Altisource Portfolio Solutions S.A.(ASPS) - 2020 Q1 - Quarterly Report

PART I — Financial Information Item 1. Interim Condensed Consolidated Financial Statements (Unaudited) Altisource's unaudited Q1 2020 consolidated financial statements detail key financial positions, performance, and cash flows Condensed Consolidated Balance Sheets | Metric (in thousands) | March 31, 2020 | December 31, 2019 | | :-------------------- | :------------- | :---------------- | | ASSETS | | | | Total current assets | $181,605 | $184,188 | | Total assets | $368,595 | $385,119 | | LIABILITIES AND EQUITY | | | | Total current liabilities | $84,722 | $87,578 | | Long-term debt | $288,233 | $287,882 | | Total deficit | $(31,524) | $(21,357) | | Total liabilities and deficit | $368,595 | $385,119 | - Total assets decreased from $385.1 million at December 31, 2019, to $368.6 million at March 31, 2020[5] - Total deficit increased from $(21.4) million at December 31, 2019, to $(31.5) million at March 31, 2020[5] Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric (in thousands, except per share) | 2020 | 2019 | | :------------------------------------ | :---------- | :---------- | | Revenue | $121,444 | $169,935 | | Gross profit | $26,863 | $45,720 | | Loss from operations | $(4,155) | $(626) | | Net loss attributable to Altisource | $(11,650) | $(3,184) | | Basic loss per share | $(0.75) | $(0.20) | | Diluted loss per share | $(0.75) | $(0.20) | - Revenue decreased by 28.5% from $169.9 million in Q1 2019 to $121.4 million in Q1 2020[8] - Net loss attributable to Altisource significantly increased from $(3.2) million in Q1 2019 to $(11.7) million in Q1 2020[8] Condensed Consolidated Statements of Equity | Metric (in thousands) | March 31, 2020 | December 31, 2019 | | :-------------------- | :------------- | :---------------- | | Common stock | $25,413 | $25,413 | | Additional paid-in capital | $136,563 | $133,669 | | Retained earnings | $252,466 | $272,026 | | Treasury stock, at cost | $(447,229) | $(453,934) |\ | Altisource deficit | $(32,787) | $(22,826) | | Non-controlling interests | $1,263 | $1,469 | | Total deficit | $(31,524) | $(21,357) | - Altisource's total deficit increased from $(21.4) million at December 31, 2019, to $(31.5) million at March 31, 2020, primarily due to a net loss of $(11.65) million[9] - Additional paid-in capital increased by $2.9 million, mainly from share-based compensation expense[9] Condensed Consolidated Statements of Cash Flows | Metric (in thousands) | 2020 | 2019 | | :-------------------- | :---------- | :---------- | | Net cash used in operating activities | $(1,648) | $(6,655) | | Net cash used in investing activities | $(511) | $(790) | | Net cash used in financing activities | $(1,516) | $(1,177) | | Net decrease in cash, cash equivalents and restricted cash | $(3,675) | $(8,622) | | Cash, cash equivalents and restricted cash at the end of the period | $82,908 | $55,424 | - Net cash used in operating activities decreased by 75% from $(6.7) million in Q1 2019 to $(1.6) million in Q1 2020[11] - Cash, cash equivalents and restricted cash at period-end increased by 49.6% from $55.4 million in Q1 2019 to $82.9 million in Q1 2020[11] Notes to Condensed Consolidated Financial Statements NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION Altisource, a NASDAQ-traded real estate and mortgage service provider, presents unaudited GAAP financials, consolidating key entities - Altisource is an integrated service provider and marketplace for the real estate and mortgage industries, publicly traded on NASDAQ under 'ASPS'[12][13] - The company consolidates Lenders One, a mortgage cooperative, and Pointillist, Inc., a customer journey analytics business, due to primary beneficiary or controlling interests[15][16][17] - Lenders One had total assets of $2.0 million and liabilities of $0.6 million as of March 31, 2020, compared to $1.6 million and $0.3 million respectively, as of December 31, 2019[16] NOTE 2 — CUSTOMER CONCENTRATION Ocwen remains Altisource's largest customer, contributing 61% of Q1 2020 revenue, impacted by platform transition Revenue from Ocwen (Three Months Ended March 31) | Metric (in millions) | 2020 | 2019 | | :------------------- | :---- | :---- | | Revenue from Ocwen | $74.2 | $98.3 | | % of consolidated revenue | 61% | 58% | - Ocwen was Altisource's largest customer, contributing 61% of total revenue in Q1 2020, an increase from 58% in Q1 2019[28][30] - Service revenue from REALServicing and related technologies decreased significantly from $8.2 million in Q1 2019 to $0.9 million in Q1 2020 due to Ocwen's platform transition[29] - Accounts receivable from Ocwen increased to $21.4 million as of March 31, 2020, from $19.1 million as of December 31, 2019[32] NOTE 3 — SALE OF BUSINESSES Altisource sold Financial Services and rental property management businesses, with future payments expected - Financial Services business sold to Transworld Systems Inc. for $44.0 million in July 2019, with $40.0 million upfront and $4.0 million due on the one-year anniversary[39] - Rental property management business sold to Front Yard Residential Corporation (RESI) for $18.0 million in August 2018. The second installment of $3.0 million (discounted to $2.4 million) is due upon a RESI change of control or by August 8, 2023[40] NOTE 4 — INVESTMENT IN EQUITY SECURITIES Altisource's RESI stock, valued at $41.3M, saw an unrealized loss in Q1 2020 due to a merger agreement Investment in RESI Common Stock (March 31, 2020 vs. December 31, 2019) | Metric (in millions) | March 31, 2020 | December 31, 2019 | | :------------------- | :------------- | :---------------- | | Fair value | $41.3 | $42.6 | | Unrealized (loss) gain | $(1.3) | $2.2 |\ | Dividends earned | $0.5 | $0.6 | - RESI entered a merger agreement on February 17, 2020, to be acquired for $12.50 cash per share, with Altisource agreeing to vote its shares in favor[42] NOTE 5 — ACCOUNTS RECEIVABLE, NET Net accounts receivable stable at $43.6M, with minor shifts and increased allowance for credit losses Accounts Receivable, Net (March 31, 2020 vs. December 31, 2019) | Metric (in thousands) | March 31, 2020 | December 31, 2019 | | :-------------------- | :------------- | :---------------- | | Billed | $36,388 | $35,921 | | Unbilled | $12,002 | $12,166 | | Total gross | $48,390 | $48,087 | | Less: Allowance for credit losses | $(4,814) | $(4,472) | | Total net | $43,576 | $43,615 | - Unbilled accounts receivable primarily relate to real estate asset management, REO sales, title and closing services, and foreclosure trustee services, where revenue is recognized when services are provided but collection occurs later[43] NOTE 6 — PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets rose to $17.7M, driven by prepayments, offset by lower tax receivables Prepaid Expenses and Other Current Assets (March 31, 2020 vs. December 31, 2019) | Metric (in thousands) | March 31, 2020 | December 31, 2019 | | :-------------------- | :------------- | :---------------- | | Maintenance agreements, current portion | $1,845 | $1,923 | | Income taxes receivable | $2,605 | $5,098 | | Prepaid expenses | $6,972 | $3,924 | | Other current assets | $6,238 | $4,269 | | Total | $17,660 | $15,214 | NOTE 7 — DISCONTINUATION OF LINES OF BUSINESS Altisource wound down Owners.com and discontinued BRS business, with no material financial impact - Owners.com, a technology-enabled real estate brokerage, was wound down and closed by December 31, 2019[45] - The Buy-Renovate-Lease-Sell (BRS) business, focused on single-family homes for investors, was discontinued, with inventory sales completed in 2019[46] NOTE 8 — PREMISES AND EQUIPMENT, NET Net premises and equipment decreased to $21.0M, primarily due to Q1 2020 depreciation and amortization Premises and Equipment, Net (March 31, 2020 vs. December 31, 2019) | Metric (in thousands) | March 31,