Altisource Portfolio Solutions
Apr 27, 2017

Altisource Announces First Quarter Financial Results

LUXEMBOURG, April 27, 2017 (GLOBE NEWSWIRE) -- Altisource Portfolio Solutions S.A. ("Altisource" or the "Company") (NASDAQ:ASPS) today reported financial results for the first quarter, reporting strong service revenue of $229.8 million and solid diluted and adjusted diluted earnings per share of $0.34 and $0.69, respectively.

"I'm pleased with our first quarter financial performance.  Compared to the mid-point of our full year 2017 scenarios, first quarter 2017 service revenue is 27% of the mid-point and adjusted diluted earnings per share(1) is 24% of the mid-point.  Since our second and third quarters are historically our seasonally strongest, we believe we're positioned to achieve the mid-point of our 2017 service revenue and adjusted earnings per share financial scenarios," said Chief Executive Officer William B. Shepro.

Compared to the first quarter of 2016, service revenue declined by 2% as revenue growth from higher property preservation referrals and home sales in the buy-renovate-sell business was offset by the expected loss in revenue from Ocwen's reduced servicing portfolio. Non-Ocwen revenue from the Servicer Solutions, Origination Solutions and Consumer Real Estate Solutions businesses collectively grew by 15%, but was more than offset by lower service revenue in the Real Estate Investor Solutions business and the non-core Customer Relationship Management business.  Lower revenue in the Real Estate Investor Solutions business was driven by Altisource Residential Corporation's ("RESI") smaller non-performing loan and REO portfolio as it transitions to a company solely focused on single family rentals.  Longer term, the Company expects the Real Estate Investor Solutions business to grow as it scales to sell tenanted homes to investors.

First quarter 2017 service revenue was relatively flat compared to first quarter 2016, but as a result of increased investments to support the Company's growth initiatives and service revenue mix changes, pretax income attributable to Altisource(1) of $9.1 million and adjusted pretax income attributable to Altisource(1) of $18.3 million declined by 56% and 44%, respectively.  Compared to the first quarter of 2016, diluted earnings per share and adjusted diluted earnings per share(1) were further impacted by a higher effective tax rate in 2017.  The fair value of the Company's available for sale securities increased by $17.4 million during the first quarter of 2017, compared to $1.0 million in the first quarter of 2016.  If this gain were included in net income, adjusted pre-tax income(1) and adjusted diluted earnings per share(1) would have been $35.7 million and $1.35, respectively, in the first quarter of 2017 compared to adjusted pre-tax income(1) and adjusted diluted earnings per share(1) of $33.9 million and $1.50, respectively, in the first quarter of 2016.

Mr. Shepro further commented, "We're making tremendous progress developing our four strategic initiatives to build a diversified growth business not defined by any one customer.  We have an attractive and growing customer list, a strong pipeline of opportunities, strong competitive advantages and a business that generates a lot of free cash.  We also have a very attractive covenant-light debt facility that doesn't mature until December 2020 and $180 million of cash and marketable securities at the end of the quarter."

First Quarter 2017 Highlights Include:

Servicer Solutions

Origination Solutions

Consumer Real Estate Solutions

Real Estate Investor Solutions

Corporate

First Quarter 2017 Results Compared to Fourth Quarter of 2016 and First Quarter 2016

Ocwen-Related News

________________________

(1)  This is a non-GAAP measure that is defined and reconciled to the corresponding GAAP measure herein.

Forward-Looking Statements

This press release contains forward-looking statements that involve a number of risks and uncertainties.  These forward-looking statements include all statements that are not historical fact, including statements about management's beliefs and expectations.  These statements may be identified by words such as "anticipate," "intend," "expect," "may," "could," "should," "would," "plan," "estimate," "seek," "believe," "potential" and similar expressions.  Forward-looking statements are based on management's beliefs as well as assumptions made by and information currently available to management.  Because such statements are based on expectations as to the future and are not statements of historical fact, actual results may differ materially from what is contemplated by the forward-looking statements.  Altisource undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.  The risks and uncertainties to which forward-looking statements are subject include, but are not limited to, Altisource's ability to integrate acquired businesses, retain key executives or employees, retain existing customers and attract new customers, general economic and market conditions, behavior of customers, suppliers and/or competitors, technological developments, governmental regulations, taxes and policies, availability of adequate and timely sources of liquidity and other risks and uncertainties detailed in the "Forward-Looking Statements," "Risk Factors" and other sections of Altisource's Form 10-K and other filings with the Securities and Exchange Commission.

Webcast

Altisource will host a webcast at 11:00 a.m. EDT today to discuss our first quarter results.  A link to the live audio webcast will be available on Altisource's website in the Investor Relations section.  Those who want to listen to the call should go to the website at least fifteen minutes prior to the call to register, download and install any necessary audio software.  A replay of the conference call will be available via the website approximately two hours after the conclusion of the call and will remain available for approximately 30 days.

About Altisource

Altisource Portfolio Solutions S.A. is an integrated service provider and marketplace for the real estate and mortgage industries.  Combining operational excellence with a suite of innovative services and technologies, Altisource helps solve the demands of the ever-changing market.  Additional information is available at www.Altisource.com.


ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
(unaudited)
 
  Three months ended
 March 31,
  2017 2016
     
Service revenue    
Mortgage Market $194,973  $188,085 
Real Estate Market 19,189  23,401 
Other Businesses, Corporate and Eliminations 15,677   22,794 
Total service revenue 229,839  234,280 
Reimbursable expenses 10,029   15,454 
Non-controlling interests 615  398 
Total revenue 240,483  250,132 
Cost of revenue 167,924  153,409 
Reimbursable expenses 10,029  15,454 
Gross profit 62,530  81,269 
Selling, general and administrative expenses 47,701  53,616 
Income from operations 14,829  27,653 
Other income (expense), net:    
Interest expense (5,798) (6,541)
Other income (expense), net 715  (27)
Total other income (expense), net (5,083) (6,568)
     
Income before income taxes and non-controlling interests 9,746  21,085 
Income tax provision (2,586) (2,193)
     
Net income 7,160  18,892 
Net income attributable to non-controlling interests (615) (398)
     
Net income attributable to Altisource $6,545  $18,494 
     
Earnings per share:    
Basic  $0.35  $0.98 
Diluted $0.34  $0.92 
     
Weighted average shares outstanding:    
Basic 18,662  18,855 
Diluted 19,304  20,040 
     
Comprehensive income:    
Net income $ 7,160  $18,892 
Other comprehensive income, net of tax:    
Unrealized gain on securities, net of income tax expense of $4,725 and $289  12,723  699 
     
Comprehensive income, net of tax 19,883  19,591 
Comprehensive income attributable to non-controlling interests (615) (398)
     
Comprehensive income attributable to Altisource $19,268  $19,193 


ALTISOURCE PORTFOLIO SOLUTIONS S.A.
SEGMENT FINANCIAL INFORMATION(1)
(in thousands)
(unaudited)
 
  Three months ended March 31, 2017
(in thousands) Mortgage
Market
 Real Estate
Market
 Other
Businesses,
Corporate and
Eliminations
 Consolidated
Altisource
         
Revenue        
Service revenue $194,973  $19,189  $15,677  $229,839 
Reimbursable expenses 9,135  874  20  10,029 
Non-controlling interests 615      615 
  204,723  20,063  15,697  240,483 
Cost of revenue 140,150  22,143  15,660   177,953 
Gross profit (loss) 64,573  (2,080) 37  62,530 
Selling, general and administrative expenses 28,682  4,325  14,694  47,701 
Income (loss) from operations 35,891  (6,405) (14,657) 14,829 
Total other income (expense), net 10    (5,093) (5,083)
         
Income (loss) before income taxes and $35,901  $(6,405)  $(19,750) $9,746 
non-controlling interests
  
  
  Three months ended March 31, 2016
(in thousands) Mortgage
Market
 Real Estate
Market
 Other
Businesses,
Corporate and
Eliminations
 Consolidated
Altisource
         
Revenue        
Service revenue $188,085  $23,401  $22,794  $234,280 
Reimbursable expenses 14,918  508  28  15,454 
Non-controlling interests 398      398 
  203,401  23,909  22,822  250,132 
Cost of revenue 134,043  14,458  20,362   168,863 
Gross profit 69,358  9,451  2,460  81,269 
Selling, general and administrative expenses 29,454  6,174  17,988  53,616 
Income (loss) from operations 39,904  3,277  (15,528) 27,653 
Total other income (expense), net 60  (4) (6,624) (6,568)
         
Income (loss) before income taxes and $39,964  $3,273   $(22,152) $21,085 
non-controlling interests
  

(1)  Effective January 1, 2017, our reportable segments changed as a result of changes in our internal organization.  Prior year comparable period segment disclosures have been restated to conform to the current year presentation.


ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
 
 March 31,
 2017
 December 31,
 2016
    
ASSETS
Current assets:   
Cash and cash equivalents$117,098  $149,294 
Available for sale securities63,202  45,754 
Accounts receivable, net83,038  87,821 
Prepaid expenses and other current assets47,357  42,608 
Total current assets310,695  325,477 
    
Premises and equipment, net96,023  103,473 
Goodwill86,283  86,283 
Intangible assets, net146,286  155,432 
Deferred tax assets, net2,567  7,292 
Other assets11,629  11,255 
    
Total assets$653,483  $689,212 
    
LIABILITIES AND EQUITY
Current liabilities:    
Accounts payable and accrued expenses$75,052  $83,135 
Accrued litigation settlement   32,000 
Current portion of long-term debt5,945  5,945 
Deferred revenue9,626   8,797 
Other current liabilities14,299  19,061 
Total current liabilities104,922  148,938 
    
Long-term debt, less current portion466,510  467,600 
Other non-current liabilities9,686  10,480 
    
Commitments, contingencies and regulatory matters   
    
Equity:   
Common stock ($1.00 par value; 25,413 shares authorized and issued and 18,413
outstanding as of March 31, 2017; 25,413 shares authorized and issued and 18,774
outstanding as of December 31, 2016)
25,413  25,413 
Additional paid-in capital108,915  107,288 
Retained earnings336,527  333,786 
Accumulated other comprehensive income (loss)10,978  (1,745)
Treasury stock, at cost (7,000 shares as of March 31, 2017 and 6,639 shares as of
December 31, 2016)
(410,919) (403,953)
Altisource equity70,914  60,789 
    
Non-controlling interests1,451  1,405 
Total equity72,365  62,194 
    
Total liabilities and equity$653,483  $689,212 



ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
 Three months ended
 March 31,
 2017 2016
    
Cash flows from operating activities:   
Net income$7,160  $18,892 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:   
Depreciation and amortization10,008  9,208 
Amortization of intangible assets9,146  12,211 
Change in the fair value of acquisition related contingent consideration8  96 
Share-based compensation expense695  1,877 
Bad debt expense1,903  876 
Amortization of debt discount105   116 
Amortization of debt issuance costs291  322 
Loss (gain) on disposal of fixed assets1,480  (10)
Changes in operating assets and liabilities:   
Accounts receivable2,880  6,502 
Prepaid expenses and other current assets(4,749) (4,970)
Other assets(374) (109)
Accounts payable and accrued expenses(10,177) (12,133)
Other current and non-current liabilities(36,735) (3,844)
Net cash (used in) provided by operating activities(18,359) 29,034 
    
Cash flows from investing activities:   
Additions to premises and equipment(1,944) (5,984)
Purchase of available for sale securities  (29,429)
Other investing activities  16 
Net cash used in investing activities(1,944) (35,397)
    
Cash flows from financing activities:   
Repayment of long-term debt(1,486) (1,486)
Proceeds from stock option exercises752  366 
Purchase of treasury stock(10,590) (11,691)
Distributions to non-controlling interests(569) (448)
Net cash used in financing activities(11,893)  (13,259)
    
Net decrease in cash and cash equivalents(32,196) (19,622)
Cash and cash equivalents at the beginning of the period149,294  179,327 
    
Cash and cash equivalents at the end of the period$117,098  $159,705 
    
Supplemental cash flow information:   
Interest paid$5,456  $6,104 
Income taxes paid, net6,515  3,830 
    
Non-cash investing and financing activities:   
Increase in payables for purchases of premises and equipment$2,094  $1,030 
        

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
NON-GAAP MEASURES
(in thousands, except per share data)
(unaudited)

Pretax income (loss) attributable to Altisource, adjusted pretax income attributable to Altisource, adjusted pretax income including unrealized gain on available for sale securities, adjusted net income attributable to Altisource, adjusted diluted earnings per share and adjusted diluted earnings per share including unrealized gain on available for sale securities are non-GAAP measures used by management, existing shareholders, potential shareholders and other users of our financial information to measure Altisource's performance and do not purport to be alternatives to income (loss) before income taxes and non-controlling interests, net income (loss) attributable to Altisource or diluted earnings (loss) per share as measures of Altisource's performance.  We believe these measures are useful to management, existing shareholders, potential shareholders and other users of our financial information in evaluating operating profitability more on a continuing cost basis as they exclude amortization expense related to acquisitions that occurred in prior periods as well as the effect of more significant non-recurring items from earnings.  We believe these measures are also useful in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management's evaluation of business performance.  Furthermore, we believe the exclusion of more significant non-recurring items enables comparability to prior period performance and trend analysis.

It is management's intent to provide non-GAAP financial information to enhance the understanding of Altisource's GAAP financial information, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP.  Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure.  The non-GAAP financial information presented may be determined or calculated differently by other companies. The non-GAAP financial information should not be unduly relied upon.

Pretax income (loss) attributable to Altisource is calculated by deducting non-controlling interests from income (loss) before income taxes and non-controlling interests.  Adjusted pretax income attributable to Altisource is calculated by adding intangible asset amortization expense plus litigation settlement loss, net of $4.0 million insurance recovery, to pretax income (loss) attributable to Altisource.  Adjusted pretax income including unrealized gain on available for sale securities in calculated by adding the unrealized gain on available for sale securities to adjusted pretax income attributable to Altisource.  Adjusted net income attributable to Altisource is calculated by adding intangible asset amortization expense (net of tax) plus litigation settlement loss, net of insurance recovery (net of tax), to GAAP net income (loss) attributable to Altisource.  Adjusted diluted earnings per share is calculated by dividing net income (loss) attributable to Altisource plus intangible asset amortization expense (net of tax) and litigation settlement loss, net of insurance recovery (net of tax), by the weighted average number of diluted shares.  Adjusted diluted earnings per share including unrealized gain on available for sale securities is calculated by adding the unrealized gain on available for sale securities (net of tax) to adjusted net income attributable to Altisource, divided by the weighted average number of diluted shares.


ALTISOURCE PORTFOLIO SOLUTIONS S.A.
NON-GAAP MEASURES
(in thousands, except per share data)
(unaudited)

Reconciliations of the non-GAAP measures to the corresponding GAAP measures are as follows:

 Three months ended
 March 31,
 Three months
ended
December 31,
 2017 2016 2016
      
Income (loss) before income taxes and non-controlling interests$9,746  $21,085  $(19,537)
      
Non-controlling interests(615) (398) (720)
Pretax income (loss) attributable to Altisource9,131  20,687  (20,257)
Intangible asset amortization expense9,146  12,211  11,144 
Net litigation settlement, net of $4,000 insurance recovery    28,000 
      
Adjusted pretax income attributable to Altisource$18,277  $32,898  $18,887 
      
Adjusted pretax income attributable to Altisource$18,277  $32,898  $18,887 
Unrealized gain on available for sale securities17,448  988  580 
Adjusted pretax income attributable to Altisource including unrealized gain on available for sale securities$35,725  $33,886  $19,467 
      
Net income (loss) attributable to Altisource$6,545   $18,494  $(20,384)
      
Intangible asset amortization expense, net of tax6,720  10,941  6,477 
Net litigation settlement loss, net of tax    24,583 
      
Adjusted net income attributable to Altisource$13,265  $29,435  $10,676 


ALTISOURCE PORTFOLIO SOLUTIONS S.A.
NON-GAAP MEASURES
(in thousands, except per share data)
(unaudited)
 
  Three months ended
 March 31,
 Three months
ended
December 31,
 2017 2016 2016
      
Diluted earnings (loss) per share$0.34  $0.92  $(1.08)
      
Impact of using diluted share count instead of basic share count
for a loss per share
    0.01 
Intangible asset amortization expense, net of tax, per diluted share0.35  0.55  0.34 
Net litigation settlement loss, net of tax, per diluted share    1.28 
      
Adjusted diluted earnings per share$0.69  $1.47  $0.55 
      
Adjusted diluted earnings per share$0.69  $1.47  $0.55 
Unrealized gain on available for sale securities, net of tax, per diluted share0.66  0.03  0.02 
Adjusted diluted earnings per share including unrealized gain on available for sale securities$1.35  $1.50  $0.58 
      
Calculation of the impact of intangible asset amortization expense, net of tax     
Intangible asset amortization expense$9,146  $12,211  $11,144 
Tax benefit from intangible asset amortization(2,426) (1,270) (4,667)
Intangible asset amortization expense, net of tax6,720  10,941  6,477 
Diluted share count19,304  20,040  19,246 
      
Intangible asset amortization expense, net of tax, per diluted share$0.35  $0.55  $0.34 
      
Calculation of the impact of unrealized gain on available for sale securities, net of tax     
Unrealized gain on available for sale securities$17,448  $988  $580 
Tax provision from unrealized gain on available for sale securities(4,725) (289) (169)
Unrealized gain on available for sale securities, net of tax12,723  699  411 
Diluted share count19,304  20,040  19,246 
Unrealized gain on available for sale securities, net of tax per diluted share$0.66  $0.03  $0.02 
      
Calculation of the impact of net litigation settlement loss, net of tax     
Net litigation settlement loss$  $  $28,000 
Tax benefit from net litigation settlement loss    (3,417)
Net litigation settlement loss, net of tax    24,583 
Diluted share count19,304  20,040   19,246 
      
Net litigation settlement loss, net of tax, per diluted share$  $  $1.28 

__________________________

Note: Amounts may not add to the total due to rounding.

CONTACT:



Michelle D. Esterman

Chief Financial Officer

T:  +352 2469 7950

E:  Michelle.Esterman@altisource.lu

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Source: Altisource Portfolio Solutions S.A.

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