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CoreLogic Inc (NYSE:CLGX)
Q3 2019 Earnings Call
Oct 24, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day. And welcome to the CoreLogic Third Quarter 2019 Conference Call. Today's conference is being recorded. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]

I'd now like to turn the conference over to Dan Smith, Investor Relations. Please go ahead, sir.

Dan Smith -- Investor Relations

Thanks, and good morning. Welcome to our investor presentation and conference call where we present our financial results for the third quarter of 2019. Speaking today will be CoreLogic's President and CEO, Frank Martell; and CFO, Jim Balas.

Before we begin, let me make a few important points. First, we'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 2018.

Finally, please limit yourselves to one question with a brief follow-up. We will take additional questions at the end of the call, if time permits. Thanks. And now let me introduce our President and CEO, Frank Martell.

Frank D. Martell -- President and Chief Executive Officer

Thank you, Dan. And good morning everyone. Welcome to CoreLogic's third quarter 2019 earnings call. I'll lead off the call today by outlining important takeaways from the quarter, and then spend some time summarizing our progress relative to strategic initiatives, including our AMC transformation as well as our efficiency programs. Jim will follow and summarize our financial results and provide updated guidance for the fourth quarter and the full year. We'll then conclude with a Q&A session.

Regarding the third quarter, we delivered results that were at the high end of our guidance ranges. We generated positive revenue momentum, driven by growth in platform-related and other high margin businesses.

We also capitalized on higher refinancing volumes in the US. These gains allowed us to more than offset the expected revenue attrition attributable to the transformation of our AMC operation, and the exit of certain non-core mortgage and default technology units. A combination of top line growth and favorable revenue mix, operating leverage, and cost productivity drove substantial increases in third quarter operating and net income from continuing operations, adjusted EBITDA, net income and EPS were also up significantly.

Importantly, we increased adjusted EBITDA margins by 140 basis points to 30% in the quarter, and I believe that we are well positioned to achieve sustained higher margin levels over the back half of 2019. Achieving the 30% adjusted EBITDA margin threshold in the third quarter is an important reference point that the company is on the right path to achieve its long-held 2020 margin target.

During the third quarter, we also increased free cash flow generation and trailing 12-month free cash flow conversion rates. This affords us the flexibility to invest in our products and solutions, and at the same time lower debt and repurchase our common shares. Jim will discuss capital allocation in more detail later in the call.

I believe our third quarter and year-to-date results demonstrate that we have made important progress advancing the key elements of our strategic plan. As outlined on past earnings calls, our strategic imperatives include first establishing strong client partnerships to unique data insights and solutions. Second, driving scale and operating leverage in our core mortgage operations. Third, driving at least 50% of our total revenues from non-US mortgage volume sensitive solutions. Fourth, achieving adjusted EBITDA margins of at least 30%. And fifth and finally, optimizing capital allocation and providing a consistent return of capital to our shareholders.

With regards to building strong strategic client partnerships through unique data driven insights and solutions, we continue to invest best-in-class products and solutions as well as our operational capabilities, technology platforms and infrastructure. Over the course of 2019, We are focused on building our smart data platform, migrating our technology infrastructure to the Google Cloud Platform or GCP, and transforming our AMC offering. As we look forward, we are also making strong progress building next generation capabilities with a particular focus on data quality, structures and visualization, as well as technology platforms and advanced automation techniques.

These capabilities allow us to build operating leverage, tap into growth opportunities across multiple verticals, and steady foundation for additional margin expansion in the future. In terms of revenue mix and diversification, we are continuing to grow our non-US mortgage volume sensitive revenues to at least 50% of total revenues in line with our strategic targets. For the first nine months of 2019, the shift has been fueled by growth in platform-related revenues, as well as our continued expansion in new verticals and internationally.

As we grow these adjacent revenue streams, we are also continuing to build market leadership in our core US mortgage solutions, which leverage common technology in back-office infrastructure and data repositories. Our mortgage operation continues to benefit from a trend among lenders and servicers, favoring integrated solutions and strategic relationships with key supplier partners.

Recently, our mortgage operations also benefited from higher refinancing volumes, catalyzed by the recent drop in mortgage rates. We estimate the total origination unit volume increased approximately 20% to 25% in the third quarter. Origination volumes expressed in dollar terms rose at a faster pace in unit volumes during the quarter as the average loan size has increased by 15% to 20%, as higher loan balances have tended to be the first in line to refinance.

Purchase market transactions continue to register modest growth, reflecting ongoing structural headwinds in the broader housing market. Last December, we announced that we are accelerating the transformation of our AMC operation into a higher performing premium service offering. This program is both a growth and a margin play. I'm pleased to report that we're making excellent progress in rightsizing our operations, automating critical workflows and upping the utilization of our in-house appraiser staff.

As we continue to test and roll out our new valuation offering, we are receiving positive feedback from our clients and our new service, which features improved cycle times and efficiencies, as well as a better and more uniform customer experience.

As I discussed earlier, our new operating model has driven revenue attrition for AMC this year, a certain customers up to maintain more traditional service models. Over the course of 2020 and beyond, we expect to see a return to positive revenue growth with enhanced profit margins associated with a broader adoption of our upgraded technology and data driven AMC solution.

I'll close out my prepared remarks today with comments on operational excellence. As our long-term investors know well, we have established track record of successfully driving productivity and our push toward first quartile levels of operational excellence. We remain on track to lower run rate costs by at least $20 million in 2019 by consolidating facilities, managing staff costs, simplifying our organization, automating certain activities, and other operational improvements.

Our laser focus on operational excellence is a major reason for our outstanding Q3 margin performance, and supports reaching our long held goal of achieving at least 30% adjusted EBITDA margins during 2020. Based on a stable US mortgage market, and after accounting for the transformation of our AMC and the wind down of our non-core mortgage technology units.

In conclusion, I want to thank all of our employees, clients and shareholders for their continued support. 2019 has been a year of significant progress and achievement on many important fronts. We're excited by the opportunities ahead of us to create value for our stakeholders as we pushed to achieve our strategic business program.

We're continuing to make significant progress and our quest to provide transformative and cutting-edge property insights, platforms and solutions, which will enable real estate professionals, financial institutions, insurance carriers, government agencies and other housing market participants to help millions of people find, acquire, and protect their homes.

Thanks for joining us today. Jim will now discuss our financial results.

James L. Balas -- Chief Financial Officer

Thanks, Frank. And good morning everyone. Today, I'm going to discuss our third quarter financial results and provide updated full year financial guidance. As Frank mentioned, CoreLogic delivered a strong operating and financial performance in the third quarter.

Financial highlights included, first, revenue growth reflecting strong performance in our core mortgage, insurance, and real estate solutions businesses. Second, improved business mix reflecting a greater proportion of higher-margin subscription, technology, and non-US mortgage-based revenues. Third, significant expansion of adjusted EBITDA margin to 30%, an increase of 140 basis points, driven by favorable business mix and productivity gains. Fourth, the reduction of $54 million in our outstanding debt. And finally significant return of capital through the repurchase of 700,000 common shares or 1% of our outstanding share count.

Third quarter revenues totaled $459 million, up $7 million or 2% from 2018 levels. Revenue growth reflected strong performance in core mortgage, insurance and real estate solutions. In addition, revenues include a decline of approximately $16 million attributable to the AMC transformation and wind down of non-core mortgage, and default technology units.

UWS revenues totaled $281 million, up $7 million reflecting the benefits of higher US mortgage origination volumes, and gains from pricing and new products, which more than offset lower credit services and the impacts of the AMC transformation and the planned wind down of mortgage and default technology units discussed previously.

PIRM revenues rose modestly from 2018 levels to $182 million, as growth in insurance, and real estate solutions more than offset unfavorable currency translation and reduced housing market activity in Australia, which together aggregated approximately $6 million.

Operating income from continuing operations totaled $74 million, compared with $60 million in 2018. The 23% improvement in operating income was primarily due to workflow efficiency and cost productivity programs as well as favorable revenue growth and mix. Operating margin totaled 16%, an increase of approximately 280 basis points. Higher operating income drove net income from continuing operations to $41 million, compared to $23 million in the same prior year period, an increase of 18%. Diluted EPS from continuing operations totaled $0.50 versus $0.27, an increase of 85% compared to the prior year period.

Adjusted EPS totaled $0.82, up from $0.72, an increase of 14%. Adjusted EBITDA totaled $137 million, up 6% compared to the same prior year period. Adjusted EBITDA margin was 30%, an increase of approximately 140 basis points. The $8 million increase in adjusted EBITDA was principally attributable to revenue growth, improved business mix and the benefits of ongoing cost efficiency and productivity programs.

As our investors are aware, margin expansion has been a top priority and our margin performance in the third quarter of 2019 is our strongest since 2015. UWS adjusted EBITDA was $93 million, compared to $80 million for the prior year quarter. The increase of $13 million, reflects improved US mortgage unit volumes, benefits from pricing and new products, favorable revenue mix and continued productivity gains, which more than offset the impact of the AMC transformation and wind down of non-core mortgage and default technology units discussed earlier. Overall, UWS adjusted EBITDA margins increased approximately 400 basis points.

PIRM segment adjusted EBITDA totaled $53 million in line with 2018, as growth in insurance and real estate solutions and cost productivity helped to offset unfavorable currency translation and reduced housing market activity in Australia. In addition, we continue to invest in platforms as well as data and technology, which we expect will support future revenue growth trends. Finally, we continue to generate significant levels of free cash flow. For the 12-months ending, September 30, 2019, free cash flow totaled $227 million, a 48% conversion rate of last 12-months adjusted EBITDA.

As discussed previously, during the last 12-months, we have increased spending on several strategic initiatives such as the GCP migration, which we expect to generate future savings and margin expansion. Normalizing for spending on these strategic initiatives, our free cash flow conversion rate would be greater than 50%.

In terms of capital structure, our overall capital allocation priorities remain to fund disciplined reinvestment, return capital through the repurchase of our common shares, pursue opportunistic M&A, and to progressively reduce our debt levels in line with our long-term leverage targets. During the third quarter, we reduced our debt by $54 million. Our relentless focus on productivity and data driven insights has resulted in a durable and cash generative business model.

During the quarter, we repurchased 700,000 or approximately 1% of our common shares, while continuing to reinvest back into the business. Through the first nine months of 2019, we have repurchased 1.4 million of common shares for $62 million. As we close out 2019, we remain on track to achieve our full year target of repurchasing 2% to 3% of our outstanding shares.

I will close my remarks today with a discussion on financial guidance. As we indicated in our release, we have revised our full year 2019 guidance as follows. We're expecting revenues of $1.74 billion to $1.76 billion. Adjusted EBITDA of $485 million to $495 million, and adjusted EPS of $2.65 to $2.75 per share.

Our revised 2019 guidance ranges reflect actual year-to-date financial results as well as our updated view on the US mortgage market. Based on our current view, we now estimate 2019 US mortgage unit volumes to be 8% to 10% higher than 2018 levels. In addition, the outlook for revenues and adjusted EBITDA, I just outlined includes currently anticipated impacts of our AMC transformation and the wind down of our non-core mortgage and default technology units.

Finally, our full year guidance update implies a fourth quarter adjusted EBITDA range of $117 million to $127 million. In conclusion, we achieved very solid operating and financial results in the third quarter, and believe we are well positioned to continue to deliver strong results through the end of 2019 and into next year.

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

Questions and Answers:

Operator

[Operator Instructions] Our first question will be from Bill Warmington with Wells Fargo.

Bill Warmington -- Wells Fargo -- Analyst

Good morning, everyone. So, a question for you on the margin side. The UWS margins were very strong, up 400 basis points year-over-year. If you could talk a little bit about what's driving that? And then also to talk about what gives you confidence that you can hit your 30% full year margin target for 2020?

Frank D. Martell -- President and Chief Executive Officer

Thanks, Bill. Good morning. This is Frank. So I guess, I'll take the second part of your question first. I think we -- we're clearly seeing achieving near 30% margins in the second half of the year. So I think that gives us a six month runway of demonstrating that we're getting very close. I think we have, as we talked, we have a number of significant employee productivity programs like the GCP that are going to increase the level of productivity in the company as we get into next year.

So I think lots of good things going on there and then mix has been also a significant benefit for that. So I think the pathway is very clear in the second half of the year. I think we've got the programs in place that have been -- that have been going, and already demonstrating savings. So I think we feel very good about the margin target for next year.

I think in terms of UWS, we've had a great -- great run there. A lot of productivity activity impacting UWS that is helping us margin wise. In addition, the mix there. We have a lot of growth in high-margin areas like Flood that are helping. So I think it's a combination of mix market as well as the automation that are going on in some of the major businesses. You know, the one item, the AMC is a little bit of a revenue -- kind of reset here this year. But I think as I said earlier, my feeling is the next year, we're setting a pathway for growth, both on the top line and the bottom line.

Bill Warmington -- Wells Fargo -- Analyst

Fair enough, Frank. My for my follow-up question, you talked about the valuation platform returning to growth in 2020. Maybe talk a little bit about the progress that you're making there on that platform and also some of the assumptions for mortgage volume that would be embedded in that plan for 2020?

Frank D. Martell -- President and Chief Executive Officer

Yeah. So I think obviously we are -- we are creating a totally different experience in the appraisals space. As I mentioned, it's kind of a more of a premium, more automated, I think a better customer experience. We are actually been trialing this service offering in a number of markets. And I think we're getting very strong positive reaction. I think the fact of that is we just had to work through those clients this year that were on our historical roster that just didn't want to go there. So I think once those are cleared and that will be cleared out this year. So the good news is that that noise will be out of those numbers as we get into next year.

We are in active discussion around new contract revenues. We've already picked up quite a number of new clients for the volume will flow next year. So I think the pathway to growth in that business is pretty clear. We want to make sure that with that growth comes the margins as well. So that's where the automation, the efficiency comes in. We're getting very strong pick-up in the trial markets around the efficiency and the throughput of appraisals that can be done with the automation. So I think as I said, it's definitely a growth and margin play and we want to get both of those, I think we've already demonstrated the pilot markets that we can do it. And I think you're going to start to see very quickly sequential growth as we move into next year.

Bill Warmington -- Wells Fargo -- Analyst

Thank you very much.

Frank D. Martell -- President and Chief Executive Officer

It's not going to reflect the broader market, obviously, because you've got a subset of clients. But you're starting from a relatively low revenue base coming out of this year. So we'll grow off of that into next year.

Bill Warmington -- Wells Fargo -- Analyst

Got it. Thank you very much.

Operator

Thank you. Our next question will be from Bose George with KBW.

Thomas Tedesco -- KBW -- Analyst

Hey guys, this is Tommy on for Bose. I wanted to ask if there is anything structural going on that's driving the weakness in the credit services revenue over the past few quarters? And then if you could just give us a reminder of how much of that business is sensitive to US mortgage versus auto versus consumer more broadly?

Frank D. Martell -- President and Chief Executive Officer

Yeah. So thanks, Tommy. So that business is roughly 60% mortgage-focused. So, and then the balance being payday lending and mostly auto credit. In the third quarter, we were down about $3.5 million on the top line. Last year, we had about a $3 million project that we did for a customer that was a one-off. So that came out of the run rate. So that explains a lot of the drop. Obviously, the market was up. So and I think that from that perspective, I think there were two offsets in the quarter related to that. One was the diversification of one of our larger clients just moving to more suppliers. That's largely finished, but obviously the year-over-year comparisons are impacted. That's the bulk of the market, taking away the market benefit.

I would just say more broadly though credit, it's a tough competitive environment right now. Obviously, the market, even though, we've had the refi away, the market still remains in a cost efficiency drive. Most of our clients want to see efficiency. Credit is not immune to that, and that's an area that there is a lot of smaller competitors. So you see -- you see the drive on the pricing side in particular, and we're not immune from that. So that's the other, I'd say more macro level pressure in this business this year that we're seeing.

As you know, there was a lot of increases in the price of credit over the last couple years with things like trended data. And that's created, I think a little bit more urgency to drop the price and get the credit cost down a little bit in some of the major players.

Thomas Tedesco -- KBW -- Analyst

Okay, thanks. And then just switching over to the PIRM segment, could you walk through the organic growth math in the quarter, touching on macro, how much Symbility contributed, FX, Australia, etc?

Frank D. Martell -- President and Chief Executive Officer

Jim, could take that one.

James L. Balas -- Chief Financial Officer

Okay. So for PIRM, we would have been essentially modestly up without the impact of the Australia business due to the market environment as well as the FX. So that $6 million, if you were to add that back, we'd be modestly up in the quarter. Symbility continues at the same run rate that you've seen in the Qs, kind of in that $8 million to $9 million range.

Thomas Tedesco -- KBW -- Analyst

Got it. That's all I was looking for. Thanks.

James L. Balas -- Chief Financial Officer

Great.

Operator

Thank you. Our next question will be from Darrin Peller with Wolfe Research.

Darrin Peller -- Wolfe Research -- Analyst

Hey guys, thanks. It's good to see the flow through on the origination uptick in the quarter and the outlook for the year. But I do, I still want to hone in on the Property Intelligence & Risk segment, again just -- look, when we look at the segment, especially the insurance, geo-spatial and the data analytics, it was still as you just mentioned, relatively flat even backing out some of the variables. If you could just give us a little more of a sense into the headwinds in each of these business in the past quarter, really even putting aside the Australia housing market? And then more importantly I think is really to figure out, are there any proactive efforts you guys think you could take be it M&A or investments, pricing products. Anything that you think could help reposition the non-mortgage sensitive businesses for better growth?

Frank D. Martell -- President and Chief Executive Officer

Sure. So as you know Darrin that business -- let me take them one at a time. So, insurance and spatial require stability. We're out in the market with a more comprehensive product offering. I think we're getting a lot of pilot activity. So we expect to land some revenue as it relates to pilots who were doing this year as we get into next year. It's just, it's a function of having a unified offering of being in the market and it's a -- it's a market that is careful to assess suppliers and partners and take some time. So I feel pretty good about insurance.

Honestly, we've had one drag in that area, which is not new news. We had that -- we have a catastrophic risk modeling business, a small footprint that service the reinsurance market. Reinsurance market blew up, so that revenue slice is coming down. It's not an insignificant. It's not a huge in the grand scheme of things, but it's a couple of million dollars. So, but I think without that you'd see a traditional growth rate in the insurance, I think with more to come with the integration of Symbility. That's kind of insurance. International, as Jim talked about. Lot of that FX and just the market volumes, we are a big player in the housing market and we are subject to their market volume. So other than that, the international business is doing, I think fairly well.

Good business in the UK in valuations. I think a very good market position in New Zealand and Australia. So I feel pretty good about the international business, but it's not with the FX being what it is in the market. We just have to kind of ride through that but structurally the business is in pretty good shape. In terms of the real estate solutions business, which is the other big chunk of revenue in there that is growing well and continue to grow well. I think we've got some exciting new products to go into the market next year. So I think that business is really solid and there's solid growth in there.

The other one, which has been a perpetual challenge has been the tenant screening business, where we're seeing some revenue attrition. It's low tenant turnover, it's the same thematic nothing really new there. In addition, we got out of a -- we had a product line, which was a couple of million dollars of revenue which we've -- we're exiting related to some -- I guess some higher exposure revenue that we felt we needed to exit. So that's been -- accentuated the drag this quarter in that area. So I think fundamentally that segment is in pretty good shape and I think we should see growth rates that are higher as we get into next year, especially if the market pressure in Australia releases a bit, which you know the early signs are that we are seeing some improvement in the market volumes there.

Darrin Peller -- Wolfe Research -- Analyst

All right, that's good to hear. Alright, just one quick follow-up. I think origination forecast right now we're calling for double-digit declines in '20. And so just -- when you consider the ability to make -- go back to the margin question again, in terms of where we're going to start the year off and the opportunities you have to have efficiencies and the mix that you mentioned earlier. Should we still feel pretty good about it despite assuming we are in the -- the market ends up being exactly what the NBA is calling for as of now, is that still realistic?

Frank D. Martell -- President and Chief Executive Officer

Yeah. I mean if you look at what Jim talked about in the guidance, Darrin, I think the fourth quarter is going to be one of our best fourth quarters ever, on really all accounts, but if you look at the margin, it's going to be astronomical compared to the normal. Now some of that's the refi benefit but in general the cost structure is really in good shape, and I think these platform businesses which we didn't talk about, but we've then -- a lot of our units were a lot heavier on the platform side. So if you look at the valuation business, which we've talked about in the past, super -- super good margin, super good growth. So that mix will continue to benefit us as we go forward.

So I think we're confident in the margins. I don't know at this point about what the final call will be on the volumes, refi wave question. Right now, the hours, how long and how big that refi wave is going to be. I think clearly it looks like it's going to carry into early next year at a minimum. So I think that's very good for us as well. We call that -- we will call our best view of the market when we get into January.

Darrin Peller -- Wolfe Research -- Analyst

Got it. Okay. Alright guys thanks very much.

Operator

Thank you. Our next question will be from Chris Gamaitoni with Compass Point.

Edward Christopher Gamaitoni -- Compass Point -- Analyst

Hi, good morning. Thanks for taking my call. I wanted to touch back on -- good morning. I wanted to touch back on PIRM. Noting the headwinds in the Australia business, can you give us a sense of what the updated percentage of revenue in that unit comes from Australia?

Frank D. Martell -- President and Chief Executive Officer

So we don't break it out obviously within the revenue stream that we disclosed but it'd be a good -- it's not -- it's not quite half, but it's a healthy -- it's a healthy percentage of it, probably as we go forward.

Edward Christopher Gamaitoni -- Compass Point -- Analyst

Okay. And then you mentioned optimism for growth in various businesses within that unit. It's really difficult to see from the outside. So could you give us any type of sense of where you think including all the headwinds you think revenue, growth for the union is going to trend organically and maybe some specifics of why there is increase -- increased -- increasingly excited in like the real estate solutions business?

James L. Balas -- Chief Financial Officer

Yes. Frank mentioned earlier, we do have a number of initiatives and investments that are going to be geared toward the real estate side of the house within the PIRM segment. That we will start to see some time in 2020. So we do have some investment plans targeted toward growth, which are not necessarily tied to the mortgage market or the Australia market or domestic that we are excited about.

Frank D. Martell -- President and Chief Executive Officer

[Speech Overlap] Yeah. I think, Chris, as you know, I mean to just to amplify that. In the realtor area, in the real estate solutions area, our primary footprint there is massive in terms of our realtor footprint. We have the majority of the realtors use our workflow platform and that gives us a lot of revenue opportunity.

We've also launched our service to help the MLS businesses -- the MLS themselves manage their data as well. So we have a lot of things going on there that are good margin, driven off the platform data-intensive initiatives, which has fueled specific growth this year and I think will continue to grow next year, but we have a tremendous market position with that platform, which is the foundation of that area. There are other services in there, but that's the foundational asset there.

Edward Christopher Gamaitoni -- Compass Point -- Analyst

Okay. So just thoughts on, I think you previously said low single-digit growth rate in the unit. I'm wondering if that's still your target or where you're thinking you can go over the next two years or something?

Frank D. Martell -- President and Chief Executive Officer

Yeah, we don't -- we don't parse it out that fine, but I think we have -- that is one of our higher growth areas and has been for the last couple of years. So I think it's been in that upper single-digit growth area. I don't -- I don't presume to project out in the next year, but I think we should -- I don't see anything that's going to materially change the trajectory of that business.

Edward Christopher Gamaitoni -- Compass Point -- Analyst

Alright. And maybe just one quick follow-up is, post all the investments you've cited in Google Cloud, where do you think capex goes 2020, beyond?

Frank D. Martell -- President and Chief Executive Officer

Yeah. So I think we have elevated our capex spend this year. Traditionally, we've kind of been in that $80 million-$90 million range. But again, don't forget, about $30 million of that is capitalized data that we acquire year in and year out. So if you take it out, our kind of apples and apples to most other company is around $50 million, and so that -- that may go up $10 million or -- this year because of Google, that's our biggest capex increase this year that's been around that that cloud move. So it's very discreet. But I think we've been pretty much in that 4%, 5% of revenue range for a long time, which frankly is a benchmark that's very consistent with most companies. So we don't, we are certainly not overspending, but I think we're down kind of a little bit this year and hopefully that will drop down next year.

Edward Christopher Gamaitoni -- Compass Point -- Analyst

Okay, thank you so much.

Operator

Thank you. Our next question will be from Kevin Kazmierczak with Zelman and Associates.

Kevin Kazmierczak Merrick -- Zelman and Associates -- Analyst

Hey guys, thanks for taking my question. Looking at the implied 4Q guidance, it looks like you guys are expecting an EBITDA margin of 29% to 30%, and I think everyone understands you're winding down a lower margin business, but is there anything chunky in terms of expenses coming out that you could point to, because I mean that imply more than 200 basis point acceleration in kind of year-over-year margin gain. So, and given we're already a month into the quarter. Can you give us some, maybe some color on what exactly is going on there?

Frank D. Martell -- President and Chief Executive Officer

Yeah, look, I think it's two things. It's two things. One is, it's the -- the mix that we talked about. And I think that mix clearly is resident in the third quarter ramp up in the margin. So we're up 140 basis points. I think you're just seeing that carry through. So the mix will carry through. And secondarily, I think, as you know, the cost actions that we take care of a progressively larger impact on the cost structure. So the efficiency that carries through and most of our initiatives are all our initiatives that really more or less permanent structural change.

So things like Google Cloud automation and some of our more intensive people businesses, AI machine learning benefits. Those will continue and then obviously the refis will benefit the fourth quarter as well. And as Jim alluded to, we are certainly factoring in an increase from the refi wave in the fourth quarter. But I think, I'd say the mix -- fundamentally, the mix in the cost efficiency, we've been working very hard, the teams worked very hard the last couple of years and we're seeing that clearly over the course of this year, let's say the first half you didn't see quite as clear as you're seeing it now because we had a bit more noise in terms of the level of transformation in the AMC etc, that was going on. But I think as we come -- coming through the year you're seeing it much more clearly because that -- those anomalies there are falling away.

Kevin Kazmierczak Merrick -- Zelman and Associates -- Analyst

Yeah. And I guess that was -- lead to my follow-up question, how much revenues remaining from the legacy AMC clients that you expect will go away?

Frank D. Martell -- President and Chief Executive Officer

We will be substantially, will be at a nominal amount in the fourth quarter.

Kevin Kazmierczak Merrick -- Zelman and Associates -- Analyst

And I guess in terms of dollars like what -- or I guess what would be a good run rate? Well what will be left at this point, do you think after that revenue comes out?

Frank D. Martell -- President and Chief Executive Officer

You know it will be $60 million-$70 million, $75 million, coming out of this year. But as I said, we've got a number of clients already signed up, which will come on stream. This is -- you have to operationalize within the client, they have to operationalize a new vendor. But that work has already been won. But I think we have a good pipe into next year in terms of new clients. And as I said, it's a kind of a nominal revenue in the fourth quarter. So we cleared out those historical clients that really just don't want you know to go on to go to the new service level. They conceptually do, but not necessarily all ready to do that from a workflow perspective or our pricing expectation perspective.

Kevin Kazmierczak Merrick -- Zelman and Associates -- Analyst

Okay great. Sounds good. Thanks a lot.

Operator

Thank you. Our next question will be from Stephen Sheldon with William Blair.

Stephen Sheldon -- William Blair -- Analyst

Good morning. First, good to see the guidance increase for the year, but it may be a little less on the adjusted EBITDA side than some would have expected given the strong uptick in mortgage volumes in the second half. So I guess are there any offsets that you point out where maybe you've lowered your adjusted EBITDA expectations?

Frank D. Martell -- President and Chief Executive Officer

No, I think we got -- most of the sentiments has been there -- we've had, it's a significant flow through. I mean, I think we've had only positive increase in our expectations, no negatives. Look, I think the margin is exceptionally strong and the flow through is exceptionally strong. If you look at the second, if you look at the third quarter performance, it's the strongest in several years, and the market even though revised, there have been a recent increase -- purchase market has been chugging along. So that's a lot of self-help in that margin appreciation number there through efficiency and infrastructure change and mix change, which is all permanent. So I think the guide is a strong -- it's their second guidance in a couple months. And again it's, as we're clear on the -- on where the volumes look in the market in the US.

Stephen Sheldon -- William Blair -- Analyst

Okay, got it. And then within property tax solutions, obviously you saw better trends in that business. I think you talked last quarter about a solid pipeline that should flow through over the next few quarters or so. I guess, as we think about the acceleration in this quarter, how much was higher industry volumes and how much was kind of the pipeline converting and how does the pipeline look there now?

Frank D. Martell -- President and Chief Executive Officer

Tax continues to be a very strong business for us and you got to remember, it's not going to grow at the same rate as the other mortgage transactional businesses. It has a differed revenue model to it. So we had strong growth during the quarter. The pipe, we continue to win clients and you'll see, you'll continue to see that pick up. And the other part of the equation with tax is, it tends to lag the cycle because it's a post-closed loan offering. So once the loan closes, we will then get it sometime thereafter 60 days and 90 days after. So tax lags the typical market in terms of the application phase to the closed phase.

Stephen Sheldon -- William Blair -- Analyst

Got it. Thank you.

Operator

Thank you. Our next question will be from John Campbell with Stephens Inc.

John Robert Campbell -- Stephens, Inc. -- Analyst

Hey guys, good morning.

Frank D. Martell -- President and Chief Executive Officer

Good morning.

John Robert Campbell -- Stephens, Inc. -- Analyst

Frank, I think you said you're expecting, I think, I think you said $60 million to $70 million of the headwind from the wind down in AMC. I think you guys had $11 million or so in the first half, and you had $60 million this quarter. So are you expecting, I mean are you expecting a $33 million to $43 million impact in 4Q? Is that right or am I missing something of that math?

Frank D. Martell -- President and Chief Executive Officer

No. So, if you look at the curve of the revenue, we traded a small amount of revenue over the first half of the year and that's accelerated. So it's going to, it's going to go down to zero. So if you look at fourth quarter of last year, seasonal -- seasonality wise was a low quarter. So, but you will see that that equivalent revenue come out of the fourth quarter of this year. So as you compare to next year, it's going to be a strong, obviously a very strong comp in the second half. The first half of next year, we're going to be looking at more -- more of that legacy revenue in the prior period, this year obviously, but then you'll see that reverse as we -- as we exit that revenue stream. So it's a sharp wind down in the third quarter and into the fourth quarter. It's the trend of this year.

John Robert Campbell -- Stephens, Inc. -- Analyst

Okay. And I guess you guys -- I guess, you guys had originally called out the $75 million to $100 million. Are you still thinking that's the case and just some of that hits in the first half of next year, is that the way to think about it?

Frank D. Martell -- President and Chief Executive Officer

The number that we gave there was the full-year impact on 2019. And we indicated on the last call that it was kind of delaying dragging out a little bit more. So probably toward the lower end of that range you know honestly, probably -- we probably finish the year somewhere around $60 million as opposed to the $70 million, is my guess --

John Robert Campbell -- Stephens, Inc. -- Analyst

Okay.

Frank D. Martell -- President and Chief Executive Officer

Combination of both AMC and the default technology units and so forth.

John Robert Campbell -- Stephens, Inc. -- Analyst

Okay. And what I'm just trying to get to is, as you guys set out this initial target, is it just a timing issue? Or are you still kind of expecting maybe just a low end of that on the $75 million, but some of that actually trickles in the next year. I'm just trying to get a sense for the impact early next year.

Frank D. Martell -- President and Chief Executive Officer

No. Next year -- next year, John we're going to be clean here. So, next year is going to be new service, and I think the client base will be clean. Clean in the sense that there is no transformative type changes.

John Robert Campbell -- Stephens, Inc. -- Analyst

Okay, makes sense. And then a quick one, just to add on the property tax row, you guys had a pretty good bounce there. That business has kind of been a little bit weaker of late. What drove that and how sustainable is that growth?

Frank D. Martell -- President and Chief Executive Officer

Yeah. So are you talking -- you are talking about our tax business

John Robert Campbell -- Stephens, Inc. -- Analyst

Right.

Frank D. Martell -- President and Chief Executive Officer

Yeah. So as you know that because of the revenue recognition and the deferred revenue component of that, it doesn't follow as directly the volumes days and months, it's a deferred revenue model. So it's a smoother trend. So what you're seeing is the build up of the deferred balances as the market picks up, and I think you'll see that trend continue for a while. The revenue and the actual recognition lags, obviously you're pulling flood reports and credit reports sooner in the mortgage origination cycle than you are, when you close the loan and provide the tax service. So you're just seeing that trend. There's nothing really anomalous there.

John Robert Campbell -- Stephens, Inc. -- Analyst

Okay. So that kind of low double-digit growth probably could hold you know maybe over the next couple of quarters?

Frank D. Martell -- President and Chief Executive Officer

Yeah, I mean I think it's -- in that business, you're -- as I said, it's kind of much more of a of a smoother curve than the volume -- daily volume type of thing.

John Robert Campbell -- Stephens, Inc. -- Analyst

Got it. Thanks guys.

Operator

Thank you. Our next question will be from Jeff Meuler with Baird.

Jeff Meuler -- Robert W. Baird -- Analyst

Yeah. Thank you. There is similarly, I guess a lot of different variations of the question, I guess why isn't mortgage as just organic growth better or why isn't reported revenue growth better considering how strong originations are trending right now. So just, I guess would love your perspective on that specific question on, is your view that it's mostly just, hey, we're at a really challenging part of the cycle for many of the end markets we serve. And then, I guess you have some non-core wind down in some smaller businesses like Eqecat and tenant screening that are just maybe more challenged? Or is there something that gets fixed by the data capabilities investment, where that will raise your growth or would just -- your view on I guess how you raise the organic profile of the business or if it's just about the way the end markets are cycling?

Frank D. Martell -- President and Chief Executive Officer

Yeah, look, I think, first of all, if you look at the market, this year, the purchase market is moving up modestly, and are -- none of the structural challenge in the housing market and we see that every day in the reporting. It has changed a lot. I think there is a lot of positive movement, a negative movement. Obviously, the rates coming down in spurt in the third quarter and particular, a rise in refi activity. And so it's the last couple of months. I think we converted that and realized the benefit of that with the exception. Obviously, the credit discussion, we talked about earlier, where you've got some more pricing and the -- a few anomalies with the vendor diversification that I mentioned. But by and large, I would say that we are absolutely capturing the full benefit of the refi activity in our financial numbers, and I think it's, we grew 2% in total.

Our mortgage sensitive business is about 60% of our total revenue in 100%. So I think it was a great quarter. Then I think we just have a couple of those anomalies, where if you look at them, there are three or four the reinsurance thing I mentioned, the project wind away last year that didn't continue this year. That's kind of $10 million, $12 million, $15 million of those types of things that were in this quarter. So I think if you normalize for those, I think you're looking pretty good in terms of growth rate.

Jeff Meuler -- Robert W. Baird -- Analyst

Okay. And then --

Frank D. Martell -- President and Chief Executive Officer

I think we've got -- we've demonstrated it in Jim's discussion on the guidance for the balance of the year. I mean a 25.5% kind of midpoint of the range for fourth quarter. I mean that's a very strong margin percentage for us in the fourth quarter.

Jeff Meuler -- Robert W. Baird -- Analyst

Yeah. And then just as your line of sight improves into the 2020 margin target realization. I think a lot of that has come from productivity improvement and cost takeout. I guess just beyond 2020, is there a good way to think about a margin framework? Does it become largely organic growth dependent, are there significant additional cost and productivity actions you can take? Thanks.

Frank D. Martell -- President and Chief Executive Officer

The answer is there is, yes, there are. You'll see the lift into next year based on what's currently in flight this year. So there is a significant lift in cost prior to the next year or is baked into the run the run rates and a lot of the programs like the cloud initiative and others will consent, we'll see escalating benefits in out years. So what we have in flight should generate escalating benefits in 2020 and beyond. And I think that we will continue to refine our processes. We're doing a lot of work and things like AI, machine learning which should automate where data-intensive complex data-intensive dataset and machine learning offers a lot of benefits in our data management area as well. So I think lots of positives there as we go forward from an efficiency perspective. Margin, we will get into our guidance for next year in January specifically.

But I think there is a lot of positives and look, I think I just -- I would just reemphasize. If you look at the second half of the year, of this year, the actual margin progression, you don't have to take my word for it's very, very strong and I think validates to a large degree the trajectory toward 30 next year.

Jeff Meuler -- Robert W. Baird -- Analyst

Got it. Thank you.

Operator

Thank you. Our next question will be from Glenn Greene with Oppenheimer.

Glenn Greene -- Oppenheimer -- Analyst

Frank, hey, good morning. Frank, can I go back to the AMC commentary, because I guess I'm a little confused. You're obviously talking about, I guess, I heard the transformation largely done this year, you'll be clean going into next year. Jim alluded to the transformational drags being sort of closer to 60 this year, does that suggest that the drags that all else equal that you thought going into the beginning here? You are certainly clearly less than you thought. And also just trying to understand sort of the growth commentary going into next year. What that means for the entirety of the valuations line item within UWS, just a clarity on AMC.

Frank D. Martell -- President and Chief Executive Officer

Yeah. So first of all, just, and some of this may be just reconciling, we had two significant revenue items that were discrete this year. One was the AMC reset and the second one was really exiting the MTS and DTS line items, which was not insignificant. I'd say on the AMC portion is just that there is not a massive difference. I think what changed though Glenn with the -- I think trajectory, which has really largely been on our control. I mean, the clients that are moving away that's largely at their pace and there are obviously the refi wave and stuff like that. So there's been some puts and takes. But I think the fact that the attrition this year was a little less probably had to do a little bit with the market being a little bit better than we thought. It would be when we establish that, it's probably actually the biggest chunk of it actually because you remember at the end of the year, we think the market will be kind of down and it is steadily up. So I think that obviously impacted the clients that are exiting.

So a little bit better volume on their side, a little bit slower on their side but nothing really changed there. I think as we look at next year the debt business is, it's going to be 50%, 60% size wise coming into next year that was coming into this year and it's going to be with new clients being on board versus they are trading out. So it's going to be on a growth path but at a higher margin level. I think the other thing is obviously the implication of that is the mix of our valuation business for our 2020 shift is fairly dramatically toward more than 50% is the platform business versus the AMC business.

So you're actually seeing a traditional kind of 65-35 that has massive margin implications obviously for what's going to be reported out. There is very, very positive margin implications on that. So I think that business is going to be a great story for us in 2020. So it's kind of flipping from -- the noise of the wind down to a stronger -- kind of a stronger sequential growth story next year.

Glenn Greene -- Oppenheimer -- Analyst

Okay. So just to be clear you are -- still going to have a meaningful year-over-year headwinds than the first half because you're feeling the wind down impacts from the back mainly in the back half of '19.

Frank D. Martell -- President and Chief Executive Officer

Yeah. We will have that quantified. So you can see exactly -- I mean the good news is it's almost all revenue related versus the margin of that particular revenue stream is fairly low. So the big comparative change would be on the revenue side.

Glenn Greene -- Oppenheimer -- Analyst

Okay, and then just back on the cost saves, good to hear you're reiterating the $20 million for this year but you had made a comment on one of the earlier earnings calls, in the second quarter or the first quarter, potentially doubling those cost saves going into 2020 and you alluded to you got sort of the full benefit of the cost actions you've taken this year going into -- but any sort of commentary in terms of the directional sort of doubling of cost saves going into '20?

Frank D. Martell -- President and Chief Executive Officer

No, I think, I don't know about the doubling to be honestly, Glenn. But I think we have over the last few years, we've taken out that $20 million, $25 million of reductions through primarily workflow changes, real estate consolidation, the things that I mentioned in my prepared remarks. That will carry on as we go forward. Some -- the quantum of some of those numbers may change. What will happen is, we're going to layer in a different type of efficiency program through really the Google Cloud where it's more of a run rate savings on the IT production. So the nature of the savings will change, but I think what you may be referring to is that as you look next year, we've talked in the past about the things like the Google Cloud and our automation of our tax business providing when it's all said and done with a significant lift, which is new coming into the year but we obviously have puts and takes on that number, but we will continue to have a significant, very similar to the last couple of years, maybe a bit more in terms of run rate cost savings flowing through the annual P&L progression.

Glenn Greene -- Oppenheimer -- Analyst

Got it. And then one more --

Frank D. Martell -- President and Chief Executive Officer

I'm not -- I'm not familiar with that. But it's not -- it's not -- it doesn't go 25 to 40 or 50 or whatever.

Glenn Greene -- Oppenheimer -- Analyst

All right. I thought I'd try, but one more for Jim maybe someone asked the organic growth for PIRM but could you just help us with the overall total company organic growth bridge just bridging from the 1.6% reported, with the mortgage and FX puts and takes from Australia, however you want to define it?

James L. Balas -- Chief Financial Officer

Sure. So overall headline numbers, 2% plus. Yeah. M&A once you see the 10-Q later today, net of the wind down activity is roughly minus 2%, and then market organic growth net of the FX is plus 4%. So, organic growth ex in-market is roughly flat to modestly down.

Glenn Greene -- Oppenheimer -- Analyst

Okay, thank you.

Operator

Thank you. Our next question will be from Andrew Jeffrey with SunTrust.

Andrew Jeffrey -- SunTrust -- Analyst

Hi guys, I appreciate you taking the question here at the end, I'll make it quick. Frank, I think you've made it pretty clear that you like the assets you have and you think they're all really strategic. I think the thrust of a lot of the questions that we've heard for the last half an hour or so are really around growth acceleration. And I want to ask that a little differently, which is some of the businesses you have or the collection of the business you have seem to contribute to volatility in quarterly results. Whether that's because of mortgage exposure, because of other aspects, such as the cap modeling? Are there any thoughts maybe beyond increasing the non-volume mix to smoothing or driving more consistent quarterly results. I think that's one of the things that that the market might like to see in terms of how it values your stock. So kind of a theoretical question, but I wonder if that's something that you think about internally.

Frank D. Martell -- President and Chief Executive Officer

Yeah, so I think first of all, I would just start with saying that we are a -- we are a diversified property information company. So we have a common repository, a common technology stack, a common infrastructure that all of our product lines feed off of. So they are not -- they are not independent units, we are discrete units. So, and we're increasingly integrated as a company. And so that's where we're getting scale benefit. I mean it's 30% margin for a diversified Property Information, even a data and analytics company is a very strong number.

So I think we're, we feel extremely good about that. I think the volatility, we are a housing player. As I said many times before, if you want to play at scale you better be in US mortgage, it's the biggest consumer of property information in the world, bar none. That's why we're almost a $2 billion revenue company and why we have 30% margin. So I think that that scale has always been central to our strategy. It's allowed us to stand up a high margin insurance play and other adjacencies. And I think that you'll see continue there. I think within the housing market itself though obviously when you get into things like mortgage you're subject to the laws of the land.

So if you have things like resto, where you cannot put a subscription based revenue model into place under the construct of the legal laws of this country. So you have to be paid on the basis of actual services rendered. So those -- those and that's frankly where the -- the majority of the volatility comes in. I think we've been great at those businesses and that arena still make 30% plus EBITDA margins. So they're not low-margin businesses. I just think that you, we obviously look at how to make sure that we're driving positive market margin trajectories in every business but the reality is not every product line is going to be 35%, 40% margin. It's the collective and our clients, our major clients buy everything from us. So if you want to start to change that complexion, then you end up with a different discussion with major clients and a different perception that come up, and I think, it's worked very well.

I mean they have taken the margins up almost 10 percentage points in the last five years, seven years. So I think that that margin expansion will continue. I think the good news is we have a lots going on around visualization and some other things, which I think offer some growth opportunities that were [indecipherable] of the company years ago, high margin growth opportunities, to add in to our existing platform. So I don't feel that we have a significant ability to change the mortgage profile to a subscription based. We do -- having said that, we do have more and more platform revenue, which is a combination of license and some volumes exposure. So that is muting. If you look at our revenue cycle, we absolutely muted -- the mortgage market to a significant degree over the last five years to six years. And we are dedicated in continuing that.

Andrew Jeffrey -- SunTrust -- Analyst

Okay, that's helpful insight. Thank you.

Operator

Thank you. I am showing no further questions in the queue at this time. Sir, I am showing no further questions in the queue at this time.

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Dan Smith -- Investor Relations

Frank D. Martell -- President and Chief Executive Officer

James L. Balas -- Chief Financial Officer

Bill Warmington -- Wells Fargo -- Analyst

Thomas Tedesco -- KBW -- Analyst

Darrin Peller -- Wolfe Research -- Analyst

Edward Christopher Gamaitoni -- Compass Point -- Analyst

Kevin Kazmierczak Merrick -- Zelman and Associates -- Analyst

Stephen Sheldon -- William Blair -- Analyst

John Robert Campbell -- Stephens, Inc. -- Analyst

Jeff Meuler -- Robert W. Baird -- Analyst

Glenn Greene -- Oppenheimer -- Analyst

Andrew Jeffrey -- SunTrust -- Analyst

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