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): February 17, 2011
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
(Exact name of registrant as specified in its charter)
| Luxembourg | 001-34354 | Not Applicable | ||
| (State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 291, Route d’Arlon L-1150 Luxembourg Grand Duchy of Luxembourg |
||
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: +352 2469 7900
| 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:
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 February 17, 2011, Altisource Portfolio Solutions S.A. (“Altisource”) issued a press release announcing financial results for its quarter ended December 31, 2010. 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 attached hereto pertaining to this Item 2.02, is furnished solely pursuant to Item 2.02 of this Form 8-K. Consequently, pursuant to this Item 2.02, 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.
Non-GAAP Financial Information
Altisource discloses the following financial measure that is calculated and presented on a basis other than in accordance with generally accepted accounting principles in the United States of America (“non-GAAP”) in the attached press release:
| • | Altisource evaluates performance based on several factors, of which the primary financial measure is income before interest, tax, depreciation and amortization (“EBITDA”). In addition, the Company adjusts EBITDA for goodwill impairment and Net Income Attributable to Non-controlling Interests. The Company believes that this non-GAAP financial measure is useful to investors and analysts in analyzing and assessing its overall business performance, for making operating and compensation decisions and for forecasting and planning future periods. The Company uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance and to provide incremental insight into the underlying factors and trends affecting both the Company’s performance and its cash-generating potential. The Company believes that disclosing non-GAAP financial measures to the readers of its financial statements provides such readers with useful supplemental data that allows for greater transparency in the review of its financial and operational performance and enables investors to more fully understand trends in its current and future performance. |
Reconciliation of this non-GAAP financial measure to the most directly comparable financial measures calculated and presented in accordance with GAAP is included in the attached press release. This non-GAAP financial measure should be considered in addition to and not as a substitute for, or superior to, financial measures presented in accordance with GAAP.
Item 9.01 Financial Statements and Exhibits.
| (d) | Exhibits. |
Exhibit No.
|
Description | |
Exhibit 99.1
|
Press release of Altisource Portfolio Solutions S.A. dated February 17, 2011. |
ii
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: February 17, 2011
Altisource Portfolio Solutions S.A.
By: /s/ Robert D. Stiles
Name: Robert D. Stiles
Title: Chief Financial Officer
iii
Exhibit 99.1
FOR IMMEDIATE RELEASE
|
FOR FURTHER INFORMATION CONTACT: | |
| Robert D. Stiles | ||
| Chief Financial Officer | ||
| T: +352 2469 7903 | ||
| E: robert.stiles@altisource.lu |
ALTISOURCE ANNOUNCES FOURTH QUARTER
AND FULL YEAR RESULTS
AND FULL YEAR RESULTS
Luxembourg, Luxembourg, 17 February, 2011 — Altisource Portfolio Solutions S.A. (“Altisource” or
the “Company”) (NASDAQ: ASPS), a provider of services focused on technology-enabled, high-value,
knowledge-based functions principally related to real estate and mortgage portfolio management,
asset recovery and customer relationship management, today announced preliminary financial results
for quarter ended December 31, 2010.
Fourth Quarter and 2010 Highlights
| • | Total Revenue of $91.5 million for the quarter ended December 31, 2010, a 62% increase
over the same quarter in 2009 and an 18% increase over the third quarter 2010. Total
Revenue of $301.4 million for the year ended December 31, 2010, a 49% increase over the
same period in 2009. |
| • | Service Revenue of $74.3 million for the quarter ended December 31, 2010, a 51%
increase over the same quarter in 2009 and a 20% increase over the third quarter
2010. Service Revenue of $247.0 million for the year ended December 31, 2010, a
32% increase over the same period in 2009. |
| • | Net Income Attributable to Altisource of $16.8 million for the quarter ended December
31, 2010, a 186% increase over the same quarter in 2009 and a 71% increase over the third
quarter 2010. Net Income Attributable to Altisource of $49.3 million for the year ended
December 31, 2010, a 90% increase over the same period in 2009. |
| • | Net Income Attributable to Altisource includes a $2.8 million goodwill
impairment for the quarter ended December 31, 2010 in the Financial Services
segment. |
| • | Fully-diluted EPS of $0.64 for the quarter ended December 31, 2010, a 167% increase over
the same quarter in 2009 and a 73% increase over the third quarter 2010. Fully-diluted EPS
of $1.88 for the year ended December 31, 2010, a 76% increase over the same period in 2009. |
| • | Fully-diluted EPS includes $0.07 per share, net of tax, attributable to the
previously mentioned goodwill impairment for the quarter and year ended December
31, 2010. |
| • | Through December 31, 2010, we repurchased 0.7 million shares of our common stock on the
open market at an average price of $27.11. |
Financial Results
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| (in thousands, except per share data) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Service Revenue |
$ | 74,301 | $ | 49,258 | $ | 247,026 | $ | 186,735 | ||||||||
Reimbursable Expenses |
14,409 | 7,068 | 47,449 | 16,077 | ||||||||||||
Cooperative Non-controlling Interest |
2,767 | — | 6,903 | — | ||||||||||||
Total Revenue |
91,477 | 56,326 | 301,378 | 202,812 | ||||||||||||
Cost of Revenue |
42,008 | 27,924 | 141,610 | 110,720 | ||||||||||||
Reimbursable Expenses |
14,409 | 7,068 | 47,449 | 16,077 | ||||||||||||
Gross Profit |
35,060 | 21,334 | 112,319 | 76,015 | ||||||||||||
Selling, General and Administrative
Expenses |
18,077 | 12,257 | 57,352 | 39,473 | ||||||||||||
Income from Operations |
16,983 | 9,077 | 54,967 | 36,542 | ||||||||||||
Other Income (Expense), net |
138 | (121 | ) | 804 | 1,034 | |||||||||||
Income before Income Taxes and
Non-controlling Interests |
17,121 | 8,956 | 55,771 | 37,576 | ||||||||||||
Income Tax Benefit (Provision) |
2,432 | (3,083 | ) | 403 | (11,605 | ) | ||||||||||
Net Income |
19,553 | 5,873 | 56,174 | 25,971 | ||||||||||||
Net Income Attributable to
Non-controlling Interests |
(2,767 | ) | — | (6,903 | ) | — | ||||||||||
Net Income Attributable to Altisource |
$ | 16,786 | $ | 5,873 | $ | 49,271 | $ | 25,971 | ||||||||
Earnings Per Share: |
||||||||||||||||
Basic |
$ | 0.67 | $ | 0.24 | $ | 1.96 | $ | 1.08 | ||||||||
Diluted |
$ | 0.64 | $ | 0.24 | $ | 1.88 | $ | 1.07 | ||||||||
Weighted Average Shares Outstanding: |
||||||||||||||||
Basic |
25,091 | 24,083 | 25,083 | 24,062 | ||||||||||||
Diluted |
26,183 | 24,338 | 26,259 | 24,260 | ||||||||||||
Transactions with Related Parties: |
||||||||||||||||
Revenue |
$ | 50,494 | $ | 27,675 | $ | 154,988 | $ | 94,897 | ||||||||
Selling, General and Administrative
Expenses |
$ | 245 | $ | — | $ | 1,056 | $ | 4,308 | ||||||||
Interest Expense |
$ | — | $ | — | $ | — | $ | 1,290 | ||||||||
Reconciliation to EBITDA: |
||||||||||||||||
Income before Income Taxes and
Non-controlling Interests |
17,121 | 8,956 | 55,771 | 37,576 | ||||||||||||
Interest, net |
22 | 43 | 87 | 1,644 | ||||||||||||
Depreciation and Amortization |
2,143 | 1,244 | 7,158 | 5,432 | ||||||||||||
Amortization of Intangibles |
802 | 668 | 4,891 | 2,672 | ||||||||||||
Goodwill Impairment |
2,816 | — | 2,816 | — | ||||||||||||
Net income Attributable to
Non-controlling Interests |
(2,767 | ) | — | (6,903 | ) | — | ||||||||||
EBITDA |
$ | 20,137 | $ | 10,911 | $ | 63,820 | $ | 47,324 | ||||||||
- 2 -
Revenue
The following table presents Total Revenue by segment:
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| (in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Mortgage Services |
||||||||||||||||
Service Revenue |
$ | 50,462 | $ | 25,169 | $ | 153,318 | $ | 87,021 | ||||||||
Reimbursable Expenses |
13,739 | 7,068 | 44,550 | 16,077 | ||||||||||||
Cooperative Non-controlling Interest |
2,767 | — | 6,903 | — | ||||||||||||
Mortgage Services — Total Revenue |
66,968 | 32,237 | 204,771 | 103,098 | ||||||||||||
Financial Services |
||||||||||||||||
Service Revenue |
13,667 | 14,810 | 57,080 | 64,434 | ||||||||||||
Reimbursable Expenses |
670 | — | 2,899 | — | ||||||||||||
Financial Services — Total Revenue |
14,337 | 14,810 | 59,979 | 64,434 | ||||||||||||
Technology Services |
14,591 | 12,320 | 52,013 | 47,453 | ||||||||||||
Eliminations |
(4,419 | ) | (3,041 | ) | (15,385 | ) | (12,173 | ) | ||||||||
Total Revenue |
$ | 91,477 | $ | 56,326 | $ | 301,378 | $ | 202,812 | ||||||||
The growth in Altisource’s Total Revenues both sequentially and on a year-to-date basis was
principally driven by the Mortgage Services segment. This growth was the result of the
development and execution of default oriented mortgage services over an expanding national platform
and the expansion of Altisource’s largest customer, Ocwen Financial Corporation’s (“Ocwen”),
residential loan portfolio. Ocwen expanded its residential loan portfolio throughout 2010
primarily as a result of the acquisitions of a $6.9 billion servicing portfolio from Saxon in May,
2010 and a $22.4 billion portfolio from HomEq in September, 2010. Finally, Altisource’s
acquisition of The Mortgage Partnership of America L.L.C. (“MPA”) in February 2010 also contributed
to the overall increase in Total Revenues.
Revenue in the Financial Services segment was substantially flat to the third quarter. For the
full year, revenue declined due to the mix of placements from this segment’s largest customer,
partially offset by increased placements from other customers. In addition, Altisource continues
to build out a global delivery platform for collections which sometimes results in lower revenues
per account although at higher margins.
Technology Services revenues increased 13% sequentially and 10% on a year-to-date basis. The
expansion of Ocwen’s residential loan portfolio was the primary contributor to Total Revenue growth
in the Technology Services both sequentially and year-to-date.
Segment Results
The following table presents EBITDA by segment:
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| (in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Mortgage Services |
$ | 20,469 | $ | 11,860 | $ | 61,749 | $ | 36,845 | ||||||||
Financial Services(1) |
(1,499 | ) | (1,012 | ) | (1,903 | ) | 8 | |||||||||
Technology Services |
6,753 | 5,682 | 22,622 | 21,150 | ||||||||||||
Corporate |
(5,586 | ) | (5,619 | ) | (18,648 | ) | (10,679 | ) | ||||||||
Total EBITDA |
$ | 20,137 | $ | 10,911 | $ | 63,820 | $ | 47,324 | ||||||||
| (1) | Adjusted for $2.8 million of goodwill impairment in the fourth quarter of 2010. |
- 3 -
For Altisource’s Mortgage Services and Financial Services segments, the Company believes that
EBITDA divided by Service Revenue (versus Total Revenue) reflects the segment’s most relevant
operating margin by appropriately adjusting for revenues that are essentially pass-through costs
for which the Company earns no margin. The following table presents the most relevant EBITDA margin
by segment:
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Mortgage Services(1) |
41 | % | 47 | % | 40 | % | 42 | % | ||||||||
Financial Services(1) |
(11 | )% | (7 | )% | (3 | )% | 0 | % | ||||||||
Technology Services(2) |
46 | % | 46 | % | 43 | % | 45 | % | ||||||||
Total Company(1) |
27 | % | 22 | % | 26 | % | 25 | % | ||||||||
| (1) | Based upon EBITDA / the applicable Service Revenue |
|
| (2) | Based upon EBITDA / Technology Services Total Revenue |
On a consolidated basis, Altisource’s EBITDA grew sequentially by $4.3 million resulting in a
slight improvement in EBITDA margins principally as a result of the composition of revenues which
were weighted more towards the higher margin Mortgage Services and Technology Services segments.
Mortgage Services EBITDA grew $4.4 million sequentially predominantly as a result of the increase
in Ocwen’s residential loan portfolio. Mortgage Services EBITDA margins were consistent with the
third-quarter as we continue to invest in our operations. The margins for the Mortgage
Service’s segment does fluctuate between periods depending on the timing of loan portfolio
additions by Ocwen, the mix of services delivered to customers, the seasonality of the business
cycles and the timing of investments to scale operations.
For 2011, the development of origination services is important to balancing our service offerings
and will require a significant investment in personnel, technology and management. These services
include valuation and fulfillment services as well as title services for which Altisource received
licenses in 18 counties in California in December. In addition, investments will be made to
further commercialize services such as an enhanced consumer real estate portal. These investments
may limit the ability to significantly expand Mortgage Service margins in 2011.
Despite a revenue decline of $4.5 million, Financial Services EBITDA declined $1.9 million year
over year. The divergence between the decline in revenue and the decline in EBITDA reflects cost
savings initiatives Altisource undertook in the second half of 2009 and the discontinuance of
certain lower margin customer relationships in the first half of 2010. As part of our annual
goodwill impairment testing, management determined it was appropriate to impair the remaining $2.8
million of goodwill in the Financial Services segment.
Sequentially, EBITDA in the Financial Services segment declined principally due to personnel
related costs and professional services costs. During 2011, Altisource is committed to improving
the financial performance of the Financial Services segment. We installed new management and
continue to focus on initiatives such as developing optimal resolution models that are deployed
through dynamic scripting.
Technology Services EBITDA increased sequentially and year-to-date principally as a result of
Ocwen’s growing servicing portfolio and the growth in referrals handled by the REALSuite
technologies. EBITDA margins decreased year over year as we enhanced our leadership team and
invested significantly in servers and our new data center to support our growth. During 2011, the
Technology Services segment will continue to expend significant resources, principally personnel
costs and external consulting costs, to accomplish key objectives including the re-architecture and
enhancement of our existing service offerings and the early stage development of technology
solutions.
Corporate costs rose throughout 2010 as we invested in staff to support our growing operations and
as a result of our first full year of being a public company. We intend to hire additional
resources in 2011 principally focused on compliance for our growing suite of services.
- 4 -
Income Taxes
Altisource recognized a tax benefit for the full year primarily as a result of certain
non-recurring items during the year and the recognition of losses in the United States attributable
primarily to our Financial Services segment. The Company received a favorable ruling in June 2010
regarding the treatment of certain intangibles that exist for purposes of determining the Company’s
taxable income. The ruling is retroactive to the Separation Date. As a result of the ruling, the
Company recognized a $3.4 million credit attributable to 2009 in the second quarter 2010. This
ruling did not have a material impact on our deferred tax assets or liabilities. The income tax
provision computed by applying the Luxembourg statutory tax rate of 28.6% differs from the
effective tax rate primarily because of the effect of the favorable tax ruling as well as the mix
of income and losses in multiple taxing jurisdictions with varied tax rates.
Non-GAAP Measures
The Company utilizes a number of different financial measures, both United States generally
accepted accounting principles (“GAAP”) and non-GAAP, in analyzing and assessing its overall
business performance, for making operating decisions, for compensation decisions and for
forecasting and planning future periods. The Company considers the use of non-GAAP financial
measures, including EBITDA, helpful in assessing its current financial performance, ongoing
operations and prospects for the future. While the Company uses non-GAAP financial measures as a
tool to enhance its understanding of certain aspects of its financial performance and to provide
incremental insight into the underlying factors and trends affecting both the Company’s performance
and its cash-generating potential, the Company does not consider these measures to be a substitute
for, or superior to, the information provided by GAAP financial measures. Consistent with this
approach, the Company believes that disclosing non-GAAP financial measures to the readers of its
financial statements provides such readers with useful supplemental data that, while not a
substitute for GAAP financial measures, allows for greater transparency in the review of its
financial and operational performance and enables investors to more fully understand trends in its
current and future performance.
Forward-Looking Statements
This press release contains forward-looking statements that involve a number of risks and
uncertainties. Those forward-looking statements include all statements that are not historical
fact, including statements about our management’s beliefs and expectations. 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 future
economic performance and are not statements of historical fact, actual results may differ
materially from those projected. The Company 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 retain existing customers and attract new customers; general economic and
market conditions; governmental regulations, taxes and policies; availability of adequate and
timely sources of liquidity and other risks and uncertainties detailed in the “Statement Regarding
Forward-Looking Information,” “Risk Factors” and other sections of the Company’s Form 10-K and
other filings with the Securities and Exchange Commission.
About Altisource
Altisource Portfolio Solutions S.A. (NASDAQ: ASPS) is a provider of services focused on high value,
knowledge-based functions principally related to real estate and mortgage portfolio management,
asset recovery and customer relationship management. Utilizing its integrated technology that
includes decision models and behavioral based scripting engines, Altisource provides solutions that
improve its clients’ performance and maximize their returns. Additional information is available at
www.altisource.com.
- 5 -