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CoreLogic Inc  (NYSE:CLGX)
Q3 2018 Earnings Conference Call
Oct. 25, 2018, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the CoreLogic Third Quarter 2018 Earnings Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please also note that this event is being recorded.

I would now like to turn the conference over to Dan Smith, Head of Investor Relations. Please go ahead, sir.

Dan Smith -- Head of Investor Relations

Thank you and good morning. Welcome to our investor presentation and conference call, where we present our financial results for the third quarter of 2018. Speaking today will be CoreLogic's President and CEO, Frank Martell; and CFO, Jim Balas.

Before we begin, let me make a few important points. First, we've posted our slide presentation, which includes additional details on our financial results on our website. Second, please note that during today's presentation, we may make forward-looking statements within the meaning of the federal securities laws, including statements concerning our expected business and operational plans, performance outlook and acquisition and growth strategies and our expectations regarding industry conditions. All of these statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please refer to our SEC filings, including the most recent annual report on Form 10-K and the subsequent 10-Qs. Our forward-looking statements are based on information currently available to us and we do not intend and undertake no duty to update these statements for any reason.

Additionally, today's presentation contains financial measures that are non-GAAP financial measures. A reconciliation of these non-GAAP measures to their GAAP equivalents is included in the Appendix to today's presentation. Unless specifically identified, comparisons of third quarter financial results to prior periods should be understood on a year-over-year basis. That is in reference to the third quarter of 2017. Finally, please limit yourselves to one question with a brief follow-up. We will take additional questions at the end of the call as time permits.

Thanks. And now, let me introduce our President and CEO, Frank Martell.

Frank Martell -- President and Chief Executive Officer

Thank you, Dan, and good morning, everyone. Welcome to CoreLogic's third quarter earnings call. I will lead off today with a discussion of notable third quarter and year-to-date operating highlights and takeaways. Jim will discuss our third quarter financial results and guidance, and we will wrap up the call today with a Q&A session.

CoreLogic delivered a strong set of operating and financial results in the third quarter and for the first nine months of this year. Despite a double-digit contraction in the US mortgage loan volumes, for the first nine months of our 2018, our revenues were down 1% and we grew overall profits, expanded margins and purchased 2% of our outstanding shares. Operationally, we continued to grow our insurance and international footprint, leveraged the benefits of our market leadership and underwriting solutions and aggressively drove cost management and capital return.

Today, I'm going to focus my remarks on what I consider to be the most noteworthy takeaways from the past nine months and the most recent quarter. The four areas I will cover are: first, market conditions and trends in housing and mortgage; secondly, continued outperformance of our core mortgage operations and the positive evolution and diversification of our revenue mix; third, our success in reducing costs and increasing productivity; and fourth and finally, our capital allocation strategy that underpins our market leadership through smart reinvestment, prudent debt management and aggressive capital return.

With regards to market conditions, it's well known that the US housing market has been subject to expected and more recently unexpected headwinds. These headwinds, which include higher home prices and borrowing costs, lack of affordable home stock, regulatory burdens and margin pressures among mortgage lenders, have intensified as the year has progressed and have more than offset the uplift from full employment and a great economy. We entered into 2018 assuming a 10% decline in US mortgage unit volumes for the year, paced by significant drops and refinancing transactions, offset by mid single-digit growth in purchase money transactions. Mid-year, we updated our market outlook for unit volumes to a 10% to 15% decline. Q3 trends and our latest view of market conditions for Q4 indicate that mortgage volumes for the full year will likely be down at least 15%. On a positive note, it is important to remember that purchase money transactions continue to grow modestly as we head into 2019.

Over the first three quarters of this year, our revenues were down 1%. The decline was driven by the mortgage market headwinds I just discussed and the diversification of appraisal volumes by two major clients of that service. Over the course of 2018, we've been able to substantially offset the top-line implications of these headwinds through the continued outperformance of our core mortgage operations, price gains and the growth of our non-US mortgage solutions.

Over the first nine months of this year and in the third quarter, we significantly outperformed the market unit volume trends and tax, flood, credit and valuation platforms. It is important to note that our continued leadership in US mortgage, which remains the largest consumer of residential property data and insights in the world, provides us with critical scale and affords us the opportunity to expand into adjacent and new verticals.

Since 2012, we have steadily increased our non-US mortgage source revenues, which are now approaching 40% of our total revenues. Further scaling of our insurance and international footprint offers the potential for significant non-cyclical growth in line with our long-term goal of generating at least 50% of our revenues from non-US mortgage sources.

We continue to make steady progress against this goal. This week, we announced that the company has entered into a definitive agreement to acquire Symbility, a leading provider of cloud-based property insurance claims workflow and innovative enterprise mobility and software application solutions. The combination of Symbility in our existing underwriting and geospatial data and analytics capabilities, as well as our property related data assets should allow CoreLogic to provide our clients in the insurance industry with new and unique insights into underwriting property and natural hazard risk coverage, while effectively processing claims. Symbility is headquartered in Toronto and operates in North America, Western Europe, Australia and New Zealand. The transaction is expected to close by the end of 2018 and should be modestly accretive to adjusted EPS in 2019.

In addition to expanding our insurance and international footprint, we also continue to build out our platforms that help to efficiently connect key constituencies in the housing ecosystem. These platforms are a distribution vehicle for our property, data and analytics and providing a high margin annuity revenue stream in real estate, the public sector and insurance. Our recent acquisitions of Mercury Network and a la mode are great examples of how we used smart scaling acquisitions to build out a unique leading-edge end-to-end collateral valuations platform that now connects almost a thousand lenders, 300 AMCs and 50,000 plus appraisal professionals.

In addition to successfully growing our insurance international platform revenues, cost management and productivity remain a major focus for our team. Optimizing costs and driving productivity are a way of life at CoreLogic. The results of this focus are evident in the long-term progression of our margins and in our 2018 results. From 2011 to 2017, our operating margins have increased over 850 basis points. This year, we have implemented aggressive cost actions to help mitigate the impact of lower US mortgage unit volumes and support our drive toward adjusted EBITDA margin of 30% in 2020.

For the first nine months of this year, our adjusted EBITDA margins were 28.2%, up 220 basis points. In Q3, we reported a 28.4% adjusted EBITDA margin, which is essentially in line with prior years, despite the drop in market volumes I discussed earlier. Year-to-date and for Q3, we reduced total operating expenses by 3% and 7%, respectively. For the full year of 2018, we expect to achieve at least $15 million in cost savings, in line with our targets. Looking ahead, based on actions we have taken or plan to take this year, we expect a lower run rate operating cost by an additional $20 million in 2019.

One of the major areas that will contribute to substantial cost efficiencies and operational improvements is our recently announced adoption of the Google Cloud Platform or GCP, as a foundational element of our ongoing technology and business transformation program. We expect to complete the initial deployment of the GCP over the next 24 months. The GCP should help us achieve best-in-class system performance and reliability and to facilitate the deployment of unique solutions in the years ahead. The successful implementation of our strategic plan has resulted in the resilient business model that generates consistently high levels of free cash flow.

Through all of the various market cycles we've experienced over the past five years, we have consistently converted 55% to 60% of our adjusted EBITDA to free cash flow. We have used a significant portion of this free cash flow to reward our long-term shareholders. Since 2011, we've repurchased approximately 45 million of our common shares for $1.3 billion. For our long-term holders, that translates to an increase in their percentage ownership of about 40%. Jim will cover our current year repurchase activity later.

Although, our market capitalization has increased significantly over the past several years, in our view, the ongoing repurchase of substantial numbers of our common shares remains a significant source of value creation for our long-term holders. In addition to being shareholder-friendly and returning a significant portion of our free cash flow to our shareholders, we've also paid down a $115 million of our debt this year and continue to prudently reinvest in the business. As an innovative market leader and a strategic partner to our clients, what truly sets us apart from other market participants is our ability to continue to invest in building out leading-edge capabilities, even in the face of sometimes challenging market conditions.

To sum it up, the CoreLogic team continues to execute against key pillars of our strategic plan and deliver strong operating and financial results. I want to conclude my prepared remarks today by thanking our employees, clients and shareholders for their continued support.

Thanks for joining us today. I'll pass the call over to Jim.

James Balas -- Chief Financial Officer

Thanks, Frank, and good morning, everyone. Today, I'm going to discuss our third quarter 2018 financial results and then provide updated views on capital return and financial guidance.

As Frank mentioned, CoreLogic delivered a strong operating and financial performance in the third quarter. Third quarter financial highlights included; first, revenue totaled $452 million, down 6% as organic growth in the PIRM segment and market outperformance in the UWS segment were more than offset by a greater than 15% decline in the volume of US mortgage loan originations. Second, during the quarter, we continued to achieve greater mix toward higher margin subscription technology and non-mortgage based revenues. Third, adjusted EBITDA totaled $128 million, a margin of 28%, largely in line with the prior year as strong cost management and organic growth partially offset the impact of lower mortgage market unit volumes. Year-to-date, our total adjusted EBITDA margin is up more than 200 basis points over 2017 and also higher by approximately a 100 basis points over the prior year when we exclude the impact of accelerated revenue recognition benefits as reported last quarter.

Next, adjusted EPS totaled $0.72 in the quarter as the benefit of productivity improvements, lower taxes and sustained return of capital via share repurchases more than offset the negative impacts of lower revenues. And finally, for the 12 months ending September 30, 2018, CoreLogic generated $276 million of free cash flow, enabling the repurchase of 479,000 shares in the third quarter. Based on our strong cash flow performance, we are raising our targeted share repurchase now for 2018 to at least 2 million common shares.

Third quarter revenues totaled $452 million compared with $483 million in the same 2017 period, a decrease of 6%. PIRM revenues totaled $181 million, equivalent to 2017 as organic growth in property insights including real estate related and international operations as well as contributions from insurance and spatial solutions acquisitions completed in 2017 were offset by the impacts of declining US mortgage unit volumes, lower weather event-related revenues and unfavorable foreign currency translation.

UWS segment revenues were down 10% to $274 million, driven by lower mortgage market unit volumes and vendor diversification by two key appraisal management clients, which more than offset market outperformance in the segment's property tax, credit and flood operations. UWS revenue also benefited from the scaling of CoreLogic's valuation solutions platform through organic growth and the acquisition of Mercury Network and a la mode technologies.

Operating income totaled $60 million for the third quarter compared with $62 million for the same prior year period, as the impacts of US mortgage market headwinds were largely offset by aggressive cost management as well as organic and acquisition-related growth discussed previously. Operating income for the third quarter of 2017 also included a legal settlement charge, which had no 2018 counterpart. Third quarter operating income margin was up approximately 30 basis points to 13%.

Third quarter net income from continuing operations totaled $23 million compared with $31 million in the same 2017 period. The decrease of $8 million was primarily attributable to a one-time $13 million provisional tax expense related to the transition tax for certain foreign earnings in connection with the Tax Cuts and Jobs Act. Third quarter diluted EPS from continuing operations totaled $0.27 compared with $0.36 in 2017. Adjusted EPS totaled $0.72, in line with the third quarter of 2017.

Adjusted EBITDA totaled $128 million in the third quarter compared with $139 million in the same prior year period. Adjusted EBITDA margin was largely in line with 2017 levels at 28%. The 7% decline in adjusted EBITDA was driven primarily by the impact of reduced US mortgage loan unit volumes, lower revenues from weather-related events, unfavorable foreign currency translation and lower appraisal revenues discussed previously, which were partially offset by benefits of higher platform revenues, pricing and aggressive cost management.

Third quarter adjusted EBITDA included $3 million in R&D expenses related to the enhancement of the Company's data visualization and solutions delivery capabilities. PIRM adjusted EBITDA decreased 5% to $54 million, while UWS adjusted EBITDA decreased 12% to $80 million. Finally, despite the significant decrease in mortgage origination volumes, we continued to generate significant levels of free cash flow. For the 12 months ending September 30, 2018, free cash flow totaled $276 million, a 54% conversion rate of last 12 months adjusted EBITDA.

I will close my prepared remarks today with a discussion on capital return and updates regarding our financial guidance. In terms of capital return, CoreLogic's strong free cash flows has enabled us to invest for future growth, while managing our overall debt balances and returning significant amounts of capital via share repurchases. Through the first nine months of 2018, we repurchased 1.8 million shares for a total of $87 million. For the full year, we expect to repurchase at least 2 million common shares.

Regarding our financial guidance, despite the US mortgage market headwinds, Frank discussed earlier, based on favorable revenue mix toward higher margin subscription, technology and non-mortgage base revenues and our progress on cost efficiency, we are projecting that our fourth quarter adjusted EBITDA will be in the range of $95 million to $105 million. With respect to revenue, we expect to see typical seasonality patterns, which would imply an approximate 8% to 10% reduction in revenues for the fourth quarter compared to third quarter actuals.

We've achieved a solid first nine months of 2018 and we believe we are well positioned to continue to deliver strong financial results as we close out the year, despite the current difficult housing and mortgage market environments. As Frank mentioned earlier, CoreLogic remains committed to achieving 30% plus adjusted EBITDA margins in 2020 based on a normalized US mortgage market and after accounting for the build out of our valuation solutions platform. We expect to achieve our margin goals through a combination of profitable growth, favorable revenue mix as well as business model transformation and cost productivity.

Thanks for your time today. I will now turn the call back over to the operator for Q&A.

Questions and Answers:

Operator

Thank you very much, sir. Ladies and gentlemen, we will now begin the Q&A session. (Operator Instructions) Our first question is from Darrin Peller of Wolfe Research. Go ahead.

Darrin Peller -- Wolfe Research LLC -- Analyst

Hey, guys. Thanks. Can we just start off with the businesses that are not mortgage -- not as mortgage sensitive for a moment. I just want to understand -- I mean, we saw some of the breakdown you gave. But, first of all, can you give us a little bit more granularity on what you see happening there both on international? And then just generally speaking, how do you think of the capability of growth for those businesses? I know, some of them are indirectly related -- touched by mortgage or the mortgage market, but overall when we look into '19 and beyond, Frank, maybe you can give us a little more color?

Frank Martell -- President and Chief Executive Officer

Yeah. Thanks, Darrin. Look, I think, the -- I'll take them one at a time. So international, we continue to see good growth there. A little bit of haircut from currency in the third quarter that we haven't seen in past quarter. So you have to take that into consideration, but the local currency growth rates continue to be pretty solid and I would expect those to continue.

I think as we look at the other areas, we have a good growth in the realtor solutions platform area, high single-digit, low double-digit growth rates there. I think we've had a bit of a resurgence in our tenant screening business, as well, which is good. And then I think, in insurance and spatial, we've had good results. The only thing in the third quarter that was a little bit of nuance was the fact that, as you may remember last year, there was a confluence of hurricanes and other weather events that fortunately didn't occur this year from a country perspective. But certainly, we did benefit from a revenue perspective and a margin perspective from a number of weather events in the third quarter of last year that didn't repeat themselves. But if you exclude that, I'm pretty pleased with the progress of that business and certainly, frankly, the addition of Symbility, I think is a major win for us because once we close the acquisition, I think the combination of two companies will be a very strong accretive offering in the market.

Darrin Peller -- Wolfe Research LLC -- Analyst

I mean -- all right, that's helpful. But just when you think about the potential for those businesses to grow going forward, I guess, we're just wondering, given it was a little below what we had expected. And again, I understand there's some mortgage sensitivity to those businesses as well. But what is your confidence level of those businesses being low to mid single-digit growth drivers for the company overall in the next couple of years?

Frank Martell -- President and Chief Executive Officer

I have -- it's the same as we've always been very confident in those businesses growing at similar higher rates than in the past.

Darrin Peller -- Wolfe Research LLC -- Analyst

Okay, all right. And then just my follow up question is on margins. I mean, I understand again there's incremental and decremental margins that can be more material when we get further swings on the origination side, but what should we be expecting? I mean, if you look at the origination forecast that you're looking at now, when we think about the fourth quarter implications and then sort of carrying that forward, are we still thinking like 30% to 40% incremental-decremental margins on the extra dollar or lost dollar of revenue for -- related to the market? Thanks guys.

Frank Martell -- President and Chief Executive Officer

Yeah. I guess, I would just take a step back and say, obviously, this year, you've seen a demonstration of our ability to offset a fair amount of the mortgage pressure through cost management activities and business mix. So I think -- I don't think the incremental margins or decremental margins will change that much frankly. I think, our ability to take additional cost actions should help cushion pressure. It doesn't completely offset it obviously, but it helps cushion it. So I think that one of the big wins for the company has been our proven track record of being able to continue to drive productivity. And I think, Google, for example, is a great example that over the next couple of years that move to the cloud and the GCP is going to yield significant additional benefit. So I don't see any change in the margin characteristics or operating leverage in mortgage. And I just think we're going to get all that more productive and efficient on the cost side. That's why we've kind of signaled the $20 million reduction in costs next year, which gives us some headroom, obviously.

Darrin Peller -- Wolfe Research LLC -- Analyst

Okay. That's helpful, guys. Thank you.

Operator

Thank you very much. The next question is from Chris Gamaitoni of Compass Point. Please go ahead.

Chris Gamaitoni -- Compass Point Research & Trading LLC -- Analyst

Good morning. Thanks for taking my call. Going to the cost side, I look at the G&A so far is down $7 million year-to-date year-over-year. The gross margin is down 2 percentage points. So how much of the $15 million guidance is currently in the numbers year-to-date, cost reduction?

James Balas -- Chief Financial Officer

It's pretty back-end loaded. It's probably like a 40% front half of the year, 60% back half of the year. So we're tracking to the $15 million ultimately.

Chris Gamaitoni -- Compass Point Research & Trading LLC -- Analyst

Okay. And is it --

James Balas -- Chief Financial Officer

And then the other thing you need to factor, Chris, is the -- we did have acquisitions that added some during the course of the year. So if you had to strip out the acquisitions, that would be the way to do the analysis when you get Q later today.

Chris Gamaitoni -- Compass Point Research & Trading LLC -- Analyst

Okay. That's helpful. And is most of that cost reduction transparent in the SG&A line, rather than the gross margin line or the cost service line?

James Balas -- Chief Financial Officer

Yes. A good portion of it's in SG&A.

Chris Gamaitoni -- Compass Point Research & Trading LLC -- Analyst

Okay. And could you give us an update on the tax business? It was down like 8% year-over-year. Wondering, if that's all volume related or if there's some other nuances from how the curves work on revenue recognition we should be considering?

James Balas -- Chief Financial Officer

No real change on the tax business. It continues to perform well. There are adjustments at times in the way we calculate the revenue due to changes in the portfolio, but it continues to perform well and outperformed the market in the quarter.

Chris Gamaitoni -- Compass Point Research & Trading LLC -- Analyst

Okay. And then finally, do you have any sense of where we are in the diversification of your two large clients in AMC? How much further to go and if you'd be able to provide kind of the revenue contribution of the previously disclosed new clients a couple of quarters ago?

Frank Martell -- President and Chief Executive Officer

Yeah, Chris. This is Frank. So obviously, the genesis of our AMC business was really two clients. We bought the captive appraisal operations of the two clients that are involved here. We don't specifically name clients obviously in our calls, but the diversification is no different than was planned. They have -- and we announced they have a progressive planned diversification. I would say, though -- and then that -- and that -- there's no surprise there, honestly. I think the fact that their individual shares and volumes are fluctuating. That is the one swing factor, obviously, particularly in one case, which is a bit beyond anybody's control there, but -- so that is one -- one nuance there. But in terms of the planned diversification, there's no real change there.

I would say, the -- on the other side of it, we are making good progress diversifying the revenue base there. We expect to see a growth rate this year, a fairly significant growth rate from those clients, those new clients and that should more than double next year. So we're going to finally see the benefit of the diversification strategy that we put into place when we put those two companies together, become a more meaningful benefit next year as these clients actually flow revenue through the pipes in new business. So I don't think there is any surprise on the existing client base. Maybe a little bit on terms of how they fare in the marketplace in any given quarter, but no surprise from a diversification standpoint. I think -- and then good news on the additional clients that we're signing up.

Chris Gamaitoni -- Compass Point Research & Trading LLC -- Analyst

Is there any sense of -- just any type of gauge or how large that can be relative base dollars, just any sense so for us to track?

Frank Martell -- President and Chief Executive Officer

We -- are you talking about the new clients or --

Chris Gamaitoni -- Compass Point Research & Trading LLC -- Analyst

The new clients, yeah, the new clients.

Frank Martell -- President and Chief Executive Officer

I think, it's -- my guess is, we're going to add next year probably -- 10% to 15% of the revenue will come from new clients.

Chris Gamaitoni -- Compass Point Research & Trading LLC -- Analyst

Thank you so much.

Operator

Thank you. The next question is from Bill Warmington of Wells Fargo. Please go ahead.

Bill Warmington -- Wells Fargo -- Analyst

Good morning, everyone.

Frank Martell -- President and Chief Executive Officer

Good morning.

Bill Warmington -- Wells Fargo -- Analyst

So I want to ask your help on a calculation. We like to do this EBITDA bridge and we may a little bit of debate about what the proper base for 2018 to build that bridge into '19 should be. And I say that normally it's not an issue. You have your guidance range. You come in somewhere in that range and you build off of that. But this year, we have that $20 million that is sort of a one-timer and that's a benefit, but then you also -- some of that portion is being spent, you talked about maybe $5 million to $10 million of that going into R&D. And so that's what I'm trying to get at is -- should we be looking at really, let's say 480 to 500, the real range going forward to serve as that base really would be maybe 470 to 490, can you help maybe a little bit with that calculation?

Frank Martell -- President and Chief Executive Officer

Yeah. Bill, this is Frank. I mean, I think the $20 million was -- I think it's -- I mean, it is what it is. It's a single event related to a renegotiation of a contract that under the accounting rules you have to recognize some revenue. So -- and then profit. So that obviously is a discrete item. So whenever you do your calculation -- I mean, Jim gave you the top-line EBITDA numbers for 2018 in his guidance update. So I think that -- which is a narrowing of the range. I want to emphasize we have narrowed the range. We're not outside of our previous guidance range. So that all remains the same. And I think it should be -- it's important to note that we have pretty much held our EBITDA guidance for the year, throughout the year, despite a deteriorating market condition, which is resulting of our ability to manage through our cost base. So that hasn't changed. None of that's changed. So I think you can use the math that Jim gave you and then factor in the discrete item to get to your -- whatever numbers you're going to indicate for 2018.

Bill Warmington -- Wells Fargo -- Analyst

Got it. And then along those lines, the $20 million in cost savings that you announced, is that going to be $20 million in benefit in 2019 or is it going to be actions taken in 2019 and the benefit is partially in 2019, partially in 2020?

James Balas -- Chief Financial Officer

It will be realized in 2019.

Bill Warmington -- Wells Fargo -- Analyst

Got it. All right. Well, thank you very much.

Frank Martell -- President and Chief Executive Officer

Thanks, Bill.

Operator

Thank you. The next question is from Bose George of KBW. Please go ahead.

Tommy Mcjoynt -- KBW -- Analyst

Hey, guys. This is Tommy Mcjoynt on for Bose. Let's see. Just starting with the Symbility, it looks like judging from kind of what the revenue numbers that it put out last year that it would add about 25% kind of incremental revenues to insurance and spatial line item. First of all, does that number sound right or is there some sort of overlap where some of that would be lost? And then going forward, how do you see those margins comparing to what that business already has at CoreLogic?

Frank Martell -- President and Chief Executive Officer

Yeah. So I think as I said in my comments, Symbility is a great add for the company. Your percentage addition numbers are roughly -- rough order magnitude in the ballpark. I don't -- can't give you exact number off the top of my head, but it's in that ballpark. So it gets us significant growth. It's a growth company. It has been a growth company historically. I don't -- there's no cannibalization, actually I think quite the contrary, we see the potential for synergy and a multiplier effect of putting the two companies together. So there's no cannibalization there.

Tommy Mcjoynt -- KBW -- Analyst

Okay. And then on the PIRM segment, you guys mentioned some weakness from the declining US mortgage unit volumes in 3Q. And I understand that property insight revenues come in both ratably from kind of the bulk deals that are coming over time as well as more on the transaction basis by usage. Could you kind of give us a breakdown of how much kind of revenue is in kind of each piece of that?

Frank Martell -- President and Chief Executive Officer

Yeah. So I think the -- where the mortgage sensitivity comes in primarily in PIRM is in some of the analytical areas, fraud analytics, for example. So there is not -- from a bulk license perspective, those are longer-term contracts. So there is not a direct correlation there to volume sensitivity. So the volume sensitivity is more in these fraud and some of the valuation analytics that are done there versus property data licensing revenues.

Now, obviously, there is an indirect muting effect, obviously, when you have a client base that is facing much, much more significant headwinds in the mortgage market and other markets, in the lending markets, so their propensity to spend or discretionary or otherwise is reduced in this kind of market condition. If you look at the -- I don't -- if you look at all the disclosure around those big lenders. So that does have a muting effect, but in general, we're seeing the volume pressures as it relates to PIRM and simply in those couple areas.

Tommy Mcjoynt -- KBW -- Analyst

Okay. And then last one from me. Has your valuation business seen any impact from the GSEs offering property inspection waivers or the treasuries come out and push for more automated appraisals? How do you see those policy changes impacting your appraisal business longer-term?

Frank Martell -- President and Chief Executive Officer

It's early days. I think that the answer -- the short answer to your question is it's really been a de minimis impact. I mean, there's been small in the round area, but again, because we really are -- we are really focused on just a few clients at this juncture, I'd say it's a relatively small impact. The future, it's hard to predict, but at this point, certainly, we don't see a big impact.

Tommy Mcjoynt -- KBW -- Analyst

Okay. Thanks.

Operator

Thank you very much. The next question is from Stephen Sheldon of William Blair. Please go ahead.

Stephen Sheldon -- William Blair -- Analyst

Hi, good morning. Thanks for taking my questions. I guess, first in the PIRM segment, can you maybe provide some more detail on the moving pieces that caused the deceleration in both property insights and insurance and spatial and maybe quantify the impact of the tough comps from hurricanes in the year ago period and the impacts of the currency headwinds? And then you also have tougher comps there in the fourth quarter, but there's also some recent weather events that may drive some activity. So any color on how you're thinking about the trajectory of those businesses in the fourth quarter?

Frank Martell -- President and Chief Executive Officer

Yeah. So I think, in terms of quantifying, so if you look at the currency implications, it's several millions of dollars on the top-line, $3 million, $4 million on the top-line, so you can use that kind of range number and I think use our margin rate to get to the EBITDA impact. So -- and then a similar quantum on the weather side, maybe slightly less year-over-year. It's hard to predict the weather events we're having, weather events this year, they're not as severe, clearly, fortunately as last year. So the hurricanes that we've had have been a lot less severe. So I think weather will achieve the same kind of revenue issues in third quarter last year. In the fourth quarter, I don't know, I don't see that at this moment, but certainly we are benefiting. There have been some weather events that we're benefiting from, but we'll have to wait and see what the fall-through is in the fourth quarter.

Stephen Sheldon -- William Blair -- Analyst

Got it. That's helpful. And then after the addition of Symbility, which was -- that was good to see. Wanted to dig a little deeper on maybe how you view your broader capabilities in the insurance sector at this point, especially in relation to your biggest kind of competitor there. You now have the claims workflow tools of Symbility, you already had the cost pricing data with Marshall & Swift. You have the kind of small cap modeling business. So, I guess, just, how do you view your broader ability to compete in insurance globally? And maybe, where would you need to add or expand in your solution set to provide more value to insurance customers?

Frank Martell -- President and Chief Executive Officer

Yeah. We think there's a lot of synergy between the property information that CoreLogic has and the assets that have been acquired over the last three years or four years to offer insurance clients really good insights, we think unique insights. So clearly, we -- I think we offer most of the capabilities that our competitors offer and some unique additional capabilities. We have to compete on our ability to add unique insights and value add. I think the acquisition of Symbility is a great one for us because it really more fully integrates our offerings. So we can be -- present them effectively with a client base. So I think it's a great confidence booster and a great addition. Obviously, we know Symbility for a long time. They've got a great team. We really like their team a lot. And I think that we've only scratched the surface in terms of what synergistic value there are and what additional products we have. I think also frankly, we have a pretty good international footprint, so did they. So we think there's some opportunity to leverage that, they're in Europe, they're in Australia, New Zealand, we're in Australia, New Zealand and Europe. So we think the combo can go global as well. So I feel pretty good about what we've assembled. We make good money in that area. And I think there's a lot of platform revenue, which has been a big focus of the company getting more of our revenues into the platform areas. So I think it's all good in insurance. And I think plenty of upside potential as we really realize the full integration benefit with Symbility and CoreLogic.

Stephen Sheldon -- William Blair -- Analyst

Great. Thank you.

Operator

Thank you very much. Next question is from Jeff Meuler from Baird. Please go ahead.

Jeffrey Meuler -- Robert W. Baird & Co -- Analyst

Yeah. Thank you. Just on your prior comment about it's a tougher RFP environment, given the challenges and your client base on the mortgage side. Can you just give us examples of maybe two or three solutions that you're most optimistic about when the market conditions get more favorable that they'll represent sizable new business opportunities for you?

Frank Martell -- President and Chief Executive Officer

Yeah. Jeff, just to clarify though, you made a comment on RFP, we didn't say anything about RFPs --

Jeffrey Meuler -- Robert W. Baird & Co -- Analyst

A tougher selling environment.

Frank Martell -- President and Chief Executive Officer

Okay. Sorry. Yeah, look I think, we're really excited about the platform business. We want to connect the real estate market. I think the platform business that I just discussed and valuations on my prepared remarks, we're getting good growth at high margins in that business, so very excited about that. Number one. We just talked about insurance and spatial, very excited about that. I think that clearly, we have a lot of opportunities in the real estate area. We have a realtor platform that connects 800,000 realtors with workflow tools, so that's again an area that is growing quite nicely for us. So those are three areas that come to mind immediately.

I think on the mortgage side, actually if you look at the third quarter, even though our revenue was down 6%, I think as somebody pointed out earlier on the call, a chunk of that -- and to me the market outperformance is even better, if you look at the AMC situation and you look at the diversification and the market gyrations of those specific clients, it's -- that's kind of a unique situation but not necessarily market related. So I think if you even back that out, our 6% becomes even less in a pure market sense. So that's a little bit of a thing that you need to factor in when you look at the trajectory of our mortgage business.

We're doing great in analytics. I think tax fund credit are really strong businesses, the valuation platforms business. So really I think the pressure release needs to come in the AMC piece of it. And I think we'll work it through. And then what's very encouraging is the diversification and the traction we're getting there and then also to be quite honestly the -- we still -- it's got lost a little bit in the market, but we still are working very hard to transform the appraisal workflow process to make it more efficient, we're making good progress there. So more to come on that in '19, but that has been always and remains the underlying strategic implication there is to make the appraisal process much quicker and much more user-friendly and we are making progress there as well.

Jeffrey Meuler -- Robert W. Baird & Co -- Analyst

Okay. And then just a clarifying question. The 30% margin target for 2020 being based on normalized market, got that, makes sense. The second part of that, the after accounting for a build-out of the VSG platform, what exactly are you saying there as it relates to the 2020 margin target?

Frank Martell -- President and Chief Executive Officer

So since the genesis of the 30% target, which came -- which was established at the time that we were acquiring the AMC assets, Jeff, that's -- that comment has been consistent throughout and it reflects the fact that, at the time the 30% margin target was established, obviously, we were looking at the market conditions underlying and also looking at that strategic initiative, which was to transform the appraisal business, as I just discussed. So that comment about after reflecting cost related to that, that's what that reflects. So there's absolutely nothing new there. Those costs have turned out to be not that material in the grand scheme of things. So -- but that's the comment that we make because we need to make sure that people understand that. We still want to transform that space. And inevitably, you don't do that with no resources or no money. So -- but it just so happened that we've been able to do that within the contours of the P&L.

Jeffrey Meuler -- Robert W. Baird & Co -- Analyst

Okay. And then just finally from me. You've had I think several different waves of tech investments and replatforming, if I think back a few years ago, I think (inaudible) TTI or something. But now, you have the Google cloud initiatives. I guess, just, what's left to be done until you get to the point of continuous improvement? What's ought to be done on the tech back-end improvement? And on the Google side, is that mostly about cost and efficiency for you or is it more about how you interface with your clients and how the solutions are consumed?

Frank Martell -- President and Chief Executive Officer

Yeah. So look, first of all, as a data analysis company, IT spending is a significant portion of our cost structure, obviously. We -- when we spun off seven, eight years ago, we had a lot of data centers, we had a lot of platforms. So the first move was what you described, which was the TTI, which was taking that and centralizing that. The TTI was a lot about addressing tech debt as well as putting our data centers into a cloud -- into a private cloud-based environment with Dell. That was achieved in 2015-'16. But the Google is the next logical step, which is taking it into a public cloud environment, where obviously you get additional operating efficiencies from that environment. So that's the basic theory there.

But in addition, we expect to derive systems performance benefits and as well as we expect to derive certain additional cost benefit. So it is a structural play, better security, addresses additional tech debt. You're never finished, obviously, I'm sure you talk to every company, you're never finished addressing and investing in technology, especially if you're data and analytics company. But I think that we are -- the Google deal allows us to take the next step and get really leading-edge in terms of the capabilities around the cloud. Obviously, everybody is doing it. So we're not unique in that regard.

Jeffrey Meuler -- Robert W. Baird & Co -- Analyst

Okay. Thank you.

Operator

Thanks very much. The next question is from John Campbell of Stephens Inc. Please go ahead.

John Campbell -- Stephens Inc. -- Analyst

Hey, guys. Good afternoon, guys.

Frank Martell -- President and Chief Executive Officer

Hey, John. Good morning.

John Campbell -- Stephens Inc. -- Analyst

Frank, just following back up on last question on the cost reduction efforts. You guys have had several years in a row of pretty sizable efficiency efforts. It sounds like you've done a lot on the real estate consolidation side and now it sounds like you're kind of getting in the technology side. Just curious, I mean, as you look at your long-term plan, kind of what innings we're in or is it kind of late innings, have you done most of the heavy lifting? Just kind of curious what remains.

Frank Martell -- President and Chief Executive Officer

No, look, I think, John, one of the things, obviously, is we have rebuilt CoreLogic over the years and we have changed the composition, I talked about. Seven years ago, we were 95% mortgage focused, now we're 60%. So we have -- the composition of the company has changed. So with that comes change in the cost structure. So I don't think you're ever done optimizing your cost structure. $20 million for us is a little over a point of margin. So it's not like we're -- it's astronomical in nature. I'd like to do more, but we have to do it in the context of investing as well. So look, I don't think it's a large number that's unachievable, I think we're -- I personally think we're going to continue to be able to trim back and reduce our costs. I mean, we're investing in things like machine learning and artificial intelligence, which again is not a new phenomenon, a lot of companies are doing that. That offers a significant automation benefit. So I think we've got continued room. I -- there's probably no ginormous -- it's a lot of work on a granular level, but it's something that is a way of life for the company and I think something that I expect that we'll be able to continue to maintain.

John Campbell -- Stephens Inc. -- Analyst

Okay, great. And then on the $3 million of reinvestment spend you guys called out for the quarter, I'm assuming that's all PIRM, is that right, it all fell in that segment?

Frank Martell -- President and Chief Executive Officer

The vast majority of it.

John Campbell -- Stephens Inc. -- Analyst

Okay. So margins, I guess, kind of flattish year-over-year there, ex the spin, is that the way to think about it?

James Balas -- Chief Financial Officer

Yeah. You also had some from FX, you had about a $1 million in EBITDA from the FX there. And then the weather-related that Frank pointed out earlier.

John Campbell -- Stephens Inc. -- Analyst

Okay. And just remind us again, kind of what you think about as far as peak margins there, long-term margins, kind of where you can get that business to?

Frank Martell -- President and Chief Executive Officer

Are you talking -- sorry, are you talking about --

John Campbell -- Stephens Inc. -- Analyst

Just PIRM.

Frank Martell -- President and Chief Executive Officer

Just PIRM. Well, we're not -- we don't forward guide on the segments, but I think we've always said we believe it's north of 30% margin and I think that's still the case.

John Campbell -- Stephens Inc. -- Analyst

Okay, great. Thanks guys.

Operator

Thank you. Next question is from Andrew Jeffrey of SunTrust. Please go ahead.

Andrew Jeffrey -- SunTrust -- Analyst

Hi, good morning. I appreciate you squeezing me in here. I guess, a couple of big picture questions because we've gone through a lot of the detail, which is helpful. One, I guess is just the overall portfolio composition. You're in a lot of different businesses and it feels like much of the focus, especially for future growth remains in valuation and insurance is obviously a nice business that doesn't have the kind of mortgage exposure of some of your other operations. Are there sub-segments or businesses that might make sense to rationalize, I'm thinking about LOS, or is there anything else that maybe doesn't fit as well with your long-term strategic plans?

Frank Martell -- President and Chief Executive Officer

Yeah. So look, I think, first of all, the business -- what we do is we sell residential property information. And we sell to a bunch of verticals and we sell it really primarily in two areas. One is for underwriting property and casualty insurance policies and for second -- secondarily for mortgages. So we provide -- the vast majority revenue is for underwriting and risk management solutions. So it's really that -- I mean, we do -- the good news is we've diversified, where we're selling the property information vertical-wise and frankly from -- more internationally as well. So we -- that's all I think a good thing for our growth opportunity there. We operate in basically very concentrated positions along the value chain of those risk management and underwriting spots, so -- and we'll continue to do so because we believe in scale and market leadership. That's why I continue to tell people, it's very important that we are a leader in US mortgage, as cyclical as it has been because it provides the scale we need to invest at a very large scale.

I think in terms of looking at the portfolio, we have been very aggressive in terms of weeding out non-core assets. Over the last couple of years, we've continued to bleed down business units and revenue streams that we don't think will add value. We are always looking at that and we'll continue to do so. So I can't speak to a specific, but you can rest assure that we are always looking at where we think we can add value and where we don't think, frankly, we can't add value and therefore we shouldn't be doing it. So we will continue to do that.

Andrew Jeffrey -- SunTrust -- Analyst

Okay. Thank you. And then with regard to just pricing, I know it's one of the initiatives in growth drivers I think you called out. Can you just characterize sort of maybe order of magnitude and perhaps some areas, where you see the opportunity to price to value?

James Balas -- Chief Financial Officer

Yeah. Pricing has continued to be a good support in the margin profile and the growth rate, as we indicated on the past calls. So nothing new there. It continues to contribute to the organic growth rate. And as we've indicated that it's become more programmatic on annual contract renewals and so forth. So it continues to be strong.

Andrew Jeffrey -- SunTrust -- Analyst

Okay. Is that -- can we think about that as maybe a 1 point of growth, 2 points of growth? Just trying to frame it up.

James Balas -- Chief Financial Officer

It's the -- probably the larger contributor in the grand scheme of things on organic growth.

Andrew Jeffrey -- SunTrust -- Analyst

Okay. Thank you.

Operator

Thank you very much. The next question is from Glenn Greene of Oppenheimer. Please go ahead.

Glenn Greene -- Oppenheimer -- Analyst

Thanks. Good morning. First question, could you just help us quantify the revenue and EBITDA drag from the unit volume decline you saw in the quarter?

James Balas -- Chief Financial Officer

Yeah. On the revenues -- hey, Glenn, it's Jim. On the revenue, it was about $45 million.

Glenn Greene -- Oppenheimer -- Analyst

Okay. And EBITDA?

James Balas -- Chief Financial Officer

EBITDA, I think the age old 30% to 40% is probably about right.

Glenn Greene -- Oppenheimer -- Analyst

Okay. And then it was helpful to get the weather drag, so it was basically $3 million to $4 million weather on the revenue and $1 million on EBITDA or that was the FX rather?

James Balas -- Chief Financial Officer

The FX was about $3 million with $1 million on the EBITDA.

Glenn Greene -- Oppenheimer -- Analyst

Okay. And then a similar call out for weather?

James Balas -- Chief Financial Officer

Weather is like a couple million, not that big.

Glenn Greene -- Oppenheimer -- Analyst

Okay. And then just -- I know it's early, but in terms of the market outlook, it was interesting that you sort of talked about purchase still sort of modestly growing. But how do you sort of view, and I don't want to put a stake in the ground, but how do you sort of view the outlook for 2019 as we sit here today? Do things sort of moderate or are we still sort of thinking 10%, 15% type unit volume decline?

James Balas -- Chief Financial Officer

Yeah. I think -- this is Frank. Thanks for the question. I think -- just to back, I think the good news in the mortgage market is -- and as we talked about this on the last bunch of calls, purchase is increasing. Now, it slowed down a bit from what we thought going into the year, but -- and what everybody thought, but I think that most people think purchase will continue to be durable and have some growth in it. It's really refi this year has come down a lot, the Fed has pushed up rates. Mortgage rates have gone up significantly. I think also housing prices going up significantly. I think it's had a dampening effect on refi activity. People a little more cautious. So I think as -- that has come down quicker than anybody thought I think. So I think as you look into next year, I think refi is -- I mean, a lot of the areas come out of the market, so I wouldn't expect a significant -- as significant decline in refi activity next year as we saw this year. So I think certainly the trends I would expect them to moderate. That's certainly the external forecast would seem to indicate that. But they've kind of -- as they progressed through the year, they ratcheted down their projection for this year. And so that obviously changes the entry point into next year, but I would expect broadly for next year purchase to be solid and refi to be a little bit volatile, but certainly not the quantum of decline that we saw this year. I can't hazard a guess in terms of what specifically it will be. I think the major indices are out there, but --

Glenn Greene -- Oppenheimer -- Analyst

Yeah. I assume you get to a certain natural floor at some point on the refi side. I guess, it was kind of where you were answering the question the way I thought you might, so that's actually helpful. And then just the final question, the 30% EBITDA margin target, can you get there with this kind of market environment, what are your confidence level to get there?

Frank Martell -- President and Chief Executive Officer

Well, look, I think it's still a couple years out, so we're working on it. I think we have all of the elements necessary from a planning perspective internally to take the actions we need to get to 30% margin and the -- one of the things that's always been a little bit of an interesting discussion with external people, they take the dollar volumes of origination and look at that. We -- our revenue is based on units processed. So if you have a 6% increase in pricing, obviously, you got to deflate that to get to the units. So it depends on the unit volumes that we see as we get out there in 2020. I would be remiss if I try to project out there, I don't know what they're going to be. We've always said it depends on the market volume. So I think that's to be determined, but I think certainly the most important thing is we have the plans necessary to get to the 30% margin mapped out, we've taken a lot of actions, the GCP that I talked about in my prepared remarks is one of those actions. The cost reductions next year, we talked about some of those actions. So I think you can see the contours of that. There's enough actions you can see that and you can judge for yourself whether you have the confidence. I think we've always hit our targets that we put forward and we're going to definitely drive to the 30% margin as we kind of indicated.

Glenn Greene -- Oppenheimer -- Analyst

Okay. Thank you. Appreciate it.

Operator

Thank you very much. And the next question is from Kevin Kaczmarek from Zelman & Associates. Please go ahead.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Hey, guys. Thanks for taking my call. I guess, on the Google cloud announcement, a couple more questions on the details. I guess, one, that you mentioned that initial phase will be like two years. How many phases might there be or how much occurs in that initial phase?

Frank Martell -- President and Chief Executive Officer

Yeah. Hey, thanks Kevin. So -- hey, look, I think, number one is the Phase 1 is really in summary level, it's basically to take our kind of our core legacy applications, replatform them and move them to the Google cloud. And that's where the bulk of our revenue is generated from those legacy. So that's the focus of Phase 1. So really it's just -- the timeline is dictated by the work involved by application, so that's what that is. So -- and that's under way. I think all things are -- look good on that application. That's kind of Phase 1. Phase 2, we'll get into the additional, the residual applications, if you will, which are being built already. So you don't have to replatform them, they can slide over because they're being built on the pivotal cloud foundry platform that we've put into place a couple years ago. So those new applications are being built already public cloud enabled, so there's less work involved there. That's why they're coming as a second Phase.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Okay. And I guess at what point would the data center with NTT not be needed? And, I guess, related to that, do you own the equipment in there or could there be a shift from CapEx to the income statement when you're talking about expenses when making this move?

Frank Martell -- President and Chief Executive Officer

No, look, I think the implication of the Dell data center, it's going to be multi-year. There is a shift -- as things shift, obviously, things get moved over. We don't have a long-term revenue commitment in terms of the Dell data center, so there's no encumbrances there. So there really is no shifting between the P&L and the balance sheet as you kind of described.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

All right. And I guess, the last one is, how much of the $20 million in next year's expenses is from Google cloud -- the next year's expense reduction?

Frank Martell -- President and Chief Executive Officer

Relatively small.

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Okay. Thanks. That's all I had.

Operator

Thanks very much. Our last question is from Jason Deleeuw of Piper Jaffray. Please go ahead.

Jason Deleeuw -- Piper Jaffray -- Analyst

Yeah. Thanks for squeezing me in here. Just a question. There's been a lot of private capital, a lot of new companies operating and starting up in the real estate space, especially the last few years, high buyers, new real estate brokerage models, there is digital mortgage initiatives, some of this CoreLogic is trying to help develop. What's kind of the lay of the landscape and opportunities that you see for CoreLogic and also risks that you see?

Frank Martell -- President and Chief Executive Officer

Yeah. Look, there's a tremendous amount of money going into housing and mortgage and I think -- by the way, that's being put in by new players and existing players. So everybody is kind of focused on making the housing bucket more efficient. The good news is, we're all about making -- connecting the constituencies and driving better insight. So some of these players are -- we're partnering with -- we're -- they're using our data. So it's -- I see it as all kind of all good, if you will, in terms of our potential growth as we go forward. A lot going into the -- being a 2% or 3% brokerage. I don't know about how those models will end up. But I think in terms of adding value to the mortgage constituencies, I think we will do that and I think the -- anything that makes the housing experience better is good for CoreLogic and we'll be there to contribute because the property data is necessary, no matter who it is and no matter what they're doing.

Jason Deleeuw -- Piper Jaffray -- Analyst

Great. Thank you very much.

Operator

Thank you very much. Ladies and gentlemen, that then concludes this conference call. Thank you for attending today's presentation, and you may now disconnect your lines.

Duration: 65 minutes

Call participants:

Dan Smith -- Head of Investor Relations

Frank Martell -- President and Chief Executive Officer

James Balas -- Chief Financial Officer

Darrin Peller -- Wolfe Research LLC -- Analyst

Chris Gamaitoni -- Compass Point Research & Trading LLC -- Analyst

Bill Warmington -- Wells Fargo -- Analyst

Tommy Mcjoynt -- KBW -- Analyst

Stephen Sheldon -- William Blair -- Analyst

Jeffrey Meuler -- Robert W. Baird & Co -- Analyst

John Campbell -- Stephens Inc. -- Analyst

Andrew Jeffrey -- SunTrust -- Analyst

Glenn Greene -- Oppenheimer -- Analyst

Kevin Kaczmarek -- Zelman & Associates -- Analyst

Jason Deleeuw -- Piper Jaffray -- Analyst

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