the date of grant and is generally recognized as compensation expense over the vesting period. We measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost is recognized over the period during which an employee is required to provide services in exchange for the award. We utilize the Monte-Carlo simulation method to estimate the fair value for PBRSUs with market-based conditions and the Black-Scholes model to estimate the fair value of stock options. We apply the straight-line single option method of attributing the value of share-based compensation expense. As share-based compensation expense recognized in results of operations is based on awards ultimately expected to vest, share-based compensation expense has been reduced for forfeitures. Forfeitures are recognized at the time they occur. We apply the long-form method for determining the pool of windfall tax benefits.

In addition, we have an employee stock purchase plan that allows eligible employees to purchase common stock of the Company at 85.0% of the closing price on the first or last day of each quarter, whichever is lower. We recognize an expense in the amount equal to the estimated fair value of the discount.

Recent Accounting Pronouncements

For a description of recently issued and adopted accounting pronouncements, including the respective dates of adoption and expected effects on our results of operations and financial condition, see Note 2 - Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K, which is incorporated by reference in response to this item.


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Item 7A. 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. We have entered into Swaps in order to convert a portion of our interest rate exposure on the Credit Agreement 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 December 31, 2019, our Swaps have a combined remaining notional balance of $1.3 billion, a weighted average fixed interest rate of 2.07% (rates range from 1.03% to 2.98%) and scheduled terminations through December 2025. As previously indicated, notional balances under our Swaps are scheduled to increase and decrease over their contract lengths based on our expectations of variable debt levels. Currently, we have scheduled notional amounts of between $1.3 billion and $1.2 billion through December 2020, then $1.1 billion and $1.0 billion through August 2022 and $400.0 million thereafter until December 2025. Weighted average fixed interest rates for the aforementioned periods are approximately 2.44%, 2.64%, and 2.95%, respectively. We have designated the Swaps as cash flow hedges. See Note 8 - Long-Term Debt included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further information.

As of December 31, 2019, we had approximately $1.7 billion in long-term debt outstanding, predominately all of which was variable interest rate debt. As of December 31, 2019, the remaining notional balance of the Swaps was $1.3 billion. A hypothetical 1% increase or decrease in interest rates could result in an approximately $0.9 million change to interest expense on a quarterly basis. Rising interest rates could 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.

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.


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Item 8. Financial Statements and Supplementary Data
 
INDEX

 
Page No.
Financial Statements:
 
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for the years ended December 31, 2019, 2018, and 2017
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2019, 2018 and 2017
Consolidated Statement of Cash Flows for the years ended December 31, 2019, 2018 and 2017
 
 
Financial Statement Schedule:
 
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2019, 2018, and 2017

Financial statement schedules not listed are either omitted because they are not applicable or the required information is shown in the consolidated financial statements or in the notes thereto.


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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of CoreLogic, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of CoreLogic, Inc. and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, of comprehensive income, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenues from contracts with customers in 2018.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Annual Report on Internal Control Over Financial Reporting, management has excluded National Tax Search, LLC (“NTS”) from its assessment of internal control over financial reporting as of December 31, 2019, because it was acquired by the Company in a purchase business combination during 2019. We have also excluded NTS from our audit of internal control over financial reporting. NTS is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 0.6% and 0.2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2019.

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Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment

As described in Notes 2 and 4 to the consolidated financial statements, the Company’s consolidated goodwill balance was $2.4 billion as of December 31, 2019. Management performs an annual impairment test for goodwill for each reporting unit every fourth quarter, or on an interim basis if an indicator of impairment is present. If management determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then quantitative impairment testing is performed utilizing a combination of the income and market approach. If the book value of a reporting unit is greater than its fair value, an impairment loss is recorded for the excess. The fair value of a reporting unit is judgmental and requires assumptions and estimates of many critical factors including revenue growth rates, operating margins, cash flows, market multiples and discount rates.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a critical audit matter are (i) there was significant judgment by management when developing the fair value measurement of the reporting units and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s cash flow projections and significant assumptions for certain of the reporting units, including revenue growth rates and operating margins.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment. For certain of the reporting units, these procedures also included, among others, testing management’s process for developing the fair value measurement; evaluating the appropriateness of the income approach; testing the completeness, accuracy, and relevance of underlying data used in the income approach; and evaluating the significant assumptions used by management, including revenue growth rates and operating margins. Evaluating management’s significant assumptions related to revenue growth rates and operating margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the applicable reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.


/s/ PricewaterhouseCoopers LLP
Irvine, California
February 27, 2020

We have served as the Company’s auditor since 1954, which includes periods prior to the Company’s separation from its predecessor (The First American Corporation) in 2010.

38


CoreLogic, Inc.
Consolidated Balance Sheets
As of December 31, 2019 and 2018
(in thousands, except par value)
 

 
Assets
2019

2018
Current assets:
 

 
Cash and cash equivalents
$
105,185


$
85,271

Accounts receivable (less allowances of $7,161 and $5,742 in 2019 and 2018, respectively)
281,392


242,814

Prepaid expenses and other current assets
58,495


50,136

Income tax receivable
1,477


25,299

Total current assets
446,549


403,520

Property and equipment, net
451,021


456,497

Operating lease assets
65,825

 

Goodwill, net
2,396,096


2,391,954

Other intangible assets, net
378,818


468,405

Capitalized data and database costs, net
327,078


324,049

Investment in affiliates, net
16,666


22,429

Other assets
76,604


102,136

Total assets
$
4,158,657


$
4,168,990

Liabilities and Equity
 


 

Current liabilities:
 


 

Accounts payable and other accrued expenses
$
173,989


$
166,258

Accrued salaries and benefits
86,598


84,940

Contract liabilities, current
321,647


308,959

Current portion of long-term debt
56,022


26,935

Operating lease liabilities, current
18,058

 

Total current liabilities
656,314


587,092

Long-term debt, net of current
1,610,538


1,752,241

Contract liabilities, net of current
563,246


524,069

Deferred income tax liabilities
110,396


124,968

Operating lease liabilities, net of current
85,139

 

Other liabilities
181,814


180,122

Total liabilities
3,207,447


3,168,492


 
 
 
Stockholders' Equity:
 


 

Preferred stock, $0.00001 par value; 500 shares authorized, no shares issued or outstanding



Common stock, $0.00001 par value; 180,000 shares authorized; 78,972 and 80,092 shares issued and outstanding as of December 31, 2019 and 2018, respectively
1


1

Additional paid-in capital
111,000


160,870

Retained earnings
1,006,992


975,375

Accumulated other comprehensive loss
(166,783
)

(135,748
)
Total stockholders' equity
951,210


1,000,498

Total liabilities and equity
$
4,158,657


$
4,168,990


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

39


CoreLogic, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2019, 2018 and 2017

(in thousands, except per share amounts)
2019
 
2018
 
2017
Operating revenue
$
1,762,235

 
$
1,788,378

 
$
1,851,117

Cost of services (exclusive of depreciation and amortization)
880,133

 
921,429

 
974,851

Selling, general and administrative expenses
480,938

 
444,614

 
459,842

Depreciation and amortization
187,716

 
191,996

 
177,806

Impairment loss
47,912

 
7,721

 

Total operating expenses
1,596,699

 
1,565,760

 
1,612,499

Operating income
165,536

 
222,618

 
238,618

Interest expense:
 

 
 

 
 

Interest income
2,136

 
1,577

 
1,532

Interest expense
78,293

 
75,551

 
63,356

Total interest expense, net
(76,157
)
 
(73,974
)
 
(61,824
)
Tax indemnification release
(13,394
)
 

 

(Loss)/gain on investments and other, net
(