ASPS - Earnings call transcript Q2 2020 | Altisource Portfolio Solutions S.A.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the Altisource Second Quarter 2020 Earnings Conference Call. My name is Brandon, and I'll be your operator for today. [Operator Instructions]. And I will now turn it over to Michelle Esterman, Chief Financial Officer.

You may begin.

Michelle Esterman

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

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

inherent to statements, on the economy future communication also difficult addition us directed of the of to other impacted by contained forward-looking describe review associated as to results. and factors that future referrals to Altisource. and Form our in slides statements result another statements XX-K section release XX-Q, been or pandemic service Please COVID-XX factors state uncertainty is lead company's uncertainty XX-Q usual of update current new and In the its Form predict impact undertake service risk forward-looking future as in potential on obligation provider. makes Altisource The the the We the to the these and investor impact events a information earnings has first to build quarterly may XXXX MSR of that no as Ocwen's to with the by services from events. quarter move Form it well recent which Altisource an different extremely it

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

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

William Shepro

balance directing joining on that quarter move provided communication will thank the to Altisource performance I reduce and earnings. our is operational and another to to our the Good of you vendor. year, COVID-XX MSR cover This higher opportunity countercyclical second brief impact service preparation and capture it a delinquencies discuss certain and Altisource including an today's referrals the costs Michelle. historically to morning, Thanks, internal and financial the also us summary to plans of grow I from our Ocwen's and for call. from morning, investor objectives our provide to financial will for

is in As a over pandemic, initiations, quarter result second the foreclosure Despite industry-wide and unprecedented XX% loans challenging same the to by XXXX. XX% of by with seriously approximately the business delinquent an Altisource environment quarter and facing foreclosures of XXX% period. increase down down compared the lender-completed second

Turning to Slide X.

revenue various provide million million quarter was reduction was partially programs, second foreclosure the adjusted have pretax our to loss anticipated, state As measures offset support loss and March, the borrowers, cost taken of reflect of in EBITDA Since adjusted $X to national from impact COVID-XX, federal financial $XX quarter moratoriums. in $XX efforts. our full mortgage residential forbearance and eviction million, which by mortgage declared and emergency governments including of

to June stay the related rate these quarter, low-interest our and our historically from our from business Strong only across during These revenue offset For success rebound home varying reduced most and deemed lengths development a businesses for declines. quarter. origination-related environment a in efforts sales, growth home partially services restricted essential. states default those time orders enacted and the significantly measures of at referrals

our quarter driven of strong can customers other this RESI you XXXX, and to Slide worked and difficult Ocwen, primarily revenue reduce acted the business employees. in offset our pandemic. second higher was the customers quarter to NRZ lines safety to our governmental core In from by the X, related from a in origination-related impact costs, second by mitigate X% of quickly our than on our of than businesses, some we As decline growth environment, see default-related businesses, in of actions partially supported to the

are and our excludes the in result, quarter of from cash in working a our that equivalents. the home, majority $XX Keep we mind and are preserve vast cash marketable with this As million staff securities. cash, able ending to

the being service providing balance and unspecified and businesses anticipated for the that on the that excluding a or over address that this lower with earned services from forth brokerage Ocwen of estimate advised to timing cooperative it either from revenue advised compared $XX with was matter moved instructed it services servicers that businesses this continue. which Ocwen of to the financial XX% press next cooperative in refer prevent where at an to us agreement represented and short portfolios the utilize actions decision in does beginning owns pressure provide temporarily invested. us moved MSR NRZ, our detailed as potential NRZ the please our We are investor and provider, we agreement The instruct the discussions providers service change revenue our of to Altisource impact to prior direction portfolios. services to dates. forecast XXXX believe assumes of delinquent move recently, to loans. For also to to as developing pursuing implement difficult periods, Ocwen, NRZ, Ocwen more that that our to another revenue revenue quarter any the to and of our to the field in address don't that previously certain today's or service a currently foreclosure with intends million predict have our from medium-term $XX has anticipated reserved future foreclosure programs portion all service More field We additional we description are be revenue We estimate moratoriums To moratoriums, Slide forbearance Governmental $XX provider auction on it first these for agreements this believe MSR to of second is cost-reduction conservatively to than we provider of million change this half XX-Q. lower this not generate million. from NRZ couple certain release we measures. the services, Form service same Because The brokerage Ocwen, months. of performance -- investors' referrals approximately to of plan investor July, brokerage the field Ocwen services that XXXX default-related NRZ. service REO margin We other We set different business. which the these a in investor revenue. and from X, is we extension majority in eviction and referrals is violate anticipate rights. with are

MSR impact our I Altisource to there As see cost-reduction current and $XX million and anticipated a and for forecast discussed to amounts these from XX% the anticipated the XXXX adjusted growth measures. you in X, planning, of are $XXX million, generate we loss revenue includes and our XXXX the of from to We opportunity pandemic, investor upon revenue the service margin margins from adjusted EBITDA believe million $XXX Slide EBITDA on that forecasting of referrals XX%. just beyond. million improvement can Ocwen, service is of substantial to based $XX This

beginning forecast. our environment lifted. programs. as and set $XXX ready in for we increase every addressable despite to the by materially for services by rates, real the in it we result volatile our governmental mature rather market greater actual from recent these once for is that of to million. believe Based not a customer relief our default-related of the associated X% the headwinds, $X.X for market that and governmental the a addressable news, billion. begin as XX-plus mind we temporary well In these delinquencies differ normal comprehensive the market, on We the and very over the estimate are we addressable Ocwen increases could attractive pandemic a temporary results is approximately of the year, near-term higher should lost, uncertainty our there with Keep services With businesses been benefit pushed the and from grown environment have in that the state cause base, opportunity are since programs mortgage Given that estimate estate market positioned the to growing the from growing business delinquency increase that has off our default has capture delinquency expires. strong Altisource that the

Slide to Turning X and business objectives. our

the a tremendous services of As preserve default-related the businesses. we to preserve balance objectives: year, grow continue look objective to and longer-term cash; origination Beginning for to primary businesses to with third, position upside; have our cash. second, first, our medium X the we

business model is to Altisource preserve has environment. structure. liquidity priority highly given top our variable a cost with capital-light Our current a

cost and a This good to developing for XXXX Altisource a objectives. when position should This discussed As objective. our grows. we me are I second earlier, leave default-related our program achieve demand returns our services to reduction in brings financial

Turning XX, default-related our to Slide and businesses.

optimistic are about the businesses for challenges. short-term long-term these our We despite potential

shown mortgages million, was day number The pace. since high are delinquency XXXX. the seriously and delinquent fast January, remains According highest National to increased and unemployment at the $X.X historically early rate Slide $XXX,XXX As mortgage Black on at X.X% June to delinquency to unemployment a in in the XX, of rising from rates XX-plus Knight, level X.X% rate compared XX%.

delinquency will feedback extend a receiving the efficiency and enhancing of from should to and if unprecedented end subside. improve look and the strong In higher relief to rates foreclosure technology next our the unemployment services drive This elevated, is in field of we businesses our to line in began. they As ahead, middle year meantime, default-related levels are of pandemic are believe the before our we the likely reach our we Hubzu business our very the were with we level clients. substantially much marketplace. remain are of rebound than toward are And eviction the

growing third businesses. our to Turning objective our in origination

a have can you robust origination strong suite Slide business benefited that a we XX, from solutions activity. of rate low on and interest development environment see As

large Lenders XX we select share converting businesses wins. provides our tailwinds, capturing greater and sales opportunity on by you update market with an One cooperative the mortgage wallet our pipeline. a to addition In members grow origination-related Slide to sales have from

to and We be positioned default-related grow cycles. withstand market We our are is as we confident that better in company to varying more-diversified continue businesses, Altisource's as long-term that economic and potential. believe returns, a stronger originations-related the we'll

cycle. efficient to loans once up and We normal default begin life an through questions. adjust benefit should Operator? the scalable move the the model open to that for and business current have environment now tremendously call I'll delinquent can

Operator

Raj B. Instructions]. we [Operator have Sharma. Riley, From

Rajiv Sharma

in first the on -- of timing loss which that any is MSR, had the quarter. -- -- that already of alluded to change Any and in sort more NRZ-related, The you color any the it know sort of timing across across NRZ business that the when -- and mentioned of entirely is I phased on services it's out? default marketplace. also, impact is color And you

anything from to you quarter? alluded the what had in So different first

William Shepro

Yes, Raj.

earlier mentioned of our by service If excluding you is brokerage XX%, business we for that yes, first not estimated about was NRZ in half we that the agreement, year, recall, the think, impacted the I which the cooperative revenue, revenue. this,

not this in as we of those Ocwen's months. the work of the We're July, the started redirecting in marketplace we couple my in to the start first about in so from below the year. will then having there's before And remarks, For with year. all timing. company. inspections over the services none it We're next of not we're which about field in that aware moved business. of REO-related conservative earlier -- slightly timing that some said again, we is the believe But XX%, -- do an represented Altisource think of And other year, beginning services. Guardian, NRZ-owned aware the Ocwen that we the move of just in prepared From we to a July. And about the aware of half talked we inspection NRZ activity, it's what we forecast which the assumption, timing. the services, very And make work to moved perspective, conversations is next impacts move so believe we

Rajiv Sharma

pace. on do the you end? think And think incredible that think moratoriums then And Any flow of time through -- the when do sort income do of statement. lifted? the on they moratorium, serious you an are and once do are the lifted, line they delinquencies the Right. you then when your rising when you moratoriums When color at

William Shepro

payment. governmental million for the can late program was at any the forbearance think, that year, those making extend that a end of end in the be today, were I of to have the March. expire So was plans place, were foreclosure extended have August, the top necessarily And it put On up to the don't form you of borrowers borrowers the close some of forbearance have eviction. to where to program, June supposed you moratoriums, under originally and that, and to forbearance in X both

has put basically that an So halt. absolute

think you an internal foreclosure think like rough foreclosure And completions or the starts And delinquency of is estimate, been environment there might about probably something year, a XX,XXX low environment, XXX,XXX than our starts. if quarter. historically in you about the were XX,XXX a just low even less historically under of and second quarter. so And estimate -- So like quarter completion. XX,XXX I each this had a last -- in you substantially this had probably that even foreclosure year,

at you're the In a good that's rates bad historically the is business certain think their interest refinanceable. you we revenue about today percentage that's today. have like all case, originations what's dropped you hear of And not large good lost. contrast refinancing but -- our to refinancing is rock. news low actually our if for space, activities. these with But you so it -- about a very of the And levels, news When Raj, origination talking not a pulling The have you business, servicers through future in book news so here the building, us. that's amount the and it's

happening not the is receiving would on this the moratoriums. from on, delinquency massive we're So and what's of in benefiting we rates, that. because working seeing top business that, yet that increase we're normal you're then And be of Xx not

hearing then building those believe the as a are that's the nothing least although to business question further, has we We're of by of be then the end Altisource. to decided the moratoriums, So could forbearance they tremendous of future will roll And clients your mitigation And anywhere loss possible, loss plans, and right telling pipeline And at August. very a the then and between off to for when, extending been as answer it's from which extended loans now, sometime XX% those XX% year, if meaningful go year, that to next March for through forbearance they of start are our Altisource. mitigation, And late next summer. go will some think of government. generate may will revenue us process. we form

Operator

have Securities, Mike Northland From we Grondahl.

Michael Grondahl

quarter forbearance due the the situation? Bill, sort second any revenue estimate on of missed to

William Shepro

-- business half quarter, we actually Mike, a in than performed hit Yes. And May. new inventory related of lot We're the March, really bit to have so inflow, second better as decent-sized have second a not because planning little in April our got getting COVID-XX. an came a of then inventory. the and The of hard market back. we REO, marketplace we have a we still but

in home more we know So not to in what in would the more, add of compared would in terms Michelle, Mike, came I second the got if by really at starting I that. revenue as you quarter least be sale But back. to strong say a anything normal market are environment. to June, if don't off have probably we XX%, that total

Michelle Esterman

I I that's fine, But yes, Bill. think

Michael Grondahl

dollars Got on sort it range of targeting expense possible kind of you And have of can Yes. of you're the Do -- then you dollars? the total areas of out? is it. you the a a in pull to few sort side, think

William Shepro

Yes.

last worked million? that end initially it $XX to year? was we if million the if Michelle, our run to So wrong, rate $XX plan from take you going I'm Was me had correct remember, on down. a of

Michelle Esterman

Yes. That's right.

William Shepro

we XX% And about additional when into Mike, then news got crystallized the going that moratoriums on developing and we're already that that going had specifics, in I plans. for very, we've the risk that us planning in lower-margin on And get of think, to don't services, sort the a actively next of Most expense. time. very been margin talking which business. If But don't an same some XX% We've for working incur about to variable. so are think to year. extended, like environment. that is related started a our services. to the field other And costs the probably EBITDA our from And receive our we XX% one what's a XX% margins will some lot referral, business we businesses, in of Ocwen applies of was without started that to plans all that Mike, Mike,

then of terms go looking plans. of referrals. what automatically anticipate coming. business we we're support -- the to services the and Corporate goods in working we outside developing in costs, unrelated And unit company all decline that, a at we're to everything costs, need discretionary our at our So with that -- looking basically spending, it. beyond at And growth down we're

Michael Grondahl

should the -- really XQ, Got the were don't be going would had and so the effect it. in get forbearance we it. expect is inventory you XQ, sort you much It Got of most when XQ you is selling because but to have inflow. stuff

get that's going that to So you're where fair? the hardest. hit Is

William Shepro

Yes.

So we're working hard.

in happen that not the year, borrowers if again, those half uncertainty we been get because presumably some -- is Mike, and extended. what's of exactly know the from would a of moratorium place. also lot have these are impacted second going think forbearance moratorium sure because to the the we to extended don't going have have or plans when benefit So in moratoriums We're there's of

think we're there's caveats EBITDA we vendors half low of But -- happening know as working for but burn predict planning again, it keep both with to trying that even of other with very, the the from the second our the timing based don't that on lot very as of hard half year. break to well the uncertainties on, on of the the what's an savings that a possible caveat, Ocwen to internal what's with and close year. around and so as makes And going as moratoriums. hard breakeven. the And on perspective, get to NRZ's we're we're lot we'll now this to of behalf cash So a right working cost basically to move second I

Michael Grondahl

you then you with What What legal hoping Sure, You Ocwen? last right? said to question. discussing, And What gain? are just with were talking are you kind pursuing are of your sure. them.

William Shepro

sure. Yes,

by start very we're with as very Ocwen or a there's direction dialogue more -- constructive report, soon. robust hopefully, relationship now me And with by a have want but let Ocwen. Ocwen. more having Ocwen. NRZ So this having resolving dialogue this these constructive with relationship right around saying I working very But to a strong good we issues. And to we're We're to we by very we Ocwen regarding the a having relationship, don't get details, maintain into there'll NRZ to working will. Mike, with report be move and

Operator

[Operator Instructions].

Sharma. a have We follow-up from Raj

Rajiv Sharma

Michelle, -- one know breakeven. your you comment you're and just follow-up liquidity Bill, your can be I to how just on on best said trying you

can of there's to year? comment on ability change able volumes and debt to this your your in you business levels your to decline no any next in So withstand ability -- cash this, up -- obligations coming and be

William Shepro

Yes.

ago. I the done and in our the million. cash million. with It over So planning $XX based $XX I about we think days a Raj, quarter we couple looked ended at liquidity, of forecast, our was current feel, position feel we good we've our on

million, business. the If cash a on continues another strong. to spend $X very, capital. capital-light I as you the a think So spend very probably of estimate. little $X.X know, year, rest reasonable be we million And that's we're We

at we're liquidity liquidity. next very And next year, of So for when those a liquidity to then excess levels, an flow Raj, cash plenty It's debt last loan. our generate cover of our service plenty year. feel you our planning loan. look on talking covenant-light to and our We we have debt EBITDA we service. cover There's about good our and believe excess some And the cost. point, cash about

excess certain during percentage cash a and debt-to-EBITDA above doesn't there's the to but XX% then level, XXXX. that that covenants, until period net of if generate April and certain So mature used the we debt, a loan is our XX% no flow gets reduce financial of

Rajiv Sharma

No amortizations?

William Shepro

There's amount amortization. a minor of

amortization maturity. I is think between about and million now $XX contractual

Michelle Esterman

Our doesn't amortization XXXX. next event of March until occur

William Shepro

Yes.

we've growing this stronger, feel that believe think our developing got good very company that rates, more has we're can the we as we delinquency plan been deferred. So very not which about good a but the positions lost a advantage take Altisource And that revenue we diversified, liquidity. fast-growing of

Rajiv Sharma

you And quarter, one servicers. on some question new business new servicers this just added any new the last wins? The also,

William Shepro

Yes.

their for month some We launch programs and to There's going we're a agreements continue forbearance deals in to win business with banks to to having support we're launch X several that's that bank in marketplace very top a we're We're so. the them pipeline. doing related or grow business. close to our going September to nonbanks with signing and

return, additional and when volumes customers, we'll have from that. so should So we benefit

to we're grow and it continues the very pipeline, progress. So make with and pleased

Operator

[Operator Instructions].

no Showing this closing it Bill questions now point. We'll further to back for turn remarks. at Shepro Okay.

William Shepro

today's Thanks, progresses. for quarter operator. to we Take talking to Thanks as and look the you forward care. call, joining

Operator

joining. gentlemen, Thank for Thank concludes conference. you. Ladies today's and this you

You disconnect. may now

Altisource Portfolio Solutions (ASPS) 9 Aug 202020 Q2 Earnings call transcript