Lender Processing Services
Forward-Looking Statements
Transaction Overview
•
FIS and LPS have unique and distinct businesses
– Different customers, markets, management
•
Current joint structure may not maximize full potential of both businesses
– limits ability to leverage operations, technology and product development
– leads to internal competition for investments and resources
– hinders strategic flexibility
•
Spin-off from FIS creates an independent publicly traded company
– Market leading mortgage processor
– Over 1,000 financial institution clients, including 39 of the 50 largest banks in the US
•
Pure play reduces complexity for investors
5
LPS Overview
Investment Highlights
•
One of the largest providers of technology, processing, data and outsourced services to
mortgage lenders
•
Leading market positions in technology based solutions:
– #1 U.S. provider of Mortgage Processing Services
– #1 U.S. provider of Centralized Settlement Services
– #1 U.S. provider of Mortgage Default Solutions
•
Industry’s most comprehensive range of integrated applications and services
•
Deep and long term relationships with nations top lenders
– On average, LPS top 10 customers have been with us for 18 years and utilize
17 of 29 services
•
Strong organic growth and Free Cash Flow
•
Significant scale with 2007 pro forma revenue and EBITDA of $1,690.6 million and $526.7
million, respectively
Enhanced flood and tax services Enhanced flood and tax services
Automated title decisioning tool – Streamlined Title Automated title decisioning tool
– Streamlined Title Loan origination platform
– Empower Loan origination platform
– Empower
LPS Overview
Evolution of LPS
Electronic delivery of settlement services – ELS Electronic delivery of settlement services – ELS Automated end-to-end servicing and loan boarding
– MSP and ELI
Automated end-to-end servicing and loan boarding – MSP and ELI
Appraisal, property valuation and title and closing – LSI Appraisal, property valuation and title and closing – LSI
Process, invoice and imaging management – Mortgage Desktop Process, invoice and imaging management – Mortgage Desktop
Data delivery at POS technology – DecisionStream
Data delivery at POS technology – DecisionStream
Web services Web services
Web-based closing technology – ClosingStream Web-based closing technology
– ClosingStream
Lien release – DOCX Lien release – DOCX
Analytics expertise – AFT Analytics expertise – AFT
Comprehensive industry databases – McDash Comprehensive industry databases – McDash 2001 2002 2003 2004 2005 2006 2007 2008 Acquire Acquire Build Build
7
LPS Overview
Market Metrics
Originations (in millions) Foreclosures (in thousands) Mortgage Volume – Loans Outstanding (in millions)LPS Overview
Growth Drivers
Leveraging
Comprehensive Solutions
Leveraging
Comprehensive Solutions
• Drive market share gains
• Extend product penetration
• Expand usage
Expanding Current
Service Offerings
Expanding Current
Service Offerings
•Capital markets
• Data and analytics
• Fraud solutions
Extending Technology
Leadership Position
Extending Technology
Leadership Position
Pursuing Selected
Acquisitions
Pursuing Selected
Acquisitions
•Desktop expansion
• DecisionStream and ClosingStream
• RealEC
•
Watterson Prime
• Applied Financial Technology
• McDash
9
LPS Overview
Financial Performance
Lender Processing Services
Strong, consistent revenue and EBITDA growth
LPS Overview
11
Business Review
66%
34%
53%
47%
Revenue: $1,690.6mm
EBITDA: $526.7mm
Technology, Data and Analytics
Loan Transaction Services
TD&A segment overview
• Mortgage processing services – automates all areas
including loan setup, ongoing processing, servicing, accounting and reporting
• Desktop System – workflow information system used
primarily in connection with default management • Other software applications – includes mortgage
origination, real estate, and title insurance software • Data and analytics businesses – includes alternative
property valuations, property records business and advanced analytic services
LTS segment overview
• Loan facilitation services – Settlement services
including title agency and closing services, traditional appraisal and appraisal management services, and other origination services such as real estate tax services and flood zone information
• Default management services – property preservation
Refinance
Sale
Default
Collections Loss Mitigation CollectionsLoss Mitigation ForeclosureForeclosure BankruptcyBankruptcy
REO Management REO Management
Servicing
Quality Control Loan Boarding Quality Control Loan Boarding Customer Service Customer Service Cash Management Cash Management Escrow Management Escrow ManagementOrigination
Lead Management Loan Sales Lead Management Loan Sales Loan Processing Loan Processing Loan Underwriting Loan Underwriting Loan Closing Loan ClosingBusiness Review
13
Business Review
Balanced Business Model
Lender Processing Services
Technology, Data and Analytics
Cyclical
Non-Cyclical
Counter Cyclical
Origination
Services
Property Valuation Title Closing ServicesOrigination
Services
Property Valuation Title Closing ServicesDefault
Services
Field Services Foreclosure/ Bankruptcy REO Management TitleDefault
Services
Field Services Foreclosure/ Bankruptcy REO Management TitleMortgage Servicing Platform Loan Origination Software
Process, Invoice and Imaging Management Property / Loan Data and Analytics
Segment EBITDA margin Technology, Data & Analytics 45.7% Loan Transaction Services 26.1%
Business Review
Highly Diversified Revenue
Segment EBITDA margin
Technology, Data & Analytics 44.3% Loan Transaction Services 29.7%
Revenue: $1,382.5 million EBITDA: $ 430.6 million EBITDA Margin: 31.1% Revenue: $1,690.6 million EBITDA: $ 526.7 million EBITDA Margin: 31.2%
Loan Facilitation Services
Mortgage Processing Other TD&A Default Services 44.9% 15.7% 23.3% 16.1%
Loan Facilitation Services
Mortgage Processing Other TD&A Default Services 13.6% 38.5% 27.9% 20.0%
Strong revenue growth, robust margins
15
Business Review
Competitive Landscape – Data and Services
Lender Processing Services
LPS
AmericanFirst LandAM Fiserv CreditBureaus
Tax Data 9 9
Flood Services 9 9 9 9
Appraisal/Property Valuation 9 9 9 9
Title and Closing Services 9 9 9 9
Lien Release 9 9 AVM 9 9 9 Field Services 9 9 REO 9 9 Data Services 9 9 Title Underwriting 9 9
Default Management Outsource 9 9
Portfolio Analytics/ Due Diligence 9 9
Business Review
Competitive Landscape – Technology
LPS
AmericanFirst LandAM Fiserv CreditBureaus
Loan Origination Technology
Automated End-to-End Loan Process 9
Web-Based Closing Solution 9 9
Data Delivery at Point of Sale
Automated Title Decisioning Tool 9 9
Electronic Delivery Technology 9 9 9 9
Automated Order, Track and Delivery 9 9
Mortgage Servicing Technology
Automated End-to-End Servicing 9
Electronic Loan Boarding 9
Web Services
Default Management Technology
Automated End-to-End Servicing 9
Process Invoice and Imaging Management 9 9
17
Lender Processing Services
2007
138 $554mm 170 $692mm2006
100 $463mm2005
# of services Revenue ($) Breadth DepthBusiness Review
Key client relationships
Bank of America
Barclays/
HomEq CitiGroup Countrywide
JPMorgan Chase JPMorgan Chase/ EMC HSBC Wilbur Ross/ Option One Washington Mutual Wells Fargo TOTAL YE 2007 Total LPS Services (Out of 29) 23 13 15 16 15 16 19 16 19 18 170 YE 2006 Total LPS Services (Out of 29) 23 10 8 10 10 8 18 16 18 17 138 • No single customer
accounted for more than 10% of FY2007 revenue
• Average length of
relationship is 18 years
• Average number of LPS
Business Review
Market Size*
TD & A
Loan Facilitation
Default
19%
81%
25%
75%
Total Market = $2.2B Total Market = $2.4B
83%
17%
* 2007 data; Source: company and industry estimates
LPS Market Share
Attractive growth opportunities in all areas
Default
Loan Facilitation
TD & A
19
Business Review
Favorable Market Dynamics
Centralized Lending
• Large banks are gaining market share • Increased direct lending versus wholesale
and correspondent channels
Low-Cost Provider
• Scale
• Domain expertise
• Integrated data, technology and services (MSP and Desktop)
Lender Processing Services
Need to Reduce Internal Costs
• Focus on reducing servicing costs • Increase efficiency through technology
and integrated solutions
Increased Market Share
• Trend to centralize and outsource operations
• Drives higher volumes to LPS
Flight to Quality
• Changing credit market conditions are driving lenders to focus on higher quality borrowers
• More stringent underwriting controls
• Increased demand for better tools to mitigate long-term risk
Streamlined Product Solutions
• Good fit for automated solutions in a centralized environment • Valuations, Streamlined Title,
Web-based closings
Financial Review
Technology, Data & Analytics
• Mortgage processing services –
automates all areas of loan servicing, including loan setup and ongoing
processing, customer service, accounting and reporting.
• Desktop System – workflow information
system that assists customers in managing business processes and connectivity used primarily in connection with default
management.
• Other software applications – include
mortgage origination, real estate, and title insurance software.
• Data and analytics businesses – includes
alternative property valuations, property records business and advanced analytic services, which assists customers in their loan marketing or loss mitigation efforts.
• Mortgage processing services – Typically
fee per month per loan on file. Recurring revenue, long-term contracts, high switching costs.
• Desktop System – Activity fees per
foreclosure. To be expanded to other mortgage servicing business processes. High switching costs; clients typically use LPS exclusively.
• Other software applications – License,
maintenance and professional service fees.
• Data and analytics businesses –
Transaction, activity and subscription fees.
Lender Processing Services
Financial Review
Technology, Data & Analytics
($MM)
($MM)
Historical Revenue
Historical EBITDA
21
$525 $547
$570
Financial Review
Loan Transaction Services
Loan facilitation services:
• Settlement services – title agency and
closing services
• Appraisal services – traditional appraisal
and appraisal management services
• Other origination services – real estate
tax services and flood zone information
Default management services:
• Property preservation services – designed
to preserve value of properties securing defaulted loans
• Foreclosure services – includes access
to a nationwide network of independent attorneys, document preparation and recording and other services
• REO services – covering real estate to
which our customers take title and seek to sell following default
Loan facilitation services:
• Transaction driven
• Origination services paid by lender and ultimately, primarily borne by customer
Default management services:
• Transaction driven
• Various services related to defaulted and foreclosed properties, paid by lender or vendor
$820
$901
$1,126
Loan Facilitation Services Default Services
($MM) ($MM)
Lender Processing Services
Historical Revenue
Historical EBITDA
Financial Review
Loan Transaction Services
Revenue ($ millions)
Financial Review
Key Statistics
$1,382.5 $1,485.0 $1,690.6 2005 2006 2007 $180.3 $271.7 $212.4 2005 2006 2007*Net income plus depreciation and amortization less capital expenditures and changes in working capital and other assets & liabilities. As presented in Form 10; includes pro-forma after-tax interest expense of $55.8 million in 2007.
EBITDA ($ millions)
Lender Processing Services
Revenue ($ millions)
Financial Review
Historical pro forma quarterly data
25
Financial Review
2008 Adjusted Guidance
2007 2008
(amounts in millions except per share data) Carveout Guidance (1)
Revenue $1,690.6 7% – 9%
EBIT 424.1 6% – 8%
Net Earnings per Diluted Share $2.06 $2.10 – $2.22
Adjusted Earnings per Diluted Share $2.32 $2.34 – $2.46
Free Cashflow $156.6 $193 – $228
Diluted Shares (2) 97.7 97.0
Capital Expenditures $70.6 $65 – $75
Depreciation & Amortization $102.6 $95
Financial Review
Long Term Outlook
•
Grow revenue 6–9% annually 2009–2011
•
Expand operating margin on average by 50 bps per year
•
Target $400–$500 million in debt reduction through 2011
•
Indicated dividend of 40 cents/share
•
Repurchase shares opportunistically
•
Selectively pursue acquisitions
Lender Processing Services
Grow EPS by 12–15% annually 2009–2011
Summary
• Leading market positions in:
– Technology, Data and Analytics
– Loan Transaction Services
• Revenue growth faster than market
• Expanding margins
• Attractive dividend
• Strong free cash flow
GAAP to Non-GAAP
Reconciliations
A. EBITDA
Consolidated TD&A LTS
Full Year Full Year Full Year Full Year Full Year Full Year Full Year Full Year Full Year
2007 2006 2005 2007 2006 2005 2007 2006 2005
Operating Income 424,062 327,520 317,925 191,629 179,533 162,142 265,573 206,356 210,798 Depreciation and Amortization 102,607 111,858 112,648 68,720 69,581 70,545 28,752 32,177 33,030
EBITDA 526,669 439,378 430,573 260,349 249,114 232,687 294,325 238,533 243,828
B. FREE CASH FLOW
Consolidated
Full Year Full Year Full Year
2007 2006 2005
Net Income 256,805 201,055 195,705
Add: Depreciation and Amortization 102,607 111,858 112,648 Less: Capital Expenditures (70,552) (70,248) (92,458) (Decrease) Increase in Working
Capital (76,418) 29,037 (35,561)
