Altisource Portfolio Solutions S.A.(ASPS) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company ended the quarter with $71 million in cash, significantly reducing cash burn compared to the first quarter, and anticipates ending the year with between $60 million and $65 million of cash [8][21] - The origination segment experienced a year-over-year revenue decline in line with a market-wide decline in origination volume, with a forecasted 41% decline in origination volume for 2022 [11][12] Business Line Data and Key Metrics Changes - The servicer and real estate segment saw revenue and adjusted EBITDA growth, benefiting from the restart of the default business, with adjusted EBITDA margins improving [9][10] - The average weighted sales pipeline in the origination business increased by 54% to $32 million, indicating a strong sales performance despite market challenges [7][13] Market Data and Key Metrics Changes - Foreclosure initiations in the second quarter were still 47% below pre-COVID 2019 levels, indicating a slow recovery in the default market [10][26] - Mortgage delinquency rates are at near historical lows, but rising interest rates and inflation may lead to increased delinquency rates, potentially expanding the addressable market for default services by $700 million for every 1% increase in 30-day delinquency rates [11] Company Strategy and Development Direction - The company is focused on growing its sales pipeline and has made progress in onboarding new business, with an estimated $8.4 million of annualized revenue on a stabilized basis [10] - The company anticipates that its countercyclical default business could benefit from a deteriorating economic environment, positioning itself for long-term growth [11][14] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about generating positive EBITDA and cash flow in 2023, depending on the recovery of the default market [21][22] - The company is learning how long it takes to convert its sales pipeline into revenue, with expectations of modest improvements in the origination business in the third quarter and more significant improvements in the fourth quarter [32][33] Other Important Information - The company has undertaken cost-saving initiatives, resulting in a 28% reduction in corporate costs compared to the second quarter of 2021 [7] - The company is experiencing increased interest in its cost-saving solutions from Lenders One members as origination volumes decline [12][18] Q&A Session Summary Question: Are there geographical differences in foreclosure timing? - Management noted no significant geographical differences in foreclosure timing, with new foreclosure initiations still down 47% from last year [16] Question: Is there an opportunity to gain market share in a softer origination environment? - Management indicated that members are now focused on cost savings, which presents an opportunity for the company to gain market share [17] Question: Can you elaborate on cash flow trajectory and breakeven expectations? - Management expects to end the year with $60 million to $65 million in cash and anticipates generating positive EBITDA and cash flow in 2023 [21][22] Question: What is the company's share of foreclosure initiations compared to pre-COVID levels? - Management stated that their inventory is currently one-third of a competitor's, indicating a potential market share position [25] Question: What is the expected cadence of REO flow and foreclosure starts? - Management expects stabilization of new foreclosures initiated this year by mid-2023, with significant revenue opportunities as the market recovers [29][30] Question: How are new product launches performing in the origination business? - Management reported that new products in the verification and credit reporting space are gaining traction, with expectations for modest improvements in the third quarter and more significant improvements in the fourth quarter [32][33]