Earnings call transcript Q3 2022

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Operator

Good day, and thank you for standing by. Welcome to the Altisource Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

And I would now like to hand the conference over to your speaker, Michelle Esterman, Chief Financial Officer. Go ahead, Michelle.

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

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

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

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

Bill Shepro

morning, Good Michelle. and Thanks, joining thank for call. you today's

by I encouraged X. with our quarter will We Slide performance. am results third begin and

reducing improving margins, During costs. the growing and sales quarter, we wins segment focused on

on business and year-over-year with and growth. restart from segment the Our adjusted XX% default the revenue XX% Real to benefit efficiencies service Estate Servicer EBITDA growth continues operational of

in annualized on Origination had that the Despite decline better adjusted million than and of origination represent our EBITDA difficult we revenue compared a reduced market decline, strong revenue segment was origination segment's basis. second sales year-over-year the quarter estimate market-wide revenue Our $XX our and volume. loss to Origination we the modestly stabilized decline wins

our the costs our by marketing the million business declined to the cost or XXXX the sales $X.X of from XX% Pointillist sale and Corporate, business, over of of employees initiatives In the assignment and third quarter segments. savings

quarter We compared in our cash. We the declined believe second by quarter, or burn up cash ending the $XX.X in million $XX factors. with anticipate working million In third other quarter cash ended $X.X continue $XX the to based will and decline on of to the million burn fluctuating our the between million with fourth XX% or quarter. further and capital and with the year down estimate cash

the from of receipt in includes Pointillist estimate anticipated refund in fourth Our quarter approximately the escrow million and $X.X indemnification no funds claims. assuming million U.S. sale, $X of taxes

our X revenue we of adjusted our Servicer and Turning service and profit improved gross third segment. EBITDA to grew and Compared the XXXX, quarter Real adjusted to Slide Estate and and margins. EBITDA

margin cost growth September the of relief of beginning delinquencies revenue following greater mix and the the improvements of the expiration recovery the of remaining savings market, reflects most pre-pandemic on reflect measures. Adjusted XXXX products Our restart and XX our initiatives. scale, of borrower foreclosures pandemic-related EBITDA and December default the

default-related the first While the multiphase phase in of is default are we improving, for only recovery of we believe performance that our our a business revenue.

by In revenue X business I addition is factors. and Altisource's to growth sales default which shortly, wins, cover will marketing market driven primarily

of First, starts. the foreclosure number

foreclosure from sales. starts REO foreclosure to and timing auctions the Second,

convert the starts Third, ultimately percentage auctions. that foreclosure foreclosure of to

Beginning starts on X. with Slide foreclosure

trustee solutions, including were title, than starts pre-pandemic X of XXXX, field For higher This our growth same services. of in months XXX% period and the primarily driving the XXXX. valuation, is foreclosure first the foreclosure

on pre-pandemic delinquent timing the returns for start they increase this the is and to for in period initiate revenue expiration same as post opportunity the We XXXX. XX% are XXXX still due market loans, foreclosure foreclosures the growth of foreclosure the significant to Despite in represents believe levels. starts, servicers moratoriums below a to

to The and auction X early REO and another sale. higher takes fully auction factor that services timing REO. second X in early XXXX REO later-stage environment, to from sales estimate We years XXXX and months timing, to to market our market driving won't foreclosure that Due typically until sell to today's Altisource's foreclosure start late from foreclosure growth it is revenue foreclosure foreclosure starts benefit on this default-related the the average convert we the anticipate XXXX. management or and starts asset foreclosure

of the X foreclosure rate market inventory third the sales. to conversion foreclosure Turning to and factor, Slide

foreclosure For in of than growth foreclosure the XXXX than starts. period but in same months the first lower higher XXX% the XXXX, X sales XX% were significantly

the We reasons. foreclosure rate believe X sales as grown having starts at foreclosure same for

First, reach following market, historical the starts, foreclosure and of are norms. to sufficient the the restart age greater in a of foreclosures of loans default had haven't XXXX XXXX from time percentage foreclosure average weighted

distressed strong interest couple believe have sell appreciation from the their their we rate or price or foreclosure the environment. home historically homeowners to due past over sale able the years, to Second, before home of refinance modify been loan low

to leaving rates doubled to the view approximately industry fewer October home many values, experts with values are more homeowners than X%, since distressed options. seen have home reducing Because decline, is XXXX. to levels affordability not interest of we going directly affordability Recently, to that correlated share

As title, including values, season further will brokerage asset higher. growth and this conversion business. our foreclosure and or return rates XXXX anticipate to our services become we should home for interest rates and auction into solutions and support higher-margin believe newer valuation, field drive REO We levels management, sale foreclosure rising that foreclosure auctions priced

is expect delinquency more factors to pre-pandemic the to environment, addition looking above just XXXX X we rates discussed, rise In which levels, services million. for increase exceed economic I for pre-pandemic levels and every addressable our foreclosure should sales would in default XX-day growth and about the segment. likely Estate estimate our for this in $XXX and market X% starts Real Servicer rates, We support further by increase delinquency market would

While Altisource's and revenue the predict market and pre-pandemic to adjusted market, what to be recovery EBITDA the manner could of default rate timing default of the run returns it's we after the environment. the slide illustrates difficult believe

of XX normal, used returning scenario. the market Slide arriving held the XX adjusted Origination applied margins XXXX from origination of $XX the constant impact on we to Under rate in the last run isolate service generating revenue. months default at $XXX To this revenue. revenue summarizes assumptions and adjusted this we we for million to the from segment estimate scenario, the EBITDA million EBITDA

higher. we above course, delinquency Of rise would earnings revenue our rates levels, pre-pandemic and anticipate would if be

of default, we the on focused recovery sales making addition Estate are pipeline segment Servicer are and growing progress. our from In the good to Real growth and

onboarding the are annualized new with During $X third million various of stages business in and on we of an estimated a stabilized revenue quarter, won basis.

currently an addition, In annualized basis. and million is our on the pipeline stabilized midpoint sales $XX average weighted of

Slide last to quarter continues our compared year by The volume and and XX% Turning compared by XX% to MBA with declined forecasted quarter, X origination is estimating second challenges to that the to segment. year. to market third face latest origination Origination report decline origination volume the full

than money. with we was This in that outperformed that by market second market as traction offset the This other significantly Compared our Lenders gain business performance the partially performance line decline the our market. members most segment's revenue for designed solutions was are the with quarter, better to Origination reflects largely save One origination businesses. to our of from help

them that decline have purchase help looking increasingly in Lenders volume originators to the solutions to attention origination margins, costs One With and do reducing their turned and are so.

an As pipeline average you the side of on slide, in $XX sales at annualized a we midpoint. business the million stabilized an annualized can with million won basis quarter the the of the see new estimated quarter, left-hand and on weighted ended $XX during

translating Importantly, wins we to revenue. progress these are making sales

stabilized in see As an related on the $X.X you and basis estimated these business recognized revenue million have $XX have million we in of can XXXX won to wins. new on a slide,

onboard we to there's believe realized. these we scale be As and additional significant wins, revenue

the lower also most origination to our results on of While volumes. cost we the addressing growth, sales are businesses structure by focusing impacted origination improve financial

the we segment we with from cost by earnings discipline, from adjusted to cost reduction continue or compared growth quarter revenue believe decline result, to improve. We initiatives. despite EBITDA the should $XXX,XXX segment's a benefit Origination our As the and in our second as revenue Origination reduced loss XX% service

with Finally, savings and sale the we continue down by in to the segment million to employees marketing the $X.X of from costs cost sales third or assignment maintain over XX% Corporate segments. the Pointillist our cost business, initiatives and XXXX discipline of of quarter business the

anticipate In market innovative our growth and of wins cost believe and will an benefit We we and third from to Real adjusted we tailwinds are strong performance segments, cost create return us should our with our benefit building quarter and are business improving efficiency pipeline our improvement. initiatives. our should discipline are help from Origination value business, combined we a substantial and exciting initiatives. Estate positioned we stakeholders. we with company sales sales for results the and Service In continued business, corporate, encouraged and EBITDA and The believe that for savings well

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

Operator

from Northland comes Grondahl Mike Securities. Our Instructions] [Operator with line of the question first

Mike Grondahl

Couple of questions.

us normal sales you and of First during the about what when know did what of today you was one, conversion Bill, it rate pre-pandemic the rate, foreclosure was were say those? Could talking level you let kind levels?

Bill Shepro

the slide? Michelle, Yes. you Sure. to refer Mike can

Michelle Esterman

X, Slide Mike. Sure.

Bill Shepro

And can some it provide was is. what and you maybe what at right commentary it

Michelle Esterman

Sure.

of is the graph foreclosure about about XX% see period, a see So of And XXXX percentage left-hand quarter. can at per to -- X% X% side on X, percentage beginning at reflects green you if Slide look back inventory foreclosure quarter. today, in by sales the XXXX, of as the was you the the X%. you what And can percentage XX%, you're line

Mike Grondahl

sales -- And percent inventory. of that's the foreclosure that just of it. a as definition the beginning Got

Okay.

Michelle Esterman

Yes.

sales inventory, the of are of foreclosure versus beginning number in quarter. the at number quarter the that of the homes So during the beginning

Mike Grondahl

it. Got

So about level at the of... running you're half

Michelle Esterman

market, total the yes. is This

Mike Grondahl

Got it. Total market.

wins you I million $XX How categories? And on get of $XX you And release, to million to revenue it revenue got in $XX it both estate side. Bill, these that take Okay. about in think annual million sort does to $XX of then real the this $X.X and having of the of Origination long servicer million. talks mentioned in originations, million; of press annual

Bill Shepro

So that's a question, great Mike.

on to focused converting wins very we're something revenue. And the is

hold revenue $XX but don't year. customers. about side, are this year can these We're from onboarding servicer generated about exact and wins in worth numbers. tell a $X.X million actively had those the of actively very We have million very this only to me And these of One. we're lot I on Lenders wins wins onboarding, you, So of

X X alone. of I or onboardings think we client October the month have in

the from those customers customers' onboard million on to we over go those Origination million as those then run officers, to, rate so we and $XX And expect loan the ramp $X.X the products would side. time, across

And side, on then some Servicer deals. the We've won same thing.

I you dollar on clients. takes but it think side, from than a transaction onboard amount the of to win is the when the wins the you time origination when smaller

for example, household business. Services So month Field our just in onboarded a we name X a ago, or bank

before So it the will take expect. we revenue fully time ramps that client to

Mike Grondahl

fair. Fair,

Next, in X release a there's Can that a Walmarts. couple of is One, you And getting press or think, I how Lenders Altisource? opportunity? know. been that about affects just don't -- describe I

Bill Shepro

Sure.

our as and the Lenders very Walmart years bit environment, loans in So to stickier help retention now stores education discussing we make their which -- in in customer having environment. an One funnel, the this provide ways particularly members a with provide of more dialogue opportunity couple customers, probably for to we've been potentially tough of of a to a a where terms can Walmart's little origination top a couple to drive and of

program between over a where -- the related members leasing money essentially in a we've us And time, be all to pilot that and putting to sublease in of created members. Lenders And but so Walmart we're over making we'll relationship the and from sublease lease for we, providing One. our place space services we're turn, the time now, in

we've it. so far. so stores about feel And good X We opened really

idea of of their component loans the demographic Our grow able that to very to provide excited. to and members being are like business. They that

over And time, into a we're optimistic could for Altisource. attractive so meaningful our that members income program cautiously for of One and, this generate turn Lenders

Mike Grondahl

you're you revenue foreclosure become Got service you X-month X and just marketing it. about the and And did inflection is that first maybe comments, hoping sales beginning And in then thinking? I then sale. Is sort your actual of years the 'XX? second that of starts that then hear right sort 'XX, half of lastly, current half talked in

Bill Shepro

Yes.

half first starts this compared of have foreclosure about to think those I all for So increased, that year, the at XXXX. least

generate on to foreclosure the services starts. starting We’re early pre-foreclosure those

a states, short X roughly work or may a process. the foreclosure those Other of as take X years, states, some years over process be it months. couple foreclosure of the complete it couple through As foreclosures as could to

the loans REO. convert for get those X another and takes then to way that But to end then months all to sell it the the REO,

some of highest-margin process. so take end And at place very that our the businesses of

substantial So XXXX. businesses starts, foreclosure increase we from until in won’t our late benefit the highest-margin in

some a seeing benefits, benefit We’re modest now.

Operator

[Operator comes question of Instructions] with next the Our B. Raj from line Riley. Sharma

Raj Sharma

sort to of the level amount on of understand since levels. that now? cost XXXX should then, I at know savings cost apples-to-apples, look how different First the in the and when cost And at from savings, we levels, and the plenty know just look been XXXX structure I inquiry cost wanted have of we have is I there savings that changes been there to

Bill Shepro

maybe the bit. reframe a question think, little I just Raj,

what improving across of business them. think very the be we're focused service margins we across I same every but XXXX, at seeing the at level provide than unit now is to you're not or necessarily most on better our

to of last and we've we're a also where corporate pretty think, than flat, already which the want reduced lower keeping which corporate we inflation costs, say relatively And so the -- environment, in is XXXX. I over were they on a significantly substantially And are but in flat -- is we've good outcome. the years. couple costs high focused don't

cost a savings, unit, quarter. in still we the around In done fourth of lot some to work do have but we've work more the business

you'll were even to think unit business, EBITDA continuing business Estate flat. we're I our and see if in be Servicer work improve to and Real So our to our revenue margins

Of being depends course, revenue a but equal. all lot on things mix,

the it quarter. quarter, And we significant didn't in third late changes Origination in the fourth in so made was on we full quarter. benefit side, get But some the the third the

earnings some Real quarter in make partial from and the seasonally fourth us, be benefit from that in as in fourth roughly slower as be expense fourth we is quarter Origination think the revenue slightly flat changes savings quarter will a be adjusted but we -- will and the segment our normally benefit the full down, our better will segment while Estate will So period to EBITDA maybe think get in of Servicer we we for quarter.

Raj Sharma

Got it.

your is when XXXX a X, Slide on So on you say scenario, would rate adjusted you a that EBITDA show improvement margin, -- XX% run significant from levels? Or...

Michelle Esterman

XXXX. look And to XX, a you at Raj, if Slide you can see comparison

Raj Sharma

Right.

Okay. my question scenario That's helpful. then helpful. run That's very on other the on Slide was X. And rate

do the mid-'XX? achieve to that segment? that scenario expect by in the heard? you Is run Is when So Servicer what I rate

Bill Shepro

Yes.

thinking on that as it, to about we said I assumptions what some that think we're I the predict. XX, when it, you Slide And think how very on a call difficult going the spend time through So sense is to get with it's you'll all slide Raj.

to XXXX, to rate. But you would the you to look. take -- a as be going some at be fairway improvements middle process, We approach of talked how terms tried in terms I of based of of in margins revenue those on the about. we per our in We've get to of think predict. start tail It's more we're end used we just to a delinquent of normal hard running certainly, could terms loan, this

trailing margins. Servicer get see to and where better Real You flat the we operating were. We Estate were business to could and is -- of they think than Origination assumed compared we will XX XXXX, very months XXXX our our margins

really isolate the business. So being the we we're of to performance default I tried think --

And in baked we bit these of the would there on have back side. a if an getting well, here, and were recession, different Origination then of sales sort of there's here in an but drive think a little levels, XXXX stronger. to included to both course, numbers be look the sales to opportunity. for there's Servicer as opportunity more than I There's growth

Raj Sharma

Right.

so business 'XX. will in you're on And said, kick not late-stage Hubzu, scenario, probably REO likely that higher-margin the really this sales rate run you in including the on

Bill Shepro

look including portfolio are a we assumptions what we couple normalized down coming over Ocwen's making no, on a around years. basis. We're more Raj, would like of

a this providing exercise. approach on look would -- we the we're portfolio work to assuming like we we're we the But we sort a in be how is normal. smaller we believe potentially on So basis are conservative rate what of once run hit

Raj Sharma

Right.

run Okay. to that in What of pipeline side, line revenues. you And sort flat when origination rate then scenario does a sales it? you Origination did How part into I lastly, on able convert Or see when you'd that the the entire you sales your pipeline? fulfill sales? stand the say Did the -- or time to mentioned? say be is has of

Bill Shepro

Sure.

is far there’s so from and the greater origination the run $XX income. we us the to the wins origination million, market, And So $X.X XX think Obviously, the get close ambitions with provided cetera. big lot million months. $X.X to this roughly call we that generating $XX the this the hopefully at to of on that if for trailing that. only information We default year, volumes million. of normal million depends A just assumes rate sales et opportunity a market much look on you equal have than

will I the longer after that of take it of year But could the lot in rate, sort a general, I’d But maybe very takes our we’re before winning long earlier in and a event new stabilizes then on than it client if the be you we’ve onboard will as products. at run customers back any that to months. originally X about some think onboarded another newer learning so deal, course, have of But taking certainly finding revenue. year, it we’re more is go to within anticipated I we believe to that. And time the like generating of proud how

Operator

[Operator questions. Okay. remarks. more back I would call like the to Bill Shepro to the was you. Thank over That closing No for last Instructions] question. turn

Bill Shepro

those a on in business sales exciting Thank moderate on very the side base. and us cost opportunity operator, our business Origination of We growing have to call. default thanks good the and progress of front our attending more Great. tailwinds believe we side the a you, on in of with

your So we’re moving our favor looking Thanks forward for well. to market in the more time. as

Operator

in your program, Thank you, participation conclude everyone, for now you conference. the may disconnect. does and today's This

Altisource Portfolio Solutions (ASPS) 3 Nov 222022 Q3 Earnings call transcript