LPS swings to 2Q loss on increased legal reserves
Lender Processing Services ($32.05 -0.23%) reported a loss of $37.9 million, or 45 cents a share, in the second quarter, after earning $21.4 million, or 25 cents a share, in the year-ago period.
Analysts expected earnings per share come in higher at 60 cents a share, according to Zack’s Investment Research.
The firm attributed the second-quarter loss to an increase to legal and regulatory reserve of $1.19 per share. On Thursday, it announced a settlement with the Missouri Attorney General resulting in a dismissal of the criminal charges pending against DocX.
"We continue to make progress toward resolving legal and regulatory matters related to past practices including our settlement with the Missouri attorney general announced today,” Tom Schilling, LPS chief financial officer, said.
“This progress enabled us to further refine our legal and regulatory reserve, which was increased in the second quarter,” Schilling added. “Our significant cash flow and liquidity allow us to continue to execute our capital allocation strategy while addressing these estimated legal costs."
Revenue for the Jacksonville, Fla.-based mortgage industry technology provider rose 7% in the quarter to $533.2 million from $499.7 million a year earlier.
Adjusted net earnings rose 30% to $64.5 million, or 76 cents a share, compared to $49.5 million, or 59 cents a share, in the first quarter 2011.
Second-quarter adjusted results exclude the impact of an increase to the legal and regulatory reserve of $144.5 million. This includes an add-back for the after-tax impact of purchase price amortization totaling 2 cents a share in the current quarter and 3 cents a share in the year-ago period.
Revenue for LPS' transaction services segment increased 5.1% to $347.4 million from $330.6 million in the second quarter of 2011. Origination services revenue rose 42.4% to $150.7 million from the prior year quarter as a result of higher refinance origination volumes. And default services revenue decreased 12.5% to $196.6 million from the prior year quarter, reflecting lower transaction volumes.
"We delivered operating results that exceeded our outlook while generating very strong free cash flow and further strengthening our balance sheet,” Schilling said. "Strong performance in origination services, fueled by higher refinance volumes… combined with sequential improvement in default services, contributed to the positive quarter."
LPS expects third quarter revenue to stand between $500 million to $520 million and adjusted net earnings a share to be in the range of 68 cents to 72 cents.
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