Altisource Announces First Quarter Financial Results
"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
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
First Quarter 2017 Highlights Include:
Servicer Solutions
- Strengthened and grew existing customer relationships with leading bank and non-bank servicers
- Began receiving referrals from four customers related to real estate asset management and sales and license fees for Equator short sales technology, including from one customer for the new FHA auction offering
- Continued the onboarding process to provide services to five new and existing customers for real estate asset management and sales, including the new FHA auction offering for one customer
Origination Solutions
- Strengthened and grew existing customer relationships with leading bank and non-bank originators
- Signed agreements with two large lenders and are receiving test files to provide fulfillment and quality control services to these clients
Consumer
- Grew the number of Owners.com® real estate agents to 264 as of
April 21, 2017 - Currently working with approximately 1,300 active buyers, up from 950 in February
- Represented home buyers and sellers in 143 first quarter home purchase and sale transactions with a total purchase price of
$37 million , a 91% increase in unit sales and a 93% increase in revenue from the fourth quarter of 2016
Real Estate Investor Solutions
- Sold 421 homes for real estate investors, primarily for RESI and, to a lesser extent, for other clients
- Acquired 36 homes and sold 39 homes in the buy-renovate-sell program
- Provided diligence and title services on RESI's recent 757 rental home portfolio acquisition
Corporate
- The fair value of available for sale securities increased by
$17.4 million in the first quarter of 2017
First Quarter 2017 Results Compared to Fourth Quarter of 2016 and First Quarter 2016
- Service revenue of
$229.8 million , a 1% increase compared to the fourth quarter 2016 and a 2% decrease compared to the first quarter 2016 - Pretax income attributable to
Altisource (1) of$9.1 million , compared to a pretax loss attributable toAltisource (1) of$20.3 million in the fourth quarter 2016 and pretax income attributable toAltisource (1) of$20.7 million in the first quarter 2016 - Adjusted pretax income attributable to
Altisource (1) of$18.3 million , a 3% decrease compared to the fourth quarter 2016 and a 44% decrease compared to the first quarter 2016 - Net income attributable to
Altisource of$6.5 million compared to a net loss attributable toAltisource of$20.4 million in the fourth quarter 2016 and net income attributable toAltisource of$18.5 million in the first quarter 2016 - Adjusted net income attributable to
Altisource (1) of$13.3 million , a 24% increase compared to the fourth quarter 2016 and a 55% decrease compared to the first quarter 2016 - Diluted earnings per share of
$0.34 compared to diluted loss per share of$1.08 in the fourth quarter 2016 and diluted earnings per share of$0.92 in the first quarter 2016 - Adjusted diluted earnings per share(1) of
$0.69 , a 25% increase compared to the fourth quarter 2016 and a 53% decrease compared to the first quarter 2016
- The Company will address certain items during our scheduled conference call this morning
________________________
(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.
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| 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 | $ | 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 | 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 | $ | 19,268 | $ | 19,193 | ||||
| SEGMENT FINANCIAL INFORMATION(1) | ||||||||||||||||
| (in thousands) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Three months ended | ||||||||||||||||
| (in thousands) | Mortgage Market | Real Estate Market | Other Businesses, Corporate and Eliminations | Consolidated | ||||||||||||
| 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 | ||||||||||||||||
| (in thousands) | Mortgage Market | Real Estate Market | Other Businesses, Corporate and Eliminations | Consolidated | ||||||||||||
| 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
| CONSOLIDATED BALANCE SHEETS | |||||||
| (in thousands, except per share data) | |||||||
| (unaudited) | |||||||
2017 | 2016 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 117,098 | $ | 149,294 | |||
| Available for sale securities | 63,202 | 45,754 | |||||
| Accounts receivable, net | 83,038 | 87,821 | |||||
| Prepaid expenses and other current assets | 47,357 | 42,608 | |||||
| Total current assets | 310,695 | 325,477 | |||||
| Premises and equipment, net | 96,023 | 103,473 | |||||
| 86,283 | 86,283 | ||||||
| Intangible assets, net | 146,286 | 155,432 | |||||
| Deferred tax assets, net | 2,567 | 7,292 | |||||
| Other assets | 11,629 | 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 debt | 5,945 | 5,945 | |||||
| Deferred revenue | 9,626 | 8,797 | |||||
| Other current liabilities | 14,299 | 19,061 | |||||
| Total current liabilities | 104,922 | 148,938 | |||||
| Long-term debt, less current portion | 466,510 | 467,600 | |||||
| Other non-current liabilities | 9,686 | 10,480 | |||||
| Commitments, contingencies and regulatory matters | |||||||
| Equity: | |||||||
| Common stock ( outstanding as of outstanding as of | 25,413 | 25,413 | |||||
| Additional paid-in capital | 108,915 | 107,288 | |||||
| Retained earnings | 336,527 | 333,786 | |||||
| Accumulated other comprehensive income (loss) | 10,978 | (1,745 | ) | ||||
| (410,919 | ) | (403,953 | ) | ||||
| 70,914 | 60,789 | ||||||
| Non-controlling interests | 1,451 | 1,405 | |||||
| Total equity | 72,365 | 62,194 | |||||
| Total liabilities and equity | $ | 653,483 | $ | 689,212 | |||
| 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 amortization | 10,008 | 9,208 | |||||
| Amortization of intangible assets | 9,146 | 12,211 | |||||
| Change in the fair value of acquisition related contingent consideration | 8 | 96 | |||||
| Share-based compensation expense | 695 | 1,877 | |||||
| Bad debt expense | 1,903 | 876 | |||||
| Amortization of debt discount | 105 | 116 | |||||
| Amortization of debt issuance costs | 291 | 322 | |||||
| Loss (gain) on disposal of fixed assets | 1,480 | (10 | ) | ||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | 2,880 | 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 exercises | 752 | 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 period | 149,294 | 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, net | 6,515 | 3,830 | |||||
| Non-cash investing and financing activities: | |||||||
| Increase in payables for purchases of premises and equipment | $ | 2,094 | $ | 1,030 | |||
NON-GAAP MEASURES
(in thousands, except per share data)
(unaudited)
Pretax
income (loss) attributable to
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
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 | ||||||||||
| 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 | 9,131 | 20,687 | (20,257 | ) | |||||||
| Intangible asset amortization expense | 9,146 | 12,211 | 11,144 | ||||||||
| Net litigation settlement, net of | — | — | 28,000 | ||||||||
| Adjusted pretax income attributable to | $ | 18,277 | $ | 32,898 | $ | 18,887 | |||||
| Adjusted pretax income attributable to | $ | 18,277 | $ | 32,898 | $ | 18,887 | |||||
| Unrealized gain on available for sale securities | 17,448 | 988 | 580 | ||||||||
| Adjusted pretax income attributable to | $ | 35,725 | $ | 33,886 | $ | 19,467 | |||||
| Net income (loss) attributable to | $ | 6,545 | $ | 18,494 | $ | (20,384 | ) | ||||
| Intangible asset amortization expense, net of tax | 6,720 | 10,941 | 6,477 | ||||||||
| Net litigation settlement loss, net of tax | — | — | 24,583 | ||||||||
| Adjusted net income attributable to | $ | 13,265 | $ | 29,435 | $ | 10,676 | |||||
| NON-GAAP MEASURES | |||||||||||
| (in thousands, except per share data) | |||||||||||
| (unaudited) | |||||||||||
|
Three months ended March 31, | Three months ended | ||||||||||
| 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 share | 0.35 | 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 share | 0.66 | 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 tax | 6,720 | 10,941 | 6,477 | ||||||||
| Diluted share count | 19,304 | 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 tax | 12,723 | 699 | 411 | ||||||||
| Diluted share count | 19,304 | 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 count | 19,304 | 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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