Altisource Announces Strong Second Quarter Results

July 23, 2015

LUXEMBOURG, July 23, 2015 – Altisource Portfolio Solutions S.A. ("Altisource" or the "Company") (NASDAQ:ASPS) today reported strong sequential quarter growth of service revenue, net income attributable to shareholders and diluted earnings per share.

Second Quarter 2015 Results Compared to First Quarter 2015 and Second Quarter 2014:

  • Service revenue of $236.6 million, a 14% increase compared to the first quarter 2015 and a 10% decrease compared to the second quarter 2014
  • Net income attributable to Altisource of $46.0 million compared to $3.7 million in the first quarter 2015 and $54.1 million in the second quarter 2014
  • Adjusted net income attributable to Altisource(1) of $54.2 million compared to $11.8 million in the first quarter 2015 and $63.6 million in the second quarter 2014
  • Diluted earnings per share of $2.22 compared to $0.18 in the first quarter 2015 and $2.24 in the second quarter 2014
  • Adjusted diluted earnings per share(1) of $2.62 compared to $0.56 in the first quarter 2015 and $2.63 in the second quarter 2014
  • Cash flows provided by (used in) operating activities of $70.7 million compared to $(15.9) million in the first quarter 2015 and $75.2 million in the second quarter 2014

 

"Altisource had a very strong quarter, marking the third highest service revenue quarter and the second highest net income quarter in the Company's history. I am very proud of our team that came together over the last two quarters to align the Company's costs with our revenue, accomplishing the objectives we established in the fourth quarter of last year. Our sales and marketing efforts are also yielding results. We are winning new engagements, one of which is to manage the REO and provide certain pre-foreclosure services to a top ten bank. Further, our sales pipeline is strong, and we are in varying stages of discussions with larger prospects," said William B. Shepro, Chief Executive Officer.

 

Second quarter 2015 highlights include:

 

  • The number of houses sold on Hubzu for customers other than Ocwen was 1,168 for the second quarter 2015, a 33% increase compared to the first quarter 2015 and 39 times higher than the second quarter 2014
  • The average number of loans serviced by Ocwen on REALServicing was 2.2 million for the second quarter 2015, a 9% decrease compared to the first quarter 2015 and a 4% decrease compared to the second quarter 2014
  • The Company repurchased 1.4 million shares of common stock at an average price of $28.57 per share
  • The Company repurchased a portion of the senior secured term loan with a par value of $16.0 million at a 9% discount and net income included an after-tax gain of $1.0 million on the early retirement of debt
  • Net income included an after-tax gain of $6.9 million from the reversal of Equator related contingent consideration in connection with a $0.5 million payment to the former owners of Equator to extinguish any future earn out liability
  • Subsequent to the close of the second quarter, we acquired CastleLine Holdings, LLC, a specialty risk management and insurance services firm. The acquisition aligns with Altisource's strategy to continue helping the mortgage banking industry safely and securely increase production while reducing costs and mitigating risks

 

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

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 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 "Forward-Looking Statements," "Risk Factors" and other sections of the Company'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 second 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. Altisource has been named to Fortune's fastest growing global companies two years in a row. Additional information is available at www.Altisource.com.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

Three months ended
June 30,

Six months ended
June 30,

 

2015

2014

2015

2014

 

 

 

 

 

Service revenue

 

 

 

 

Mortgage Services

$ 165,674

$ 189,349

$ 310,055

$ 336,498

Financial Services

23,350

25,436

45,663

49,693

Technology Services

55,992

57,111

107,962

103,960

Eliminations

(8,421)

(8,731)

(19,269)

(17,027)

Total service revenue

236,595

263,165

444,411

473,124

Reimbursable expenses

30,830

32,276

62,786

61,071

Non-controlling interests

896

631

1,606

1,146

Total revenue

268,321

296,072

508,803

535,341

Cost of revenue

137,329

151,723

278,199

270,733

Reimbursable expenses

30,830

32,276

62,786

61,071

Gross profit

100,162

112,073

167,818

203,537

Selling, general and administrative expenses

43,975

49,021

96,381

92,555

Income from operations

56,187

63,052

71,437

110,982

Other income (expense), net:

 

 

 

 

Interest expense

(7,195)

(4,784)

(14,355)

(9,560)

Other than temporary impairment loss on HLSS equity securities

--

--

(3,285)

--

Gain on sale of and dividends from HLSS equity securities

1,431

--

1,431

--

Other income (expense), net

821

(43)

824

4

Total other income (expense), net

(4,943)

(4,827)

(15,385)

(9,556)

Income before income taxes and non-controlling interests

51,244

58,225

56,052

101,426

Income tax provision

(4,398)

(3,493)

(4,798)

(6,548)

Net income

46,846

54,732

51,254

94,878

Net income attributable to non-controlling interests

(896)

(631)

(1,606)

(1,146)

 

 

 

 

 

Net income attributable toAltisource

$ 45,950

$ 54,101

$ 49,648

$ 93,732

 

 

 

 

 

Earnings per share:

 

 

 

 

Basic

$ 2.35

$ 2.45

$ 2.50

$ 4.20

Diluted

$ 2.22

$ 2.24

$ 2.38

$ 3.84

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

Basic

19,571

22,089

19,870

22,301

Diluted

20,669

24,166

20,830

24,415

 

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

 

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

 

 

June 30,

December 31,

 

2015

2014

ASSETS


Current assets:

 

 

Cash and cash equivalents

$ 130,079

$ 161,361

Accounts receivable, net

116,766

112,183

Prepaid expenses and other current assets

19,087

23,567

Deferred tax assets, net

4,987

4,987

Total current assets

270,919

302,098

Premises and equipment, net

126,637

127,759

Goodwill

90,851

90,851

Intangible assets, net

227,369

245,246

Other assets

20,232

22,267


Total assets

$ 736,008

$ 788,221


LIABILITIES AND EQUITY


Current liabilities:

 

 

Accounts payable and accrued expenses

$ 79,118

$ 111,766

Current portion of long-term debt

5,945

5,945

Deferred revenue

9,012

9,829

Other current liabilities

13,133

13,227

Total current liabilities

107,208

140,767

 

 

 

Long-term debt, less current portion

563,993

582,669

Deferred tax liabilities, net

2,699

2,694

Other non-current liabilities

13,205

20,648


Equity:

 

 

Common stock ($1.00par value; 25,413 shares authorized and issued and 18,737 outstanding as ofJune 30, 2015; 25,413 shares authorized and issued and 20,279 outstanding as ofDecember 31, 2014)

25,413

25,413

Additional paid-in capital

92,824

91,509

Retained earnings

415,914

367,967

Treasury stock, at cost (6,676 shares as ofJune 30, 2015and 5,134 shares as ofDecember 31, 2014)

(486,556)

(444,495)

Altisourceequity

47,595

40,394

 

 

 

Non-controlling interests

1,308

1,049

Total equity

48,903

41,443

Total liabilities and equity

$ 736,008

$ 788,221

 

 

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Six months endedJune 30,

 

2015

2014


Cash flows from operating activities:

 

 

Net income

$ 51,254

$ 94,878

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Depreciation and amortization

18,432

13,375

Amortization of intangible assets

17,877

19,573

Goodwill impairment

--

37,473

Other than temporary impairment loss on HLSS equity securities

3,285

--

Gain on sale of and dividends from HLSS equity securities

(1,431)

--

Change in the fair value of acquisition related contingent consideration

(7,346)

(37,924)

Share-based compensation expense

1,315

1,130

Bad debt expense

2,143

4,250

Gain on early extinguishment of debt

(1,114)

--

Amortization of debt discount

255

90

Amortization of debt issuance costs

585

483

Deferred income taxes

5

462

Loss on disposal of fixed assets

20

98

Changes in operating assets and liabilities:

 

 

Accounts receivable

(6,726)

(24,510)

Prepaid expenses and other current assets

4,480

(5,131)

Other assets

1,338

(2,089)

Accounts payable and accrued expenses

(28,557)

21,319

Other current and non-current liabilities

(1,008)

(11,950)

Net cash provided by operating activities

54,807

111,527


Cash flows from investing activities:

 

 

Additions to premises and equipment

(21,421)

(30,522)

Purchase of HLSS equity securities

(29,966)

--

Proceeds received from sale of and dividends from HLSS equity securities

28,112

--

Other investing activities

(4)

(294)

Net cash used in investing activities

(23,279)

(30,816)

 

 

 

Cash flows from financing activities:

 

 

Repayment of long-term debt

(17,701)

(1,986)

Proceeds from stock option exercises

203

639

Purchases of treasury stock

(43,965)

(80,702)

Distributions to non-controlling interests

(1,347)

(1,207)

Net cash used in financing activities

(62,810)

(83,256)

 

 

 

 

 

 

Net decrease in cash and cash equivalents

(31,282)

(2,545)

Cash and cash equivalents at the beginning of the period

161,361

130,429

Cash and cash equivalents at the end of the period

$ 130,079

$ 127,884

 

 

 

Supplemental cash flow information:

 

 

Interest paid

$ 13,345

$ 9,074

Income taxes paid, net

3,490

1,561

 

 

 

Non-cash investing and financing activities:

 

 

Decrease in payables for purchases of premises and equipment

$ (4,091)

$(3,339)

Decrease in acquisition of businesses from subsequent workingcapital true-ups

--

(3,711)

 

 

 

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

NON-GAAP MEASURES 
(in thousands, except per share data) 
(unaudited)

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. Adjusted net income attributable to Altisource is calculated by adding amortization of intangible assets (net of tax) to GAAP net income attributable to Altisource. Adjusted diluted earnings per share is calculated by dividing net income attributable to Altisource plus amortization of intangible assets (net of tax) by the weighted average number of diluted shares outstanding. Reconciliations of the non-GAAP measures to the corresponding GAAP measures are as follows:

 

Three months ended
June 30,

Six months ended
June 30,

 

2015

2014

2015

2014

Net income attributable toAltisource

$ 45,950

$ 54,101

$ 49,648

$ 93,732

 

 

 

 

 

Amortization of intangible assets

8,986

10,107

17,877

19,573

Tax benefit on amortization of intangible assets

(771)

(606)

(1,530)

(1,264)

Amortization of intangible assets, net of tax

8,215

9,501

16,347

18,309

 

 

 

 

 

Adjusted net income attributable toAltisource

$ 54,165

$ 63,602

$ 65,995

$ 112,041

 

 

 

 

 

Diluted earnings per share

$ 2.22

$ 2.24

$ 2.38

$ 3.84

 

 

 

 

 

Amortization of intangible assets, net of tax, per diluted share

0.40

0.39

0.79

0.75

 

 

 

 

 

Adjusted diluted earnings per share

$ 2.62

$ 2.63

$ 3.17

$ 4.59


Weighted average shares outstanding - diluted

20,669

24,166

20,830

24,415