Earnings call transcript Q2 2023

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Operator

Good day and thank you for standing by. Welcome to the Altisource Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference call is being recorded. I would now like to hand the conference call over to your speaker today, Michelle Esterman, Chief Financial Officer. Please go ahead.

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

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

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

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

Bill Shepro

X. I and good morning. Slide Michelle, on Thanks, begin will

to continues performance XXXX. EBITDA adjusted over Our improve

and XXXX Based better XX% adjusted EBITDA breakeven EBITDA the year. current XX% we on quarter better EBITDA anticipate third EBITDA in fourth for or adjusted quarter than adjusted the quarter full million. the was was for same adjusted and forecast, positive roughly our $X.X year-to-date Second and period

our the adjusted XXXX, rate quarter environment of quarter and same higher Despite second nonrecurring we quarter the first net the EBITDA second loss. period EBITDA $XXX,XXX to estimated of adjusted greater half second expense from remain the XXXX contributed from interest plan impacted the compared in was term to adjusted our items, loans our certain unexpected ahead for amended adjusted For EBITDA year. by an improving interest

quarter services us the year, Second XXXX, unexpected lower in revenue are from X California was in care holds in a of and customer’s quarter and the exit lower-margin the temporary associated than fourth not revenue largely last foreclosures. is low-margin service of the foreclosure primarily the same businesses now default-related to and decline behind business order certain of temporary propensity quarter delays in the believe that those our We lost. deferred customer

Altisource residential market take potential the the face stress. advantage years We financial default continue continues as market to to coming of mortgage in we as see position opportunities normalize the significant what to over consumers and

can you strong, our Wins Pipeline see on of we As manage and Slide Sales continue aggressively expenses. our segments remain in and to our both X,

average weighted the revenue. stabilized pipeline excuse representing an consolidated of basis, XX% second our was Our the the end consolidated million quarter quarter of $XX second me, pipeline of annual sales average second – at the our quarter a on of at XXXX annualized revenue weighted end estimated

other The annual $X million asset per and will $XX.X million new a to We of stabilized estimate will are also Since $XX.X basis. that won generate winning a we across $X client that default July we revenue new on in generate most of adjusted million EBITDA business win year last of solutions. we Hubzu quarter, our business. have management million estimate reflects

wins XXXX, $XX million run at to and of revenue grow continued which from combined, onboard sales annualized we now XXXX quarter, are rate. and the During

cost reduction once we complete. company-wide in perspective, cost cash estimate expenses implement $XX.X reduce annual will July, began plan Finally, operating million a that from we a by to

Turning to and Estate Real X segment. in Service our Slide

lower-margin, impact, $XXX,XXX or adjusted Despite in to the second to last the adjusted XX% this in deferred the improved cost adjusted The of quarter than California estimate improvement EBITDA $XXX,XXX service in XX% of order the Second EBITDA from X% product impact in same low-margin delays. customer’s certain a our exit year. quarter care foreclosure of from partially not propensity temporary now quarters. in offset are quarter a that We and the quarter lower is mix EBITDA two deferred by that and second and revenue margins was the to foreclosures compared margin lost. largely fourth subsequent experienced us believe of measures, unexpected in business those the the in quarter and businesses customer reflects revenue, the XXXX. revenue from We decline to reduction temporary the decline delays holds. We primarily XXXX, the default-related services behind foreclosure holds associated

countercyclical adjusted that anticipate Estate higher driven our segment initiatives. compared XXXX, we efficiency have will EBITDA and to revenue mix by and Real XXXX, Servicer For

Slide to and sales Estate our Moving Real X and pipeline wins. Service and

revenue for business market will recover, In At business. our $XX.X totaled annualized a estimate we pipeline to to that our continue wait we $XX.X new build stabilized we revenue generate the through the of million end basis. in weighted we winning average While won and million once April of July, the second on default our stabilized. pipeline annual quarter,

new we of and to stabilized stabilization I the management, adjusted and servicer’s of will and receive to more provide this portion We not master anticipate in in earlier begin $X asset $X EBITDA. On of to revenue the third One estimate the REO signing referrals of business services that a year sooner. XXXX, on valuation REO the that million mentioned auction, million agreement reach that and middle a in notable Servicer’s brokerage, field a per we by revenue annual wins the if million quarter represents July $XX.X earnings basis, was portfolio.

purchasing precursors in mortgage X. are American Slide Inflation, which financially power. which rates. in has There consumers’ on a reached several XXXX, June to indicators environment could rise are consumers macroeconomic the to X-year high eroded a that delinquency Turning be the stressed,

auto see and As rise lows, personal were credit fixed X.X% remain can interest in May which affordability. graphs, XX-year mortgage on delinquencies to XXXX. have continue savings reducing rates pandemic rates, from and home XX% at you double March in to Average more declined than card ‘XX, the of

from Additionally, have an years with and XXX(k) withdrawal workers IRA, all-time and/or similar XX% in marking high. or hardship early XXXX of a both XXXX, their taken plan, or loan, withdrawal

are we are payment that increased signs behind June, and mortgages In of from plus by delinquencies by While are XX early close mortgage that the day delinquent there one financial to lows, X.X% stress. of day stress U.S. rates are two that believe will economy mortgage increased a by anticipate we under historical borrowers that by remain payments enters the X.X% those May. recession, rise. delinquency Should or number

origination our negative Slide despite origination in settlement quarter a difficult environment, impact from XX% of the In EBITDA, same adjusted segment. we to a with the period X well Turning and non-recurring second matter. $XXX,XXX the XXXX performed better than litigation

revenue from service are quarter the first products. XX% second quarter to making reflects Service and our progress higher growth year. X% customer in compared we quarter Second the wins last onboarding than Lenders the revenue newer was One higher

the XXXX the left are with as quarter market our on help to money. reflects see performance second better from One solutions growth traction the we to Lenders our than the revenue quarter slide, members designed significantly compared gain of bottom our can business you in As same save that

initiatives segment’s Our Originations refi performance was to offerings. performance partially market. the the progresses product performed and businesses, our as offset other with line for which We origination from year newer anticipate momentum, the by maturity efficiency our largely sales in reseller improve

the the growth MBA’s in adjusted we flat to XXXX forecasted generate improvement volume. despite anticipate For to full segment XX% the annual year, year-over-year EBITDA origination modest revenue and Originations decline

Slide XX pipeline summary a and wins. segment origination of sales provides our

strong June at One wins stabilized sales first on and weighted million pipeline reseller our significantly annual revenue $X sales million an on million the revenue as we an the Lenders $X.X annualized the for basis to This XXXX from weighted annualized to related $XX.X business. in revenue up $X.X quarter of in pricing is basis. prospects year Our This of our closed basis. during a million proposals as in sales members estimated the of newer average approximately million recognized is We includes half of of opportunities in from revenue the on second $XX.X and or $X.X million first wins, ‘XX quarter quarter. XX

segment. corporate our to Moving

We continue cost to maintain discipline.

quarter was than in XXXX. Second million quarter in adjusted same the the corporate EBITDA XX% loss or segment $X.X better

same we costs, To lower nonrecurring temporary estimated quarter the to compared For This than period excluding initiatives to conclude, $XXX,XXX foreclosure costs was we reflects cost-cutting in adjusted additional one-time impact second corporate began be EBITDA the anticipate the despite XX% better amendment the and in implementing interest debt XXXX, holds and year, XXXX. July. the our that settlement. expense litigation from

remain our we and EBITDA. foreclosure in adjusted year, to for positioning and positive ‘XX wins significant EBITDA of and if and continue the stronger and our aggressively revenue portfolios in to if to adjusted potential pipeline the strong, California quarter EBITDA to sales to will customers. quarter We the generate quarter positioned we for with acquired in return performance for full from breakeven market third sale, be expenses. in EBITDA XXXX positive number are the and We the by believe holds recover fourth begin upside well and the acquired, year-over-year company Our servicing from third reported adjusted growth revenue manage the anticipate for adjusted roughly significantly

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

Operator

question comes open. your is Instructions] Thank Mike, Our Mike line Northland first you. Grondahl Securities. of [Operator call from

Mike Grondahl

Bill, inflect levels, think Thanks. would going guys. first Hubzu when on the to you that’s Hey, question, just higher? inventory

Bill Shepro

Yes.

don’t changed. think our has So Mike, view I

the because I these it our relatively is to of inventory of through foreclosures starts REO-related. year. most stabilize the is system, now, holding think flat Right work next new our as business middle

through expect that As would through we see it inventory, see would to new we expect work work that foreclosures those sorry, grow. process, – to

Mike Grondahl

Got it.

is revenue about inventory is sort it? if fair also? of it in your middle of that of right to sort next of year assume Hubzu middle way So flex next to the Is inflecting year, think

Bill Shepro

on would to look, in I market we’re very the focused mean new revenue the side I recovering. addition sales say, Yes. on Mike,

anticipate revenue in make market that we as upon our next we new selling we of wins, significantly. we to want throughout And sure place as so improve growth into meantime. think business we’re hard new And rest and winning while business going out the year. there we this and revenue to continue we and core can year anticipate quite From based the is can take our earnings will sales our to the recover, growth

the that REO represents process become and Hubzu more foreclosure work initiations most and for new of our the terms the is foreclosures, growth profitable as business clearly, In us. through

Mike Grondahl

big you win going a like management July, you Great. Are a million – I asset $X I to think said there client, more $XX.X and drive, representing client it’s is million, can out in that million of EBITDA. like something run the kind bit? think, That with mean and there annualized little replicate I looked $X that? of to

Bill Shepro

Yes.

really first of excited Mike, that all, So opportunity. about we are

with our launched, customer very this to We hard working get September plan. in are is hopefully,

other launch should dates, not working like speak. some terms are in opportunities. look In as successful be opportunities, on they this opportunities year, we be That year of would we winning we those other next

we it’s opportunities, for our we to But Hubzu not until similar some services of related be pretty have course, but of you of manner couple more deals, opportunity. – we do So, a growth done, could think excited represent in there. this win a that are the and

Mike Grondahl

of lastly, set savings, you that the me up guess, ‘XX? a just pushing July then for July reduction. talk of kind guaranteeing Is that I $XX.X for margin help kind guess it million that and understand reduction annual cost ‘XX And with of cost the profitability of about kind I the just to and moment. in

Bill Shepro

sure. Yes,

be think roughly right? So, a beginning, $X of month a savings million at is of Is Michelle, things. in I September. of couple One month we that the will

Michelle Esterman

right. That’s

Bill Shepro

the company larger point, at sure – help leverage upon forward. flexibility. market ensure to And we today. size have that want in reflect of a of also very our sure we company, much need make terms one look, to we were, – we the pre-pandemic, I make and significant need the we operating comes for Mike, of we think the stronger And today, market And have I when timing going market back. think it the the operating recovers, leverage timing we taking of as by depending have we on And depending the more costs these actions

quickly. And important to of help so and take proud and team has identify thought those those work implemented step the it was get done the cost an savings us to

Mike Grondahl

it. Got

Thank Okay. you.

Bill Shepro

Mike. Thanks

Operator

question. for you Thank One our much. moment very next

Sharma Raj from comes of question B. next Riley line Our your open. Financial. is Raj,

Raj Sharma

come Michelle, the my you. more and the just Thank holds on were Thank are taking off? to And other such revenues. give in you XQ states? the Yes. on in that impact you they in and you no wanted impact color entirely us Bill Can – some Do and when did and any they if XQ similar foreclosure XQ? done understand there I for questions. holds

Bill Shepro

Good Sure. morning Raj.

customers California for the pending second put once. in One in agreed to roughly on the that of their State hold XX but our foreclosures start days, it not did at of with state quarter

revenue saw of are very it So, start have of back of quarter holds our EBITDA, title We the We foreclosure event back come those the business our to largely the think was at the end a – deferred. third business come is second two will services business are That $XXX,XXX both largely trustee now our off a quarter they June. that I primarily primarily businesses, this we that quarter us. California. and impacted for are in And believe in referred and off, fourth to and was year. fully in we high-margin

Raj Sharma

such other any or in states? And commentary holds you. Thank Great. other

Bill Shepro

time. other not anything are at customers not states no, we impact this I in our thing would I – of Raj, mean today. the only any point say from in aware, No, we of aware are

Raj Sharma

years. secondly, it. cuts one areas These Got last just an cost reductions touching more then several the these in? And were of to cost addition done cost reductions the are X that time. just upon What

Bill Shepro

say and like Michelle, – and things comp costs, would smaller correct – that majority from amount the from Michelle, is correct? are technology a with I wrong, some vast coming benefits am if I from coming that. and coming me insurance Yes. much

Michelle Esterman

That’s Yes. right.

Okay.

Raj Sharma

Right.

variable? cost done years our because was X So, that in were the costs, fixed fixed costs, more last this largely impression that cuts the were the is

Bill Shepro

both say, variable costs. I department of fixed the corporate sort business No, are and then inside say, costs a – inside we look, degree, I Raj, to we yes, infrastructure would addressing still lesser would are and units the

Raj Sharma

more see Great. I on may your the maybe out get And to inorganic the potential growth big are opportunities acquire to that environment be then tuck-in congratulations that or management on win. there take understand possibilities. are you you in or wanted tuck-in…? asset Do

Bill Shepro

servicers amount reported their in all – – their already the talking I loan the about their last that Yes. earnings and that to mean portfolios sale. the this quarter reported if are that earnings – market – for servicers quarter’s you quarter listen available large earnings those in have very earnings last of of is large those first calls. Everyone the

those platforms some inside and of them. include of fee-based portfolios And businesses

participate. think partners those we portfolios acquiring customer, opportunities us some for are our so potentially or in And successful should benefit and/or there to be

a our so how we lot And successful seems And there see short there is is of short like activity wait customers the and answer. are. will

Raj Sharma

you, in that could flow-through are market? be through share servicers to business acquisitions taking Great. than default servicing other acquisition services the potentially there rights Other the from the of and opportunities

Bill Shepro

keep always eyes We our Yes. open.

focused, the in of managing expenses, our will make terms and other course the revenue, being if growing sure, benefiting to company. eyes But they opportunities for sense come our of aggressive market very absolutely open on we back. are like our We from keep for organically very

Raj Sharma

Perfect.

Thank questions, the offline. So take will much you. it in I

Bill Shepro

Thanks Raj.

Operator

further like remarks. Shepro no I Bill turn questions. I conference to back the to showing At Instructions] this closing time, [Operator am would now for

Bill Shepro

we Take Thank everyone’s joining call, care. thanks Great. support. the operator, and you, for and appreciate

Operator

today’s concludes your participation. Thank you call. This for conference

disconnect. now may You

Altisource Portfolio Solutions (ASPS) 27 Jul 232023 Q2 Earnings call transcript