LUXEMBOURG,– Altisource Portfolio Solutions S.A. (“Altisource” or the “Company”) (NASDAQ: ASPS), a leading provider and marketplace for the real estate and mortgage industries, today reported financial results for the first quarter 2019.
“I’m pleased with our solid first quarter performance. Operationally, we have streamlined our organization, are focusing on our larger opportunities, and seeing the results through our financial performance. First quarter 2019 adjusted operating income was 10% higher than the first quarter 2018 and marks the third straight quarter of adjusted operating income growth compared to the same quarter in the prior year. To focus on our larger opportunities, last year we sold the property management business and announced that we are exiting the buy-renovate-lease-sell business. Recently, we entered into an agreement to sell our Financial Services business for $44 million, $40 million of which will be received at closing and the remaining $4 million on the one year anniversary of closing. We anticipate this sale to close before the end of the third quarter 2019 and plan to use the proceeds to reduce our debt,” said Chief Executive Officer William B. Shepro.
Mr. Shepro further commented, “On the business front, we are making excellent progress with new and existing customers. With Hubzu, we are winning new business and diversifying our customer base as demonstrated by our growing inventory of foreclosure auctions and homes for sale from customers other than Ocwen, NRZ and RESI. As of March 31, 2019, Hubzu inventory from these other customers has grown by 116% over March 31, 2018 and represented 26% of total inventory at the end of the quarter compared to 10% a year ago. With Field Services, we have largely completed the on-boarding process with a top-5 servicer customer and anticipate receiving referrals as one of three of its vendors in the third quarter 2019. We also continue to develop our sales pipeline and have promising opportunities.”
First quarter 2019 service revenue of $165.0 million was 13% lower than the first quarter 2018, primarily from the reduction in size of the Ocwen Financial Corporation (“Ocwen”) servicing portfolio and the Front Yard Residential Corporation (“RESI”) portfolio of non-performing loans and real estate owned and the impact of the higher cooperative brokerage commission to New Residential Corp. (“NRZ”). These decreases in service revenue were partially offset by service revenue growth from greater referral volumes of certain higher fee property preservation services in the Field Services business and growth in the earlier stage Owners.com® and Pointillist® businesses.
First quarter 2019 operating income of $0.2 million was 98% lower than the first quarter 2018, primarily from the impact of revenue declines discussed above, $4.4 million of restructuring charges related to Project Catalyst, a $2.1 million reserve for sales tax and higher intangible asset amortization during the first quarter 2019, partially offset by the benefits of Project Catalyst.
First quarter 2019 adjusted operating income(1) of $18.1 million was 10% higher than the first quarter 2018, primarily from margin expansion from the benefits of Project Catalyst, partially offset by the impact of revenue declines discussed above. First quarter 2019 adjusted operating income(1) as a percentage of service revenue was 11.0% compared to 8.7% during the first quarter 2018.
First quarter 2019 loss per share of $(0.20) improved compared to first quarter 2018 loss per share of $(0.24) from fewer shares outstanding and unrealized gains on marketable securities (unrealized loss in 2018), partially offset by higher interest expense from higher average interest rates on a lower debt balance and a higher effective income tax rate.
First quarter 2019 adjusted earnings per share(1) of $0.48 was the same as the first quarter 2018 of $0.48 from adjusted operating income margin expansion and fewer diluted shares outstanding, offset by higher interest expense from higher average interest rates on a lower debt balance and a higher effective income tax rate.
First Quarter 2019 Highlights(2)
- On March 28, 2019, entered into a definitive agreement to sell our Financial Services business, consisting of our Asset Recovery Management, Customer Relationship Management and Mortgage Charge-Off Collections businesses, for $44.0 million, consisting of an up-front payment of $40.0 million, subject to a working capital adjustment upon closing of the sale, and an additional $4.0 million to be paid on the one year anniversary of the sale closing; the sale is subject to closing conditions including the receipt of regulatory consents
- Achieved several key Project Catalyst milestones, including reorganizing our business units and reporting structure and substantially reducing our costs; we incurred $4.4 million of severance costs and professional services fees in connection with Project Catalyst and reduced compensation and benefits by $15.7 million, or 23%, compared to the first quarter of 2018
- Grew Hubzu inventory from customers other than Ocwen, NRZ and RESI by 116% since March 31, 2018, with such inventory representing 26% of total Hubzu inventory as of March 31, 2019
- Expanded our relationship with a top 10 servicer customer to provide end-to-end asset management services and began receiving referrals
- Selected by a middle-market bank to provide end-to-end asset management services and, in April 2019, executed agreements and began receiving referrals
- Ended the first quarter 2019 with $89.9 million of cash, cash equivalents and investment in equity securities
- Ended the first quarter 2019 with $248.9 million of net debt less investment in equity securities(1), 12.9% lower than March 31, 2018
First Quarter 2019 Results Compared to the First Quarter 2018:
|(in thousands, except per share data)||First Quarter 2019||First Quarter 2018||%
|Income from operations||171||7,120||(98||)|
|Adjusted operating income(1)||18,116||16,468||10|
|Loss before income taxes and non-controlling interests||(3,966||)||(4,972||)||(20||)|
|Pretax loss attributable to Altisource(1)||(4,406||)||(5,497||)||(20||)|
|Adjusted pretax income attributable to Altisource(1)||11,301||11,352||—|
|Net loss attributable to Altisource||(3,184||)||(4,132||)||(23||)|
|Adjusted net income attributable to Altisource(1)||8,005||8,601||(7||)|
|Diluted loss per share||(0.20||)||(0.24||)||(17||)|
|Adjusted diluted earnings per share(1)||0.48||0.48||—|
|Cash flows from operating activities||(6,655||)||(8,569||)||(22||)|
|Adjusted cash flows from operating activities(1)||604||1,346||(55||)|
|Adjusted cash flows from operating activities less additions for
premises and equipment(1)
- First quarter 2019 income from operations includes restructuring charges of $4.4 million related to Project Catalyst, a sales tax accrual of $2.1 million and an other asset write-off from a business exit of $0.2 million (no comparable amounts in first quarter 2018)
- First quarter 2019 and first quarter 2018 pretax income attributable to Altisource(1) include mark-to-market gains (losses) on our equity investment in RESI of $2.2 million and $(7.5) million, respectively
(1) This is a non-GAAP measure that is defined and reconciled to the corresponding GAAP measure herein.
(2) Applies to the first quarter 2019 unless otherwise indicated.
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 does not undertake, and expressly disclaims, any 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, our ability to retain existing customers and attract new customers and the potential for changes in our customer relationships; various risks relating to our ability to effectively manage our regulatory and contractual obligations; the adequacy of our financial resources, including our sources of liquidity and ability to repay borrowings and comply with our Credit Agreement, including the financial and other covenants contained therein; as well as Altisource’s ability to retain key executives or employees, general economic and market conditions, behavior of customers, suppliers and/or competitors, technological developments, governmental regulations, taxes and policies, 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.
Altisource will host a webcast at 8:30 a.m. EDT today to discuss our first quarter. 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.
Altisource Portfolio Solutions S.A. is an integrated service provider and marketplace for the real estate and mortgage industries. Combining operational excellence with a suite of innovative services and technologies, Altisource helps solve the demands of the ever-changing markets we serve. Additional information is available at www.Altisource.com.