ASPS - Earnings call transcript Q1 2020 | Altisource Portfolio Solutions S.A.

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Operator

Good day, ladies and gentlemen, and welcome to the Altisource First Quarter 2020 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your host, Michelle Esterman, Chief Financial Officer. Please go ahead.

Michelle Esterman

Thank you, operator. remind slides the website are to XX-Q release, at want quarterly and available first you earnings that Form www.altisource.com. We on our additional provide information may useful. These investors find

number cause actual to include which forward-looking Our results and remarks could involve differ. today a that uncertainties of statements, risks

XX-Q review as factors In addition the predict obligation result to Please these statements with earnings in on the of as Form state and events. results. may factors of of uncertainty usual Form and section quarter Form forward-looking to update new COVID-XX describe its current Altisource. difficult which the different well to it forward-looking its no that and contained extremely the XXXX economy the in undertake impact a quarterly our future pandemic XX-Q, first as release, lead risk or and potential associated statements information XX-K to statements, the the impact makes We future company's slides

this quarterly earnings release present During non-GAAP included appendix our additional slides, GAAP will you measures. reconciliation measures. quarterly disclosures the of in both non-GAAP find financial is A call, to to GAAP the and slides. In non-GAAP and measures will regarding the we

Bill Joining to I would and Bill. turn to Shepro, me now the call for Chief today's is like Chairman our Executive Officer. call over

Bill Shepro

economy human the for you operate. COVID-XX Thank life, an the which thank impact Good joining today's call. you, on and morning Michelle. is having industries unprecedented we and in

estate servicing and we to medium-term summary the the short disruptions quarter address discuss impact actions today environment, virus-related and are longer-term of a from I industry real our the the this opportunities will the first the potential taking to brief crisis. Given provide and describe in performance, mortgage

period first governmental impact businesses. our of in default-related by financial than portfolios businesses, pattern of disposition was our Ocwen's certain quarter and businesses. than same the RESI restrictions year. origination-related changing the that the performance from and vendor the other behavior COVID-XX-related This run-off performance the customers both last From service stronger offset XXXX default was lower and and Our our consumer partially NRZ and Ocwen,

we As X, adjusted million million you million income $XXX.X per and of first earnings diluted of quarter, can on of $X.X $X.XX adjusted share, adjusted in revenue. generated the of Slide pre-tax see $XX.X service EBITDA,

RESI as our shown first on first fourth in increase to quarter X, headwinds. other XXXX to three services XX% the is compared and customers quarter of base, the rates. our from year-over-year origination-related interest expansion businesses, market quarter due and core and service grew Slide Across was than OCwen, revenue modestly COVID-XX by despite NRZ than for This lower the primarily growth higher our customer XXXX share

on customers We medium-term impact anticipate will to default-related pandemic but negative strong short a longer-term revenue the the from these should support in have that growth.

detailed please first our XX-Q. of prior performance For today's quarter financial a more description and release refer to to press compared periods,

economy from Reserve terminations has the large employee country across country. Turning estate work-from-home lowered the rates and At impact is Today, of March. in much number furloughs restrictions and a having environment. operating a negative are an and and non-essential mortgage to business or Corona the is interest assistance the Despite shelter-in-place and servicing operating government, in industry distancing virus Federal impact with time, real unfortunate of and early on the environment social same programs Altisource. closed and had pandemic under the tremendous the Federal the businesses the the on

that These quarter to their of were mortgages. Budget The Over factors third Bankers the real refinance early estimates greater up and the in in XX% Office March. X% borrowers XX.X Congressional several Mortgage last as a to claims forbearance in in from estimates million be estate people the demand mortgage for XX, that weeks, disruption filed April unemployment will and servicing XXXX. X.XX% Association rate have borrower and greater led markets XX% unemployment the and the than of

the summarizes we estimate believe factors. to certain driven anticipate impact the of early and too largely two could Altisource. Slide will what that short programs X to duration COVID-XX pandemic, the for Altisource be it's to medium-term by the revenue While We impact be

our the will unemployment, growing First, homes home be country should activity significantly largely with and settlement most their businesses. lower. services buying expect that impact of confined Hubzu we and This to

interest foreclosure Second, along also this foreclosure relief, We eviction with will with that restrictions, be will and growth that shelter-in-place negatively valuation strong At expect social referrals we service that substantially businesses. same moratoriums impact our rate trustee, in lower. borrower low anticipate and environment the other governmental and services. support origination-related equator, anticipate field we and our title, will and the time, eviction foreclosure distancing

industry, in this adapting Altisource, environment. our is to like other companies rapidly changing

We have of three areas focus.

the our employees. maintaining and of First, health safety

some the with our to customers complying of and orders guidance. mitigate while business, Second, and governmental adjusting to impact our operations

our cost prepare preserving could structure revenue period planned. lower be for addressing Third, what liquidity than and of to a

the and maintain our implementing ago, the comply across governmental To capabilities with health organization. began orders, our business plans continuity where employees we possible help month-and-a-half and enabling of over a work-from-home

employees The at remotely this with Our new rapidly number able essential with continuing employees workforce working a global is to were our functions of of small our where minimal disruption. to perform majority environment to facilities adjust operational permitted.

employees, implemented we heightened protocols. For hygiene have these

COVID-XX. we and despite for customers We're can as to disruptions deliver operational also impact our minimize from the seeking best

Our critical their for customers operations. rely and origination functions perform to servicing upon loan Altisource

we our in in pivoting our manage control what and relationship and opportunities. regular is customer with customers operations business-related operations to challenges to address teams Our our management, sales diligently are and are working and contact

believe in what delinquency we could be what rate making for preparing cost with lower to rising environment. COVID-XX. changes financial preserve due we we current period position, longer-term a of will and Finally, interest effects our be help our opportunity are benefit the could are revenue believe We firm lower-than-planned a and to of structure, the liquidity from along a

to $XXX and debt liquidity a securities. X. we $XXX Altisource cash net $XX is million perspective, of well From marketable of with believe that million positioned Turning debt and less million in Slide equivalents,

Our $XX marketable will for million that shares announced the RESI if closes. previously million RESI X.X of in cash we anticipate securities be include sale sold

doesn't April covenant-light is XXXX. and debt mature until Our

In and director, and to address certain cost Unfortunately, decision of expenses and by to our cash an million is reduction reduction we the declined Based part compensation. quarter cost planned on addition from addition taken $XX compared that reduce million to other have COVID-XX. and estimated reducing employee run several these activities we goods the anticipated to prior furlough the services XXXX annual further to proportionately to and to to $XX fourth impact measures, fewer executive employees temporarily reduce savings outside difficult generally measures, as measures This these to have make and pandemic, with expenses terminate service the we our the in rate. anticipate XXXX referrals. XXXX

we homebuyers believe circumstances growth the services, waters businesses our seeking on higher sell make before cost across strong also evaluate to the and As we We and to remains and and continue our foreclosure be we for rates were from operating will demand relief will be eviction for may fluid, for are believe in impact if the to will return our the subside to plan services we our unprecedented to warrant. adjustments innovate further than to medium will continued delinquencies. anticipated and prepare our pandemic we are of what unchartered growing capacity to origination-related Altisource as delinquency they elevated, We're maintain longer-term to in inventory. Hubzu structure anticipate levels default-related market time, and loan unemployment level began. In remain intend likely

impact rates unemployment this Knight you rate, XX.X%. recently estimated Black at give a to could from crisis, To mortgage approximately of sense that the a of XX% rates delinquency X.X% from rise delinquency potential

will efforts While to the likely is this tremendous rate economy, we impact at and delinquency to on at the prior were higher horrific that the and historical having pandemic believe lows post-crisis. stabilize broader crisis help mitigate are governmental a the consumers rates relief

that believe share that originators low rate to a is support industry the and national servicers, a opportunity residential default-related conservatively we of to leading rising the a over a X% services a and addressable position market total provider addressable present. of by our We the billion what environment As delinquencies interest capture and in increase of sizable loan services increases market business mortgage Altisource $X for roughly support every in estimate pre-crisis. delinquency $XXX was would strong million from

our remain to I'd by customers. thanking environment and on serving incredibly who our new adjusted employees to operating like our quickly conclude focused

us opportunities. for positioned this with allow performance emerge long-term our to will challenging new success situation Our for from customers

open up the for now questions. I'll Operator? call

Operator

Grondahl And with question your first [Operator Mike Northland from Instructions] Securities. comes

Mike Grondahl

how revenues, Bill morning, forecast million of roughly or to Good did of compare budget? The Ocwen-related and your kind kind Michelle. that of internal $XX Hey.

Bill Shepro

we And then were achieve we from on March. our track in plan largely pandemic. disruption until in see March, to the started a first to Mike, Yes. quarter the

actually we were say, of perspective. dollars pre-tax from plan an plan, EBITDA couple off total, or in probably or that a EBITDA off not So adjusted I'd far of million a adjusted

Mike Grondahl

servicing of Got exist? And that catch-up new still that it. delay to happening Ocwen is moving platform, or sort does there there any

Bill Shepro

No.

delays then in are expected In sales, to REO closings, in quite improved where and are remember, over we higher for largely all So first we you substantially track fourth pandemic. conversion if hit, quarter, on March of the REO periods. a had our sales again REO the quarter, you and prior the cancellations, convert rate result for

Mike Grondahl

it. Got

of basis, first an of spread some and of So you've it. million the really between Got EBITDA on just mentioned. COVID other things adjusted kind quarter couple the a

Bill Shepro

That's right.

Mike Grondahl

of sold, to pulling be of rough $XX much any streamlining business you're business, million million incremental much goods of that the or savings? might cost how how of is And the the $XX SG&A that thought that out

Bill Shepro

Sure.

all than goods Mike, as about of expenses everything cash think -- sold. all cost So other that of

of $XX In down cost lower referrals. addition $XX in line come will million to million, our the with sold to largely goods

fewer also So so field come down. and inspection inspections if from receive, don't and example, field will for costs the fewer in an services order we or those someone referrals we

we've It tied run $XX and quarter reduction by services our to amounts what's our directly base, roughly in $XX And fourth so, to -- rate. largely a expense goods reduced from to our million million. excluding not and within XX% outside control necessarily again, referrals,

Mike Grondahl

it. Got

cost sold most guess, of it the to I breakdown SG&A. between and goods goods then? trying Is of sold still cost So I'm of understand

Bill Shepro

cost of So of say inside when cost sold, certainly employee sold. goods of goods I cost

have have costs receiving Outside and when of sold, separate, say, I I really on will So you employee and based referrals. goods and fewer should services you then services. decline outside and goods cost goods

Mike Grondahl

Volume?

Bill Shepro

to and by decline the with we in but Yes, that's million not -- services included in Comp included come expect referrals. down $XX benefits and cost outside outside is $XX sold the down and top to not million, inside goods $XX million goods services. $XX on of that of come to SG&A, costs and and of we goods will about inside other anticipate million

Mike Grondahl

the And year? sold. guys it course it. million cost quarter, break of in Got then of you to going the line come meaningfully first in the P&L the SG&A, not down for out goods inside was the over $XX That's

Bill Shepro

Yes.

I you in think reductions as both you're in goods going well here to cost SG&A. Michelle, as in jump could see sold and, of

Bill Shepro

That's exactly right.

see it You'll in both Mike. places,

Mike Grondahl

lastly, -- And at year? XXXX, then, or you cash-cash of cash sort just Okay, on sort what's best look usage of if your this flow guess great.

Bill Shepro

the this. on We're month month-and-a-half Look, of around going Mike, a that there's to impact have a a only is into COVID so, uncertainty or business. our lot

is with close do plan -- So cash of stay what to on the position end this trying best based had beginning our at cost the try we as of at reduction our year the guess, the to to year. we're to

pretty try targeted close expect maintain, we plan. reduction to cost I the of looking down, started year. at to to end but it how will we've we're the the So where That's year our be

the to Of lot going of related on businesses. various have and unknowns the there our course, pandemic a to is it's impact

see. basically we did But is liquidity. we'll basically So our to that's how preserve planning

Mike Grondahl

on it your Maybe call of in first to a out or like looked to the it. couple looks nice Got slide? lastly, there, be you just Anyone several them wins quarter. had large couple a

Bill Shepro

the Give second. slide. Yes, just let me me pull a

Mike Grondahl

X.X.

Bill Shepro

wins. Yes, a good of we couple had

and we the Verification pointing anticipate Lenders actually from that's a members, very a the this And we based to the product. ramp Services, grow of decent margin to I getting feedback we'll is amount generate as sorts on the members, improve still we're referrals, of throughout that worth out And And our and that product. margins progresses to from see make We're believe anticipate revenue can the initial we more Services. goes we think reselling from as cost a we're partner the our product as the the of meaningful that save on to large down vendor one channel agreement, One money Verification year. year on opportunity. we buying basically goods all continue

anything servicer same that or Let's FHA a two so field did there's customer a launch or their working services see we're very large ago just if a We -- non-bank Hubzu, with else is opportunity worth launch on the launched And noting. ago. portfolio. this a with week now and servicer week to

that So we're opportunity. excited about

of And There are then, couple of good business and loan in we're very first prospects we QC. processing for but -- a that traction about large capacity business. Trelix, Frankly that in our providing have and be lot trained. underwriting, that which could as existing promising well we that to some working people hired demand We're a fulfillment do clients in getting quite is customers, closings well. that our as it's business, of lot enough getting and as is for service, a

Mike Grondahl

Great. you. it. Got Thank

Bill Shepro

Mike. Thanks,

Operator

Instructions] comes [Operator question with next from Riley Your FBR. B. Sharma Rajiv

Rajiv Sharma

issues Hi. going of impact that support payments be to about the other you facing expect your business Good the that's advance or to many moratorium you the that impact to is, is in providing. different long that the that does business how the impact How you related Michelle, all you are the Bill ability referral does on And last? How get, not do advances how question that do expect think question also and help current and also the their that that do that going the And the -- are to to morning. servicers in expect think the the related and flow? agencies what you do sense help what advances, and last? advance of flow you're sort months do when is of moratorium? My

Bill Shepro

Sure.

So, first on -- hey, Raj.

and taking I there's place is, several things two the foreclosures First put are that moratorium think evictions. on and federal One a the now. government so have moratorium, states on right

halts so reduce It And into REO. so reduce those referrals that potentially related that activity businesses. any essentially would would our to and inflows of that

of my at and eviction, level, some a moratoriums that moratorium So, foreclosure recollection bit federal the a the is make and XX state while the for little days longer.

are of the forbearance plans. The what's second place component taking

-- consumers both months. on program up a so under has for or if six the their and forbearance six the and payments And making to be in to plan, essentially plan can months directly and loans an stop out a essentially that year. and they up up forbearance then obtain GSE then -- months mortgage And for to initially can again, program, loans they been indirectly governments government put to that allows could for borrowers extended participate six impacted a for additional that the

have foreclosure-related as scenario where So But referral, think both a from referrals a year, anticipate first see moratoriums the start into in this of increase large into to don't we we'll of been to is period those going that, quarter terms happen, to forbearance next what the of we impact maybe otherwise seeing is when will an get end, that until year, have pickup quarter we start come referrals. you I fourth expire. these might related and

will increase If consumers is there the still unemployment past pay to to those able should the loans, sssAnd not on begin. If potentially are end relatively fault is unemployment going -- their process payments is. mortgage, be unemployment working, to mortgage those their depend then of they where period. be and may think modify I the amortization lot's be that their on a tackle able should to and or due to higher are people low, able people

in very So short temporary cost the -- way, able referrals. decline manage we a Rajiv, we've to adjust term, the be approached want our to be through we business in believe we look sure base will our make to quickly it

We also growing And make be that remain to foreseeable We we for a ready increase the to support going make keep to also origination sure we you want anticipate business. and interest so want our we we're could are getting for future. capacity low sure going for got rates we've capacity across what's to a in believe as sure to products and into that large be anticipated we innovate what to next go want to able delinquencies make the be continue growth. year to

Rajiv Sharma

understand impact certain not And really you? then If -- or and to just about does ability to the want that advance how help. are is there their impacts servicers to if I advance servicers Altisource? is a find payments there hard how help to no payments, they that and

Bill Shepro

Yes.

So in at cap servicers fairly rapidly, but place changing is months. advances programs four put I environment has the the think, government that

So plan, the four get has servicer there forbearance what to advance, if loans the months. It's are would those after with for repaid that advance servicer still to obligations our under four that at stop forbearance a goes loan on advancing unclear under but -- going months. point is

was So with is and to a, non-bank obligations. our advancing I think that help bank good both support first servicers a step

And Rajiv be government it's a programs so, I to don't because necessarily don't of on think course, impact cover to have Altisource, the securities. still label private direct seen, going it's

question still historically those I but historically, handled, manage obligations that's an advances has how will I well. be think very So their know open advancing Ocwen

that And has Altisource. so we necessarily on a direct don't impact anticipate

Rajiv Sharma

Got I question. have Thank just you. last one it.

delinquency goes percentage rates. up in with You just point every mentioned market how your increase addressable

to I $X million and market. it a COVID, addressable to said prior And you $XXX goes it to by billion was clarify just so wanted and up,

percentage Is at the the X every increase addressable way? Am in point XX% rates. up XX%, right? right for delinquency looking So that and increase the I the market in

Bill Shepro

for loans. whole at right. us, roughly market or for loans of each addressable increase GSE we $XXX result and FHA increase label in did to X% was private And products across And Yes. we loans, what basically, a both would those looked be million

Rajiv Sharma

expect first on then quarter, that's And you turn you to things expect or out, the that -- quarter increase volume starts increase of the to course, depending, flow the way start they that -- fourth

Bill Shepro

we're hardest second from impact be the Yes, Rajiv. third the and quarters from COVID-XX. will assuming hit Altisource the

rates to in but delinquency recover, on then and unemployment see to recover in into fully and the start an all seeing start quarter we the then increase will year, interest depending provide sustained We the given across to and continuing won't origination on what we with now could happens to next going meaningful improvement volumes low grow fourth revenue. rates, originators. rates in the we're it delinquency side, And origination the are loan we services

Rajiv Sharma

Got you get so Thank much. it. answering, Thank I'll you for Thanks. offline.

Bill Shepro

Rajiv. Thanks,

Operator

next Kamali with And question Okay. from comes Ramin Suisse. your Credit

Ramin Kamali

has a Hi, taking wrapped percentage in you're remain some of up, today. how Michelle. fixed segments monthly I segment. Services assume in operating other probably by percentage compromise. the trying base month bit sense are And guess relatively wise? the the the Field rate, environment I'm run environment? like back of burn Bill. segment, the me understand Thanks whereas Front the doing or sense current just monthly you like should what's a cost get the a think give I really the more active, call. to kind two Could of then current my at business for looks but Hi, April Hope what to like well. the should I

Bill Shepro

right. All

That's Hubzu orders let's the sale foreclosure the Equator. so to home and business probably stay homes. from being in of and Ramin, right which at the now that's inability most three moratoriums is close break and So marketplace impacted the down businesses,

that anticipating business. that we're So

be about I correct it keep the estimating mind, unchartered improve. wrong to of in is here. it I'm starting least quarters again in down. if then for XX% we're at and truly next And mean, couple think Michelle, I to waters Hubzu me,

guests. And best so these are just our

we not we then it least planned, be bad on going at believe impact as as -- to based the And thought Services, we're be going originally definitely Field April. going on to was lower but be to lower than it's we're

default MRES plans, there's our Field mortgage well businesses well. that in is, impacted. we think holding well, trustee a origination there down real lot from up so And and business, better title, valuation related solutions, unit will Ramin, our that of holding default perform we up reasonably but our estate And reasonably expected. going Services to be and inside are of business And is then potentially than then

the impact, remain our basically year. year, when did we the essentially we a where the roughly, at beginning slightly of perspective down think the whole Ramin, planning cash net the at I you from of are were so to end

so, we're keeping this remain were we about slightly happening And to to see of operations try targeting we we're and in is the next want couple sort on think what Again, to down the cash, at water adjust of when you beginning mind, unchartered from of over to the year. months. where our based going

Ramin Kamali

But for ramp does the of the flat current that of cash assume happened duration to the you to up expect from continues in state business April what that April do or gradually year December?

Bill Shepro

in the some not and we're quarter, the or ramp expired. in will and is makes sense beginning Field So of Hubzu have third the up forecasting that we're there some because moratoriums be Services in quarter, foreclosure a pickup -- fourth that second in forecasting

Ramin Kamali

to that down, segments, are in Solutions, how let's then about relatively to lift guess declines say XX%, Hubzu, XX% particularly offset Real parts flat. it? the other to business of from to is down Is if have the Mortgage marketplace is related I Service think origination So capacity I think about and Field so the about Estate from

Bill Shepro

wise much, me I the me down, be as -- percentage think the and but not estate for growing Services the much nearly we'll on increase will Hubzu from benefit solutions then the as then Field down year and be origination down, largest will -- one real but business. will percentage basis. decrease Give second, let and yes, have but not mortgage

Ramin Kamali

Thanks guys. All safe. right. Stay

Operator

to time, Bill I'm I no this Shepro. the now at conference further like questions showing would back to turn

Bill Shepro

you safe for joining and very Thanks Thanks healthy. much. Thank for support. your the Please stay call.

Operator

this participation, conference. concludes today’s have wonderful gentlemen a your day. for you and Thank Ladies

Altisource Portfolio Solutions (ASPS) 2 May 202020 Q1 Earnings call transcript