Altisource Portfolio Solutions S.A.(ASPS)

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Altisource Portfolio Solutions S.A.(ASPS) - 2021 Q4 - Earnings Call Transcript
2022-03-03 17:02
Altisource Portfolio Solutions S.A. Q4 2021 Earnings Conference Call March 3, 2022 8:30 AM ET Company Participants William Shepro - Chairman and Chief Executive Officer, Board of Directors Michelle Esterman - Chief Financial Officer Conference Call Participants Mike Grondahl - Northland Securities Raj Sharma - B. Riley Operator Ladies and gentlemen, thank you for standing by. And welcome to the Altisource Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today’s c ...
Altisource Portfolio Solutions S.A.(ASPS) - 2021 Q4 - Earnings Call Presentation
2022-03-03 14:04
Financial Highlights - Altisource ended 2021 with $98.1 million in cash and cash equivalents, a 68% increase from December 31, 2020[5] - Net debt decreased by 21% to $149.1 million as of December 31, 2021, compared to December 31, 2020[5] - Q4 2021 net income attributable to Altisource was $70.6 million, benefiting from the sale of Pointillist[7] - Altisource received $102.2 million at the closing of the Pointillist sale and recognized a post-tax gain of $88.9 million[7] - The company anticipates receiving an additional $3.8 million in 2022 related to the Pointillist sale[7] Business Performance & Outlook - Altisource anticipates positive Adjusted EBITDA for the second half of 2022, driven by expected revenue growth and cost reduction initiatives[5] - The company expects quarterly year-over-year revenue growth beginning in the third quarter of 2022[5] - Lenders One membership grew by 11 members in Q4 2021, reaching a total of 251 members[9] - Despite an anticipated 34% decline in origination volume in 2022, the Origination business expects double-digit revenue growth[9] - For the first two months of 2022, trustee referrals grew 57%, pre-foreclosure title referrals grew 22%, and Hubzu referrals grew 217% compared to the same period in 2021[10] Default Business & Pandemic Recovery - The company believes the default market is entering the early stages of recovery following the expiration of foreclosure moratoriums and loss mitigation measures[10] - Fourth quarter Hubzu referrals were 158% higher than the same quarter in 2020, and 30% higher in 2021 compared to 2020[10]
Altisource Portfolio Solutions S.A.(ASPS) - 2021 Q3 - Earnings Call Transcript
2021-11-06 19:05
Financial Data and Key Metrics Changes - The company anticipates generating positive cash flow in the second half of 2022 as it returns to revenue growth on a significantly reduced cost structure [5][12] - Cash costs, excluding outside fees and services for the nine months ended September 30, were $40.7 million, which is 26% lower than the same period in 2020 [13] Business Line Data and Key Metrics Changes - The default business revenue could grow on a stabilized basis to between $227 million and $296 million, depending on delinquency levels [9] - Third quarter Hubzu referrals were 107% higher than the same quarter in 2020, indicating a positive trend in the default business [8] - The origination business is expected to see 40% to 50% revenue growth despite a forecasted 33% decline in origination volume in 2022 [11] Market Data and Key Metrics Changes - Foreclosure initiations in the third quarter were 28% higher than the second quarter, but still more than 85% lower than pre-pandemic levels [7] - The single-family investor market is more than 7 times larger than the REO sales market, with an estimated 1 million investment homes sold per year compared to 140,000 foreclosures in 2019 [9] Company Strategy and Development Direction - The company is executing on its strategic plan in the originations business, which is expected to be a significant driver for growth [5] - The anticipated sale of the equity interest in Pointillist is expected to strengthen the balance sheet by adding an estimated $100 million in cash at closing [6][14] Management's Comments on Operating Environment and Future Outlook - Management believes the default offerings are poised for significant revenue and earnings growth as the operating environment normalizes post-pandemic [5] - The company is optimistic about growth opportunities in both the origination and default businesses in 2022 [15] Other Important Information - The sale of Pointillist is expected to close before the end of the year, generating a pre- and post-tax gain of $107 million [14] - The company is focused on reducing costs further, with expectations to lower facilities costs by approximately $1.5 million to $2 million on a run rate basis by the end of next year [30] Q&A Session Summary Question: What are the big drivers behind the expected 40% to 50% growth in origination revenue? - The company expects growth from the launch of the tri-merge credit product, a suite of employment verification solutions, and the preferred investor program [17] Question: What level of revenues is needed to generate cash flow? - The company anticipates meaningful revenue growth next year, with expectations for improvement in revenue and EBITDA as the year progresses [18] Question: Has the outlook for the default services business changed? - The change in outlook is primarily due to current delinquency rates being lower than previously anticipated, affecting potential service revenues [24] Question: Are there opportunities for new sales in the default services business? - The company expects to grow not only with existing clients but also to add new clients as the market opens up [28] Question: When is the Pointillist sale expected to close? - The sale is expected to close by the end of the fourth quarter, with no feedback received on the filed HSR applications so far [34]
Altisource Portfolio Solutions S.A.(ASPS) - 2021 Q3 - Quarterly Report
2021-11-03 16:00
PART I — Financial Information [Item 1 Interim Condensed Consolidated Financial Statements (Unaudited)](index=2&type=section&id=Item%201%20Interim%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited interim financial statements detail the company's financial position, performance, and cash flows [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased while total liabilities increased, driven by lower cash and higher long-term debt **Condensed Consolidated Balance Sheets (in thousands):** | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets:** | | | | Cash and cash equivalents | $36,492 | $58,263 | | Total current assets | $74,672 | $100,155 | | Total assets | $220,930 | $265,685 | | **Liabilities and Equity:** | | | | Total current liabilities | $72,580 | $71,545 | | Long-term debt, less current portion | $258,247 | $242,656 | | Total liabilities and deficit | $220,930 | $265,685 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Significant declines in revenue and gross profit resulted in higher operating and net losses for the period **Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share data):** | Item | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $43,243 | $88,795 | $139,749 | $305,581 | | Gross profit | $2,576 | $16,225 | $4,887 | $55,802 | | Loss from operations | $(14,028) | $(6,814) | $(47,159) | $(28,725) | | Net loss attributable to Altisource | $(18,269) | $(13,237) | $(58,746) | $(59,948) | | Basic loss per share | $(1.15) | $(0.85) | $(3.71) | $(3.85) | [Condensed Consolidated Statements of Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) The company's total deficit increased significantly due to net losses and distributions to non-controlling interests **Condensed Consolidated Statements of Equity (in thousands):** | Item | December 31, 2020 | September 30, 2021 | | :--- | :--- | :--- | | Additional paid-in capital | $141,473 | $143,983 | | Retained earnings | $190,383 | $116,881 | | Treasury stock, at cost | $(441,034) | $(427,214) | | Altisource deficit | $(83,765) | $(140,937) | | Total deficit | $(82,556) | $(141,683) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash used in operations increased while new debt issuance drove a net cash inflow from financing activities **Condensed Consolidated Statements of Cash Flows (in thousands):** | Item | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(41,133) | $(14,077) | | Net cash provided by investing activities | $1,875 | $805 | | Net cash provided by (used in) financing activities | $17,929 | $(2,471) | | Net decrease in cash, cash equivalents and restricted cash | $(21,329) | $(15,743) | | Cash, cash equivalents and restricted cash at end of period | $40,767 | $70,840 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, customer concentration, debt, equity, and the sale of its Pointillist business [NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION](index=8&type=section&id=NOTE%201%20%E2%80%94%20ORGANIZATION%20AND%20BASIS%20OF%20PRESENTATION) Altisource provides integrated services for the real estate and mortgage industries and is traded on NASDAQ - Altisource is an integrated service provider and marketplace for the real estate and mortgage industries, publicly traded on NASDAQ under the symbol "ASPS"[19](index=19&type=chunk)[20](index=20&type=chunk) - The company consolidates Best Partners Mortgage Cooperative, Inc (Lenders One) and Pointillist, Inc, with non-controlling interests representing other ownership portions[22](index=22&type=chunk)[23](index=23&type=chunk) - On October 6, 2021, Altisource entered into an agreement to sell its equity interest in Pointillist to Genesys Cloud Services, Inc, with Altisource owning approximately **69% of Pointillist's equity** on a fully diluted basis[24](index=24&type=chunk) [NOTE 2 — CUSTOMER CONCENTRATION](index=9&type=section&id=NOTE%202%20%E2%80%94%20CUSTOMER%20CONCENTRATION) Revenue from Ocwen, the largest customer, decreased significantly due to a major MSR investor's directive **Revenue from Ocwen (in millions):** | Period | 2021 | 2020 | | :--- | :--- | :--- | | Nine months ended September 30 | $44.7 | $174.1 | | Third quarter ended September 30 | $13.6 | $42.5 | | Revenue from Ocwen as % of consolidated revenue (9 months) | 32% | 57% | | Revenue from Ocwen as % of consolidated revenue (3rd quarter) | 31% | 48% | - Revenue from Field Services referrals from NRZ portfolios decreased significantly from **$69.1 million** (9 months ended Sep 30, 2020) to **$0.4 million** (9 months ended Sep 30, 2021)[34](index=34&type=chunk) - A May 2021 agreement with Ocwen extended service terms to **August 2030** and expanded Altisource's scope to include FHA first and second chance foreclosure auctions, field services on Government Loans, and title services on FHA/VA loans[35](index=35&type=chunk) **Accounts Receivable from Ocwen (in millions):** | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total accounts receivable from Ocwen | $4.5 | $5.9 | | Billed | $4.2 | $5.1 | | Unbilled | $0.3 | $0.8 | [NOTE 3 — SALE OF BUSINESSES](index=12&type=section&id=NOTE%203%20%E2%80%94%20SALE%20OF%20BUSINESSES) The company received final installment payments for its previously sold Financial Services and Rental Property Management businesses - Received net proceeds of **$3.3 million** on July 1, 2020, as the final installment payment for the Financial Services Business sold in 2019[43](index=43&type=chunk) - Received a **$3.0 million** payment on January 11, 2021, for the sale of the Rental Property Management Business, triggered by a merger event[44](index=44&type=chunk) [NOTE 4 — INVESTMENT IN EQUITY SECURITIES](index=12&type=section&id=NOTE%204%20%E2%80%94%20INVESTMENT%20IN%20EQUITY%20SECURITIES) The company held no shares of RESI common stock as of September 30, 2021 - As of September 30, 2021, Altisource held **no shares** of RESI common stock[46](index=46&type=chunk) **Unrealized Gain (Loss) on RESI Investment (in millions):** | Period | Unrealized Gain (Loss) | | :--- | :--- | | Nine months ended September 30, 2020 | $(12.4) | | Three months ended September 30, 2020 | $0.1 | [NOTE 5 — ACCOUNTS RECEIVABLE, NET](index=13&type=section&id=NOTE%205%20%E2%80%94%20ACCOUNTS%20RECEIVABLE%2C%20NET) Net accounts receivable decreased from year-end 2020, with a slight increase in the allowance for credit losses **Accounts Receivable, Net (in thousands):** | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Billed | $20,087 | $19,703 | | Unbilled | $5,155 | $8,291 | | Total before allowance | $25,242 | $27,994 | | Less: Allowance for credit losses | $(5,943) | $(5,581) | | Total | $19,299 | $22,413 | **Changes in Allowance for Expected Credit Losses (in thousands):** | Period | Balance at Beginning of Period | Additions to Expenses | Deductions | Balance at End of Period | | :--- | :--- | :--- | :--- | :--- | | Nine months ended September 30, 2021 | $5,581 | $1,268 | $906 | $5,943 | | Twelve months ended December 31, 2020 | $4,472 | $2,229 | $1,120 | $5,581 | [NOTE 6 — PREPAID EXPENSES AND OTHER CURRENT ASSETS](index=14&type=section&id=NOTE%206%20%E2%80%94%20PREPAID%20EXPENSES%20AND%20OTHER%20CURRENT%20ASSETS) Prepaid expenses and other current assets decreased slightly, with a notable decline in prepaid expenses **Prepaid Expenses and Other Current Assets (in thousands):** | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Income taxes receivable | $8,286 | $7,053 | | Maintenance agreements, current portion | $2,288 | $2,513 | | Prepaid expenses | $3,096 | $4,812 | | Other current assets | $5,211 | $5,101 | | Total | $18,881 | $19,479 | [NOTE 7 — PREMISES AND EQUIPMENT, NET](index=14&type=section&id=NOTE%207%20%E2%80%94%20PREMISES%20AND%20EQUIPMENT%2C%20NET) Net premises and equipment decreased due to depreciation, with a significant reduction in related expenses **Premises and Equipment, Net (in thousands):** | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Computer hardware and software | $52,682 | $52,837 | | Leasehold improvements | $9,719 | $14,792 | | Total before accumulated depreciation | $68,324 | $75,328 | | Less: Accumulated depreciation and amortization | $(58,948) | $(63,434) | | Total | $9,376 | $11,894 | **Depreciation and Amortization Expense (in thousands):** | Period | 2021 | 2020 | | :--- | :--- | :--- | | Nine months ended September 30 | $3,479 | $11,521 | | Third quarter ended September 30 | $1,100 | $3,800 | [NOTE 8 — RIGHT-OF-USE ASSETS UNDER OPERATING LEASES, NET](index=14&type=section&id=NOTE%208%20%E2%80%94%20RIGHT-OF-USE%20ASSETS%20UNDER%20OPERATING%20LEASES%2C%20NET) Net right-of-use assets under operating leases declined due to ongoing amortization **Right-of-Use Assets Under Operating Leases, Net (in thousands):** | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Right-of-use assets under operating leases | $26,554 | $31,932 | | Less: Accumulated amortization | $(13,370) | $(13,719) | | Total | $13,184 | $18,213 | **Amortization of Operating Leases (in thousands):** | Period | 2021 | 2020 | | :--- | :--- | :--- | | Nine months ended September 30 | $6,340 | $8,107 | | Third quarter ended September 30 | $1,800 | $2,600 | [NOTE 9 — GOODWILL AND INTANGIBLE ASSETS, NET](index=16&type=section&id=NOTE%209%20%E2%80%94%20GOODWILL%20AND%20INTANGIBLE%20ASSETS%2C%20NET) Goodwill remained unchanged, while net intangible assets decreased due to amortization **Goodwill (in thousands):** | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Goodwill | $73,849 | $73,849 | **Intangible Assets, Net (in thousands):** | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Customer related intangible assets, net | $20,463 | $27,050 | | Operating agreement, net | $14,583 | $15,874 | | Trademarks and trade names, net | $3,097 | $3,402 | | Total | $38,143 | $46,326 | **Amortization Expense for Definite Lived Intangible Assets (in thousands):** | Period | 2021 | 2020 | | :--- | :--- | :--- | | Nine months ended September 30 | $8,183 | $11,344 | | Third quarter ended September 30 | $2,700 | $4,300 | [NOTE 10 — OTHER ASSETS](index=16&type=section&id=NOTE%2010%20%E2%80%94%20OTHER%20ASSETS) Other assets decreased primarily due to a reduction in security deposits and other miscellaneous assets **Other Assets (in thousands):** | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Restricted cash | $4,275 | $3,833 | | Security deposits | $1,060 | $2,416 | | Other | $1,092 | $3,601 | | Total | $6,427 | $9,850 | [NOTE 11 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES](index=17&type=section&id=NOTE%2011%20%E2%80%94%20ACCOUNTS%20PAYABLE%2C%20ACCRUED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) Current liabilities saw a minor decrease, driven by lower accrued expenses and operating lease liabilities **Accounts Payable and Accrued Expenses (in thousands):** | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Accounts payable | $20,411 | $16,797 | | Accrued expenses - general | $16,866 | $24,422 | | Accrued salaries and benefits | $13,030 | $11,226 | | Income taxes payable | $3,687 | $4,334 | | Total | $53,994 | $56,779 | **Other Current Liabilities (in thousands):** | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Operating lease liabilities | $5,698 | $7,609 | | Other | $764 | $1,696 | | Total | $6,462 | $9,305 | [NOTE 12 — LONG-TERM DEBT](index=17&type=section&id=NOTE%2012%20%E2%80%94%20LONG-TERM%20DEBT) Long-term debt increased due to a new credit facility, while a high leverage ratio restricted further borrowing **Long-term Debt (in thousands):** | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Senior secured term loans (principal) | $247,204 | $247,204 | | Total Senior secured term loans (net) | $243,732 | $242,656 | | Credit Facility (net) | $19,515 | $0 | | Total Long-term debt, less current portion | $258,247 | $242,656 | - The company's **leverage ratio exceeded 3.50 to 1.00** for the twelve months ended September 30, 2021, which restricts additional borrowings under the revolving credit facility and mandatory prepayments from excess cash flow under the Credit Agreement[67](index=67&type=chunk)[70](index=70&type=chunk) - A new revolving Credit Facility was entered into on June 22, 2021, with STS Master Fund, Ltd, allowing borrowings up to **$20 million** through June 2022, bearing interest at **9.00% per annum**[76](index=76&type=chunk)[78](index=78&type=chunk) [NOTE 13 — OTHER NON-CURRENT LIABILITIES](index=20&type=section&id=NOTE%2013%20%E2%80%94%20OTHER%20NON-CURRENT%20LIABILITIES) Other non-current liabilities decreased, primarily driven by reductions in operating lease liabilities **Other Non-Current Liabilities (in thousands):** | Item | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Operating lease liabilities | $8,545 | $12,281 | | Income tax liabilities | $12,314 | $12,414 | | Deferred revenue | $247 | $504 | | Other non-current liabilities | $79 | $40 | | Total | $21,185 | $25,239 | [NOTE 14 — FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS](index=21&type=section&id=NOTE%2014%20%E2%80%94%20FAIR%20VALUE%20MEASUREMENTS%20AND%20FINANCIAL%20INSTRUMENTS) The company uses a three-tier hierarchy for fair value, with most debt instruments valued based on market rates **Fair Value Measurements (in thousands):** | Item | Carrying amount (Sep 30, 2021) | Fair value (Sep 30, 2021) | Carrying amount (Dec 31, 2020) | Fair value (Dec 31, 2020) | | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents (Level 1) | $36,492 | $36,492 | $58,263 | $58,263 | | Restricted cash (Level 1) | $4,275 | $4,275 | $3,833 | $3,833 | | Senior secured term loan (Level 2) | $247,204 | $204,562 | $247,204 | $201,472 | | Credit Facility (Level 3) | $20,000 | $20,000 | — | — | | Convertible debt payable to related parties (Level 3) | $1,337 | $1,337 | — | — | - The fair value of the Credit Facility and convertible debt payable to related parties (Level 3 inputs) equals their book value, as contractual interest rates are believed to represent market rates due to the absence of quoted market prices and stable interest rate environment[87](index=87&type=chunk)[88](index=88&type=chunk) [NOTE 15 — SHAREHOLDERS' EQUITY AND SHARE-BASED COMPENSATION](index=22&type=section&id=NOTE%2015%20%E2%80%94%20SHAREHOLDERS'%20EQUITY%20AND%20SHARE-BASED%20COMPENSATION) The share repurchase program remains active but is limited by the current leverage ratio - Approximately **2.4 million shares** of common stock remain available for repurchase under the program as of September 30, 2021[92](index=92&type=chunk) - Share repurchases are limited by Luxembourg law (approx **$81 million** available) and the Credit Agreement (approx **$376 million** available, but restricted if leverage ratio exceeds 3.50 to 1.00, which it did)[92](index=92&type=chunk) **Share-Based Compensation Expense (in thousands):** | Period | 2021 | 2020 | | :--- | :--- | :--- | | Nine months ended September 30 | $2,510 | $6,556 | | Third quarter ended September 30 | $400 | $1,700 | **Outstanding Stock Options (as of September 30, 2021):** | Type | Number of Options | | :--- | :--- | | Service-Based Options | 213,000 | | Market-Based Options | 155,000 | | Performance-Based Options | 427,000 | | Total Outstanding | 794,923 | **Outstanding Restricted Shares and Units (as of September 30, 2021):** | Type | Number of Awards | | :--- | :--- | | Service-Based Awards | 278,000 | | Performance-Based Awards | 187,000 | | Market-Based Awards | 112,000 | | Performance-Based and Market-Based Awards | 77,000 | | Total Outstanding | 654,555 | [NOTE 16 — REVENUE](index=24&type=section&id=NOTE%2016%20%E2%80%94%20REVENUE) Total revenue declined significantly due to COVID-19 related moratoriums and customer transitions **Revenue (in thousands):** | Item | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Service revenue | $41,626 | $85,386 | $133,672 | $289,570 | | Reimbursable expenses | $1,416 | $2,810 | $5,365 | $14,495 | | Non-controlling interests | $201 | $599 | $712 | $1,516 | | Total revenue | $43,243 | $88,795 | $139,749 | $305,581 | **Disaggregation of Revenue by Major Source (in thousands):** | Item | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue recognized when services are performed or assets are sold | $38,147 | $82,067 | $124,111 | $277,522 | | Revenue related to technology platforms and professional services | $3,680 | $3,918 | $10,273 | $13,564 | | Reimbursable expenses revenue | $1,416 | $2,810 | $5,365 | $14,495 | | Total revenue | $43,243 | $88,795 | $139,749 | $305,581 | [NOTE 17 — COST OF REVENUE](index=25&type=section&id=NOTE%2017%20%E2%80%94%20COST%20OF%20REVENUE) Cost of revenue decreased in line with lower service revenue, driven by reduced outside fees and compensation **Cost of Revenue (in thousands):** | Item | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Compensation and benefits | $15,171 | $23,947 | $55,655 | $74,776 | | Outside fees and services | $16,891 | $34,013 | $52,473 | $123,914 | | Technology and telecommunications | $6,391 | $8,776 | $18,972 | $27,082 | | Reimbursable expenses | $1,416 | $2,810 | $5,365 | $14,495 | | Depreciation and amortization | $798 | $3,024 | $2,397 | $9,512 | | Total | $40,667 | $72,570 | $134,862 | $249,779 | [NOTE 18 — SELLING, GENERAL AND ADMINISTRATIVE EXPENSES](index=25&type=section&id=NOTE%2018%20%E2%80%94%20SELLING%2C%20GENERAL%20AND%20ADMINISTRATIVE%20EXPENSES) SG&A expenses decreased due to lower compensation, occupancy costs, and amortization of intangible assets **Selling, General and Administrative Expenses (in thousands):** | Item | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Compensation and benefits | $6,859 | $9,077 | $21,007 | $30,396 | | Amortization of intangible assets | $2,673 | $4,295 | $8,183 | $11,344 | | Professional services | $2,318 | $2,129 | $7,896 | $8,605 | | Occupancy related costs | $2,182 | $4,636 | $7,652 | $15,725 | | Marketing costs | $327 | $422 | $1,500 | $2,810 | | Depreciation and amortization | $346 | $796 | $1,082 | $2,009 | | Other | $1,899 | $(543) | $4,726 | $2,717 | | Total | $16,604 | $20,812 | $52,046 | $73,606 | [NOTE 19 — OTHER (EXPENSE) INCOME, NET](index=25&type=section&id=NOTE%2019%20%E2%80%94%20OTHER%20(EXPENSE)%20INCOME%2C%20NET) Net other income improved due to the absence of a prior-year unrealized loss on equity investments **Other (Expense) Income, Net (in thousands):** | Item | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Interest (expense) income | $0 | $25 | $(28) | $105 | | Other, net | $(115) | $(386) | $819 | $307 | | Total | $(115) | $(361) | $791 | $412 | [NOTE 20 — INCOME TAXES](index=25&type=section&id=NOTE%2020%20%E2%80%94%20INCOME%20TAXES) The income tax provision decreased, primarily influenced by transfer pricing income and unrepatriated earnings in India **Income Tax Provision (in thousands):** | Period | 2021 | 2020 | | :--- | :--- | :--- | | Nine months ended September 30 | $1,857 | $5,295 | | Third quarter ended September 30 | $430 | $1,757 | - The income tax provision for the three and nine months ended September 30, 2021, was influenced by income tax on transfer pricing income from India, lack of tax benefit on pretax loss from the Luxembourg operating company and Pointillist, uncertain tax positions, and tax on unrepatriated earnings in India[117](index=117&type=chunk)[118](index=118&type=chunk) [NOTE 21 — LOSS PER SHARE](index=27&type=section&id=NOTE%2021%20%E2%80%94%20LOSS%20PER%20SHARE) Loss per share calculations excluded all potentially dilutive securities due to their anti-dilutive effect **Loss Per Share (in thousands, except per share data):** | Item | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net loss attributable to Altisource | $(18,269) | $(13,237) | $(58,746) | $(59,948) | | Weighted average common shares outstanding, basic | 15,831 | 15,637 | 15,816 | 15,578 | | Basic loss per share | $(1.15) | $(0.85) | $(3.71) | $(3.85) | | Diluted loss per share | $(1.15) | $(0.85) | $(3.71) | $(3.85) | - Approximately **1.5 million** (2021) and **1.6 million** (2020) stock options, restricted shares, and restricted share units were excluded from diluted loss per share calculations because their impact would be anti-dilutive due to net losses or exercise prices exceeding market prices[119](index=119&type=chunk) [NOTE 22 — RESTRUCTURING CHARGES](index=27&type=section&id=NOTE%2022%20%E2%80%94%20RESTRUCTURING%20CHARGES) No restructuring charges were incurred in 2021 as the Project Catalyst cost-reduction initiative was finalized in 2020 - No restructuring charges were incurred for the three and nine months ended September 30, 2021[120](index=120&type=chunk) **Restructuring Charges (in thousands):** | Period | 2021 | 2020 | | :--- | :--- | :--- | | Nine months ended September 30 | $0 | $10,900 | | Three months ended September 30 | $0 | $2,200 | [NOTE 23 — COMMITMENTS, CONTINGENCIES AND REGULATORY MATTERS](index=27&type=section&id=NOTE%2023%20%E2%80%94%20COMMITMENTS%2C%20CONTINGENCIES%20AND%20REGULATORY%20MATTERS) The company faces ongoing legal and regulatory matters, with significant risk tied to its customer concentration with Ocwen - The company does not believe the outcome of current legal actions will have a material impact on its financial condition, results of operations, or cash flows[122](index=122&type=chunk) - Altisource is responding to inquiries from governmental authorities regarding certain aspects of its business, but it is premature to predict the outcome or financial impact[123](index=123&type=chunk) - Ocwen was Altisource's largest customer, accounting for **32% of total revenue** for the nine months ended September 30, 2021, and **5% of revenue** was earned from Ocwen-serviced portfolios where another party selected Altisource[125](index=125&type=chunk) - Ocwen's ongoing regulatory matters or the termination of its subservicing agreement with NRZ could **significantly reduce Altisource's revenue** and materially adversely affect its operations[128](index=128&type=chunk)[131](index=131&type=chunk) **Maturities of Operating Lease Liabilities (in thousands, as of September 30, 2021):** | Year | Operating lease obligations | | :--- | :--- | | 2021 | $2,039 | | 2022 | $4,809 | | 2023 | $3,405 | | 2024 | $3,002 | | 2025 | $1,708 | | Thereafter | $563 | | Total lease payments | $15,526 | | Less: interest | $(1,329) | | Present value of lease liabilities | $14,197 | [NOTE 24 — SUBSEQUENT EVENT](index=30&type=section&id=NOTE%2024%20%E2%80%94%20SUBSEQUENT%20EVENT) Altisource agreed to sell its equity interest in Pointillist to Genesys for $150 million after the reporting period - On October 6, 2021, Altisource agreed to sell its **69% equity interest** in Pointillist to Genesys for **$150 million**[136](index=136&type=chunk)[138](index=138&type=chunk) - The company estimates receiving approximately **$100 million in cash** at closing and an additional **$3.7 million** after one year, with an estimated pre-tax and after-tax gain of approximately **$107 million**[138](index=138&type=chunk) - The transaction is anticipated to close before the end of the **2021 calendar year**[138](index=138&type=chunk) [Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial results, liquidity, and strategic initiatives amid pandemic and customer-related challenges [FORWARD-LOOKING STATEMENTS](index=33&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section highlights risks and uncertainties that could cause actual results to differ from forward-looking statements - Forward-looking statements are based on expectations and involve assumptions, risks, and uncertainties that could cause actual results to differ materially[141](index=141&type=chunk) - Key risks include the Genesys transaction, timing of default related referrals post-moratoriums, ability to retain Ocwen and NRZ as customers, compliance with material agreements, execution of strategic plans, regulatory changes, and impacts of the COVID-19 pandemic[142](index=142&type=chunk)[143](index=143&type=chunk) [OVERVIEW](index=34&type=section&id=OVERVIEW) Altisource provides integrated services for the mortgage lifecycle and is navigating pandemic impacts and key customer changes - Altisource provides marketplaces, services, and technologies spanning the residential mortgage and real estate lifecycles, operating with one reportable segment[145](index=145&type=chunk)[146](index=146&type=chunk) - The company's strategy focuses on becoming the premier provider of mortgage and real estate marketplaces and related technology-enabled solutions, aiming to grow referrals from existing customers and attract new ones[148](index=148&type=chunk)[149](index=149&type=chunk) - Altisource is evaluating strategic options for its Origination business, including potential divestiture, joint venture, third-party investment, or retention, to enhance shareholder value[150](index=150&type=chunk) - The company entered into a revolving credit facility with STS Master Fund, Ltd on June 22, 2021, providing up to **$20 million** for general corporate purposes[153](index=153&type=chunk)[154](index=154&type=chunk) - COVID-19 pandemic impacts include significantly lower foreclosure initiations (**70% lower** for Jan-Sep 2021 vs 2020) and higher mortgage originations (**11% higher** for Jan-Sep 2021 vs 2020), leading to reduced demand for default services and increased demand for origination services[155](index=155&type=chunk)[156](index=156&type=chunk) - Management anticipates default business demand to grow in 2022 after the expiration of temporary loss mitigation rules and stabilize in 2023, while the originations business is expected to continue growing[157](index=157&type=chunk) - Ocwen remains the largest customer (**32% of total revenue** for nine months ended Sep 30, 2021), but revenue from Ocwen has been significantly impacted by an MSR investor (NRZ) directing services to other providers[161](index=161&type=chunk)[165](index=165&type=chunk) - A May 2021 agreement with Ocwen extended service terms and expanded Altisource's opportunities in foreclosure auctions and government loan services, resolving a contractual dispute[166](index=166&type=chunk) [RESULTS OF OPERATIONS](index=40&type=section&id=RESULTS%20OF%20OPERATIONS) Revenue and gross profit declined substantially due to reduced default-related business, leading to an increased operating loss **Summary Results (in thousands, except per share data):** | Item | Three months ended Sep 30, 2021 | % Change | Nine months ended Sep 30, 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $43,243 | (51)% | $139,749 | (54)% | | Gross profit | $2,576 | (84)% | $4,887 | (91)% | | Loss from operations | $(14,028) | (106)% | $(47,159) | (64)% | | Net loss attributable to Altisource | $(18,269) | (38)% | $(58,746) | 2% | | Basic loss per share | $(1.15) | (36)% | $(3.71) | 3% | | Gross profit/service revenue | 6% | | 4% | | | Loss from operations/service revenue | (34)% | | (35)% | | **Service Revenue by Line of Business (in thousands):** | Line of Business | Three months ended Sep 30, 2021 | % Change | Nine months ended Sep 30, 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | | Field Services | $11,760 | (66)% | $36,455 | (73)% | | Marketplace | $7,585 | (68)% | $28,118 | (58)% | | Mortgage and Real Estate Solutions | $20,238 | (22)% | $65,218 | (20)% | | Earlier Stage Business (Pointillist) | $1,888 | 245% | $3,410 | 102% | | Other | $155 | (21)% | $471 | (72)% | | Total service revenue | $41,626 | (51)% | $133,672 | (54)% | - The decrease in service revenue was primarily due to **COVID-19 related foreclosure/eviction moratoriums** and borrower forbearance plans, and an MSR investor's instructions to Ocwen to transition services[173](index=173&type=chunk) - Cost of revenue decreased by **46%** for the nine months ended September 30, 2021, driven by lower outside fees, compensation, and depreciation, aligning with reduced service revenue[177](index=177&type=chunk) - Gross profit as a percentage of service revenue decreased from **19% to 4%** for the nine months ended September 30, 2021, mainly due to revenue mix with lower margin Marketplace businesses and lower gross profit margin in Field Services[178](index=178&type=chunk) - SG&A expenses decreased by **29%** for the nine months ended September 30, 2021, due to lower compensation, occupancy costs (from facility consolidation), marketing, and amortization of intangible assets[181](index=181&type=chunk) - Other income (expense), net, improved for the nine months ended September 30, 2021, primarily due to the absence of a **$(12.4) million unrealized loss** on RESI common shares in the prior year and lower interest expense[185](index=185&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=44&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Negative operating cash flow prompted cost reductions and a new credit facility, with the Pointillist sale expected to boost liquidity - Primary liquidity sources historically include cash flow from operations, business sales, and cash on hand, but revenue decline led to **negative operating cash flow** for the nine months ended September 30, 2021[187](index=187&type=chunk) - The company plans to continue cost reduction initiatives and expects significant cash proceeds (approx **$100 million**) from the anticipated sale of Pointillist to Genesys[187](index=187&type=chunk) - As of September 30, 2021, **$247.2 million** of Term B Loans were outstanding under the Credit Agreement, maturing in April 2024, with an interest rate of **5.00%**[188](index=188&type=chunk)[191](index=191&type=chunk) - The company's **leverage ratio exceeded 3.50 to 1.00**, restricting borrowings under the revolving credit facility and mandatory prepayments from excess cash flow under the Credit Agreement[188](index=188&type=chunk)[190](index=190&type=chunk) - The new Credit Facility with STS allows borrowing up to **$20 million** through June 2022, with an outstanding balance of **$20.0 million** as of September 30, 2021, bearing **9.00% interest**[196](index=196&type=chunk)[198](index=198&type=chunk)[202](index=202&type=chunk) **Cash Flows (in thousands):** | Item | Nine months ended Sep 30, 2021 | % Change | Nine months ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(41,133) | (192)% | $(14,077) | | Net cash provided by investing activities | $1,875 | 133% | $805 | | Net cash provided by (used in) financing activities | $17,929 | N/M | $(2,471) | | Net decrease in cash, cash equivalents and restricted cash | $(21,329) | 35% | $(15,743) | | Cash, cash equivalents and restricted cash at end of period | $40,767 | (42)% | $70,840 | - The increase in cash used in operating activities was driven by a **higher net loss** adjusted for non-cash items, partially offset by lower cash used for changes in operating assets and liabilities[204](index=204&type=chunk) - Cash provided by investing activities increased due to lower capital expenditures and receipt of **$3.0 million** from the sale of the rental property management business[205](index=205&type=chunk) - Cash provided by financing activities increased significantly due to **$20.0 million** proceeds from the Credit Facility and **$1.2 million** from Pointillist convertible notes[206](index=206&type=chunk) - The company believes existing cash, available Credit Facility borrowings, and estimated Pointillist sale proceeds will be **sufficient to meet liquidity needs** for the next 12 months[208](index=208&type=chunk) [CRITICAL ACCOUNTING POLICIES, ESTIMATES AND RECENT ACCOUNTING PRONOUNCEMENTS](index=47&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%2C%20ESTIMATES%20AND%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) No material changes to critical accounting policies occurred, and recent accounting pronouncements had no material impact - The preparation of financial statements involves assumptions, estimates, and judgments that are often subjective, and actual results may differ[210](index=210&type=chunk) - **No material changes** to critical accounting policies occurred during the nine months ended September 30, 2021[211](index=211&type=chunk) - Recently adopted accounting pronouncements (ASU No 2019-12 and ASU No 2020-06) **did not have a material impact** on the condensed consolidated financial statements[26](index=26&type=chunk)[27](index=27&type=chunk) - The company is evaluating the impact of ASU No 2020-04 and ASU No 2021-01 (Reference Rate Reform) on its financial statements[28](index=28&type=chunk) [Item 3 Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are interest rate risk on its term loan and foreign currency risk from the Indian rupee [Interest Rate Risk](index=47&type=section&id=Interest%20Rate%20Risk) The company is exposed to interest rate risk on its Term B Loan, which has a minimum interest rate floor - The interest rate on the Term B Loan was **5.00%** as of September 30, 2021, based on the Adjusted Eurodollar Rate with a minimum floor of **1.00% plus 4.00%**[212](index=212&type=chunk) - A one percentage point increase in the Eurodollar rate would increase annual interest expense by approximately **$2.5 million**, while a decrease would have no impact due to the **1.00% minimum floor**[213](index=213&type=chunk) [Currency Exchange Risk](index=47&type=section&id=Currency%20Exchange%20Risk) Altisource's primary currency exchange risk stems from its operations in India - The most significant currency exposure relates to the **Indian rupee**[214](index=214&type=chunk) - A one percentage point increase or decrease in the Indian rupee's value against the U.S dollar would increase or decrease annual expenses by approximately **$0.3 million**[214](index=214&type=chunk) [Item 4 Controls and Procedures](index=42&type=section&id=Item%204%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes to internal controls [Evaluation of Disclosure Controls and Procedures](index=47&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management evaluated and concluded that the company's disclosure controls and procedures were effective - Disclosure controls and procedures are designed to ensure timely and accurate reporting of information required under the Exchange Act[215](index=215&type=chunk)[216](index=216&type=chunk) - Management, including the Chairman and Chief Executive Officer and Chief Financial Officer, concluded that disclosure controls and procedures were **effective** as of September 30, 2021[217](index=217&type=chunk) [Internal Control over Financial Reporting](index=48&type=section&id=Internal%20Control%20over%20Financial%20Reporting) No material changes to internal control over financial reporting occurred during the quarter - **No changes** in internal control over financial reporting occurred during the quarter ended September 30, 2021, that materially affected or are reasonably likely to materially affect it[218](index=218&type=chunk) PART II — Other Information [Item 1 Legal Proceedings](index=44&type=section&id=Item%201%20Legal%20Proceedings) The company is involved in various legal and regulatory matters but does not expect a material financial impact [Litigation](index=49&type=section&id=Litigation) Ongoing legal actions are not expected to materially impact the company's financial condition or results - The company is involved in legal actions but does not believe the outcome will have a **material impact** on its financial condition, results of operations, or cash flows[221](index=221&type=chunk) [Regulatory Matters](index=49&type=section&id=Regulatory%20Matters) The company is responding to regulatory inquiries, but the potential outcome and financial impact are currently unknown - The company is subject to audits, examinations, and investigations by governmental authorities and is responding to inquiries[222](index=222&type=chunk) - It is **premature to predict** the potential outcome or estimate any potential financial impact of these regulatory inquiries[222](index=222&type=chunk) [Item 1A Risk Factors](index=44&type=section&id=Item%201A%20Risk%20Factors) No material changes to risk factors were reported since the company's last Form 10-Q filing - No material changes in risk factors from the Form 10-K for the year ended December 31, 2020, except as discussed in the Form 10-Q for the quarterly period ended June 30, 2021[223](index=223&type=chunk) [Item 2 Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No common stock was repurchased during the quarter, with 2.4 million shares remaining available under the program - **No purchases of common stock** were made during the three months ended September 30, 2021[224](index=224&type=chunk) - Approximately **2.4 million shares** remain available for repurchase under the program as of September 30, 2021[224](index=224&type=chunk) - **994 common shares** were withheld from employees to satisfy tax withholding obligations from restricted share vesting during the three months ended September 30, 2021[224](index=224&type=chunk) [Item 6 Exhibits](index=45&type=section&id=Item%206%20Exhibits) This section lists the exhibits filed with the report, including CEO/CFO certifications and XBRL data - Exhibits include Section 302 and 906 Certifications by the CEO and CFO, and financial information formatted in Inline XBRL[226](index=226&type=chunk) [SIGNATURES](index=46&type=section&id=SIGNATURES) The report was duly signed by the Chief Financial Officer on behalf of the company - The report was signed by **Michelle D Esterman, Chief Financial Officer**, on November 4, 2021[228](index=228&type=chunk)
Altisource Portfolio Solutions S.A.(ASPS) - 2021 Q2 - Earnings Call Transcript
2021-07-31 17:41
Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) Q2 2021 Results Conference Call July 29, 2021 8:30 AM ET Company Participants Michelle Esterman - CFO William Shepro - Chairman & CEO Conference Call Participants Mike Grondahl - Northland Securities Raj Sharma - B. Riley Operator Ladies and gentlemen, thank you for standing by, and welcome to the Altisource Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a ...
Altisource Portfolio Solutions S.A.(ASPS) - 2021 Q1 - Earnings Call Transcript
2021-05-10 19:23
Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) Q1 2021 Earnings Conference Call May 10, 2021 8:30 AM ET Company Participants Bill Shepro - Chairman and Chief Executive Officer Michelle Esterman - Chief Financial Officer Conference Call Participants Shachar Minkove - Napier Park Raj Sharma - B. Riley Operator Ladies and gentlemen, thank you for standing by and welcome to Altisource First Quarter 2021 Earnings Call. [Operator Instructions] I would now like to hand the conference over to your host, Michelle ...