Altisource Announces Second Quarter Financial Results
Compared to the first quarter of 2017, service revenue growth was driven by 15% growth in non-Ocwen revenue. Service revenue relating to Ocwen and its portfolio was flat as growth from seasonality in the property inspection and preservation business was offset by lower technology related revenue and fewer delinquent loans. Each of the Company's four initiatives contributed to the 15% non-Ocwen revenue growth. Compared to the second quarter of 2016, the 1% decline in service revenue was primarily from the normal runoff of Ocwen's portfolio and Altisource Residential Corporation's smaller portfolio of non-performing loans and REO partially offset by growth in referrals of higher fee property preservation services and growth in home sales revenue in the buy-renovate-sell business which began operations in the second half of 2016.
Compared to
the first quarter of 2017, growth in diluted earnings per share and adjusted diluted earnings per share(1) was driven by service revenue growth, margin expansion in the property preservation and REO sales businesses and a positive second quarter income tax accrual adjustment. The second quarter
"I am pleased with our solid second quarter 2017 financial results and our accomplishments since last quarter. We continue to develop our four initiatives to build a diversified and growing company. We also opportunistically purchased our debt and equity at very attractive prices," said Chief Executive Officer
Second Quarter 2017 Highlights Include(3):
Servicer Solutions
- Grew
non-Ocwen service revenue by 11% over the first quarter of 2017 and 9% over the second quarter of 2016
- Selected by a top 25 bank to provide REO asset management and brokerage services
Origination Solutions
- Grew non-Ocwen service revenue by 12% over the first quarter of 2017 and 11% over the second quarter of 2016
- Recently signed an agreement with and began providing mortgage underwriting services for a top 5 correspondent lender
Consumer
- Grew the number of home purchase and sale transactions to 222, a 55% increase in unit transactions and an 82% increase in service revenue over the first quarter of 2017
- Launched Owners.com Loans as part of our strategy to provide a broader suite of services to customers
Real Estate Investor Solutions
- Grew non-Ocwen service revenue by 25% over the first quarter of 2017 (a 4% decline compared to the second quarter of 2016)
- Sold 46 homes in the buy-renovate-sell program, generating 49% revenue growth in this program over the first quarter of 2017, and had 101 homes in inventory at
June 30, 2017
Corporate
- Purchased
$26.0 million of the Company's senior secured term loan at an average discount of 16.5%, generating a$3.9 million gain - Repurchased 416 thousand shares of Altisource's common stock at
$19.17 per share
Second Quarter 2017 Results Compared to First Quarter of 2017 and Second Quarter 2016
- Service revenue of
$238.1 million , a 4% increase compared to the first quarter 2017 and a 1% decrease compared to the second quarter 2016 - Income before income taxes and non-controlling interests of
$12.2 million , a 25% increase compared to the first quarter 2017 and a 49% decrease compared to the second quarter 2016 - Pretax income attributable to
Altisource (1) of$11.5 million , a 26% increase compared to the first quarter 2017 and a 51% decrease compared to the second quarter 2016 - Adjusted pretax income attributable to
Altisource (1) of$20.9 million , a 14% increase compared to the first quarter 2017 and a 42% decrease compared to the second quarter 2016 - Net income attributable to
Altisource of$9.0 million , a 38% increase compared to the first quarter 2017 and a 55% decrease compared to the second quarter 2016 - Adjusted net income attributable to
Altisource (1) of$16.5 million , a 25% increase compared to the first quarter 2017 and a 47% decrease compared to the second quarter 2016 - Diluted earnings per share of
$0.48 , a 41% increase compared to the first quarter 2017 and a 53% decrease compared to the second quarter 2016 - Adjusted diluted earnings per share(1) of
$0.88 , a 28% increase compared to the first quarter 2017 and a 44% decrease compared to the second quarter 2016 - Cash from operations of
$30.9 million compared to cash used in operations of$18.4 million in the first quarter of 2017 (primarily driven by the$28.0 million net litigation settlement paid in the first quarter 2017) and cash from operations of$40.4 million in the second quarter 2016
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| (1) | This is a non-GAAP measure that is defined and reconciled to the corresponding GAAP measure herein. | ||
| (2) | This information is based on disclosures made by Ocwen and NRZ in their filings with the | ||
| (3) | Applies to the second quarter of 2017 unless otherwise indicated. | ||
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 June 30, | Six months ended June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Service revenue | ||||||||||||||||
| Mortgage Market | $ | 198,414 | $ | 197,479 | $ | 393,387 | $ | 385,564 | ||||||||
| Real Estate Market | 24,347 | 24,173 | 43,536 | 47,574 | ||||||||||||
| Other Businesses, Corporate and Eliminations | 15,346 | 19,672 | 31,023 | 42,466 | ||||||||||||
| Total service revenue | 238,107 | 241,324 | 467,946 | 475,604 | ||||||||||||
| Reimbursable expenses | 11,891 | 13,783 | 21,920 | 29,237 | ||||||||||||
| Non-controlling interests | 687 | 692 | 1,302 | 1,090 | ||||||||||||
| Total revenue | 250,685 | 255,799 | 491,168 | 505,931 | ||||||||||||
| Cost of revenue | 173,502 | 160,588 | 341,426 | 313,997 | ||||||||||||
| Reimbursable expenses | 11,891 | 13,783 | 21,920 | 29,237 | ||||||||||||
| Gross profit | 65,292 | 81,428 | 127,822 | 162,697 | ||||||||||||
| Selling, general and administrative expenses | 52,470 | 54,207 | 100,171 | 107,823 | ||||||||||||
| Income from operations | 12,822 | 27,221 | 27,651 | 54,874 | ||||||||||||
| Other income (expense), net: | ||||||||||||||||
| Interest expense | (5,465 | ) | (5,988 | ) | (11,263 | ) | (12,529 | ) | ||||||||
| Other income (expense), net | 4,803 | 2,744 | 5,518 | 2,717 | ||||||||||||
| Total other income (expense), net | (662 | ) | (3,244 | ) | (5,745 | ) | (9,812 | ) | ||||||||
| Income before income taxes and non-controlling interests | 12,160 | 23,977 | 21,906 | 45,062 | ||||||||||||
| Income tax provision | (2,438 | ) | (3,291 | ) | (5,024 | ) | (5,484 | ) | ||||||||
| Net income | 9,722 | 20,686 | 16,882 | 39,578 | ||||||||||||
| Net income attributable to non-controlling interests | (687 | ) | (692 | ) | (1,302 | ) | (1,090 | ) | ||||||||
| Net income attributable to | $ | 9,035 | $ | 19,994 | $ | 15,580 | $ | 38,488 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 0.49 | $ | 1.08 | $ | 0.84 | $ | 2.06 | ||||||||
| Diluted | $ | 0.48 | $ | 1.02 | $ | 0.82 | $ | 1.94 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 18,335 | 18,437 | 18,497 | 18,646 | ||||||||||||
| Diluted | 18,836 | 19,604 | 19,069 | 19,822 | ||||||||||||
| Comprehensive income: | ||||||||||||||||
| Net income | $ | 9,722 | $ | 20,686 | $ | 16,882 | $ | 39,578 | ||||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||||
| Unrealized gain (loss) on securities, net of
income tax (provision) benefit of | (6,981 | ) | (7,871 | ) | 5,742 | (7,172 | ) | |||||||||
| Comprehensive income, net of tax | 2,741 | 12,815 | 22,624 | 32,406 | ||||||||||||
| Comprehensive income attributable to non-controlling interests | (687 | ) | (692 | ) | (1,302 | ) | (1,090 | ) | ||||||||
| Comprehensive income attributable to | $ | 2,054 | $ | 12,123 | $ | 21,322 | $ | 31,316 | ||||||||
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 | $ | 198,414 | $ | 24,347 | $ | 15,346 | $ | 238,107 | ||||||||
| Reimbursable expenses | 11,094 | 783 | 14 | 11,891 | ||||||||||||
| Non-controlling interests | 687 | — | — | 687 | ||||||||||||
| 210,195 | 25,130 | 15,360 | 250,685 | |||||||||||||
| Cost of revenue | 144,326 | 26,844 | 14,223 | 185,393 | ||||||||||||
| Gross profit (loss) | 65,869 | (1,714 | ) | 1,137 | 65,292 | |||||||||||
| Selling, general and administrative expenses | 29,805 | 5,551 | 17,114 | 52,470 | ||||||||||||
| Income (loss) from operations | 36,064 | (7,265 | ) | (15,977 | ) | 12,822 | ||||||||||
| Total other income (expense), net | 102 | — | (764 | ) | (662 | ) | ||||||||||
| Income (loss) before income taxes and non-controlling interests | $ | 36,166 | $ | (7,265 | ) | $ | (16,741 | ) | $ | 12,160 | ||||||
| Three months ended | ||||||||||||||||
| (in thousands) | Mortgage Market | Real Estate Market | Other Businesses, Corporate and Eliminations | Consolidated | ||||||||||||
| Revenue | ||||||||||||||||
| Service revenue | $ | 197,479 | $ | 24,173 | $ | 19,672 | $ | 241,324 | ||||||||
| Reimbursable expenses | 13,129 | 631 | 23 | 13,783 | ||||||||||||
| Non-controlling interests | 692 | — | — | 692 | ||||||||||||
| 211,300 | 24,804 | 19,695 | 255,799 | |||||||||||||
| Cost of revenue | 135,723 | 16,854 | 21,794 | 174,371 | ||||||||||||
| Gross profit (loss) | 75,577 | 7,950 | (2,099 | ) | 81,428 | |||||||||||
| Selling, general and administrative expenses | 31,141 | 5,620 | 17,446 | 54,207 | ||||||||||||
| Income (loss) from operations | 44,436 | 2,330 | (19,545 | ) | 27,221 | |||||||||||
| Total other income (expense), net | 74 | 4 | (3,322 | ) | (3,244 | ) | ||||||||||
| Income (loss) before income taxes and non-controlling interests | $ | 44,510 | $ | 2,334 | $ | (22,867 | ) | $ | 23,977 | |||||||
(1) Effective
SEGMENT FINANCIAL INFORMATION(1) (in thousands) (unaudited) | ||||||||||||||||
| Six months ended | ||||||||||||||||
| (in thousands) | Mortgage Market | Real Estate Market | Other Businesses, Corporate and Eliminations | Consolidated | ||||||||||||
| Revenue | ||||||||||||||||
| Service revenue | $ | 393,387 | $ | 43,536 | $ | 31,023 | $ | 467,946 | ||||||||
| Reimbursable expenses | 20,229 | 1,657 | 34 | 21,920 | ||||||||||||
| Non-controlling interests | 1,302 | — | — | 1,302 | ||||||||||||
| 414,918 | 45,193 | 31,057 | 491,168 | |||||||||||||
| Cost of revenue | 284,476 | 48,987 | 29,883 | 363,346 | ||||||||||||
| Gross profit (loss) | 130,442 | (3,794 | ) | 1,174 | 127,822 | |||||||||||
| Selling, general and administrative expenses | 58,487 | 9,876 | 31,808 | 100,171 | ||||||||||||
| Income (loss) from operations | 71,955 | (13,670 | ) | (30,634 | ) | 27,651 | ||||||||||
| Total other income (expense), net | 112 | — | (5,857 | ) | (5,745 | ) | ||||||||||
| Income (loss) before income taxes and non-controlling interests | $ | 72,067 | $ | (13,670 | ) | $ | (36,491 | ) | $ | 21,906 | ||||||
| Six months ended | ||||||||||||||||
| (in thousands) | Mortgage Market | Real Estate Market | Other Businesses, Corporate and Eliminations | Consolidated | ||||||||||||
| Revenue | ||||||||||||||||
| Service revenue | $ | 385,564 | $ | 47,574 | $ | 42,466 | $ | 475,604 | ||||||||
| Reimbursable expenses | 28,047 | 1,139 | 51 | 29,237 | ||||||||||||
| Non-controlling interests | 1,090 | — | — | 1,090 | ||||||||||||
| 414,701 | 48,713 | 42,517 | 505,931 | |||||||||||||
| Cost of revenue | 269,766 | 31,312 | 42,156 | 343,234 | ||||||||||||
| Gross profit | 144,935 | 17,401 | 361 | 162,697 | ||||||||||||
| Selling, general and administrative expenses | 60,595 | 11,794 | 35,434 | 107,823 | ||||||||||||
| Income (loss) from operations | 84,340 | 5,607 | (35,073 | ) | 54,874 | |||||||||||
| Total other income (expense), net | 134 | — | (9,946 | ) | (9,812 | ) | ||||||||||
| Income (loss) before income taxes and non-controlling interests | $ | 84,474 | $ | 5,607 | $ | (45,019 | ) | $ | 45,062 | |||||||
(1) Effective
CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (unaudited) | |||||||
2017 | 2016 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 114,205 | $ | 149,294 | |||
| Available for sale securities | 53,628 | 45,754 | |||||
| Accounts receivable, net | 72,977 | 87,821 | |||||
| Prepaid expenses and other current assets | 49,419 | 42,608 | |||||
| Total current assets | 290,229 | 325,477 | |||||
| Premises and equipment, net | 87,060 | 103,473 | |||||
| 86,283 | 86,283 | ||||||
| Intangible assets, net | 136,893 | 155,432 | |||||
| Deferred tax assets, net | 5,160 | 7,292 | |||||
| Other assets | 11,003 | 11,255 | |||||
| Total assets | $ | 616,628 | $ | 689,212 | |||
| LIABILITIES AND EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued expenses | $ | 75,162 | $ | 83,135 | |||
| Accrued litigation settlement | — | 32,000 | |||||
| Current portion of long-term debt | 5,945 | 5,945 | |||||
| Deferred revenue | 9,886 | 8,797 | |||||
| Other current liabilities | 10,520 | 19,061 | |||||
| Total current liabilities | 101,513 | 148,938 | |||||
| Long-term debt, less current portion | 439,486 | 467,600 | |||||
| Other non-current liabilities | 8,906 | 10,480 | |||||
| Commitments, contingencies and regulatory matters | |||||||
| Equity: | |||||||
| Common stock ( | 25,413 | 25,413 | |||||
| Additional paid-in capital | 110,078 | 107,288 | |||||
| Retained earnings | 341,926 | 333,786 | |||||
| Accumulated other comprehensive income (loss) | 3,997 | (1,745 | ) | ||||
| (416,342 | ) | (403,953 | ) | ||||
| 65,072 | 60,789 | ||||||
| Non-controlling interests | 1,651 | 1,405 | |||||
| Total equity | 66,723 | 62,194 | |||||
| Total liabilities and equity | $ | 616,628 | $ | 689,212 | |||
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) | |||||||
| Six months ended June 30, | |||||||
| 2017 | 2016 | ||||||
| Cash flows from operating activities: | |||||||
| Net income | $ | 16,882 | $ | 39,578 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 18,895 | 18,346 | |||||
| Amortization of intangible assets | 18,539 | 24,967 | |||||
| Change in the fair value of acquisition related contingent consideration | 16 | 193 | |||||
| Share-based compensation expense | 1,858 | 3,569 | |||||
| Bad debt expense | 2,890 | 1,041 | |||||
| Gain on early extinguishment of debt | (3,937 | ) | (5,464 | ) | |||
| Amortization of debt discount | 156 | 201 | |||||
| Amortization of debt issuance costs | 433 | 557 | |||||
| Deferred income taxes | — | 18 | |||||
| Loss on disposal of fixed assets | 2,798 | 9 | |||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | 11,954 | 3,407 | |||||
| Prepaid expenses and other current assets | (6,811 | ) | (6,012 | ) | |||
| Other assets | 523 | 447 | |||||
| Accounts payable and accrued expenses | (10,637 | ) | (4,454 | ) | |||
| Other current and non-current liabilities | (41,042 | ) | (6,998 | ) | |||
| Net cash provided by operating activities | 12,517 | 69,405 | |||||
| Cash flows from investing activities: | |||||||
| Additions to premises and equipment | (5,658 | ) | (12,441 | ) | |||
| Purchase of available for sale securities | — | (48,219 | ) | ||||
| Change in restricted cash | (271 | ) | (10 | ) | |||
| Net cash used in investing activities | (5,929 | ) | (60,670 | ) | |||
| Cash flows from financing activities: | |||||||
| Repayment and repurchases of long-term debt | (24,766 | ) | (47,751 | ) | |||
| Proceeds from stock option exercises | 765 | 986 | |||||
| Purchase of treasury shares | (15,531 | ) | (19,746 | ) | |||
| Distributions to non-controlling interests | (1,056 | ) | (1,065 | ) | |||
| Payment of tax withholding on issuance of restricted shares | (1,089 | ) | — | ||||
| Net cash used in financing activities | (41,677 | ) | (67,576 | ) | |||
| Net decrease in cash and cash equivalents | (35,089 | ) | (58,841 | ) | |||
| Cash and cash equivalents at the beginning of the period | 149,294 | 179,327 | |||||
| Cash and cash equivalents at the end of the period | $ | 114,205 | $ | 120,486 | |||
| Supplemental cash flow information: | |||||||
| Interest paid | $ | 10,787 | $ | 11,694 | |||
| Income taxes paid, net | 12,668 | 5,618 | |||||
| Non-cash investing and financing activities: | |||||||
| (Decrease) increase in payables for purchases of premises and equipment | $ | (378 | ) | $ | 1,369 | ||
| Increase in payables for purchases of treasury shares | 3,042 | — | |||||
NON-GAAP MEASURES
(in thousands, except per share data)
(unaudited)
Pretax income 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 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 June 30, | Three months ended | Six months ended June 30, | |||||||||||||||||
| 2017 | 2016 | 2017 | 2017 | 2016 | |||||||||||||||
| Income before income taxes and non-controlling interests | $ | 12,160 | $ | 23,977 | $ | 9,746 | $ | 21,906 | $ | 45,062 | |||||||||
| Non-controlling interests | (687 | ) | (692 | ) | (615 | ) | (1,302 | ) | (1,090 | ) | |||||||||
| Pretax income attributable to | 11,473 | 23,285 | 9,131 | 20,604 | 43,972 | ||||||||||||||
| Intangible asset amortization expense | 9,393 | 12,756 | 9,146 | 18,539 | 24,967 | ||||||||||||||
| Adjusted pretax income attributable to | $ | 20,866 | $ | 36,041 | $ | 18,277 | $ | 39,143 | $ | 68,939 | |||||||||
| Net income attributable to | $ | 9,035 | $ | 19,994 | $ | 6,545 | $ | 15,580 | $ | 38,488 | |||||||||
| Intangible asset amortization expense | 9,393 | 12,756 | 9,146 | 18,539 | 24,967 | ||||||||||||||
| Tax benefit from intangible asset amortization | (1,883 | ) | (1,751 | ) | (2,426 | ) | (4,251 | ) | (3,038 | ) | |||||||||
| Intangible asset amortization expense, net of tax | 7,510 | 11,005 | 6,720 | 14,288 | 21,929 | ||||||||||||||
| Adjusted net income attributable to | $ | 16,545 | $ | 30,999 | $ | 13,265 | $ | 29,868 | $ | 60,417 | |||||||||
| Diluted earnings per share | $ | 0.48 | $ | 1.02 | $ | 0.34 | $ | 0.82 | $ | 1.94 | |||||||||
| Intangible asset amortization expense, net of tax, per diluted share | 0.40 | 0.56 | 0.35 | 0.75 | 1.11 | ||||||||||||||
| Adjusted diluted earnings per share | $ | 0.88 | $ | 1.58 | $ | 0.69 | $ | 1.57 | $ | 3.05 | |||||||||
| Weighted average shares outstanding - diluted | 18,836 | 19,604 | 19,304 | 19,069 | 19,822 | ||||||||||||||
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Note: Amounts may not add to the total due to rounding.
FOR FURTHER INFORMATION CONTACT:Michelle D. Esterman Chief Financial Officer T: +352 2469 7950 E: Michelle.Esterman@altisource.lu
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