Find timely information for shareholders here or contact us directly.


Contact us
<< Back
Oct 27, 2016

Altisource Announces Third Quarter Results

LUXEMBOURG, Oct. 27, 2016 (GLOBE NEWSWIRE) -- Altisource Portfolio Solutions S.A. ("Altisource" or the "Company") (NASDAQ:ASPS) today reported financial results for the third quarter of 2016, reporting strong cash flows from operations and service revenue.  Service revenue growth from non-Ocwen customers and higher property preservation referrals from Ocwen largely offset the expected loss in revenue from Ocwen's declining portfolio and lower delinquencies, resulting in a decline of only 2% compared to the third quarter of 2015.

While third quarter 2016 service revenue of $239.8 million was relatively flat compared to third quarter 2015, pretax income attributable to Altisource(1) of $17.9 million and adjusted pretax income attributable to Altisource(1) of $29.4 million declined by 56% and 42%, respectively.  This was primarily the result of increased investments to support the Company's growth initiatives, service revenue mix changes and technology price concessions provided to Ocwen effective January 1, 2016.  Net income attributable to Altisource of $10.6 million was further impacted by an increase in the 2016 effective tax rate and adjustments to true-up tax expense from prior quarters, resulting in an anticipated 2016 annual effective tax rate of approximately 20%.  The effective tax rate increased primarily due to lower pretax income margins which changed the expected mix of taxable income across the jurisdictions in which we operate.  Over the next couple of years, the Company believes that margins will expand and the effective cash tax rate will return to a rate that is closer to Altisource's historical rate.

"During the quarter, Altisource continued to execute on its strategy to diversify and grow its customer base through our four initiatives.  We believe the investments in our diversification strategy along with the growing stability of our largest customers position us to be a larger, stronger company," said Chief Executive Officer William B. Shepro.

Shepro further commented, "While we have experienced tremendous non-Ocwen service revenue growth over the last three years, we have not achieved our very high growth expectations for 2016.  In our Servicer Solutions initiative, this is primarily a function of timing as it is taking substantially longer than anticipated to achieve stabilized revenue from new customers and close transactions from our robust pipeline of opportunities.  We fully expect that we will achieve our revenue growth expectations as we reach stabilization with our newer clients and continue to win new business.  In our Consumer Real Estate Solutions initiative, we launched our buy side brokerage offering in February 2016 in two initial markets. We have since expanded to 18 markets, and the good news is that the consumer interest in our offering has more than met our expectations.  However, we did not have sufficient capacity to respond to all of the leads and our initial approach did not provide a sufficient in-person experience to manage a prospect from lead to home purchase.  We are adjusting our operational model and the changes are beginning to make a difference, better positioning us to capitalize on this very large market opportunity."

Third Quarter 2016 Results Compared to Second Quarter 2016 and Third Quarter 2015:

  • Service revenue of $239.8 million, a 1% decrease compared to the second quarter 2016 and a 2% decrease compared to the third quarter 2015
  • Pretax income attributable to Altisource(1) of $17.9 million, a 23% decrease compared to the second quarter 2016 and a 56% decrease compared to the third quarter 2015
  • Adjusted pretax income attributable to Altisource(1) of $29.4 million, an 18% decrease compared to the second quarter 2016 and a 42% decrease compared to the third quarter 2015
  • Net income attributable to Altisource of $10.6 million, a 47% decrease compared to the second quarter 2016 and a 71% decrease compared to the third quarter 2015
  • Adjusted net income attributable to Altisource(1) of $17.6 million, a 43% decrease compared to the second quarter 2016 and a 62% decrease compared to the third quarter 2015
  • Diluted earnings per share of $0.54, a 47% decrease compared to the second quarter 2016 and a 70% decrease compared to the third quarter 2015
  • Adjusted diluted earnings per share(1) of $0.90, a 43% decrease compared to the second quarter 2016 and a 60% decrease compared to the third quarter 2015
  • Cash from operations of $36.6 million, a 9% decrease compared to the second quarter 2016 and a 33% decrease compared to the third quarter 2015; cash from operations would have been $43.2 million had the Company not invested $6.6 million for the purchase of real estate in the Real Estate Investor Solutions business that Altisource is renovating and will resell

Third Quarter 2016 highlights include:

Servicer Solutions:

  • Executed a master services agreement with a top ten bank customer and signed a statement of work with this customer to provide Equator software to manage its short sales
  • Executed an agreement with a mortgage insurance company to manage and sell its REO
  • Acquired Granite Loan Management of Delaware, LLC, a residential and commercial loan disbursement processing, risk mitigation and construction inspection services company, for $9.6 million

Origination Solutions:

  • Grew third quarter 2016 service revenue in the Origination Solutions businesses by 22% over the second quarter of 2016

Consumer Real Estate Solutions:

  • Grew the total number of Owners.com monthly leads from 5,000 in April 2016 to 28,000 in September 2016, a 460% increase
  • Grew the total number of Owners.com real estate agents from 21 as of July 1, 2016 to 97 as of September 30, 2016
  • Launched the beta version of the Owners.com real estate agent app in mid-October 2016

Real Estate Investor Solutions:

  • Executed an agreement with RESI providing a limited waiver of Altisource's exclusive right to provide property management and other services to RESI relating to its acquisition of single family rental homes from investment funds sponsored by Amherst Holdings LLC (the "Amherst Portfolio Acquisition") in exchange for the right to receive a $60 million payment from RESI in the event that it sells, liquidates or otherwise disposes of 50% or more of its single family rental portfolio managed by Altisource(2)
  • Provided due diligence and title services to RESI in connection with the Amherst Portfolio Acquisition

Capital Allocation

  • Repurchased $14.6 million of our common stock (0.5 million shares at an average price of $28.68 per share)

__________________________

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

(2) The terms are more fully described in the Amendment and Waiver Agreement which we filed with the Securities and Exchange Commission on Form 8-K on October 3, 2016.

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 third 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 a premier marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries.  Altisource's proprietary business processes, vendor and electronic payment management software and behavioral science-based analytics improve outcomes for marketplace participants.  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
 September 30,
 Nine months ended
 September 30,
  2016 2015 2016 2015
         
Service revenue        
Mortgage Services $191,766  $182,222  $569,038  $492,277 
Financial Services 17,566  21,314  57,376  66,977 
Technology Services 41,544  51,437  120,291  159,399 
Eliminations (11,094) (9,504) (31,319) (28,773)
Total service revenue 239,782  245,469  715,386  689,880 
Reimbursable expenses 12,080  26,456  41,317  89,242 
Non-controlling interests 883  851   1,973  2,457 
Total revenue 252,745   272,776  758,676  781,579 
Cost of revenue 161,922  147,394   475,919  425,593 
Reimbursable expenses 12,080  26,456   41,317  89,242 
Gross profit 78,743  98,926  241,440  266,744 
Selling, general and administrative expenses 53,886  51,338   161,709  155,310 
Change in the fair value of Equator Earn Out        (7,591)
Income from operations 24,857  47,588  79,731  119,025 
Other income (expense), net:        
Interest expense (5,952) (7,041) (18,481) (21,396)
Loss on HLSS equity securities and dividends received, net       (1,854)
Other income (expense), net (109) 653  2,608  1,477 
Total other income (expense), net (6,061) (6,388) (15,873) (21,773)
         
Income before income taxes and non-controlling interests 18,796  41,200  63,858  97,252 
Income tax provision (7,324) (3,303) (12,808) (8,101)
          
Net income 11,472  37,897  51,050  89,151 
Net income attributable to non-controlling interests (883) (851) (1,973) (2,457)
         
Net income attributable to Altisource $10,589  $37,046  $49,077  $86,694 
         
Earnings per share:        
Basic $0.57  $1.94  $2.63  $4.42 
Diluted $0.54  $1.82  $2.49  $4.19 
         
Weighted average shares outstanding:        
Basic 18,715  19,091  18,669  19,608 
Diluted 19,568  20,411  19,738  20,688 
         
Comprehensive income:        
Net income $11,472  $37,897  $51,050  $89,151 
Other comprehensive income (loss), net of tax:        
Unrealized gain (loss) on securities, net of income tax benefit (provision) of $(2,070), $0, $889, $0 5,016     (2,156)  
         
Comprehensive income, net of tax 16,488  37,897  48,894  89,151 
Comprehensive income attributable to non-controlling interests (883) (851) (1,973) (2,457)
         
Comprehensive income attributable to Altisource $15,605  $37,046  $46,921  $86,694 
                  


ALTISOURCE PORTFOLIO SOLUTIONS S.A.
SEGMENT FINANCIAL INFORMATION
(in thousands)
(unaudited)
 
  Three months ended September 30, 2016
  Mortgage
Services
 Financial
Services
 Technology
Services
 Corporate
Items and
Eliminations
 Consolidated
Altisource
           
Revenue          
Service revenue $191,766  $17,566  $41,544  $(11,094) $239,782 
Reimbursable expenses 12,047  33      12,080 
Non-controlling interests 883        883 
  204,696  17,599   41,544  (11,094) 252,745 
Cost of revenue 132,399  13,238  38,557  (10,192) 174,002 
Gross profit (loss) 72,297  4,361  2,987  (902) 78,743 
Selling, general and administrative expenses 27,543  4,002  6,115  16,226  53,886 
Income (loss) from operations 44,754  359  (3,128) (17,128) 24,857 
Total other income (expense), net 8  28  1  (6,098) (6,061)
           
Income (loss) before income taxes and
non-controlling interests
 $44,762  $387  $(3,127) $(23,226) $18,796 
                      


  Three months ended September 30, 2015
  Mortgage
Services
 Financial
Services
 Technology
Services
 Corporate
Items and
Eliminations
 Consolidated
Altisource
           
Revenue          
Service revenue $182,222  $21,314  $51,437  $(9,504) $245,469 
Reimbursable expenses 26,433  23      26,456 
Non-controlling interests 851        851 
  209,506  21,337  51,437  (9,504) 272,776 
Cost of revenue 122,724  15,418  44,419  (8,711) 173,850 
Gross profit (loss) 86,782  5,919  7,018  (793) 98,926 
Selling, general and administrative expenses 23,399  4,553  7,628  15,758  51,338 
Income (loss) from operations 63,383  1,366   (610) (16,551) 47,588 
Total other income (expense), net 9  31  38  (6,466) (6,388)
           
Income (loss) before income taxes and
non-controlling interests
 $ 63,392  $1,397  $(572) $(23,017) $41,200 
                     


ALTISOURCE PORTFOLIO SOLUTIONS S.A.
SEGMENT FINANCIAL INFORMATION
(in thousands)
(unaudited)
 
  Nine months ended September 30, 2016
  Mortgage
Services
 Financial
Services
 Technology
Services
 Corporate
Items and
Eliminations
 Consolidated
Altisource
            
Revenue          
Service revenue $569,038  $57,376  $120,291  $(31,319) $715,386 
Reimbursable expenses 41,232  85       41,317 
Non-controlling interests 1,973        1,973 
  612,243  57,461  120,291  (31,319) 758,676 
Cost of revenue 381,543  41,645   122,874  (28,826) 517,236 
Gross profit (loss) 230,700  15,816  (2,583) (2,493) 241,440 
Selling, general and administrative expenses 83,119  12,515  20,113  45,962  161,709 
Income (loss) from operations 147,581  3,301  (22,696) (48,455) 79,731 
Total other income (expense), net 57  63   101  (16,094) (15,873)
           
Income (loss) before income taxes and
non-controlling interests
 $147,638  $3,364  $(22,595) $(64,549) $63,858 
                     


  Nine months ended September 30, 2015
   Mortgage
Services
 Financial
Services
 Technology
Services
 Corporate
Items and
Eliminations
 Consolidated
Altisource
           
Revenue          
Service revenue  $492,277  $66,977  $159,399  $(28,773) $689,880 
Reimbursable expenses 89,139  103      89,242 
Non-controlling interests 2,457        2,457 
  583,873  67,080  159,399  (28,773) 781,579 
Cost of revenue 350,238  46,058  144,565  (26,026) 514,835 
Gross profit (loss) 233,635  21,022  14,834  (2,747) 266,744 
Selling, general and administrative expenses 69,188  13,856  22,189  50,077  155,310 
Change in the fair value of Equator Earn Out     (7,591)   (7,591)
Income (loss) from operations 164,447  7,166  236  (52,824) 119,025 
Total other income (expense), net  28  21  21  (21,843) (21,773)
           
Income (loss) before income taxes and
non-controlling interests
 $164,475  $7,187  $257  $(74,667) $97,252 
                     


ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
 
  September 30,
 2016
 December 31,
 2015
     
ASSETS
Current assets:    
Cash and cash equivalents $134,948  $179,327 
Available for sale securities  45,174   
Accounts receivable, net 101,580  105,023 
Prepaid expenses and other current assets 31,927  21,751 
Total current assets 313,629  306,101 
     
Premises and equipment, net 109,785  119,121 
Goodwill 89,905  82,801 
Intangible assets, net 162,976  197,003 
Deferred tax assets, net 4,847  3,619 
Other assets 12,190  13,153 
     
Total assets $693,332  $721,798 
     
LIABILITIES AND EQUITY
Current liabilities:    
Accounts payable and accrued expenses $101,361  $91,871 
Current portion of long-term debt 5,945  5,945 
Deferred revenue 10,927  15,060 
Other current liabilities 13,846  16,266 
Total current liabilities 132,079  129,142 
     
Long-term debt, less current portion  468,689  522,233 
Other non-current liabilities 13,790  18,153 
     
Equity:    
Common stock ($1.00 par value; 25,413 shares authorized and issued and 18,878 outstanding as of September 30, 2016;  25,413 shares authorized and issued and 19,021 outstanding as of December 31, 2015)  25,413  25,413 
Additional paid-in capital 101,013  96,321 
Retained earnings 359,435  369,270 
Accumulated other comprehensive loss (2,156)  
Treasury stock, at cost (6,535 shares as of September 30, 2016 and 6,392 shares as of December 31, 2015) (406,559) (440,026)
Altisource equity 77,146  50,978 
     
Non-controlling interests 1,628  1,292 
Total equity 78,774  52,270 
     
Total liabilities and equity $693,332  $721,798 
         


ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
 Nine months ended
 September 30,
 2016 2015
     
Cash flows from operating activities:   
Net income$51,050  $89,151 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization27,521  27,637 
Amortization of intangible assets 36,432  27,995 
Loss on HLSS equity securities and dividends received, net  1,854 
Change in the fair value of acquisition related contingent consideration(1,174) (7,302)
Share-based compensation expense4,692  3,258 
Bad debt expense763  3,477 
Gain on early extinguishment of debt(5,464) (1,986)
Amortization of debt discount307  379 
Amortization of debt issuance costs850  1,045 
Deferred income taxes17  54 
Loss on disposal of fixed assets30  50 
Changes in operating assets and liabilities:   
Accounts receivable3,505  (19,681)
Prepaid expenses and other current assets(10,167) 2,001 
Other assets496   2,085 
Accounts payable and accrued expenses7,005  (20,876)
Other current and non-current liabilities(9,828) 10 
Net cash provided by operating activities106,035  109,151 
    
Cash flows from investing activities:   
Additions to premises and equipment(16,525) (27,670)
Acquisition of businesses, net of cash acquired(9,617) (11,193)
Purchase of available for sale securities(48,219) (29,966)
Proceeds received from sale of and dividends from HLSS equity securities  28,112 
Other investing activities266  722 
Net cash used in investing activities(74,095) (39,995)
    
Cash flows from financing activities:    
Repayment and repurchases of long-term debt(49,237) (29,087)
Proceeds from stock option exercises8,876  332 
Purchase of treasury stock(34,321) (48,971)
Distributions to non-controlling interests(1,637) (2,144)
Other financing activities  (500)
Net cash used in financing activities(76,319) (80,370)
    
Net decrease in cash and cash equivalents(44,379) (11,214)
Cash and cash equivalents at the beginning of the period179,327  161,361 
    
Cash and cash equivalents at the end of the period$134,948  $150,147 
    
Supplemental cash flow information:   
Interest paid$17,244  $19,770 
Income taxes paid, net14,178  6,638 
    
Non-cash investing and financing activities:   
Acquisition of businesses with restricted shares$  $14,427 
Increase (decrease) in payables for purchases of premises and equipment2,458  (5,326)
      


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

Pretax income attributable to Altisource, adjusted pretax income attributable to Altisource, adjusted net income attributable to Altisource and adjusted diluted earnings per share are non-GAAP measures used by management, existing shareholders and potential shareholders to measure Altisource's performance.  Pretax income attributable to Altisource is calculated by deducting non-controlling interests from income before income taxes and non-controlling interests.  Adjusted pretax income attributable to Altisource is calculated by adding intangible asset amortization expense to, and deducting the gain associated with the reduction of the Equator earn out liability from, pretax income attributable to Altisource.  Adjusted net income attributable to Altisource is calculated by adding intangible asset amortization expense (net of tax) to, and deducting the gain associated with the reduction of the Equator earn out liability (net of tax) from, GAAP net income attributable to Altisource.  Adjusted diluted earnings per share is calculated by dividing net income attributable to Altisource plus intangible asset amortization expense (net of tax) less the gain associated with the reduction of the Equator earn out liability (net of tax) by the weighted average number of diluted shares.  Reconciliations of the non-GAAP measures to the corresponding GAAP measures are as follows:

 Three months ended
 September 30,
 Three months
ended June 30,
 Nine months ended
 September 30,
 2016 2015 2016 2016 2015
          
Income before income taxes and non-controlling interests$18,796  $41,200  $23,977  $63,858  $97,252 
          
Non-controlling interests(883) (851) (692) (1,973) (2,457)
          
Pretax income attributable to Altisource17,913  40,349  23,285  61,885  94,795 
          
Amortization of intangible assets11,465  10,118  12,756  36,432  27,995 
Gain on Equator earn out liability        (7,591)
          
Adjusted pretax income attributable to Altisource$29,378  $50,467  $36,041  $98,317  $115,199 
          
          
Net income attributable to Altisource$10,589  $37,046  $19,994  $49,077  $86,694 
          
Amortization of intangible assets11,465  10,118  12,756  36,432  27,995 
Tax benefit on amortization of intangible assets(4,467) (811) (1,751) (7,307) (2,332)
Amortization of intangible assets, net of tax6,998  9,307  11,005  29,125  25,663 
          
Gain on Equator earn out liability        (7,591)
Tax provision from the gain on Equator earn out liability        651 
Gain on Equator earn out liability, net of tax        (6,940)
          
Adjusted net income attributable to Altisource $17,587  $46,353  $30,999  $78,202  $105,417 
          
Diluted earnings per share$0.54  $1.82  $1.02  $2.49  $4.19 
          
Amortization of intangible assets, net of tax, per diluted share0.36  0.46  0.56  1.48  1.24 
Gain on Equator earn out liability, net of tax, per diluted share        (0.34)
          
Adjusted diluted earnings per share$0.90  $2.27  $1.58  $3.96  $5.10 
          
Weighted average shares outstanding - diluted19,568  20,411   19,604  19,738  20,688 
               

__________________________

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

Primary Logo

Source: Altisource Portfolio Solutions S.A.

News Provided by Acquire Media