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Lender Processing Services, Inc reported third quarter 2013 GAAP net income of $35.5 million or 41 cents per share versus net income of $58.3 million or 69 cents per share in the year-ago quarter.

Excluding the non-recurring items, adjusted earnings for the reported quarter were 51 cents per share versus 71 cents in the year-earlier quarter. The quarterly adjusted earnings missed the Zacks Consensus Estimate of 55 cents

Total revenue decreased 15.8% year over year to $419.0 million. The fall was primarily due to lower contributions from Origination and Default Services. The quarterly revenues missed the Zacks Consensus Estimate of $428 million. Adjusted operating income decreased 31.9% year over year to $76.2 million owing to the decline in contributions from Default Services.

Segment Performance

Revenues for the Technology, Data and Analytics (TD&A) segment stood at $183.4 million in the reported quarter, down 3.0% year over year. Revenues from Servicing Technology sub-segment increased 1.8% due to higher loan counts and professional services. Origination Technology revenues decreased 8.3% from the prior-year quarter due to lower refinance transaction volume on the loan quality gateway platform.  Default Technology sub-segment revenues were down 14.5% due to lower foreclosure referral volumes.
 
Revenues from Data and Analytics sub-segment declined 1.4%, primarily due to lower transactional volumes. Adjusted operating income for the segment decreased 15.2% year over year to $49.4 million.

Revenues for the Transaction Services segment fell 23.6% from the prior-year quarter to $235.5 million. Origination Services revenues decreased 21.5% to $120.9 million due to a decline in mortgage refinance volumes, which resulted in lower title, escrow and appraisal revenues. Default Services revenues were down 25.8% year over year to $114.6 million due to lower foreclosure activity. Overall adjusted operating income for the segment stood at $37.1 million, down 43.6% year over year.

Liquidity

At quarter-end, Lender Processing had adequate liquidity with cash and cash equivalents of $203.2 million and $398.1 million available under its credit facility. Long-term debt (net of current portion) was $1,028.0 million.

Net cash provided by operating activities for nine months period stood at $107.6 million versus $303.6 million in the comparable year-ago period. Adjusted free cash flow in third quarter 2013 was $56.0 million.

Merger Update

On May 28, 2013, Lender Processing and Fidelity National Financial, Inc. (FNF - Snapshot Report) entered into an agreement by virtue of which the former would be acquired by the latter. The merger is approved by shareholders and is currently awaiting regulatory approvals.

Outlook

Lender Processing is well positioned to enhance the mortgage value chain and deliver innovative technology, data and expertise to its clients. Going forward, the rapidly growing mortgage landscape continues to create new requirements for its clients.

Lender Processing currently has a Zacks Rank #3 (Hold). Other stocks that look promising in the industry and are worth a look now include Global Payments Inc (GPN - Snapshot Report) and MasterCard Incorporated (MA - Analyst Report), both carrying a Zacks Rank #2 (Buy).
 

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