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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 
FORM 8-K
 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 27, 2016

 
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
(Exact name of Registrant as specified in its Charter)
 
 
Luxembourg
 
001-34354
 
98-0554932
 
 
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 

40, avenue Monterey
L-2163 Luxembourg
Grand Duchy of Luxembourg
(Address of principal executive offices including zip code)

+352 2469 7900
(Registrant’s telephone number, including area code)

NOT APPLICABLE
(Former name or former address, if changed since last report)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 




Item 2.02 Results of Operations and Financial Condition.

On October 27, 2016, Altisource Portfolio Solutions S.A. (“Altisource”) issued a press release announcing financial results for its quarter ended September 30, 2016. A copy of the press release is attached hereto as Exhibit 99.1.

The information in this Item 2.02, including the information in Exhibit 99.1, is furnished solely pursuant to Item 2.02 of this Form 8-K. Consequently, it is not deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that Section. It may only be incorporated by reference in another filing under the Securities Exchange Act of 1934 or Securities Act of 1933 if such subsequent filing specifically references this Item 2.02 of this Form 8-K.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.
 
Description
Exhibit 99.1
 
Press release issued by Altisource Portfolio Solutions S.A. dated October 27, 2016








SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 27, 2016

 
Altisource Portfolio Solutions S.A.
 
 
 
 
 
By:
/s/ Michelle D. Esterman
 
 
Name:
Michelle D. Esterman
 
 
Title:
Chief Financial Officer
 







Exhibit


Exhibit 99.1
https://cdn.kscope.io/e91ca3e3adffd7693e0abc8cc071cfd0-altisource3q2016.jpg
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION CONTACT:
 
 
 
Michelle D. Esterman
 
Chief Financial Officer
 
T: +352 2469 7950
 
E: Michelle.Esterman@altisource.lu

ALTISOURCE ANNOUNCES THIRD QUARTER RESULTS

Luxembourg, October 27, 2016 - 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

1


•
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

2


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.

3


 
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


4


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



5


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




6


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



7


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 amortization
27,521

 
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 expense
4,692

 
3,258

Bad debt expense
763

 
3,477

Gain on early extinguishment of debt
(5,464
)
 
(1,986
)
Amortization of debt discount
307

 
379

Amortization of debt issuance costs
850

 
1,045

Deferred income taxes
17

 
54

Loss on disposal of fixed assets
30

 
50

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
3,505

 
(19,681
)
Prepaid expenses and other current assets
(10,167
)
 
2,001

Other assets
496

 
2,085

Accounts payable and accrued expenses
7,005

 
(20,876
)
Other current and non-current liabilities
(9,828
)
 
10

Net cash provided by operating activities
106,035

 
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 activities
266

 
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 exercises
8,876

 
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 period
179,327

 
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, net
14,178

 
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 equipment
2,458

 
(5,326
)

8


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 Altisource
17,913

 
40,349

 
23,285

 
61,885

 
94,795

 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets
11,465

 
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 assets
11,465

 
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 tax
6,998

 
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 share
0.36

 
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 - diluted
19,568

 
20,411

 
19,604

 
19,738

 
20,688

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

9