Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Oct. 19, 2013 | |
Document and Entity Information | ||
Entity Registrant Name | Altisource Portfolio Solutions S.A. | |
Entity Central Index Key | 1462418 | |
Document Type | 10-Q | |
Document Period End Date | 30-Sep-13 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 22,857,130 | |
Document Fiscal Year Focus | 2013 | |
Document Fiscal Period Focus | Q3 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Current assets: | ||
Cash and cash equivalents | $212,585 | $105,502 |
Accounts receivable, net | 83,851 | 88,955 |
Prepaid expenses and other current assets | 13,760 | 7,618 |
Deferred tax assets, net | 1,775 | 1,775 |
Total current assets | 311,971 | 203,850 |
Premises and equipment, net | 59,464 | 50,399 |
Deferred tax assets, net | 4,073 | 4,073 |
Intangible assets, net | 242,088 | 56,586 |
Goodwill | 14,915 | 14,915 |
Investment in Correspondent One | 12,729 | |
Loan to Ocwen | 75,000 | |
Other assets | 15,243 | 11,674 |
Total assets | 647,754 | 429,226 |
Current liabilities: | ||
Accounts payable and accrued expenses | 66,848 | 58,976 |
Current portion of long-term debt | 4,000 | 2,000 |
Current portion of capital lease obligations | 233 | |
Other current liabilities | 9,371 | 10,423 |
Total current liabilities | 80,219 | 71,632 |
Long-term debt, less current portion | 392,708 | 196,027 |
Other non-current liabilities | 1,296 | 1,738 |
Commitments and contingencies (Note 17) | ||
Equity: | ||
Common stock ($1.00 par value; 100,000 shares authorized; 25,413 issued and 22,866 outstanding as of September 30, 2013; 25,413 issued and 23,427 outstanding as of December 31, 2012) | 25,413 | 25,413 |
Additional paid-in-capital | 88,949 | 86,873 |
Retained earnings | 209,783 | 124,127 |
Treasury stock, at cost (2,547 shares as of September 30, 2013 and 1,986 shares as of December 31, 2012) | -151,861 | -77,954 |
Altisource equity | 172,284 | 158,459 |
Non-controlling interests | 1,247 | 1,370 |
Total equity | 173,531 | 159,829 |
Total liabilities and equity | $647,754 | $429,226 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, except Per Share data, unless otherwise specified | ||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value (in dollars per share) | $1 | $1 |
Common stock, shares authorized | 100,000 | 100,000 |
Common stock, shares issued | 25,413 | 25,413 |
Common stock, shares outstanding | 22,866 | 23,427 |
Treasury stock, shares | 2,547 | 1,986 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Revenue | $210,835 | $143,988 | $545,772 | $427,259 |
Cost of revenue | 134,261 | 94,287 | 348,195 | 278,785 |
Gross profit | 76,574 | 49,701 | 197,577 | 148,474 |
Selling, general and administrative expenses | 31,519 | 18,452 | 80,027 | 54,485 |
Income from operations | 45,055 | 31,249 | 117,550 | 93,989 |
Other income (expense), net: | ||||
Interest expense | -6,188 | -10 | -14,302 | -39 |
Other income (expense), net | -253 | -257 | 529 | -900 |
Total other income (expense), net | -6,441 | -267 | -13,773 | -939 |
Income before income taxes and non-controlling interests | 38,614 | 30,982 | 103,777 | 93,050 |
Income tax provision | -1,659 | -2,898 | -6,227 | -8,493 |
Net income | 36,955 | 28,084 | 97,550 | 84,557 |
Net income attributable to non-controlling interests | -947 | -1,060 | -3,093 | -4,223 |
Net income attributable to Altisource | 36,008 | 27,024 | 94,457 | 80,334 |
Earnings per share: | ||||
Basic (in dollars per share) | $1.56 | $1.16 | $4.07 | $3.44 |
Diluted (in dollars per share) | $1.42 | $1.08 | $3.77 | $3.23 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 23,025 | 23,338 | 23,185 | 23,347 |
Diluted (in shares) | 25,333 | 25,016 | 25,070 | 24,895 |
Transactions with related parties included above: | ||||
Revenue | 143,557 | 86,558 | 354,889 | 257,491 |
Selling, general and administrative expenses | 720 | 621 | 2,133 | 1,801 |
Other income | $773 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (USD $) | Total | Common stock | Additional paid-in capital | Retained earnings | Treasury stock, at cost | Non-controlling interests |
In Thousands, unless otherwise specified | ||||||
Balance at Dec. 31, 2011 | $165,943 | $25,413 | $83,229 | $126,161 | ($72,048) | $3,188 |
Balance (in shares) at Dec. 31, 2011 | 25,413 | |||||
Increase (Decrease) in Equity | ||||||
Net income | 84,557 | 80,334 | 4,223 | |||
Contributions from non-controlling interest holders | 27 | 27 | ||||
Distributions to non-controlling interest holders | -6,008 | -6,008 | ||||
Share-based compensation expense | 2,038 | 2,038 | ||||
Exercise of stock options | 2,619 | -5,759 | 8,378 | |||
Repurchase of shares | -16,781 | -16,781 | ||||
Balance at Sep. 30, 2012 | 232,395 | 25,413 | 85,267 | 200,736 | -80,451 | 1,430 |
Balance (in shares) at Sep. 30, 2012 | 25,413 | |||||
Balance at Dec. 31, 2012 | 159,829 | 25,413 | 86,873 | 124,127 | -77,954 | 1,370 |
Balance (in shares) at Dec. 31, 2012 | 25,413 | |||||
Increase (Decrease) in Equity | ||||||
Net income | 97,550 | 94,457 | 3,093 | |||
Contributions from non-controlling interest holders | 18 | 18 | ||||
Distributions to non-controlling interest holders | -3,234 | -3,234 | ||||
Share-based compensation expense | 2,076 | 2,076 | ||||
Exercise of stock options | 4,710 | -8,801 | 13,511 | |||
Repurchase of shares | -87,418 | -87,418 | ||||
Balance at Sep. 30, 2013 | $173,531 | $25,413 | $88,949 | $209,783 | ($151,861) | $1,247 |
Balance (in shares) at Sep. 30, 2013 | 25,413 |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Cash flows from operating activities: | ||
Net income | $97,550 | $84,557 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 13,791 | 9,038 |
Amortization of intangible assets | 18,857 | 3,833 |
Share-based compensation expense | 2,076 | 2,038 |
Equity in losses of affiliates | 176 | 872 |
Bad debt expense | 1,338 | 1,170 |
Amortization of debt discount | 184 | |
Amortization of debt issuance costs | 702 | |
Loss on sale or disposal of fixed assets | 1,178 | 401 |
Changes in operating assets and liabilities, net of effects of acquisitions: | ||
Accounts receivable | 3,762 | -11,662 |
Prepaid expenses and other current assets | -6,142 | -4,058 |
Other assets | -1,871 | 809 |
Accounts payable and accrued expenses | 4,574 | 10,405 |
Other current and non-current liabilities | -1,535 | -266 |
Net cash provided by operating activities | 134,640 | 97,137 |
Cash flows from investing activities: | ||
Additions to premises and equipment | -20,528 | -24,199 |
Acquisition of businesses, net of cash acquired | -204,567 | |
Investment in equity affiliate | -50 | |
Proceeds from sale of equity affiliate | 12,648 | |
Proceeds from loan to Ocwen | 75,000 | |
Net cash used in investing activities | -137,497 | -24,199 |
Cash flows from financing activities: | ||
Proceeds from issuance of long-term debt | 201,000 | |
Repayment of long-term debt | -2,503 | |
Debt issuance costs | -2,400 | |
Principal payments on capital lease obligations | -233 | -491 |
Proceeds from stock option exercises | 4,710 | 2,619 |
Purchase of treasury stock | -87,418 | -16,781 |
Contributions from non-controlling interests | 18 | 27 |
Distributions to non-controlling interests | -3,234 | -6,008 |
Net cash provided by (used in) financing activities | 109,940 | -20,634 |
Increase in cash and cash equivalents | 107,083 | 52,304 |
Cash and cash equivalents at the beginning of the period | 105,502 | 32,125 |
Cash and cash equivalents at the end of the period | 212,585 | 84,429 |
Supplemental cash flow information | ||
Interest paid | 13,592 | 39 |
Income taxes paid, net | 2,360 | 2,252 |
Non-cash investing and financing activities | ||
Amortization of tax-deductible goodwill | 2,524 | |
Premises and equipment purchased on account | $1,947 | $5,992 |
ORGANIZATION_AND_BASIS_OF_PRES
ORGANIZATION AND BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2013 | |
ORGANIZATION AND BASIS OF PRESENTATION | |
ORGANIZATION AND BASIS OF PRESENTATION | NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION |
Description of Business | |
Altisource Portfolio Solutions S.A., together with its subsidiaries (which may be referred to as “Altisource,” the “Company,” “we,” “us” or “our”), is a premier marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries offering both distribution and content. We leverage proprietary business process, vendor and electronic payment management software and behavioral science based analytics to improve outcomes for marketplace participants. | |
We are incorporated under the laws of Luxembourg and are publicly traded on the NASDAQ Global Select market under the symbol “ASPS.” | |
We conduct our operations through three reporting segments: Mortgage Services, Financial Services and Technology Services. In addition, we report our corporate related expenditures and eliminations as a separate segment (see Note 18 for a description of our business segments). | |
Basis of Presentation | |
The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, these financial statements do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, the interim data includes all normal recurring adjustments considered necessary to fairly state the results for the interim periods presented. The preparation of interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our interim condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All significant intercompany and inter-segment transactions and accounts have been eliminated in consolidation. | |
The Mortgage Partnership of America, L.L.C. (“MPA”), a wholly-owned subsidiary of Altisource®, is the manager of a national alliance of community mortgage bankers, correspondent lenders and suppliers of mortgage products and services that is referred to as the Lenders One® Mortgage Cooperative (“Lenders One”). The management agreement between MPA and Lenders One, pursuant to which MPA is the management company of Lenders One, represents a variable interest in a variable interest entity. MPA is the primary beneficiary of Lenders One as it has the power to direct the activities that most significantly impact Lenders One’s economic performance and the obligation to absorb losses or the right to receive benefits from Lenders One. As a result, Lenders One is presented in the accompanying interim condensed consolidated financial statements on a consolidated basis with the interests of the members reflected as non-controlling interests. As of September 30, 2013, Lenders One had total assets of $3.8 million and liabilities of $2.5 million. As of December 31, 2012, Lenders One had total assets of $2.3 million and liabilities of $1.0 million. | |
These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our Form 10-K for the year ended December 31, 2012, filed with the SEC on February 13, 2013, which contains a summary of our significant accounting policies. Certain footnote detail in the Form 10-K is omitted from the information included herein. | |
Fair Value of Financial Instruments | |
Our financial instruments primarily include cash and cash equivalents, restricted cash and long-term debt. Cash and cash equivalents and restricted cash are carried at amounts that approximate their fair value due to the short-term nature of these instruments. The fair value was determined by level 1 of the three level hierarchy established by the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement, using quoted prices in active markets for identical assets. The carrying amount of the long-term debt approximates fair value due to the variable interest rate. The fair value was determined by level 2 of the three level hierarchy in ASC Topic 820 using inputs other than quoted prices that are observable, either directly or indirectly. | |
TRANSACTIONS_WITH_RELATED_PART
TRANSACTIONS WITH RELATED PARTIES | 9 Months Ended | |||||||||
Sep. 30, 2013 | ||||||||||
TRANSACTIONS WITH RELATED PARTIES | ||||||||||
TRANSACTIONS WITH RELATED PARTIES | NOTE 2 — TRANSACTIONS WITH RELATED PARTIES | |||||||||
Ocwen® | ||||||||||
Ocwen Financial Corporation, together with its subsidiaries (“Ocwen”), is our largest customer. Our Chairman is also the Chairman of Ocwen. Ocwen is contractually obligated to purchase certain mortgage services and technology services from us through August 2025 under the terms of a master services agreement and amendments to the master services agreement (collectively, the “Service Agreements”). In connection with our acquisition from Ocwen of the fee-based businesses of Homeward Residential, Inc. (“Homeward”) that closed on March 29, 2013 and the acquisition from Ocwen related to the fee-based businesses of Residential Capital, LLC (“ResCap”) that closed on April 12, 2013 (see Note 3), our Service Agreements with Ocwen were amended to extend the term from 2020 to 2025. Further, as part of the amendments, we are the exclusive provider of services to Ocwen with respect to the Homeward and ResCap servicing portfolios, and Ocwen agreed not to establish similar fee-based businesses that would directly or indirectly compete with Altisource’s services with respect to the Homeward and ResCap businesses. We settle amounts with Ocwen on a daily, weekly or monthly basis depending upon the nature of the service and when the service is provided. | ||||||||||
Related party revenue consists of revenue earned directly from Ocwen and revenue earned from the loans serviced by Ocwen when Ocwen designates us as the service provider. We earn additional revenue on the portfolios serviced by Ocwen that are not considered related party revenue when a party other than Ocwen selects the service provider. Related party revenue as a percentage of segment and consolidated revenue was as follows: | ||||||||||
Three months ended | Nine months ended | |||||||||
September 30, | September 30, | |||||||||
2013 | 2012 | 2013 | 2012 | |||||||
Mortgage Services | 73 | % | 68 | % | 71 | % | 69 | % | ||
Financial Services | 37 | % | <1 | % | 25 | % | <1 | % | ||
Technology Services | 53 | % | 39 | % | 53 | % | 40 | % | ||
Consolidated revenue | 68 | % | 60 | % | 65 | % | 60 | % | ||
We record revenue we earn from Ocwen under various long-term servicing contracts at rates we believe to be market rates as they are consistent with one or more of the following: the fees we charge to other customers for comparable services, the fees Ocwen pays to other service providers and fees charged by our competitors. | ||||||||||
Support Services | ||||||||||
We have support services agreements with Ocwen. These services provided and received pursuant to the above agreements include such areas as human resources, vendor management, corporate services, operational effectiveness, quality assurance, quantitative analytics and treasury. Payment for the services provided or received is on the fully-allocated cost of providing the service based on an estimate of the time and expense of providing the service. For the nine months ended September 30, 2013 and 2012, we billed Ocwen $1.8 million and $2.0 million, respectively ($0.6 million for the third quarter of 2013 and 2012), and Ocwen billed us $2.1 million and $1.8 million, respectively ($0.7 million and $0.6 million for the third quarter of 2013 and 2012, respectively), for services provided under these agreements. These amounts are reflected as a component of selling, general and administrative expenses in the condensed consolidated statements of operations. | ||||||||||
Unsecured Term Loan | ||||||||||
On December 27, 2012, we entered into a senior unsecured term loan agreement with Ocwen under which we loaned $75.0 million to Ocwen. Payments of interest were due quarterly at a rate per annum equal to the Eurodollar Rate (as defined in the agreement) plus 6.75%, provided that the Eurodollar Rate shall at no time be less than 1.50%. On February 15, 2013, Ocwen repaid the outstanding principal amount of $75.0 million, plus all accrued and unpaid interest and the term loan was terminated. Interest income related to this loan was $0.8 million for the nine months ended September 30, 2013 (no comparative amounts for 2012). | ||||||||||
Transactions Related to Fee-Based Businesses | ||||||||||
On January 31, 2013, we entered into non-binding letters of intent with Ocwen to acquire certain fee-based businesses associated with Ocwen’s acquisitions of the Homeward and the ResCap servicing portfolios. Ocwen acquired the Homeward servicing portfolio on December 27, 2012 and the ResCap servicing portfolio on February 15, 2013. Altisource acquired the Homeward fee-based businesses from Ocwen on March 29, 2013 (see Note 3). Altisource entered into an agreement with Ocwen on April 12, 2013 to establish additional terms related to our services in connection with the ResCap fee-based businesses (see Note 3). | ||||||||||
Correspondent One® and HLSS™ | ||||||||||
In July 2011, we acquired an equity interest in Correspondent One S.A. (“Correspondent One”) (see Note 8). Correspondent One purchased closed conforming and government guaranteed residential mortgages from approved mortgage bankers. On March 31, 2013, we sold our 49% interest in Correspondent One to Ocwen for $12.6 million. Under a support services agreement, we provided Correspondent One certain finance, human resources, legal support, facilities, technology, vendor management and risk management services. For the nine months ended September 30, 2013 and 2012, we billed Correspondent One less than $0.1 million and $0.2 million, respectively (none for the third quarter of 2013 and $0.1 million for the third quarter of 2012). We also provided certain origination related services to Correspondent One. We earned revenue of $0.1 million and $0.2 million for the nine months ended September 30, 2013 and 2012, respectively, for these services (none for the third quarter of 2013 and $0.2 million for the third quarter of 2012). | ||||||||||
Home Loan Servicing Solutions, Ltd. (“HLSS”) is a publicly traded company whose primary objective is the acquisition of mortgage servicing rights and advances. In connection with the February 2012 HLSS initial public offering and subsequent thereto, HLSS acquired mortgage servicing related assets from Ocwen. Our Chairman is also the Chairman of HLSS. Under a support services agreement, we provide HLSS certain finance, human resources and legal support services. For the nine months ended September 30, 2013 and 2012, we billed HLSS $0.5 million and $0.4 million, respectively ($0.2 million for the third quarter of 2013 and 2012). | ||||||||||
These amounts are reflected as a component of selling, general and administrative expenses in the condensed consolidated statements of operations. | ||||||||||
Residential and AAMC | ||||||||||
Altisource Residential Corporation (“Residential”) and Altisource Asset Management Corporation (“AAMC”) were established, capitalized and their equity was distributed to our shareholders on December 21, 2012 and are each separate publicly traded companies (the “Separation of the Residential Asset Businesses”). Residential is focused on acquiring and managing single family rental properties by acquiring portfolios of sub-performing and non-performing residential mortgage loans throughout the United States. AAMC is an asset management company providing portfolio management and corporate governance services to Residential. Our Chairman is also the Chairman of each of Residential and AAMC. | ||||||||||
For purposes of governing certain ongoing relationships between Altisource, Residential and AAMC after the Separation of the Residential Asset Businesses, and to provide for an orderly transition, we entered into certain agreements with Residential and AAMC. We have agreements to provide Residential with renovation management, lease management and property management services. In addition, we have agreements with Residential and AAMC to provide support services such as finance, human resources, legal support, facilities, technology, vendor management and risk management. Further, we have separate agreements for certain services related to income tax matters, trademark licenses and technology products and services. For the nine months ended September 30, 2013, we billed Residential $0.4 million, and we billed AAMC $0.9 million ($0.2 million for Residential and $0.7 million for AAMC for the third quarter of 2013 and no comparative amounts in 2012), under these agreements. |
ACQUISITIONS
ACQUISITIONS | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
ACQUISITIONS | ||||||||
ACQUISITIONS | NOTE 3 — ACQUISITIONS | |||||||
Homeward Fee-Based Businesses | ||||||||
On March 29, 2013, we acquired certain fee-based businesses associated with Ocwen’s acquisition of Homeward. As part of the acquisition, Ocwen agreed not to develop similar fee-based businesses that would directly or indirectly compete with services provided by Altisource relative to the Homeward servicing portfolio. Additionally, the terms of the Service Agreements were amended to extend the term from 2020 to 2025 (see Note 2). We paid $75.8 million, after a working capital and net income adjustment of $11.1 million, for the Homeward fee-based businesses. From the acquisition date through September 30, 2013, we recorded service revenue of $74.3 million and we estimate pre-tax income is $14.2 million related to these businesses. | ||||||||
Since the acquisition date, management adjusted the preliminary purchase price allocation and assigned associated asset lives based upon information that has become available. In addition to the working capital adjustment, we also reduced premises and equipment by $1.2 million based on a post-acquisition detailed analysis of software licenses received. The purchase price allocation and assessment of asset lives will continue to be revised as additional information about the fair value of assets and liabilities becomes available. Such assessment must be completed within 12 months from the acquisition date. | ||||||||
The preliminary adjusted allocation of the purchase price is estimated as follows: | ||||||||
(in thousands) | ||||||||
Premises and equipment | $ | 1,559 | ||||||
Customer relationship | 75,609 | |||||||
77,168 | ||||||||
Accounts payable and accrued expenses | (1,351 | ) | ||||||
Purchase price | $ | 75,817 | ||||||
Estimated | ||||||||
life | ||||||||
(in years) | ||||||||
Premises and equipment | 5-Mar | |||||||
Customer relationship | 7 | |||||||
ResCap Fee-Based Businesses | ||||||||
On April 12, 2013, we entered into an agreement with Ocwen to establish additional terms related to the existing servicing arrangements between Altisource and Ocwen in connection with certain mortgage servicing platform assets of ResCap (the “ResCap Business”). The Service Agreements provide that (i) Altisource will be the exclusive provider, except as prohibited by applicable law, to Ocwen of certain services related to the ResCap Business, (ii) Ocwen will not establish similar fee-based businesses that would directly or indirectly compete with Altisource’s services as they relate to the ResCap Business and (iii) Ocwen will market and promote the utilization of Altisource’s services to their various third party relationships. Additionally, the parties agreed to use commercially reasonable best efforts to ensure that the loans associated with the ResCap Business are boarded onto Altisource’s mortgage servicing platform. We paid $128.8 million ($80.0 million on April 12, 2013 and $48.8 million on May 10, 2013) for the ResCap fee-based businesses. From the acquisition date through September 30, 2013, we recorded service revenue of $28.6 million and we estimate pre-tax income is $10.9 million related to these businesses. | ||||||||
We acquired no tangible assets and assumed no liabilities in connection with the acquisition. However, certain employees as well as practices and processes developed to support the ResCap servicing portfolio were components of the transaction. We accounted for this transaction as a business combination in accordance with ASC Topic 805, Business Combinations. | ||||||||
Management prepared a preliminary purchase price allocation and assigned associated asset lives based upon available information at the time of the agreement and through the date of filing. This preliminary allocation and assessment of asset lives will be revised as additional information about the fair value of assets and liabilities becomes available. Such assessment must be completed within 12 months from the acquisition date. The agreement consideration of $128.8 million was fully allocated to the customer relationship intangible asset with an estimated average useful life of 7 years. | ||||||||
The following tables present the unaudited pro forma condensed consolidated results of operations as if the Homeward and ResCap Business transactions had occurred at the beginning of the earliest period presented. | ||||||||
Nine months ended | ||||||||
September 30, 2013 | ||||||||
(in thousands, except per share amounts) | As reported | Pro forma | ||||||
Revenue | $ | 545,772 | $ | 579,263 | ||||
Net income attributable to Altisource | 94,457 | 101,413 | ||||||
Earnings per share — diluted | 3.77 | 4.05 | ||||||
Nine months ended | ||||||||
September 30, 2012 | ||||||||
(in thousands, except per share amounts) | As reported | Pro forma | ||||||
Revenue | $ | 427,259 | $ | 536,647 | ||||
Net income attributable to Altisource | 80,334 | 103,313 | ||||||
Earnings per share — diluted | 3.23 | 4.15 | ||||||
Three months ended | ||||||||
September 30, 2012 | ||||||||
(in thousands, except per share amounts) | As reported | Pro forma | ||||||
Revenue | $ | 143,988 | $ | 180,451 | ||||
Net income attributable to Altisource | 27,024 | 34,665 | ||||||
Earnings per share — diluted | 1.08 | 1.39 | ||||||
The unaudited pro forma information presents the combined operating results of Altisource and the Homeward and ResCap Business transactions. The Homeward and ResCap Business operating results were derived from their historical financial statements for the most comparable periods available. The results prior to the acquisition dates have been adjusted to include the pro forma impact of the adjustment of amortization of the acquired intangible assets based on the preliminary purchase price allocations, the adjustment of interest expense reflecting the portion of our $200 million senior secured term loan, increased to $400 million on May 7, 2013, used in the Homeward and ResCap Business transactions and to reflect the impact of income taxes on the pro forma adjustments utilizing Altisource’s effective income tax rate in each period presented. | ||||||||
The unaudited pro forma results are presented for illustrative purposes only and do not reflect additional revenue opportunities, the realization of any potential cost savings and any related integration costs. Certain revenue opportunities and cost savings may result from the transactions and the conversion to the Altisource model; however, there can be no assurance that these revenue opportunities and cost savings will be achieved. These pro forma results do not purport to be indicative of the results that would have actually been obtained if the transactions occurred as of the beginning of each of the periods presented, nor is the pro forma data intended to be a projection of results that may be obtained in the future. | ||||||||
Equator Acquisition | ||||||||
On August 19, 2013, we entered into a Purchase and Sale Agreement (the “Purchase Agreement”) pursuant to which we agreed to purchase all of the outstanding limited liability company interests of Equator, LLC, a California limited-liability company (“Equator”). The aggregate consideration payable under the Purchase Agreement is up to $150.0 million comprised of (i) $70.0 million in initial consideration and (ii) up to an additional $80.0 million in potential additional consideration, the payment of which is dependent upon the Equator business meeting targeted levels of profitability (as described in the Purchase Agreement) for three consecutive 12-month periods following closing. Each 12-month period has targeted levels of profitability and potential additional consideration will be paid based on each 12-month period. We may, at our discretion, pay up to 20% of the initial consideration and up to 20% of each payment of any additional consideration in shares of our restricted stock, with the balance to be paid in cash. The closing is subject to the satisfaction of customary closing terms and conditions, including, without limitation, clearance under the Hart-Scott-Rodino (“HSR”) Act. The purchase price is subject to certain adjustments based on targeted amounts of current assets and current liabilities of Equator at closing, to be settled within 90 days of the closing date. | ||||||||
We initially filed the HSR application with the Federal Trade Commission (the “FTC”) in the third quarter and initially expected to receive approval and close the acquisition in the third quarter of 2013. With the recent disruption of the United States government and shutdown of nonessential services, approval from the FTC has been delayed. To ensure that the HSR waiting period did not expire during the United States government disruption, and following discussions with the staff of the FTC, we voluntarily withdrew our initial application and re-filed it early in the fourth quarter of 2013. We believe, although there can be no assurance, the transaction will close in the fourth quarter of 2013. |
ACCOUNTS_RECEIVABLE_NET
ACCOUNTS RECEIVABLE, NET | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
ACCOUNTS RECEIVABLE, NET | ||||||||
ACCOUNTS RECEIVABLE, NET | NOTE 4 — ACCOUNTS RECEIVABLE, NET | |||||||
Accounts receivable, net consists of the following: | ||||||||
September 30, | December 31, | |||||||
(in thousands) | 2013 | 2012 | ||||||
Billed | ||||||||
Non-related parties | $ | 27,392 | $ | 25,950 | ||||
Ocwen | 11,146 | 19,817 | ||||||
Correspondent One | — | 27 | ||||||
HLSS | 71 | 163 | ||||||
AAMC | 595 | 14 | ||||||
Residential | 71 | — | ||||||
Other receivables | 234 | 353 | ||||||
39,509 | 46,324 | |||||||
Unbilled | ||||||||
Non-related parties | 40,010 | 39,496 | ||||||
Ocwen | 8,940 | 6,377 | ||||||
Correspondent One | — | 32 | ||||||
88,459 | 92,229 | |||||||
Allowance for doubtful accounts | (4,608 | ) | (3,274 | ) | ||||
Total | $ | 83,851 | $ | 88,955 | ||||
Unbilled fees consist primarily of asset management and default management services for which we recognize revenues over the service delivery period but bill following completion of the service. |
PREPAID_EXPENSES_AND_OTHER_CUR
PREPAID EXPENSES AND OTHER CURRENT ASSETS | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
PREPAID EXPENSES AND OTHER CURRENT ASSETS | ||||||||
PREPAID EXPENSES AND OTHER CURRENT ASSETS | NOTE 5 — PREPAID EXPENSES AND OTHER CURRENT ASSETS | |||||||
Prepaid expenses and other current assets consist of the following: | ||||||||
September 30, | December 31, | |||||||
(in thousands) | 2013 | 2012 | ||||||
Maintenance agreements, current portion | $ | 4,350 | $ | 3,636 | ||||
Income taxes receivable | 4,256 | 1,814 | ||||||
Prepaid expenses | 4,646 | 1,640 | ||||||
Other current assets | 508 | 528 | ||||||
Total | $ | 13,760 | $ | 7,618 |
PREMISES_AND_EQUIPMENT_NET
PREMISES AND EQUIPMENT, NET | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
PREMISES AND EQUIPMENT, NET | ||||||||
PREMISES AND EQUIPMENT, NET | NOTE 6 — PREMISES AND EQUIPMENT, NET | |||||||
Premises and equipment, net, which includes amounts recorded under capital leases, consists of the following: | ||||||||
September 30, | December 31, | |||||||
(in thousands) | 2013 | 2012 | ||||||
Computer hardware and software | $ | 81,897 | $ | 68,329 | ||||
Office equipment and other | 21,849 | 15,592 | ||||||
Furniture and fixtures | 6,414 | 5,344 | ||||||
Leasehold improvements | 14,863 | 12,982 | ||||||
125,023 | 102,247 | |||||||
Less: Accumulated depreciation and amortization | (65,559 | ) | (51,848 | ) | ||||
Total | $ | 59,464 | $ | 50,399 | ||||
Depreciation and amortization expense, inclusive of capital leases, amounted to $13.8 million and $9.0 million for the nine months ended September 30, 2013 and 2012, respectively ($4.5 million and $3.8 million for the third quarter of 2013 and 2012, respectively), and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets in the accompanying condensed consolidated statements of operations. |
GOODWILL_AND_INTANGIBLE_ASSETS
GOODWILL AND INTANGIBLE ASSETS, NET | 9 Months Ended | |||||||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||||||
GOODWILL AND INTANGIBLE ASSETS, NET | ||||||||||||||||||||||
GOODWILL AND INTANGIBLE ASSETS, NET | NOTE 7 — GOODWILL AND INTANGIBLE ASSETS, NET | |||||||||||||||||||||
Goodwill | ||||||||||||||||||||||
There were no changes in goodwill during the nine months ended September 30, 2013. The following is a summary of goodwill by segment: | ||||||||||||||||||||||
Mortgage | Financial | Technology | ||||||||||||||||||||
(in thousands) | Services | Services | Services | Total | ||||||||||||||||||
Balance, September 30, 2013 and December 31, 2012 | $ | 10,919 | $ | 2,378 | $ | 1,618 | $ | 14,915 | ||||||||||||||
Intangible Assets, Net | ||||||||||||||||||||||
Intangible assets, net consist of the following: | ||||||||||||||||||||||
Weighted | Gross carrying amount | Accumulated amortization | Net book value | |||||||||||||||||||
average | ||||||||||||||||||||||
estimated | ||||||||||||||||||||||
(dollars in thousands) | useful life | September 30, | December 31, | September 30, | December 31, | September 30, | December 31, | |||||||||||||||
(years) | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
Definite lived intangible assets | ||||||||||||||||||||||
Trademarks | 16 | $ | 10,614 | $ | 10,614 | $ | (4,414 | ) | $ | (4,060 | ) | $ | 6,200 | $ | 6,554 | |||||||
Customer-related intangible assets | 9 | 242,725 | 38,366 | (35,520 | ) | (18,567 | ) | 207,205 | 19,799 | |||||||||||||
Operating agreement | 20 | 35,000 | 35,000 | (6,417 | ) | (5,104 | ) | 28,583 | 29,896 | |||||||||||||
Non-compete agreement | 4 | 1,300 | 1,300 | (1,200 | ) | (963 | ) | 100 | 337 | |||||||||||||
Total | $ | 289,639 | $ | 85,280 | $ | (47,551 | ) | $ | (28,694 | ) | $ | 242,088 | $ | 56,586 | ||||||||
Amortization expense for definite lived intangible assets was $18.9 million and $3.8 million for the nine months ended September 30, 2013 and 2012, respectively ($8.6 million and $1.2 million for the third quarter of 2013 and 2012, respectively). Expected annual definite lived intangible asset amortization for 2013 through 2017 is $27.6 million, $46.9 million, $40.4 million, $32.5 million and $26.0 million, respectively, for assets recorded as of September 30, 2013, including preliminary amounts associated with the Homeward and ResCap fee-based business transactions (see Note 3). |
INVESTMENT_IN_EQUITY_AFFILIATE
INVESTMENT IN EQUITY AFFILIATES | 9 Months Ended |
Sep. 30, 2013 | |
INVESTMENT IN EQUITY AFFILIATES | |
INVESTMENT IN EQUITY AFFILIATES | NOTE 8 — INVESTMENT IN EQUITY AFFILIATES |
Correspondent One purchased closed conforming and government guaranteed residential mortgages from approved mortgage bankers. Prior to the sale of our interest in Correspondent One to Ocwen on March 31, 2013 (see Note 2), we had significant influence over the general operations of Correspondent One consistent with our 49% ownership level, and therefore, accounted for our investment under the equity method. On March 31, 2013, we sold our 49% interest in Correspondent One to Ocwen for $12.6 million. | |
Our net loss on this investment was $0.1 million and $0.9 million for the nine months ended September 30, 2013 and 2012, respectively (none for the third quarter of 2013 and $0.3 million net loss for the third quarter of 2012). | |
OTHER_ASSETS
OTHER ASSETS | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
OTHER ASSETS | ||||||||
OTHER ASSETS | NOTE 9 — OTHER ASSETS | |||||||
Other assets consist of the following: | ||||||||
September 30, | December 31, | |||||||
(in thousands) | 2013 | 2012 | ||||||
Security deposits, net | $ | 7,105 | $ | 5,019 | ||||
Debt issuance costs, net | 6,143 | 4,260 | ||||||
Maintenance agreements, non-current portion | 1,743 | 1,614 | ||||||
Restricted cash | 158 | 158 | ||||||
Other | 94 | 623 | ||||||
Total | $ | 15,243 | $ | 11,674 |
ACCOUNTS_PAYABLE_ACCRUED_EXPEN
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ||||||||
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | NOTE 10 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |||||||
Accounts payable and accrued expenses consist of the following: | ||||||||
September 30, | December 31, | |||||||
(in thousands) | 2013 | 2012 | ||||||
Accounts payable | $ | 7,818 | $ | 5,079 | ||||
Accrued expenses - general | 16,903 | 16,528 | ||||||
Accrued salaries and benefits | 23,222 | 19,613 | ||||||
Income taxes payable | 14,774 | 8,750 | ||||||
Payable to Ocwen | 4,131 | 8,865 | ||||||
Payable to AAMC | — | 141 | ||||||
Total | $ | 66,848 | $ | 58,976 | ||||
Other current liabilities consist of the following: | ||||||||
September 30, | December 31, | |||||||
(in thousands) | 2013 | 2012 | ||||||
Deferred revenue | $ | 1,512 | $ | 2,482 | ||||
Facility closure cost accrual, current portion | 141 | 138 | ||||||
Book overdrafts | 4,601 | 5,229 | ||||||
Other | 3,117 | 2,574 | ||||||
Total | $ | 9,371 | $ | 10,423 |
LONGTERM_DEBT
LONG-TERM DEBT | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
LONG-TERM DEBT | ||||||||
LONG-TERM DEBT | NOTE 11 — LONG-TERM DEBT | |||||||
Long-term debt consists of the following: | ||||||||
September 30, | December 31, | |||||||
(in thousands) | 2013 | 2012 | ||||||
Senior secured term loan | $ | 397,497 | $ | 200,000 | ||||
Less: Unamortized discount, net | (789 | ) | (1,973 | ) | ||||
Net long-term debt | 396,708 | 198,027 | ||||||
Less: Current portion | (4,000 | ) | (2,000 | ) | ||||
Long-term debt, less current portion | $ | 392,708 | $ | 196,027 | ||||
On November 27, 2012, we entered into a senior secured term loan agreement with Bank of America, N.A., as administrative agent, and certain lenders, pursuant to which we borrowed $200 million. The senior secured term loan was issued with a 1.0% original issue discount ($2.0 million), resulting in net proceeds of $198.0 million (the “Initial Proceeds”), with the Company and certain wholly-owned subsidiaries acting as guarantors (collectively, the “Guarantors”). | ||||||||
On May 7, 2013, we amended the senior secured term loan agreement to increase the principal amount of the senior secured term loan by $200 million (the “Incremental Term Loan”), which was issued with a $1.0 million original issue premium, resulting in gross proceeds to the Company of $201.0 million. | ||||||||
The Initial Proceeds and the Incremental Term Loan must be repaid in equal consecutive quarterly principal installments of 0.25% of the initial principal amounts, with the balance due at maturity. The aggregate amount of each quarterly scheduled principal installment of the term loans is equal to approximately $1.0 million. All amounts outstanding under the senior secured term loan agreement will become due on the earlier of (i) November 27, 2019, being the seventh anniversary of the closing date of the senior secured term loan agreement or (ii) the date on which the loans are declared to be due and owed by the administrative agent at the request (or with the consent) of the lenders upon the occurrence of any event of default under the senior secured term loan agreement. | ||||||||
The Incremental Term Loan was used to fund a portion of the Company’s previously announced transaction with Ocwen related to the ResCap servicing portfolio (see Note 3), with the remainder to be used for stock repurchases and for general corporate purposes, including potential acquisitions. Additionally, the Incremental Term Loan was used to pay certain fees, commissions and expenses in connection with the Incremental Term Loan. The Company paid legal fees and other costs associated with the Incremental Term Loan of $2.4 million, which were recorded as debt issuance costs in other assets in the accompanying condensed consolidated balance sheets. | ||||||||
Additionally, the Incremental Term Loan modified the senior secured term loan agreement to, among other changes, provide for an additional $200 million incremental term loan facility accordion and increase the maximum amount of Restricted Payments (as defined in the senior secured term loan) that may be made by us, including increasing the amount of Company share repurchases permitted. | ||||||||
All of the term loans outstanding bear interest at rates based upon, at our option, the Adjusted Eurodollar Rate or the Base Rate (each as defined in the senior secured term loan agreement). Eurodollar Rate loans bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Adjusted Eurodollar Rate for the applicable interest period and (y) 1.25% plus (ii) a 4.50% margin. Base Rate loans bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Base Rate and (y) 2.25% plus (ii) a 3.50% margin. The interest rate at September 30, 2013 was 5.75%. | ||||||||
Payments under the senior secured term loan agreement are guaranteed by the Guarantors and are secured by a pledge of all equity interests of certain subsidiaries, as well as a lien on substantially all of the assets of Altisource Solutions S.à r.l., a wholly-owned subsidiary of Altisource, and the Guarantors, subject to certain exceptions. | ||||||||
At September 30, 2013, debt issuance costs were $6.1 million, net of $0.8 million of accumulated amortization. At December 31, 2012, debt issuance costs were $4.3 million, net of $0.1 million of accumulated amortization. Debt issuance costs are included in other assets in the accompanying condensed consolidated balance sheets. |
EQUITY_AND_SHAREBASED_COMPENSA
EQUITY AND SHARE-BASED COMPENSATION | 9 Months Ended | |||||||||||
Sep. 30, 2013 | ||||||||||||
EQUITY AND SHARE-BASED COMPENSATION | ||||||||||||
EQUITY AND SHARE-BASED COMPENSATION | NOTE 12 — EQUITY AND SHARE-BASED COMPENSATION | |||||||||||
Stock Repurchase Plan | ||||||||||||
In May 2012, our shareholders approved a stock repurchase program, which replaced the previous stock repurchase program. Under the program, we are authorized to purchase up to 3.5 million shares of our common stock in the open market in addition to amounts previously purchased under the prior program. From authorization of the previous program in May 2010 through September 30, 2013, we have purchased approximately 3.4 million shares of our common stock in the open market at an average price of $53.94 per share. We purchased 0.8 million shares of common stock (at an average price of $103.45 per share) and 0.3 million shares of common stock (at an average price of $63.25 per share) during the nine months ended September 30, 2013 and 2012, respectively (0.3 million shares at an average price of $134.86 per share for the third quarter of 2013 and no comparative amounts in the third quarter of 2012). Approximately 2.7 million shares of common stock remain available for repurchase under the program. Luxembourg law limits share repurchases to approximately the balance of Altisource Portfolio Solutions S.A. (unconsolidated parent company) retained earnings less shares repurchased. As of September 30, 2013, approximately $38 million was available to repurchase our common stock under Luxembourg law. Our $200 million senior secured term loan, increased to $400 million on May 7, 2013, also limits the amount we can spend on share repurchases in any year and may prevent repurchases in certain circumstances. As of September 30, 2013, approximately $107 million was available to repurchase our common stock under our senior secured term loan. | ||||||||||||
Share-Based Compensation | ||||||||||||
We issue share-based awards in the form of stock options and certain other equity-based awards for certain employees and officers. We recorded share-based compensation expense of $2.1 million and $2.0 million for the nine months ended September 30, 2013 and 2012, respectively ($0.6 million and $1.1 million for the third quarter of 2013 and 2012, respectively). The amount for the nine months ended September 30, 2012 includes the reversal of $0.8 million of share-based compensation expense related to the departure of an executive officer in March 2012. | ||||||||||||
Outstanding share-based compensation currently consists primarily of stock option grants that are a combination of service-based and market-based options. | ||||||||||||
Service-based Options. These options are granted at fair value on the date of grant. The options generally vest over four years with equal annual cliff-vesting and expire on the earlier of 10 years after the date of grant or following termination of service. A total of 0.8 million service-based awards were outstanding at September 30, 2013. | ||||||||||||
Market-based Options. These option grants have two components each of which vest only upon the achievement of certain criteria. The first component, which we refer to internally as “ordinary performance” grants, consists of two-thirds of the market-based grant and begins to vest if the stock price is at least double the exercise price, as long as the stock price realizes a compounded annual gain of at least 20% over the exercise price. The remaining third of the market-based options, which we refer to internally as “extraordinary performance” grants, begins to vest if the stock price is at least triple the exercise price, as long as the stock price realizes a compounded annual gain of at least 25% over the exercise price. The vesting schedule for all market-based awards is 25% upon achievement of the criteria and the remaining 75% in three equal annual installments. A total of 1.9 million market-based awards were outstanding at September 30, 2013. | ||||||||||||
The Company granted less than 0.1 million stock options (at a weighted average exercise price of $104.84 per share) and 0.3 million stock options (at a weighted average exercise price of $69.48 per share) during the nine months ended September 30, 2013 and 2012, respectively. | ||||||||||||
The fair value of the service-based options was determined using the Black-Scholes option pricing model, and a lattice (binomial) model was used to determine the fair value of the market-based options, using the following assumptions as of the grant date: | ||||||||||||
Nine months ended | Nine months ended | |||||||||||
September 30, 2013 | September 30, 2012 | |||||||||||
Black-Scholes | Binomial | Black-Scholes | Binomial | |||||||||
Risk-free interest rate | 1.02% — 1.81% | 0.01% — 2.71% | 0.87% — 1.17% | 0.08% — 2.04% | ||||||||
Expected stock price volatility | 36.35% — 36.76% | 36.40% — 36.80% | 34.22% — 34.65% | 34.20% — 34.60% | ||||||||
Expected dividend yield | — | — | — | — | ||||||||
Expected option life (in years) | 6.25 | — | 6.25 | — | ||||||||
Contractual life (in years) | — | 14 | — | 14 | ||||||||
Fair value | $31.33 — $49.14 | $16.12 — $41.72 | $19.25 — $29.80 | $9.98 — $22.76 | ||||||||
The following table summarizes the weighted average fair value of stock options granted, the total intrinsic value of stock options exercised and the fair value of options vested: | ||||||||||||
Nine months ended September 30, | ||||||||||||
(in thousands, except per share amounts) | 2013 | 2012 | ||||||||||
Weighted average fair value at grant date per share | $ | 32.59 | $ | 20.77 | ||||||||
Intrinsic value of options exercised | 24,587 | 11,535 | ||||||||||
Fair value of options vested | 1,867 | 1,491 | ||||||||||
Share-based compensation expense is recorded net of estimated forfeiture rates ranging from 1% to 10%. | ||||||||||||
As of September 30, 2013, estimated unrecognized compensation costs related to share-based payments amounted to $3.0 million, which we expect to recognize over a weighted average remaining requisite service period of approximately 2.9 years. | ||||||||||||
The following table summarizes the activity related to our stock options: | ||||||||||||
Number of | Weighted | Weighted | Aggregate | |||||||||
options | average | average | intrinsic value | |||||||||
exercise | contractual | (in thousands) | ||||||||||
price | term | |||||||||||
(in years) | ||||||||||||
Outstanding at December 31, 2012 | 3,058,309 | $ | 17.69 | 6.1 | $ | 211,072 | ||||||
Granted | 75,000 | 104.84 | ||||||||||
Exercised | (279,531 | ) | 17.12 | |||||||||
Forfeited | (117,248 | ) | 59.49 | |||||||||
Outstanding at September 30, 2013 | 2,736,530 | 18.34 | 5.4 | 332,955 | ||||||||
Exercisable at September 30, 2013 | 2,216,347 | 11.99 | 4.9 | 283,735 | ||||||||
COST_OF_REVENUE
COST OF REVENUE | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
COST OF REVENUE | ||||||||||||||
COST OF REVENUE | NOTE 13 — COST OF REVENUE | |||||||||||||
Cost of revenue principally includes payroll and employee benefits associated with personnel employed in customer service and operations roles, fees paid to external providers related to the provision of services, reimbursable expenses, technology and telecommunications expenses as well as depreciation and amortization of operating assets. The components of cost of revenue were as follows: | ||||||||||||||
Three months ended | Nine months ended | |||||||||||||
September 30, | September 30, | |||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Compensation and benefits | $ | 39,600 | $ | 28,840 | $ | 108,923 | $ | 84,314 | ||||||
Outside fees and services | 56,611 | 31,084 | 137,851 | 91,494 | ||||||||||
Reimbursable expenses | 29,496 | 24,326 | 73,061 | 77,846 | ||||||||||
Technology and telecommunications | 5,459 | 6,900 | 18,010 | 17,890 | ||||||||||
Depreciation and amortization | 3,095 | 3,137 | 10,350 | 7,241 | ||||||||||
Total | $ | 134,261 | $ | 94,287 | $ | 348,195 | $ | 278,785 |
SELLING_GENERAL_AND_ADMINISTRA
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | ||||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | NOTE 14 — SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | |||||||||||||
Selling, general and administrative expenses include payroll for personnel employed in executive, finance, legal, human resources, vendor management, risk and operational effectiveness roles. This category also includes occupancy costs, professional fees and depreciation and amortization on non-operating assets. The components of selling, general and administrative expenses were as follows: | ||||||||||||||
Three months ended | Nine months ended | |||||||||||||
September 30, | September 30, | |||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Compensation and benefits | $ | 6,802 | $ | 5,212 | $ | 18,868 | $ | 15,995 | ||||||
Professional services | 2,168 | 2,089 | 5,184 | 5,550 | ||||||||||
Occupancy related costs | 7,438 | 6,641 | 21,971 | 19,308 | ||||||||||
Amortization of intangible assets | 8,620 | 1,201 | 18,857 | 3,833 | ||||||||||
Depreciation and amortization | 1,390 | 701 | 3,441 | 1,797 | ||||||||||
Other | 5,101 | 2,608 | 11,706 | 8,002 | ||||||||||
Total | $ | 31,519 | $ | 18,452 | $ | 80,027 | $ | 54,485 |
OTHER_INCOME_EXPENSE_NET
OTHER INCOME (EXPENSE), NET | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
OTHER INCOME (EXPENSE), NET | ||||||||||||||
OTHER INCOME (EXPENSE), NET | NOTE 15 — OTHER INCOME (EXPENSE), NET | |||||||||||||
Other income (expense), net consists of the following: | ||||||||||||||
Three months ended | Nine months ended | |||||||||||||
September 30, | September 30, | |||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Loss in equity affiliates | $ | (54 | ) | $ | (293 | ) | $ | (176 | ) | $ | (872 | ) | ||
Interest income | 14 | 49 | 881 | 75 | ||||||||||
Other, net | (213 | ) | (13 | ) | (176 | ) | (103 | ) | ||||||
Total | $ | (253 | ) | $ | (257 | ) | $ | 529 | $ | (900 | ) | |||
Loss in equity affiliates primarily represents our proportional share of the losses in Correspondent One (see Note 8), net of the gain on sale of Correspondent One (see Note 2). |
EARNINGS_PER_SHARE
EARNINGS PER SHARE | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
EARNINGS PER SHARE | ||||||||||||||
EARNINGS PER SHARE | NOTE 16 — EARNINGS PER SHARE | |||||||||||||
Basic earnings per share (“EPS”) is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the assumed conversion of all dilutive securities using the treasury stock method. | ||||||||||||||
Basic and diluted EPS are calculated as follows: | ||||||||||||||
Three months ended | Nine months ended | |||||||||||||
September 30, | September 30, | |||||||||||||
(in thousands, except per share data) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Net income attributable to Altisource | $ | 36,008 | $ | 27,024 | $ | 94,457 | $ | 80,334 | ||||||
Weighted average common shares outstanding, basic | 23,025 | 23,338 | 23,185 | 23,347 | ||||||||||
Dilutive effect of stock options | 2,308 | 1,678 | 1,885 | 1,548 | ||||||||||
Weighted average common shares outstanding, diluted | 25,333 | 25,016 | 25,070 | 24,895 | ||||||||||
Earnings per share | ||||||||||||||
Basic | $ | 1.56 | $ | 1.16 | $ | 4.07 | $ | 3.44 | ||||||
Diluted | $ | 1.42 | $ | 1.08 | $ | 3.77 | $ | 3.23 | ||||||
For the nine months ended September 30, 2013 and 2012, less than 0.1 million options (less than 0.1 million for the third quarter of 2013 and 2012), that were anti-dilutive have been excluded from the computation of diluted EPS. These options were anti-dilutive because their exercise price was greater than the average market price of our common stock. Also excluded from the computation of diluted EPS for the nine months ended September 30, 2013 and 2012 are 0.1 million and 0.3 million options, respectively (0.1 million and 0.2 million options for the third quarter of 2013 and 2012, respectively), granted for shares that are issuable upon the achievement of certain market and performance criteria related to our common stock price and an annualized rate of return to investors that have not been met. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2013 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 17 — COMMITMENTS AND CONTINGENCIES |
Litigation | |
From time to time, we are involved in legal proceedings arising in the ordinary course of business. We record a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated, including expected insurance coverage. For proceedings where a range of loss is determined, we record a best estimate of loss within the range. | |
When legal proceedings are material, we disclose the nature of the litigation, and to the extent possible, the estimate of loss or range of loss. In the opinion of management, after consultation with legal counsel and considering insurance coverage where applicable, the outcome of current legal proceedings, both individually and in the aggregate, will not have a material impact on our financial condition, results of operations or cash flows. | |
Escrow Balances | |
We hold customers’ assets in escrow at various financial institutions pending completion of certain real estate activities. These amounts are held in escrow for limited periods of time, generally consisting of a few days and are not included in the condensed consolidated balance sheets. Amounts held in escrow were $56.8 million and $47.2 million as of September 30, 2013 and December 31, 2012, respectively. | |
SEGMENT_REPORTING
SEGMENT REPORTING | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
SEGMENT REPORTING | |||||||||||||||||
SEGMENT REPORTING | NOTE 18 — SEGMENT REPORTING | ||||||||||||||||
Our business segments are based upon our organizational structure, which focuses primarily on the services offered, and are consistent with the internal reporting used by our Chief Executive Officer to evaluate operating performance and to assess the allocation of our resources. | |||||||||||||||||
We classify our businesses into three reportable segments. The Mortgage Services segment provides services that span the mortgage and real estate lifecycle and are typically outsourced by loan servicers, loan originators and investors in single family homes. The Financial Services segment provides collection and customer relationship management services primarily to debt originators and servicers (e.g., credit card, auto lending, retail credit and mortgage) and the utility and insurance industries. The Technology Services segment principally consists of our REALSuite software applications as well as our information technology infrastructure services. The REALSuite platform provides a fully integrated set of software applications and technologies that manage the end-to-end lifecycle for residential and commercial mortgage loan servicing including the automated management and payment of a distributed network of vendors. In addition, our Corporate Items and Eliminations segment includes eliminations of transactions between the reporting segments, interest expense and costs related to corporate support functions including executive, finance, legal, human resources, vendor management, risk and operational effectiveness. | |||||||||||||||||
Financial information for our segments is as follows: | |||||||||||||||||
Three months ended September 30, 2013 | |||||||||||||||||
Corporate | |||||||||||||||||
Mortgage | Financial | Technology | Items and | Consolidated | |||||||||||||
(in thousands) | Services | Services | Services | Eliminations | Altisource | ||||||||||||
Revenue | $ | 164,661 | $ | 27,267 | $ | 25,175 | $ | (6,268 | ) | $ | 210,835 | ||||||
Cost of revenue | 106,412 | 14,998 | 18,569 | (5,718 | ) | 134,261 | |||||||||||
Gross profit | 58,249 | 12,269 | 6,606 | (550 | ) | 76,574 | |||||||||||
Selling, general and administrative expenses | 14,224 | 4,616 | 2,621 | 10,058 | 31,519 | ||||||||||||
Income from operations | 44,025 | 7,653 | 3,985 | (10,608 | ) | 45,055 | |||||||||||
Other income (expense), net | (41 | ) | — | — | (6,400 | ) | (6,441 | ) | |||||||||
Income before income taxes and non-controlling interests | $ | 43,984 | $ | 7,653 | $ | 3,985 | $ | (17,008 | ) | $ | 38,614 | ||||||
Three months ended September 30, 2012 | |||||||||||||||||
Corporate | |||||||||||||||||
Mortgage | Financial | Technology | Items and | Consolidated | |||||||||||||
(in thousands) | Services | Services | Services | Eliminations | Altisource | ||||||||||||
Revenue | $ | 115,882 | $ | 15,394 | $ | 19,076 | $ | (6,364 | ) | $ | 143,988 | ||||||
Cost of revenue | 72,774 | 11,784 | 15,418 | (5,689 | ) | 94,287 | |||||||||||
Gross profit | 43,108 | 3,610 | 3,658 | (675 | ) | 49,701 | |||||||||||
Selling, general and administrative expenses | 6,155 | 3,116 | 1,851 | 7,330 | 18,452 | ||||||||||||
Income from operations | 36,953 | 494 | 1,807 | (8,005 | ) | 31,249 | |||||||||||
Other income (expense), net | (290 | ) | (6 | ) | (5 | ) | 34 | (267 | ) | ||||||||
Income before income taxes and non-controlling interests | $ | 36,663 | $ | 488 | $ | 1,802 | $ | (7,971 | ) | $ | 30,982 | ||||||
Nine months ended September 30, 2013 | |||||||||||||||||
Corporate | |||||||||||||||||
Mortgage | Financial | Technology | Items and | Consolidated | |||||||||||||
(in thousands) | Services | Services | Services | Eliminations | Altisource | ||||||||||||
Revenue | $ | 426,319 | $ | 66,675 | $ | 70,189 | $ | (17,411 | ) | $ | 545,772 | ||||||
Cost of revenue | 267,859 | 40,831 | 55,088 | (15,583 | ) | 348,195 | |||||||||||
Gross profit | 158,460 | 25,844 | 15,101 | (1,828 | ) | 197,577 | |||||||||||
Selling, general and administrative expenses | 32,272 | 11,000 | 7,514 | 29,241 | 80,027 | ||||||||||||
Income from operations | 126,188 | 14,844 | 7,587 | (31,069 | ) | 117,550 | |||||||||||
Other income (expense), net | (153 | ) | (8 | ) | 3 | (13,615 | ) | (13,773 | ) | ||||||||
Income before income taxes and non-controlling interests | $ | 126,035 | $ | 14,836 | $ | 7,590 | $ | (44,684 | ) | $ | 103,777 | ||||||
Nine months ended September 30, 2012 | |||||||||||||||||
Corporate | |||||||||||||||||
Mortgage | Financial | Technology | Items and | Consolidated | |||||||||||||
(in thousands) | Services | Services | Services | Eliminations | Altisource | ||||||||||||
Revenue | $ | 341,446 | $ | 49,649 | $ | 53,984 | $ | (17,820 | ) | $ | 427,259 | ||||||
Cost of revenue | 218,969 | 35,780 | 40,098 | (16,062 | ) | 278,785 | |||||||||||
Gross profit | 122,477 | 13,869 | 13,886 | (1,758 | ) | 148,474 | |||||||||||
Selling, general and administrative expenses | 17,458 | 10,550 | 5,519 | 20,958 | 54,485 | ||||||||||||
Income from operations | 105,019 | 3,319 | 8,367 | (22,716 | ) | 93,989 | |||||||||||
Other income (expense), net | (857 | ) | (22 | ) | (22 | ) | (38 | ) | (939 | ) | |||||||
Income before income taxes and non-controlling interests | $ | 104,162 | $ | 3,297 | $ | 8,345 | $ | (22,754 | ) | $ | 93,050 | ||||||
Corporate | |||||||||||||||||
Mortgage | Financial | Technology | Items and | Consolidated | |||||||||||||
(in thousands) | Services | Services | Services | Eliminations | Altisource | ||||||||||||
Total assets: | |||||||||||||||||
September 30, 2013 | $ | 313,441 | $ | 52,578 | $ | 120,059 | $ | 161,676 | $ | 647,754 | |||||||
December 31, 2012 | 132,924 | 37,782 | 64,570 | 193,950 | 429,226 | ||||||||||||
TRANSACTIONS_WITH_RELATED_PART1
TRANSACTIONS WITH RELATED PARTIES (Tables) | 9 Months Ended | |||||||||
Sep. 30, 2013 | ||||||||||
TRANSACTIONS WITH RELATED PARTIES | ||||||||||
Schedule of related party revenue as a percentage of segment and consolidated revenue | Three months ended | Nine months ended | ||||||||
September 30, | September 30, | |||||||||
2013 | 2012 | 2013 | 2012 | |||||||
Mortgage Services | 73 | % | 68 | % | 71 | % | 69 | % | ||
Financial Services | 37 | % | <1 | % | 25 | % | <1 | % | ||
Technology Services | 53 | % | 39 | % | 53 | % | 40 | % | ||
Consolidated revenue | 68 | % | 60 | % | 65 | % | 60 | % |
ACQUISITIONS_Tables
ACQUISITIONS (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
ACQUISITIONS | ||||||||
Schedule of the preliminary adjusted allocation of the purchase price | (in thousands) | |||||||
Premises and equipment | $ | 1,559 | ||||||
Customer relationship | 75,609 | |||||||
77,168 | ||||||||
Accounts payable and accrued expenses | (1,351 | ) | ||||||
Purchase price | $ | 75,817 | ||||||
Schedule of estimated life of identified assets acquired as a result of acquisitions | Estimated | |||||||
life | ||||||||
(in years) | ||||||||
Premises and equipment | 5-Mar | |||||||
Customer relationship | 7 | |||||||
Schedule of unaudited pro forma condensed consolidated results of operations | ||||||||
Nine months ended | ||||||||
September 30, 2013 | ||||||||
(in thousands, except per share amounts) | As reported | Pro forma | ||||||
Revenue | $ | 545,772 | $ | 579,263 | ||||
Net income attributable to Altisource | 94,457 | 101,413 | ||||||
Earnings per share — diluted | 3.77 | 4.05 | ||||||
Nine months ended | ||||||||
September 30, 2012 | ||||||||
(in thousands, except per share amounts) | As reported | Pro forma | ||||||
Revenue | $ | 427,259 | $ | 536,647 | ||||
Net income attributable to Altisource | 80,334 | 103,313 | ||||||
Earnings per share — diluted | 3.23 | 4.15 | ||||||
Three months ended | ||||||||
September 30, 2012 | ||||||||
(in thousands, except per share amounts) | As reported | Pro forma | ||||||
Revenue | $ | 143,988 | $ | 180,451 | ||||
Net income attributable to Altisource | 27,024 | 34,665 | ||||||
Earnings per share — diluted | 1.08 | 1.39 | ||||||
ACCOUNTS_RECEIVABLE_NET_Tables
ACCOUNTS RECEIVABLE, NET (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
ACCOUNTS RECEIVABLE, NET | ||||||||
Schedule of accounts receivable, net | September 30, | December 31, | ||||||
(in thousands) | 2013 | 2012 | ||||||
Billed | ||||||||
Non-related parties | $ | 27,392 | $ | 25,950 | ||||
Ocwen | 11,146 | 19,817 | ||||||
Correspondent One | — | 27 | ||||||
HLSS | 71 | 163 | ||||||
AAMC | 595 | 14 | ||||||
Residential | 71 | — | ||||||
Other receivables | 234 | 353 | ||||||
39,509 | 46,324 | |||||||
Unbilled | ||||||||
Non-related parties | 40,010 | 39,496 | ||||||
Ocwen | 8,940 | 6,377 | ||||||
Correspondent One | — | 32 | ||||||
88,459 | 92,229 | |||||||
Allowance for doubtful accounts | (4,608 | ) | (3,274 | ) | ||||
Total | $ | 83,851 | $ | 88,955 |
PREPAID_EXPENSES_AND_OTHER_CUR1
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
PREPAID EXPENSES AND OTHER CURRENT ASSETS | ||||||||
Schedule of prepaid expenses and other current assets | September 30, | December 31, | ||||||
(in thousands) | 2013 | 2012 | ||||||
Maintenance agreements, current portion | $ | 4,350 | $ | 3,636 | ||||
Income taxes receivable | 4,256 | 1,814 | ||||||
Prepaid expenses | 4,646 | 1,640 | ||||||
Other current assets | 508 | 528 | ||||||
Total | $ | 13,760 | $ | 7,618 |
PREMISES_AND_EQUIPMENT_NET_Tab
PREMISES AND EQUIPMENT, NET (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
PREMISES AND EQUIPMENT, NET | ||||||||
Schedule of premises and equipment, net, which includes amounts recorded under capital leases | September 30, | December 31, | ||||||
(in thousands) | 2013 | 2012 | ||||||
Computer hardware and software | $ | 81,897 | $ | 68,329 | ||||
Office equipment and other | 21,849 | 15,592 | ||||||
Furniture and fixtures | 6,414 | 5,344 | ||||||
Leasehold improvements | 14,863 | 12,982 | ||||||
125,023 | 102,247 | |||||||
Less: Accumulated depreciation and amortization | (65,559 | ) | (51,848 | ) | ||||
Total | $ | 59,464 | $ | 50,399 |
GOODWILL_AND_INTANGIBLE_ASSETS1
GOODWILL AND INTANGIBLE ASSETS, NET (Tables) | 9 Months Ended | |||||||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||||||
GOODWILL AND INTANGIBLE ASSETS, NET | ||||||||||||||||||||||
Summary of goodwill by segment | ||||||||||||||||||||||
Mortgage | Financial | Technology | ||||||||||||||||||||
(in thousands) | Services | Services | Services | Total | ||||||||||||||||||
Balance, September 30, 2013 and December 31, 2012 | $ | 10,919 | $ | 2,378 | $ | 1,618 | $ | 14,915 | ||||||||||||||
Schedule of intangible assets, net | Weighted | Gross carrying amount | Accumulated amortization | Net book value | ||||||||||||||||||
average | ||||||||||||||||||||||
estimated | ||||||||||||||||||||||
(dollars in thousands) | useful life | September 30, | December 31, | September 30, | December 31, | September 30, | December 31, | |||||||||||||||
(years) | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
Definite lived intangible assets | ||||||||||||||||||||||
Trademarks | 16 | $ | 10,614 | $ | 10,614 | $ | (4,414 | ) | $ | (4,060 | ) | $ | 6,200 | $ | 6,554 | |||||||
Customer-related intangible assets | 9 | 242,725 | 38,366 | (35,520 | ) | (18,567 | ) | 207,205 | 19,799 | |||||||||||||
Operating agreement | 20 | 35,000 | 35,000 | (6,417 | ) | (5,104 | ) | 28,583 | 29,896 | |||||||||||||
Non-compete agreement | 4 | 1,300 | 1,300 | (1,200 | ) | (963 | ) | 100 | 337 | |||||||||||||
Total | $ | 289,639 | $ | 85,280 | $ | (47,551 | ) | $ | (28,694 | ) | $ | 242,088 | $ | 56,586 |
OTHER_ASSETS_Tables
OTHER ASSETS (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
OTHER ASSETS | ||||||||
Schedule of other assets | September 30, | December 31, | ||||||
(in thousands) | 2013 | 2012 | ||||||
Security deposits, net | $ | 7,105 | $ | 5,019 | ||||
Debt issuance costs, net | 6,143 | 4,260 | ||||||
Maintenance agreements, non-current portion | 1,743 | 1,614 | ||||||
Restricted cash | 158 | 158 | ||||||
Other | 94 | 623 | ||||||
Total | $ | 15,243 | $ | 11,674 |
ACCOUNTS_PAYABLE_ACCRUED_EXPEN1
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ||||||||
Schedule of accounts payable and accrued expenses | September 30, | December 31, | ||||||
(in thousands) | 2013 | 2012 | ||||||
Accounts payable | $ | 7,818 | $ | 5,079 | ||||
Accrued expenses - general | 16,903 | 16,528 | ||||||
Accrued salaries and benefits | 23,222 | 19,613 | ||||||
Income taxes payable | 14,774 | 8,750 | ||||||
Payable to Ocwen | 4,131 | 8,865 | ||||||
Payable to AAMC | — | 141 | ||||||
Total | $ | 66,848 | $ | 58,976 | ||||
Schedule of other current liabilities | September 30, | December 31, | ||||||
(in thousands) | 2013 | 2012 | ||||||
Deferred revenue | $ | 1,512 | $ | 2,482 | ||||
Facility closure cost accrual, current portion | 141 | 138 | ||||||
Book overdrafts | 4,601 | 5,229 | ||||||
Other | 3,117 | 2,574 | ||||||
Total | $ | 9,371 | $ | 10,423 |
LONGTERM_DEBT_Tables
LONG-TERM DEBT (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
LONG-TERM DEBT | ||||||||
Schedule of long-term debt | September 30, | December 31, | ||||||
(in thousands) | 2013 | 2012 | ||||||
Senior secured term loan | $ | 397,497 | $ | 200,000 | ||||
Less: Unamortized discount, net | (789 | ) | (1,973 | ) | ||||
Net long-term debt | 396,708 | 198,027 | ||||||
Less: Current portion | (4,000 | ) | (2,000 | ) | ||||
Long-term debt, less current portion | $ | 392,708 | $ | 196,027 |
EQUITY_AND_SHAREBASED_COMPENSA1
EQUITY AND SHARE-BASED COMPENSATION (Tables) | 9 Months Ended | |||||||||||
Sep. 30, 2013 | ||||||||||||
EQUITY AND SHARE-BASED COMPENSATION | ||||||||||||
Schedule of assumptions used to determine the fair value of options as of the grant date | Nine months ended | Nine months ended | ||||||||||
September 30, 2013 | September 30, 2012 | |||||||||||
Black-Scholes | Binomial | Black-Scholes | Binomial | |||||||||
Risk-free interest rate | 1.02% — 1.81% | 0.01% — 2.71% | 0.87% — 1.17% | 0.08% — 2.04% | ||||||||
Expected stock price volatility | 36.35% — 36.76% | 36.40% — 36.80% | 34.22% — 34.65% | 34.20% — 34.60% | ||||||||
Expected dividend yield | — | — | — | — | ||||||||
Expected option life (in years) | 6.25 | — | 6.25 | — | ||||||||
Contractual life (in years) | — | 14 | — | 14 | ||||||||
Fair value | $31.33 — $49.14 | $16.12 — $41.72 | $19.25 — $29.80 | $9.98 — $22.76 | ||||||||
Summary of the weighted average fair value of stock options granted, the total intrinsic value of stock options exercised and the fair value of options vested | Nine months ended September 30, | |||||||||||
(in thousands, except per share amounts) | 2013 | 2012 | ||||||||||
Weighted average fair value at grant date per share | $ | 32.59 | $ | 20.77 | ||||||||
Intrinsic value of options exercised | 24,587 | 11,535 | ||||||||||
Fair value of options vested | 1,867 | 1,491 | ||||||||||
Summary of the activity of the entity's stock options | Number of | Weighted | Weighted | Aggregate | ||||||||
options | average | average | intrinsic value | |||||||||
exercise | contractual | (in thousands) | ||||||||||
price | term | |||||||||||
(in years) | ||||||||||||
Outstanding at December 31, 2012 | 3,058,309 | $ | 17.69 | 6.1 | $ | 211,072 | ||||||
Granted | 75,000 | 104.84 | ||||||||||
Exercised | (279,531 | ) | 17.12 | |||||||||
Forfeited | (117,248 | ) | 59.49 | |||||||||
Outstanding at September 30, 2013 | 2,736,530 | 18.34 | 5.4 | 332,955 | ||||||||
Exercisable at September 30, 2013 | 2,216,347 | 11.99 | 4.9 | 283,735 | ||||||||
COST_OF_REVENUE_Tables
COST OF REVENUE (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
COST OF REVENUE | ||||||||||||||
Schedule of components of cost of revenue | Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | |||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Compensation and benefits | $ | 39,600 | $ | 28,840 | $ | 108,923 | $ | 84,314 | ||||||
Outside fees and services | 56,611 | 31,084 | 137,851 | 91,494 | ||||||||||
Reimbursable expenses | 29,496 | 24,326 | 73,061 | 77,846 | ||||||||||
Technology and telecommunications | 5,459 | 6,900 | 18,010 | 17,890 | ||||||||||
Depreciation and amortization | 3,095 | 3,137 | 10,350 | 7,241 | ||||||||||
Total | $ | 134,261 | $ | 94,287 | $ | 348,195 | $ | 278,785 |
SELLING_GENERAL_AND_ADMINISTRA1
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | ||||||||||||||
Schedule of the components of selling, general and administrative expenses | Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | |||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Compensation and benefits | $ | 6,802 | $ | 5,212 | $ | 18,868 | $ | 15,995 | ||||||
Professional services | 2,168 | 2,089 | 5,184 | 5,550 | ||||||||||
Occupancy related costs | 7,438 | 6,641 | 21,971 | 19,308 | ||||||||||
Amortization of intangible assets | 8,620 | 1,201 | 18,857 | 3,833 | ||||||||||
Depreciation and amortization | 1,390 | 701 | 3,441 | 1,797 | ||||||||||
Other | 5,101 | 2,608 | 11,706 | 8,002 | ||||||||||
Total | $ | 31,519 | $ | 18,452 | $ | 80,027 | $ | 54,485 |
OTHER_INCOME_EXPENSE_NET_Table
OTHER INCOME (EXPENSE), NET (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
OTHER INCOME (EXPENSE), NET | ||||||||||||||
Schedule of other income (expense), net | Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | |||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Loss in equity affiliates | $ | (54 | ) | $ | (293 | ) | $ | (176 | ) | $ | (872 | ) | ||
Interest income | 14 | 49 | 881 | 75 | ||||||||||
Other, net | (213 | ) | (13 | ) | (176 | ) | (103 | ) | ||||||
Total | $ | (253 | ) | $ | (257 | ) | $ | 529 | $ | (900 | ) |
EARNINGS_PER_SHARE_Tables
EARNINGS PER SHARE (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
EARNINGS PER SHARE | ||||||||||||||
Schedule of basic and diluted EPS calculation | Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | |||||||||||||
(in thousands, except per share data) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Net income attributable to Altisource | $ | 36,008 | $ | 27,024 | $ | 94,457 | $ | 80,334 | ||||||
Weighted average common shares outstanding, basic | 23,025 | 23,338 | 23,185 | 23,347 | ||||||||||
Dilutive effect of stock options | 2,308 | 1,678 | 1,885 | 1,548 | ||||||||||
Weighted average common shares outstanding, diluted | 25,333 | 25,016 | 25,070 | 24,895 | ||||||||||
Earnings per share | ||||||||||||||
Basic | $ | 1.56 | $ | 1.16 | $ | 4.07 | $ | 3.44 | ||||||
Diluted | $ | 1.42 | $ | 1.08 | $ | 3.77 | $ | 3.23 |
SEGMENT_REPORTING_Tables
SEGMENT REPORTING (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
SEGMENT REPORTING | |||||||||||||||||
Schedule of financial information of segments | Three months ended September 30, 2013 | ||||||||||||||||
Corporate | |||||||||||||||||
Mortgage | Financial | Technology | Items and | Consolidated | |||||||||||||
(in thousands) | Services | Services | Services | Eliminations | Altisource | ||||||||||||
Revenue | $ | 164,661 | $ | 27,267 | $ | 25,175 | $ | (6,268 | ) | $ | 210,835 | ||||||
Cost of revenue | 106,412 | 14,998 | 18,569 | (5,718 | ) | 134,261 | |||||||||||
Gross profit | 58,249 | 12,269 | 6,606 | (550 | ) | 76,574 | |||||||||||
Selling, general and administrative expenses | 14,224 | 4,616 | 2,621 | 10,058 | 31,519 | ||||||||||||
Income from operations | 44,025 | 7,653 | 3,985 | (10,608 | ) | 45,055 | |||||||||||
Other income (expense), net | (41 | ) | — | — | (6,400 | ) | (6,441 | ) | |||||||||
Income before income taxes and non-controlling interests | $ | 43,984 | $ | 7,653 | $ | 3,985 | $ | (17,008 | ) | $ | 38,614 | ||||||
Three months ended September 30, 2012 | |||||||||||||||||
Corporate | |||||||||||||||||
Mortgage | Financial | Technology | Items and | Consolidated | |||||||||||||
(in thousands) | Services | Services | Services | Eliminations | Altisource | ||||||||||||
Revenue | $ | 115,882 | $ | 15,394 | $ | 19,076 | $ | (6,364 | ) | $ | 143,988 | ||||||
Cost of revenue | 72,774 | 11,784 | 15,418 | (5,689 | ) | 94,287 | |||||||||||
Gross profit | 43,108 | 3,610 | 3,658 | (675 | ) | 49,701 | |||||||||||
Selling, general and administrative expenses | 6,155 | 3,116 | 1,851 | 7,330 | 18,452 | ||||||||||||
Income from operations | 36,953 | 494 | 1,807 | (8,005 | ) | 31,249 | |||||||||||
Other income (expense), net | (290 | ) | (6 | ) | (5 | ) | 34 | (267 | ) | ||||||||
Income before income taxes and non-controlling interests | $ | 36,663 | $ | 488 | $ | 1,802 | $ | (7,971 | ) | $ | 30,982 | ||||||
Nine months ended September 30, 2013 | |||||||||||||||||
Corporate | |||||||||||||||||
Mortgage | Financial | Technology | Items and | Consolidated | |||||||||||||
(in thousands) | Services | Services | Services | Eliminations | Altisource | ||||||||||||
Revenue | $ | 426,319 | $ | 66,675 | $ | 70,189 | $ | (17,411 | ) | $ | 545,772 | ||||||
Cost of revenue | 267,859 | 40,831 | 55,088 | (15,583 | ) | 348,195 | |||||||||||
Gross profit | 158,460 | 25,844 | 15,101 | (1,828 | ) | 197,577 | |||||||||||
Selling, general and administrative expenses | 32,272 | 11,000 | 7,514 | 29,241 | 80,027 | ||||||||||||
Income from operations | 126,188 | 14,844 | 7,587 | (31,069 | ) | 117,550 | |||||||||||
Other income (expense), net | (153 | ) | (8 | ) | 3 | (13,615 | ) | (13,773 | ) | ||||||||
Income before income taxes and non-controlling interests | $ | 126,035 | $ | 14,836 | $ | 7,590 | $ | (44,684 | ) | $ | 103,777 | ||||||
Nine months ended September 30, 2012 | |||||||||||||||||
Corporate | |||||||||||||||||
Mortgage | Financial | Technology | Items and | Consolidated | |||||||||||||
(in thousands) | Services | Services | Services | Eliminations | Altisource | ||||||||||||
Revenue | $ | 341,446 | $ | 49,649 | $ | 53,984 | $ | (17,820 | ) | $ | 427,259 | ||||||
Cost of revenue | 218,969 | 35,780 | 40,098 | (16,062 | ) | 278,785 | |||||||||||
Gross profit | 122,477 | 13,869 | 13,886 | (1,758 | ) | 148,474 | |||||||||||
Selling, general and administrative expenses | 17,458 | 10,550 | 5,519 | 20,958 | 54,485 | ||||||||||||
Income from operations | 105,019 | 3,319 | 8,367 | (22,716 | ) | 93,989 | |||||||||||
Other income (expense), net | (857 | ) | (22 | ) | (22 | ) | (38 | ) | (939 | ) | |||||||
Income before income taxes and non-controlling interests | $ | 104,162 | $ | 3,297 | $ | 8,345 | $ | (22,754 | ) | $ | 93,050 | ||||||
Corporate | |||||||||||||||||
Mortgage | Financial | Technology | Items and | Consolidated | |||||||||||||
(in thousands) | Services | Services | Services | Eliminations | Altisource | ||||||||||||
Total assets: | |||||||||||||||||
September 30, 2013 | $ | 313,441 | $ | 52,578 | $ | 120,059 | $ | 161,676 | $ | 647,754 | |||||||
December 31, 2012 | 132,924 | 37,782 | 64,570 | 193,950 | 429,226 | ||||||||||||
ORGANIZATION_AND_BASIS_OF_PRES1
ORGANIZATION AND BASIS OF PRESENTATION (Details) (USD $) | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 |
item | Lenders One | Lenders One | |
ORGANIZATION AND BASIS OF PRESENTATION | |||
Number of reportable segments | 3 | ||
Summary of significant accounting policies | |||
Total assets | $3.80 | $2.30 | |
Liabilities | $2.50 | $1 |
TRANSACTIONS_WITH_RELATED_PART2
TRANSACTIONS WITH RELATED PARTIES (Details) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 0 Months Ended | 9 Months Ended | 0 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Mar. 31, 2013 | Feb. 15, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 27, 2012 | Dec. 27, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Residential | Residential | Residential | Residential | AAMC | AAMC | AAMC | AAMC | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Ocwen | Correspondent One | Correspondent One | Correspondent One | Correspondent One | Correspondent One | Correspondent One | Correspondent One | Correspondent One | HLSS | HLSS | HLSS | HLSS | ||||||
Correspondent One | Senior unsecured term loan | Senior unsecured term loan | Senior unsecured term loan | Senior unsecured term loan | Senior unsecured term loan | Support Services Agreement | Support Services Agreement | Support Services Agreement | Support Services Agreement | Mortgage Services | Mortgage Services | Mortgage Services | Mortgage Services | Financial Services | Financial Services | Financial Services | Financial Services | Technology Services | Technology Services | Technology Services | Technology Services | Support Services Agreement | Support Services Agreement | Support Services Agreement | Maximum | Support Services Agreement | Support Services Agreement | Support Services Agreement | Support Services Agreement | ||||||||||||||||||||||
Eurodollar Rate | Maximum | Maximum | Support Services Agreement | ||||||||||||||||||||||||||||||||||||||||||||||||
TRANSACTIONS WITH RELATED PARTIES | |||||||||||||||||||||||||||||||||||||||||||||||||||
Related party revenue as a percentage of segment revenue | 73.00% | 68.00% | 71.00% | 69.00% | 37.00% | 25.00% | 1.00% | 1.00% | 53.00% | 39.00% | 53.00% | 40.00% | |||||||||||||||||||||||||||||||||||||||
Related party revenue as a percentage of consolidated revenue | 68.00% | 60.00% | 65.00% | 60.00% | |||||||||||||||||||||||||||||||||||||||||||||||
Amount billed to related party | $200,000 | $0 | $400,000 | $0 | $700,000 | $0 | $900,000 | $0 | $600,000 | $600,000 | $1,800,000 | $2,000,000 | $0 | $100,000 | $200,000 | $100,000 | $200,000 | $200,000 | $500,000 | $400,000 | |||||||||||||||||||||||||||||||
Amount billed by related party | 720,000 | 621,000 | 2,133,000 | 1,801,000 | 700,000 | 600,000 | 2,100,000 | 1,800,000 | |||||||||||||||||||||||||||||||||||||||||||
Revenue earned from related party | 143,557,000 | 86,558,000 | 354,889,000 | 257,491,000 | 0 | 200,000 | 100,000 | 200,000 | |||||||||||||||||||||||||||||||||||||||||||
Amount of loan provided to related party | 75,000,000 | 75,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||
Reference rate | Eurodollar Rate | ||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate margin (as a percent) | 6.75% | ||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate, variable interest rate floor (as a percent) | 1.50% | ||||||||||||||||||||||||||||||||||||||||||||||||||
Repayment of outstanding principal amount | 75,000,000 | 75,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||
Interest income | 800,000 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||
Percentage of equity interest sold to the related party | 49.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||
Proceeds from sale of equity interest | $12,600,000 |
ACQUISITIONS_Details
ACQUISITIONS (Details) (Homeward servicing portfolio, USD $) | 0 Months Ended | 6 Months Ended |
Mar. 29, 2013 | Sep. 30, 2013 | |
Acquisitions | ||
Service revenue recorded from the date of acquisition | $74,300,000 | |
Estimated pre-tax income recorded from the date of acquisition | 14,200,000 | |
Ocwen | ||
Acquisitions | ||
Amount paid | 75,800,000 | |
Working capital and net income adjustment | 11,100,000 | |
Reduction in premises and equipment | 1,200,000 | |
Preliminary allocation of the purchase price | ||
Premises and equipment | 1,559,000 | |
Customer relationship | 75,609,000 | |
Assets acquired | 77,168,000 | |
Accounts payable and accrued expenses | -1,351,000 | |
Purchase price | $75,817,000 | |
Estimated life (in years) | ||
Customer relationship | 7 years | |
Minimum | Ocwen | ||
Estimated life (in years) | ||
Premises and equipment | 3 years | |
Maximum | Ocwen | ||
Estimated life (in years) | ||
Premises and equipment | 5 years |
ACQUISITIONS_Details_2
ACQUISITIONS (Details 2) (ResCap, USD $) | 6 Months Ended | 0 Months Ended | 3 Months Ended | |
Sep. 30, 2013 | 10-May-13 | Apr. 12, 2013 | Jun. 30, 2013 | |
Ocwen | Ocwen | Ocwen | ||
Acquisitions | ||||
Amount paid | $48,800,000 | $80,000,000 | $128,800,000 | |
Service revenue recorded from the date of acquisition | 28,600,000 | |||
Estimated pre-tax income recorded from the date of acquisition | 10,900,000 | |||
Preliminary allocation of the purchase price | ||||
Acquired tangible assets | 0 | |||
Assumed liabilities in connection with the acquisition | 0 | |||
Customer relationship | $128,800,000 | |||
Estimated life (in years) | ||||
Customer relationship | 7 years |
ACQUISITIONS_Details_3
ACQUISITIONS (Details 3) (USD $) | 3 Months Ended | 9 Months Ended | ||||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | 7-May-13 | Dec. 31, 2012 |
Pro forma condensed consolidated results of operations | ||||||
Revenue, As reported | $210,835 | $143,988 | $545,772 | $427,259 | ||
Revenue, Pro forma | 180,451 | 579,263 | 536,647 | |||
Net income attributable to Altisource, As reported | 36,008 | 27,024 | 94,457 | 80,334 | ||
Net income attributable to Altisource, Pro forma | 34,665 | 101,413 | 103,313 | |||
Earnings per share - diluted (in dollars per share), As reported | $1.42 | $1.08 | $3.77 | $3.23 | ||
Earnings per share - diluted (in dollars per share), Pro forma | $1.39 | $4.05 | $4.15 | |||
Debt carrying amount | $397,497 | $397,497 | $400,000 | $200,000 |
ACQUISITIONS_Details_4
ACQUISITIONS (Details 4) (Equator, USD $) | 0 Months Ended |
In Millions, unless otherwise specified | Aug. 19, 2013 |
item | |
Acquisitions | |
Initial consideration | $70 |
Number of consecutive 12-month periods for meeting targeted levels of adjusted EBITA | 3 |
Number of months for each consecutive period for meeting targeted levels of adjusted EBITA | 12 months |
Settlement period of purchase price from closing date | 90 days |
Maximum | |
Acquisitions | |
Aggregate consideration | 150 |
Additional consideration | $80 |
Initial consideration that can be paid in restricted stock shares (as a percent) | 20.00% |
Additional consideration that can be paid in restricted stock shares (as a percent) | 20.00% |
ACCOUNTS_RECEIVABLE_NET_Detail
ACCOUNTS RECEIVABLE, NET (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Accounts receivable, net | ||
Accounts receivable, gross | $88,459 | $92,229 |
Allowance for doubtful accounts | -4,608 | -3,274 |
Total | 83,851 | 88,955 |
Billed | ||
Accounts receivable, net | ||
Non-related party, Accounts receivable | 27,392 | 25,950 |
Other receivables | 234 | 353 |
Accounts receivable, gross | 39,509 | 46,324 |
Billed | Ocwen | ||
Accounts receivable, net | ||
Receivable from related party | 11,146 | 19,817 |
Billed | Correspondent One | ||
Accounts receivable, net | ||
Receivable from related party | 27 | |
Billed | HLSS | ||
Accounts receivable, net | ||
Receivable from related party | 71 | 163 |
Billed | AAMC | ||
Accounts receivable, net | ||
Receivable from related party | 595 | 14 |
Billed | Residential | ||
Accounts receivable, net | ||
Receivable from related party | 71 | |
Unbilled | ||
Accounts receivable, net | ||
Non-related party, Accounts receivable | 40,010 | 39,496 |
Unbilled | Ocwen | ||
Accounts receivable, net | ||
Receivable from related party | 8,940 | 6,377 |
Unbilled | Correspondent One | ||
Accounts receivable, net | ||
Receivable from related party | $32 |
PREPAID_EXPENSES_AND_OTHER_CUR2
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
PREPAID EXPENSES AND OTHER CURRENT ASSETS | ||
Maintenance agreements, current portion | $4,350 | $3,636 |
Income taxes receivable | 4,256 | 1,814 |
Prepaid expenses | 4,646 | 1,640 |
Other current assets | 508 | 528 |
Total | $13,760 | $7,618 |
PREMISES_AND_EQUIPMENT_NET_Det
PREMISES AND EQUIPMENT, NET (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 |
PREMISES AND EQUIPMENT, NET | |||||
Premises and equipment, gross | $125,023 | $125,023 | $102,247 | ||
Less: Accumulated depreciation and amortization | -65,559 | -65,559 | -51,848 | ||
Total | 59,464 | 59,464 | 50,399 | ||
Depreciation and amortization expense, inclusive of capital leases | 4,500 | 3,800 | 13,791 | 9,038 | |
Computer hardware and software | |||||
PREMISES AND EQUIPMENT, NET | |||||
Premises and equipment, gross | 81,897 | 81,897 | 68,329 | ||
Office equipment and other | |||||
PREMISES AND EQUIPMENT, NET | |||||
Premises and equipment, gross | 21,849 | 21,849 | 15,592 | ||
Furniture and fixtures | |||||
PREMISES AND EQUIPMENT, NET | |||||
Premises and equipment, gross | 6,414 | 6,414 | 5,344 | ||
Leasehold improvements | |||||
PREMISES AND EQUIPMENT, NET | |||||
Premises and equipment, gross | $14,863 | $14,863 | $12,982 |
GOODWILL_AND_INTANGIBLE_ASSETS2
GOODWILL AND INTANGIBLE ASSETS, NET (Details) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2012 |
GOODWILL AND INTANGIBLE ASSETS, NET | ||
Changes in goodwill | $0 | |
Changes in goodwill | ||
Balance at the end of the period | 14,915 | 14,915 |
Mortgage Services | ||
Changes in goodwill | ||
Balance at the end of the period | 10,919 | 10,919 |
Financial Services | ||
Changes in goodwill | ||
Balance at the end of the period | 2,378 | 2,378 |
Technology Services | ||
Changes in goodwill | ||
Balance at the end of the period | $1,618 | $1,618 |
GOODWILL_AND_INTANGIBLE_ASSETS3
GOODWILL AND INTANGIBLE ASSETS, NET (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Intangible Assets, Net | |||||
Gross carrying amount | $289,639,000 | $289,639,000 | $85,280,000 | ||
Accumulated amortization | -47,551,000 | -47,551,000 | -28,694,000 | ||
Net book value | 242,088,000 | 242,088,000 | 56,586,000 | ||
Amortization expense for definite lived intangible assets | 8,620,000 | 1,201,000 | 18,857,000 | 3,833,000 | |
2013 | 27,600,000 | 27,600,000 | |||
2014 | 46,900,000 | 46,900,000 | |||
2015 | 40,400,000 | 40,400,000 | |||
2016 | 32,500,000 | 32,500,000 | |||
2017 | 26,000,000 | 26,000,000 | |||
Trademarks | |||||
Intangible Assets, Net | |||||
Weighted average estimated useful life | 16 years | ||||
Gross carrying amount | 10,614,000 | 10,614,000 | 10,614,000 | ||
Accumulated amortization | -4,414,000 | -4,414,000 | -4,060,000 | ||
Net book value | 6,200,000 | 6,200,000 | 6,554,000 | ||
Customer-related intangible assets | |||||
Intangible Assets, Net | |||||
Weighted average estimated useful life | 9 years | ||||
Gross carrying amount | 242,725,000 | 242,725,000 | 38,366,000 | ||
Accumulated amortization | -35,520,000 | -35,520,000 | -18,567,000 | ||
Net book value | 207,205,000 | 207,205,000 | 19,799,000 | ||
Operating agreement | |||||
Intangible Assets, Net | |||||
Weighted average estimated useful life | 20 years | ||||
Gross carrying amount | 35,000,000 | 35,000,000 | 35,000,000 | ||
Accumulated amortization | -6,417,000 | -6,417,000 | -5,104,000 | ||
Net book value | 28,583,000 | 28,583,000 | 29,896,000 | ||
Non-compete agreement | |||||
Intangible Assets, Net | |||||
Weighted average estimated useful life | 4 years | ||||
Gross carrying amount | 1,300,000 | 1,300,000 | 1,300,000 | ||
Accumulated amortization | -1,200,000 | -1,200,000 | -963,000 | ||
Net book value | $100,000 | $100,000 | $337,000 |
INVESTMENT_IN_EQUITY_AFFILIATE1
INVESTMENT IN EQUITY AFFILIATES (Details) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 0 Months Ended | |||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Mar. 29, 2013 | Mar. 31, 2013 | |
Correspondent One | Correspondent One | Correspondent One | Correspondent One | Correspondent One | Correspondent One | |||||
Ocwen | ||||||||||
Investment in equity affiliates | ||||||||||
Ownership percentage | 49.00% | |||||||||
Percentage of equity interest sold to the related party | 49.00% | |||||||||
Proceeds from sale of equity interest | $12,600,000 | |||||||||
Net loss on investment | $54,000 | $293,000 | $176,000 | $872,000 | $0 | $300,000 | $100,000 | $900,000 |
OTHER_ASSETS_Details
OTHER ASSETS (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
OTHER ASSETS | ||
Security deposits, net | $7,105 | $5,019 |
Debt issuance costs, net | 6,143 | 4,260 |
Maintenance agreements, non-current portion | 1,743 | 1,614 |
Restricted cash | 158 | 158 |
Other | 94 | 623 |
Total | $15,243 | $11,674 |
ACCOUNTS_PAYABLE_ACCRUED_EXPEN2
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Accounts payable and accrued expenses | ||
Accounts payable | $7,818 | $5,079 |
Accrued expenses - general | 16,903 | 16,528 |
Accrued salaries and benefits | 23,222 | 19,613 |
Income taxes payable | 14,774 | 8,750 |
Total | 66,848 | 58,976 |
Ocwen | ||
Accounts payable and accrued expenses | ||
Payable to related party | 4,131 | 8,865 |
AAMC | ||
Accounts payable and accrued expenses | ||
Payable to related party | $141 |
ACCOUNTS_PAYABLE_ACCRUED_EXPEN3
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details 2) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Other current liabilities | ||
Deferred revenue | $1,512 | $2,482 |
Facility closure cost accrual, current portion | 141 | 138 |
Book overdrafts | 4,601 | 5,229 |
Other | 3,117 | 2,574 |
Total | $9,371 | $10,423 |
LONGTERM_DEBT_Details
LONG-TERM DEBT (Details) (USD $) | 9 Months Ended | 0 Months Ended | 9 Months Ended | 0 Months Ended | ||||||
Sep. 30, 2013 | 7-May-13 | Dec. 31, 2012 | 7-May-13 | Nov. 27, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | 7-May-13 | |
Senior secured term loan | Senior secured term loan | Senior secured term loan | Senior secured term loan | Senior secured term loan | Senior secured term loan | Incremental Term Loan | ||||
Adjusted Eurodollar Rate | Base Rate | |||||||||
Debt | ||||||||||
Senior secured term loan | $397,497,000 | $400,000,000 | $200,000,000 | |||||||
Less: Unamortized discount, net | -789,000 | -1,973,000 | -2,000,000 | |||||||
Net long-term debt | 396,708,000 | 198,027,000 | ||||||||
Less: Current portion | -4,000,000 | -2,000,000 | ||||||||
Long-term debt, less current portion | 392,708,000 | 196,027,000 | ||||||||
Amount borrowed | 200,000,000 | 200,000,000 | ||||||||
Original issue discount (as a percent) | 1.00% | |||||||||
Original issue premium | 1,000,000 | |||||||||
Proceeds from issuance of long-term debt | 201,000,000 | 198,000,000 | 201,000,000 | |||||||
Quarterly principal installments of loan as a percentage of the initial principal amount | 0.25% | |||||||||
Aggregate amount of each quarterly scheduled principal installment | 1,000,000 | |||||||||
Payment of legal fees and other costs | 2,400,000 | 2,400,000 | ||||||||
Reference rate | Adjusted Eurodollar Rate | Base Rate | ||||||||
Fixed interest rate base (as a percent) | 1.25% | 2.25% | ||||||||
Interest rate margin (as a percent) | 4.50% | 3.50% | ||||||||
Interest rate at the end of the period (as a percent) | 5.75% | |||||||||
Debt issuance costs, net | 6,143,000 | 4,260,000 | 6,100,000 | 4,300,000 | ||||||
Accumulated amortization | $800,000 | $100,000 |
EQUITY_AND_SHAREBASED_COMPENSA2
EQUITY AND SHARE-BASED COMPENSATION (Details) (USD $) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 41 Months Ended | 9 Months Ended | |||||||||||||||||||||||||
Mar. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | 7-May-13 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | 31-May-12 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | |
Minimum | Maximum | Black-Scholes | Black-Scholes | Black-Scholes | Black-Scholes | Black-Scholes | Black-Scholes | Binomial | Binomial | Binomial | Binomial | Binomial | Binomial | Stock Repurchase Programs | Stock Repurchase Programs | Stock Repurchase Programs | Stock Repurchase Programs | Stock Repurchase Programs | 2012 Stock Repurchase Program | Service-based Options | Market-based Options | Ordinary performance grants | Ordinary performance grants | Extraordinary performance grants | Extraordinary performance grants | ||||||||
Minimum | Minimum | Maximum | Maximum | Minimum | Minimum | Maximum | Maximum | Maximum | item | Minimum | Minimum | ||||||||||||||||||||||
item | item | ||||||||||||||||||||||||||||||||
Stock Repurchase Plan | |||||||||||||||||||||||||||||||||
Number of shares of common stock authorized to be purchased | 3,500,000 | ||||||||||||||||||||||||||||||||
Number of shares of common stock purchased | 300,000 | 0 | 800,000 | 300,000 | 3,400,000 | ||||||||||||||||||||||||||||
Average purchase price per share (in dollars per share) | $134.86 | $103.45 | $63.25 | $53.94 | |||||||||||||||||||||||||||||
Remaining number of shares available for repurchase under the plan | 2,700,000 | 2,700,000 | 2,700,000 | ||||||||||||||||||||||||||||||
Amount available to repurchase common stock under Luxembourg law (in dollars) | $38,000,000 | $38,000,000 | $38,000,000 | ||||||||||||||||||||||||||||||
Senior secured term loan | 397,497,000 | 397,497,000 | 400,000,000 | 200,000,000 | |||||||||||||||||||||||||||||
Capacity available to repurchase common stock under senior secured term loan (in dollars) | 107,000,000 | 107,000,000 | 107,000,000 | ||||||||||||||||||||||||||||||
EQUITY AND SHARE-BASED COMPENSATION | |||||||||||||||||||||||||||||||||
Share-based compensation expense (in dollars) | 600,000 | 1,100,000 | 2,100,000 | 2,000,000 | |||||||||||||||||||||||||||||
Reversal of share-based compensation expense (in dollars) | 800,000 | ||||||||||||||||||||||||||||||||
Vesting period | 4 years | ||||||||||||||||||||||||||||||||
Expiration term | 10 years | ||||||||||||||||||||||||||||||||
Outstanding (in shares) | 2,736,530 | 2,736,530 | 3,058,309 | 800,000 | 1,900,000 | ||||||||||||||||||||||||||||
Number of components of an award | 2 | ||||||||||||||||||||||||||||||||
Market-based options subject to specified performance achievement (as a percent) | 0.67 | 0.33 | |||||||||||||||||||||||||||||||
Percentage of compounded annual gain of stock price over exercise price required for the award to vest | 20.00% | 25.00% | |||||||||||||||||||||||||||||||
Vesting percentage for awards that vest upon achievement of certain criteria | 25.00% | ||||||||||||||||||||||||||||||||
Cumulative vesting percentage for awards that vest in equal annual installments | 75.00% | ||||||||||||||||||||||||||||||||
Number of equal annual installments for vesting of award | 3 | ||||||||||||||||||||||||||||||||
Stock options granted (in shares) | 75,000 | 300,000 | |||||||||||||||||||||||||||||||
Weighted average exercise price of stock options granted (in dollars per share) | $104.84 | $69.48 | |||||||||||||||||||||||||||||||
Multiplier of stock price over exercise price as a condition for the award to vest | 2 | 3 | |||||||||||||||||||||||||||||||
Assumptions used to determine the fair value of options as of the grant date | |||||||||||||||||||||||||||||||||
Risk-free interest rate, minimum (as a percent) | 1.02% | 0.87% | 0.01% | 0.08% | |||||||||||||||||||||||||||||
Risk-free interest rate, maximum (as a percent) | 1.81% | 1.17% | 2.71% | 2.04% | |||||||||||||||||||||||||||||
Expected stock price volatility, minimum (as a percent) | 36.35% | 34.22% | 36.40% | 34.20% | |||||||||||||||||||||||||||||
Expected stock price volatility, maximum (as a percent) | 36.76% | 34.65% | 36.80% | 34.60% | |||||||||||||||||||||||||||||
Expected option life | 6 years 3 months | 6 years 3 months | |||||||||||||||||||||||||||||||
Contractual life | 14 years | 14 years | |||||||||||||||||||||||||||||||
Fair value (in dollars per share) | $32.59 | $20.77 | $31.33 | $19.25 | $49.14 | $29.80 | $16.12 | $9.98 | $41.72 | $22.76 | |||||||||||||||||||||||
Weighted average fair value of stock options granted and total intrinsic value of stock options exercised | |||||||||||||||||||||||||||||||||
Weighted average fair value at grant date per share (in dollars per share) | $32.59 | $20.77 | $31.33 | $19.25 | $49.14 | $29.80 | $16.12 | $9.98 | $41.72 | $22.76 | |||||||||||||||||||||||
Intrinsic value of options exercised (in dollars) | 24,587,000 | 11,535,000 | |||||||||||||||||||||||||||||||
Fair value of options vested (in dollars) | 1,867,000 | 1,491,000 | |||||||||||||||||||||||||||||||
Estimated forfeiture rate (as a percent) | 1.00% | 10.00% | |||||||||||||||||||||||||||||||
Estimated unrecognized compensation costs (in dollars) | $3,000,000 | $3,000,000 | |||||||||||||||||||||||||||||||
Weighted average remaining requisite service period for stock options over which unrecognized compensation costs would be recognized | 2 years 10 months 24 days |
EQUITY_AND_SHAREBASED_COMPENSA3
EQUITY AND SHARE-BASED COMPENSATION (Details 2) (USD $) | 9 Months Ended | 12 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 |
Number of Options | |||
Outstanding at the beginning of the period (in shares) | 3,058,309 | ||
Granted (in shares) | 75,000 | 300,000 | |
Exercised (in shares) | -279,531 | ||
Forfeited (in shares) | -117,248 | ||
Outstanding at the end of the period (in shares) | 2,736,530 | 3,058,309 | |
Exercisable at the end of the period (in shares) | 2,216,347 | ||
Weighted average exercise price | |||
Outstanding at the beginning of the period (in dollars per share) | $17.69 | ||
Granted (in dollars per share) | $104.84 | $69.48 | |
Exercised (in dollars per share) | $17.12 | ||
Forfeited (in dollars per share) | $59.49 | ||
Outstanding at the end of the period (in dollars per share) | $18.34 | $17.69 | |
Exercisable at the end of the period (in dollars per share) | $11.99 | ||
Weighted average contractual term | |||
Weighted average contractual term | 5 years 4 months 24 days | 6 years 1 month 6 days | |
Exercisable at the end of the period | 4 years 10 months 24 days | ||
Aggregate intrinsic value | |||
Aggregate intrinsic value (in dollars) | $332,955 | $211,072 | |
Exercisable at the end of the period (in dollars) | $283,735 |
COST_OF_REVENUE_Details
COST OF REVENUE (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
COST OF REVENUE | ||||
Compensation and benefits | $39,600 | $28,840 | $108,923 | $84,314 |
Outside fees and services | 56,611 | 31,084 | 137,851 | 91,494 |
Reimbursable expenses | 29,496 | 24,326 | 73,061 | 77,846 |
Technology and telecommunications | 5,459 | 6,900 | 18,010 | 17,890 |
Depreciation and amortization | 3,095 | 3,137 | 10,350 | 7,241 |
Total | $134,261 | $94,287 | $348,195 | $278,785 |
SELLING_GENERAL_AND_ADMINISTRA2
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | ||||
Compensation and benefits | $6,802 | $5,212 | $18,868 | $15,995 |
Professional services | 2,168 | 2,089 | 5,184 | 5,550 |
Occupancy related costs | 7,438 | 6,641 | 21,971 | 19,308 |
Amortization of intangible assets | 8,620 | 1,201 | 18,857 | 3,833 |
Depreciation and amortization | 1,390 | 701 | 3,441 | 1,797 |
Other | 5,101 | 2,608 | 11,706 | 8,002 |
Total | $31,519 | $18,452 | $80,027 | $54,485 |
OTHER_INCOME_EXPENSE_NET_Detai
OTHER INCOME (EXPENSE), NET (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
OTHER INCOME (EXPENSE), NET | ||||
Loss in equity affiliates | ($54) | ($293) | ($176) | ($872) |
Interest income | 14 | 49 | 881 | 75 |
Other, net | -213 | -13 | -176 | -103 |
Other income (expense), net | ($253) | ($257) | $529 | ($900) |
EARNINGS_PER_SHARE_Details
EARNINGS PER SHARE (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
EARNINGS PER SHARE | ||||
Net income attributable to Altisource (in dollars) | $36,008 | $27,024 | $94,457 | $80,334 |
Weighted average common shares outstanding, basic | 23,025,000 | 23,338,000 | 23,185,000 | 23,347,000 |
Dilutive effect of stock options (in shares) | 2,308,000 | 1,678,000 | 1,885,000 | 1,548,000 |
Weighted average common shares outstanding, diluted | 25,333,000 | 25,016,000 | 25,070,000 | 24,895,000 |
Earnings per share | ||||
Basic (in dollars per share) | $1.56 | $1.16 | $4.07 | $3.44 |
Diluted (in dollars per share) | $1.42 | $1.08 | $3.77 | $3.23 |
Options | Maximum | ||||
Anti-dilutive securities | ||||
Options excluded from the computation of diluted EPS (in shares) | 100,000 | 100,000 | 100,000 | 100,000 |
Options for shares issuable upon achievement of market and performance criteria | ||||
Anti-dilutive securities | ||||
Options excluded from the computation of diluted EPS (in shares) | 100,000 | 200,000 | 100,000 | 300,000 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Escrow Balances | ||
Amounts held in escrow | $56.80 | $47.20 |
SEGMENT_REPORTING_Details
SEGMENT REPORTING (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 |
item | |||||
SEGMENT REPORTING | |||||
Number of reportable segments | 3 | ||||
SEGMENT REPORTING | |||||
Revenue | $210,835 | $143,988 | $545,772 | $427,259 | |
Cost of revenue | 134,261 | 94,287 | 348,195 | 278,785 | |
Gross profit | 76,574 | 49,701 | 197,577 | 148,474 | |
Selling, general and administrative expenses | 31,519 | 18,452 | 80,027 | 54,485 | |
Income from operations | 45,055 | 31,249 | 117,550 | 93,989 | |
Other income (expense), net | -6,441 | -267 | -13,773 | -939 | |
Income before income taxes and non-controlling interests | 38,614 | 30,982 | 103,777 | 93,050 | |
Total Assets: | |||||
Total Assets | 647,754 | 647,754 | 429,226 | ||
Mortgage Services | |||||
SEGMENT REPORTING | |||||
Revenue | 164,661 | 115,882 | 426,319 | 341,446 | |
Cost of revenue | 106,412 | 72,774 | 267,859 | 218,969 | |
Gross profit | 58,249 | 43,108 | 158,460 | 122,477 | |
Selling, general and administrative expenses | 14,224 | 6,155 | 32,272 | 17,458 | |
Income from operations | 44,025 | 36,953 | 126,188 | 105,019 | |
Other income (expense), net | -41 | -290 | -153 | -857 | |
Income before income taxes and non-controlling interests | 43,984 | 36,663 | 126,035 | 104,162 | |
Total Assets: | |||||
Total Assets | 313,441 | 313,441 | 132,924 | ||
Financial Services | |||||
SEGMENT REPORTING | |||||
Revenue | 27,267 | 15,394 | 66,675 | 49,649 | |
Cost of revenue | 14,998 | 11,784 | 40,831 | 35,780 | |
Gross profit | 12,269 | 3,610 | 25,844 | 13,869 | |
Selling, general and administrative expenses | 4,616 | 3,116 | 11,000 | 10,550 | |
Income from operations | 7,653 | 494 | 14,844 | 3,319 | |
Other income (expense), net | -6 | -8 | -22 | ||
Income before income taxes and non-controlling interests | 7,653 | 488 | 14,836 | 3,297 | |
Total Assets: | |||||
Total Assets | 52,578 | 52,578 | 37,782 | ||
Technology Services | |||||
SEGMENT REPORTING | |||||
Revenue | 25,175 | 19,076 | 70,189 | 53,984 | |
Cost of revenue | 18,569 | 15,418 | 55,088 | 40,098 | |
Gross profit | 6,606 | 3,658 | 15,101 | 13,886 | |
Selling, general and administrative expenses | 2,621 | 1,851 | 7,514 | 5,519 | |
Income from operations | 3,985 | 1,807 | 7,587 | 8,367 | |
Other income (expense), net | -5 | 3 | -22 | ||
Income before income taxes and non-controlling interests | 3,985 | 1,802 | 7,590 | 8,345 | |
Total Assets: | |||||
Total Assets | 120,059 | 120,059 | 64,570 | ||
Corporate Items and Eliminations | |||||
SEGMENT REPORTING | |||||
Revenue | -6,268 | -6,364 | -17,411 | -17,820 | |
Cost of revenue | -5,718 | -5,689 | -15,583 | -16,062 | |
Gross profit | -550 | -675 | -1,828 | -1,758 | |
Selling, general and administrative expenses | 10,058 | 7,330 | 29,241 | 20,958 | |
Income from operations | -10,608 | -8,005 | -31,069 | -22,716 | |
Other income (expense), net | -6,400 | 34 | -13,615 | -38 | |
Income before income taxes and non-controlling interests | -17,008 | -7,971 | -44,684 | -22,754 | |
Total Assets: | |||||
Total Assets | $161,676 | $161,676 | $193,950 |