Altisource Portfolio Solutions S.A.(ASPS) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 2020, the company generated $0.17 of adjusted diluted earnings per share, $4.4 million of adjusted pre-tax income, $13.2 million of adjusted EBITDA, and $113.2 million of service revenue [6][5][7] - The first quarter financial performance was lower than the same period last year due to the disposition of certain businesses, the run-off of Ocwen's service portfolios, and COVID-19 related disruptions [5][6] Business Line Data and Key Metrics Changes - Service revenue from customers other than Ocwen, NRZ, and RESI grew by 36% year-over-year in Q1 2020, driven by customer base growth and market share expansion [7] - The company anticipates a short to medium-term negative impact on default-related revenue but expects strong long-term growth due to low interest rates [7][10] Market Data and Key Metrics Changes - The COVID-19 pandemic has led to significant disruptions in the real estate mortgage and servicing markets, with a rise in unemployment claims and borrowers in forbearance [9][10] - The Mortgage Bankers Association estimates that 7% of borrowers were in forbearance as of April 19, 2020, up from 0.25% in early March [9] Company Strategy and Development Direction - The company is focusing on maintaining employee health, adjusting operations to mitigate impacts, and preserving liquidity in anticipation of lower revenue [10][12] - The company believes it is well-positioned to capture opportunities in a low interest rate and rising delinquency environment, estimating that a 1% increase in mortgage delinquencies could increase the addressable market for default-related services by over $700 million [17][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the unprecedented impact of COVID-19 on the economy and the company's operations, with expectations of a challenging environment in the second and third quarters [5][49] - The company anticipates a gradual recovery starting in the fourth quarter, depending on the unemployment and delinquency rates [49][42] Other Important Information - The company has implemented cost reduction measures, including furloughs and compensation reductions, aiming to reduce cash expenses by $45 million to $50 million compared to the fourth quarter of 2019 [14][15] - The company holds $79 million in cash and equivalents, with $294 million in debt, positioning itself to manage through the current economic challenges [13] Q&A Session Summary Question: How did Ocwen-related revenues compare to forecasts? - Management indicated that they were largely on track until March when disruptions began due to the pandemic, resulting in a couple of million dollars off plan [20] Question: What is the impact of the moratorium on business flow? - Management explained that the federal and state moratoriums on foreclosures and evictions would reduce inflows into REO and referrals, with expectations of a pickup in referrals as moratoriums end [39][41] Question: What is the current state of business segments? - Management noted that the marketplace segment (Hubzu) is expected to be down about 75%, while Field Services is down but holding up reasonably well, and Mortgage Real Estate Solutions is expected to perform better than initially anticipated [53][58]