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Altisource Announces Preliminary Fourth Quarter and Full Year Financial Results

LUXEMBOURG, March 10, 2016 (GLOBE NEWSWIRE) -- Altisource Portfolio Solutions S.A. (“Altisource”) (NASDAQ:ASPS) today announces preliminary fourth quarter and full year 2015 results, capping off a year of strong financial performance with 2015 service revenue of $940.9 million, the best in the Company’s history. 2015 service revenue growth in the asset management business along with the full year benefit of the 2014 Mortgage Builder acquisition offset lost revenue from the November 2014 discontinuation of the lender placed insurance brokerage business, the full amortization of Equator acquisition deferred revenue in November 2014 and fewer 2015 valuation referrals. The growth of the asset management business was primarily driven by a higher number of both non-Ocwen and Ocwen homes sold on Hubzu and growth in the property inspection and preservation business.

The Company's 2015 diluted earnings per share of $2.02 was impacted by a $71.8 million non-cash impairment charge primarily driven by the Company’s current projected Technology Services revenue from Ocwen and investment in technologies provided to Ocwen. Adjusted diluted earnings per share(1) for 2015 of $6.96 significantly exceeded the mid-point of the Company’s 2015 financial scenarios.

Fourth Quarter 2015 Results Compared to Fourth Quarter 2014:

  • Service revenue of $251.0 million, a 15% increase
  • Net loss attributable to Altisource of $45.1 million compared to a net loss attributable to Altisource of $1.5 million in the fourth quarter 2014
  • Net loss includes a non-cash impairment loss of $71.8 million (no comparable amount in the fourth quarter 2014)
  • Adjusted net income attributable to Altisource(1) of $38.0 million, a 506% increase
  • Diluted loss per share of $2.35 compared to diluted loss per share of $0.08 in the fourth quarter 2014
  • Adjusted diluted earnings per share(1) of $1.86, a 564% increase
  • Cash from operations of $86.2 million, a 20% increase

Full Year 2015 Results Compared to Full Year 2014:

  • Service revenue of $940.9 million, a 0.2% increase
  • Net income attributable to Altisource of $41.6 million, a 69% decrease
  • Net income was impacted by a $71.8 million non-cash impairment loss partially offset by a $7.6 million gain on Equator earn out liability compared to a net gain from these items of $0.5 million in 2014
  • Adjusted net income attributable to Altisource(1) of $143.5 million, a 15% decrease
  • Diluted earnings per share of $2.02, a 64% decrease
  • Adjusted diluted earnings per share(1) of $6.96, a 3% decrease
  • Cash from operations of $195.4 million, a 1% decrease

“I am very pleased with our operating results and the progress we are making on our strategic initiatives to diversify and grow our revenue and earnings. We believe our non-Ocwen growth, recent customer wins, current negotiations with new and existing customers and our robust pipeline activity demonstrate Altisource’s value to the market and our ability to deliver on our initiatives,” said Chief Executive Officer William B. Shepro.

Fourth quarter and full year 2015 highlights include:

  • We were selected by two top ten banks(2) to provide services for their portfolios in 2015, including the selection by a top four bank in the fourth quarter. We have agreements to provide services and/or software to five of the top ten banks and one GSE;
  • We repurchased $58.9 million of our common stock in 2015 (2.1 million shares at an average price of $27.60 per share); this includes $10.0 million of repurchases in the fourth quarter (0.4 million shares at an average price of $26.23 per share). In January and February of 2016, we repurchased $5.0 million of our common stock (0.2 million shares at an average price of $27.58 per share);
  • We repurchased $49.0 million of our senior secured term loan for $44.4 million (a weighted average discount of 10.3%), resulting in net pretax gains of $3.8 million on the early extinguishment of debt in 2015; this includes fourth quarter repurchases of $22.0 million for $19.8 million (a discount of 11.0%), resulting in a pretax gain of $1.8 million;
  • To strengthen the Real Estate Investor Solutions initiative, we acquired RentRange® and Investability in the fourth quarter for $24.8 million; and
  • The average number of loans serviced by Ocwen Financial Corporation and its subsidiaries (“Ocwen”) on REALServicing® was 2.0 million, an 8% decrease compared to the year ended December 31, 2014 (the average number of loans was 1.7 million in the fourth quarter 2015, a 31% decrease compared to the fourth quarter 2014).

___________________
(1)
This is a non-GAAP measure that is defined and reconciled to the corresponding GAAP measure herein.

(2) Source: Wall Street Journal's list of top ten banks by assets

The financial data in this press release is unaudited and preliminary, based upon estimates and subject to completion of the Company's financial closing procedures and the audit of the Company’s financial statements. Moreover, this data has been prepared on the basis of currently available information. This data does not constitute a comprehensive statement of the Company's financial results for the year ended December 31, 2015, and the Company's final numbers for this data may differ materially from these estimates. The Company's independent registered public accounting firm has not audited or reviewed, and does not express an opinion with respect to, this data.

Forward-Looking Statements

This press release contains forward-looking statements that involve a number of risks and uncertainties. These forward-looking statements include all statements that are not historical fact, including statements about management’s beliefs and expectations. These statements may be identified by words such as “anticipate,” “intend,” “expect,” “may,” “could,” “should,” “would,” “plan,” “estimate,” “seek,” “believe,” “potential” and similar expressions. Forward-looking statements are based on management’s beliefs as well as assumptions made by and information currently available to management. Because such statements are based on expectations as to the future and are not statements of historical fact, actual results may differ materially from what is contemplated by the forward-looking statements. Altisource undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. The risks and uncertainties to which forward-looking statements are subject include, but are not limited to, Altisource’s ability to integrate acquired businesses, retain key executives or employees, retain existing customers and attract new customers, general economic and market conditions, behavior of customers, suppliers and/or competitors, technological developments, governmental regulations, taxes and policies, availability of adequate and timely sources of liquidity and other risks and uncertainties detailed in the “Forward-Looking Statements,” “Risk Factors” and other sections of Altisource’s Form 10-K and other filings with the Securities and Exchange Commission.

Webcast

Altisource will host a webcast at 11:00 a.m. EST today to discuss our fourth quarter and full year results. A link to the live audio webcast will be available on Altisource’s website in the Investor Relations section. Those who want to listen to the call should go to the website at least fifteen minutes prior to the call to register, download and install any necessary audio software. A replay of the conference call will be available via the website approximately two hours after the conclusion of the call and will remain available for approximately 30 days.

About Altisource

Altisource Portfolio Solutions S.A. is a premier marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries. Altisource’s proprietary business processes, vendor and electronic payment management software and behavioral science-based analytics improve outcomes for marketplace participants. Additional information is available at www.Altisource.com.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

Three months ended
December 31,
Years ended
December 31,
2015 2014 2015 2014
Service revenue
Mortgage Services $183,945 $145,776 $676,222 $653,093
Financial Services 21,351 21,816 88,328 98,312
Technology Services 56,083 62,415 215,482 227,300
Eliminations (10,339) (12,163) (39,112) (40,026)
Total service revenue 251,040 217,844 940,920 938,679
Reimbursable expenses 18,102 37,414 107,344 137,634
Non-controlling interests 745 629 3,202 2,603
Total revenue 269,887 255,887 1,051,466 1,078,916
Cost of revenue 154,390 149,238 579,983 569,546
Reimbursable expenses 18,102 37,414 107,344 137,634
Gross profit 97,395 69,235 364,139 371,736
Selling, general and administrative expenses 65,558 61,979 220,868 201,733
Impairment losses 71,785 71,785 37,473
Change in the fair value of Equator earn out liability (7,591) (37,924)
Income (loss) from operations (39,948) 7,256 79,077 170,454
Other income (expense), net:
Interest expense (6,812) (7,323) (28,208) (23,363)
Loss on sale of HLSS equity securities, net of dividends received (1,854)
Other income (expense), net 2,568 39 4,045 174
Total other income (expense), net (4,244) (7,284) (26,017) (23,189)
Income (loss) before income taxes and non-controlling interests (44,192) (28) 53,060 147,265
Income tax provision (159) (878) (8,260) (10,178)
Net income (loss) (44,351) (906) 44,800 137,087
Net income attributable to non-controlling interests (745) (629) (3,202) (2,603)
Net income (loss) attributable to Altisource $(45,096) $(1,535) $41,598 $134,484
Earnings (loss) per share:
Basic $(2.35) $(0.08) $2.13 $6.22
Diluted $(2.35) $(0.08) $2.02 $5.69
Weighted average shares outstanding:
Basic 19,196 20,306 19,504 21,625
Diluted 19,196 20,306 20,619 23,634
Non-GAAP Financial Measures (1)
Adjusted net income attributable to Altisource $38,048 $6,275 $143,475 $169,141
Adjusted diluted earnings per share $1.86 $0.28 $6.96 $7.16

__________________________
(1) These are non-GAAP measures that are defined and reconciled to the corresponding GAAP measures herein

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
SEGMENT FINANCIAL INFORMATION
(in thousands)
(unaudited)

Year ended December 31, 2015
Mortgage
Services
Financial
Services
Technology
Services
Corporate
Items and
Eliminations
Consolidated
Altisource
Revenue
Service revenue $676,222 $88,328 $215,482 $(39,112) $940,920
Reimbursable expenses 107,224 120 107,344
Non-controlling interests 3,202 3,202
786,648 88,448 215,482 (39,112) 1,051,466
Cost of revenue 474,169 60,806 187,835 (35,483) 687,327
Gross profit (loss) 312,479 27,642 27,647 (3,629) 364,139
Selling, general and administrative expenses 105,153 18,707 29,902 67,106 220,868
Impairment losses 71,785 71,785
Change in the fair value of Equator earn out liability (7,591) (7,591)
Income (loss) from operations 207,326 8,935 (66,449) (70,735) 79,077
Other income (expense), net 506 58 61 (26,642) (26,017)
Income (loss) before income taxes and non-controlling interests $207,832 $8,993 $(66,388) $(97,377) $53,060


Year ended December 31, 2014
Mortgage
Services
Financial
Services
Technology
Services
Corporate
Items and
Eliminations
Consolidated
Altisource
Revenue
Service revenue $653,093 $98,312 $227,300 $(40,026) $938,679
Reimbursable expenses 137,447 187 137,634
Non-controlling interests 2,603 2,603
793,143 98,499 227,300 (40,026) 1,078,916
Cost of revenue 486,387 64,338 192,426 (35,971) 707,180
Gross profit (loss) 306,756 34,161 34,874 (4,055) 371,736
Selling, general and administrative expenses 94,686 18,791 32,393 55,863 201,733
Impairment losses 37,473 37,473
Change in the fair value of Equator earn out liability (37,924) (37,924)
Income (loss) from operations 212,070 15,370 2,932 (59,918) 170,454
Other income (expense), net 204 62 (31) (23,424) (23,189)
Income (loss) before income taxes and non-controlling interests $212,274 $15,432 $2,901 $(83,342) $147,265

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)

December 31,
2015 2014
ASSETS
Current assets:
Cash and cash equivalents $179,327 $161,361
Accounts receivable, net 105,023 112,183
Prepaid expenses and other current assets 21,751 23,567
Deferred tax assets, net 4,987
Total current assets 306,101 302,098
Premises and equipment, net 119,121 127,759
Goodwill 82,801 90,851
Intangible assets, net 197,003 245,246
Deferred tax assets, net 3,619
Other assets 19,337 22,267
Total assets $727,982 $788,221
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses $91,871 $111,766
Current portion of long-term debt 5,945 5,945
Deferred revenue 15,060 9,829
Other current liabilities 16,266 13,227
Total current liabilities 129,142 140,767
Long-term debt, less current portion 528,417 582,669
Deferred tax liabilities, net 2,694
Other non-current liabilities 18,153 20,648
Equity:
Common stock ($1.00 par value; 25,413 shares authorized and issued and 19,021 outstanding as of December 31, 2015; 25,413 shares authorized and issued and 20,279 outstanding as of December 31, 2014) 25,413 25,413
Additional paid-in capital 96,321 91,509
Retained earnings 369,270 367,967
Treasury stock, at cost (6,392 shares as of December 31, 2015 and 5,134 shares as of December 31, 2014) (440,026) (444,495)
Altisource equity 50,978 40,394
Non-controlling interests 1,292 1,049
Total equity 52,270 41,443
Total liabilities and equity $727,982 $788,221

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

Years ended December 31,
2015 2014
Cash flows from operating activities:
Net income$44,800 $137,087
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization36,470 29,046
Amortization of intangible assets41,135 37,680
Loss on sale of HLSS equity securities, net of dividends received1,854
Change in the fair value of acquisition related contingent consideration(7,184) (37,924)
Impairment losses71,785 37,473
Share-based compensation expense4,812 2,236
Bad debt expense5,514 16,257
Gain on early extinguishment of debt(3,836)
Amortization of debt discount498 317
Amortization of debt issuance costs1,374 1,151
Deferred income taxes(1,326) 1,166
Loss on disposal of fixed assets26 184
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable2,401 (22,492)
Prepaid expenses and other current assets1,883 (12,501)
Other assets2,993 (1,750)
Accounts payable and accrued expenses(14,483) 24,285
Other current and non-current liabilities6,636 (14,722)
Net cash provided by operating activities195,352 197,493
Cash flows from investing activities:
Additions to premises and equipment(36,188) (64,846)
Acquisition of businesses, net of cash acquired(28,675) (34,720)
Purchase of HLSS equity securities(29,966)
Proceeds received from sale of and dividends from HLSS equity securities28,112
Change in restricted cash722 (1,402)
Other investing activities (300)
Net cash used in investing activities(65,995) (101,268)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 198,000
Repurchases and repayment of long-term debt(50,373) (4,959)
Debt issuance costs (2,608)
Proceeds from stock option exercises1,390 2,688
Purchase of treasury stock(58,949) (255,713)
Distributions to non-controlling interests(2,959) (2,596)
Other financing activities(500)
Net cash used in financing activities(111,391) (65,188)
Net increase in cash and cash equivalents17,966 31,037
Cash and cash equivalents at the beginning of the period161,361 130,324
Cash and cash equivalents at the end of the period$179,327 $161,361
Supplemental cash flow information:
Interest paid$26,274 $21,829
Income taxes paid, net9,725 13,340
Non-cash investing and financing activities:
Acquisition of businesses with restricted shares$21,733 $
Decrease in payables for purchases of premises and equipment(6,679) (2,328)
Decrease in acquisition of businesses from subsequent working capital true-ups (3,711)

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
NON-GAAP MEASURES
(in thousands, except per share data)
(unaudited)

Adjusted net income attributable to Altisource and adjusted diluted earnings per share are non-GAAP measures used by management, existing shareholders and potential shareholders to measure Altisource’s performance. Adjusted net income attributable to Altisource is calculated by adding intangible asset amortization expense (net of tax) and impairment losses (net of tax) and deducting gains associated with reductions of the Equator earn out liability (net of tax) to GAAP net income attributable to Altisource. Adjusted diluted earnings per share is calculated by dividing net income attributable to Altisource plus intangible asset amortization expense (net of tax) plus impairment losses (net of tax) less gains associated with reductions of the Equator earn out liability (net of tax) to GAAP net income attributable to Altisource by the weighted average number of diluted shares. Reconciliations of the non-GAAP measures to the corresponding GAAP measures are as follows:

Three months ended
December 31,
Years ended
December 31,
2015 2014 2015 2014
Net income (loss) attributable to Altisource $(45,096) $(1,535) $41,598 $134,484
Intangible amortization expense, net of tax 12,514 7,810 38,187 35,076
Impairment loss, net of tax 70,630 70,630 34,884
Gain on Equator earn out liability, net of tax (6,940) (35,303)
Adjusted net income attributable to Altisource $38,048 $6,275 $143,475 $169,141
Diluted earnings (loss) per share $(2.35) $(0.08) $2.02 $5.69
Impact of using diluted share count instead of basic share count for a loss per share 0.14 0.01
Intangible amortization expense, net of tax, per diluted share 0.61 0.35 1.85 1.48
Impairment loss, net of tax, per diluted share 3.46 3.43 1.48
Gain on Equator earn out liability, net of tax, per diluted share (0.34) (1.49)
Adjusted diluted earnings per share $1.86 $0.28 $6.96 $7.16
Calculation of the impact of intangible amortization expense, net of tax
Intangible amortization expense $13,140 $8,390 $41,135 $37,680
Tax benefit from intangible asset amortization (626) (580) (2,948) (2,604)
Intangible asset amortization expense, net of tax 12,514 7,810 38,187 35,076
Diluted share count 20,417 22,100 20,619 23,634
Intangible asset amortization expense, net of tax, per diluted share $0.61 $0.35 $1.85 $1.48
Calculation of the impact of impairment loss, net of tax
Impairment loss $71,785 $ $71,785 $37,473
Tax benefit from impairment loss (1,155) (1,155) (2,589)
Impairment loss, net of tax 70,630 70,630 34,884
Diluted share count 20,417 22,100 20,619 23,634
Impairment loss, net of tax, per diluted share $3.46 $ $3.43 $1.48
Calculation of gain on Equator earn out liability, net of tax
Gain on Equator earn out liability $ $ $(7,591) $(37,924)
Tax provision from the gain on Equator earn out liability 651 2,621
Gain on Equator earn out liability, net of tax (6,940) (35,303)
Diluted share count 20,417 22,100 20,619 23,634
Gain on Equator earn out liability, net of tax, per diluted share $ $ $(0.34) $(1.49)


CONTACT: Michelle D. Esterman Chief Financial Officer T: +352 2469 7950 E: Michelle.Esterman@altisource.lu

Source:Altisource Portfolio Solutions S.A.