Earnings call transcript: Altisource Portfolio Solutions Q2 2025 sees stock dip

Altisource Portfolio Solutions (ASPS) reported its financial results for Q2 2025, highlighting a notable improvement in revenue and net income. Despite these gains, the company’s stock experienced a decline of 8.59% in pre-market trading, with shares dropping from $12.58 to $11.5 after the earnings announcement. The stock later showed a slight recovery, closing at $10.96, a 1.72% increase from the last close. The company’s earnings per share (EPS) reached $0.19, with revenue climbing 11% to $40.8 million, driven by growth in key business segments. According to InvestingPro data, ASPS has demonstrated strong momentum with a remarkable 92% price return over the past six months, though the stock typically trades with high volatility. InvestingPro analysis indicates the stock is currently trading at Fair Value.

Key Takeaways

• Altisource reported an 11% increase in total company service revenue.
• Net income improved significantly from a loss of $8.3 million in Q2 2024 to a profit of $16.6 million.
• The company’s stock price fell 8.59% in pre-market trading following the earnings release.
• Growth in revenue and adjusted EBITDA was fueled by business segment expansion and cost discipline.

Company Performance

Altisource demonstrated strong performance in Q2 2025, with total company service revenue rising by 11% to $40.8 million. This growth was supported by improvements across its business segments, particularly in the Servicer and Real Estate Segment, which saw a 10% increase in service revenue. The company’s focus on cost discipline and business segment growth contributed to a turnaround from a net loss in the previous year to a net income of $16.6 million this quarter. InvestingPro analysis reveals the company maintains a current ratio of 1.34, indicating sufficient liquidity to meet short-term obligations, though it operates with a significant debt burden that warrants attention. For deeper insights into ASPS’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Financial Highlights

• Revenue: $40.8 million, up 11% year-over-year.
• EPS: $0.19, with no available forecast for comparison.
• Adjusted EBITDA: Increased 23% to $5.4 million.
• Net Income: Improved to $16.6 million from a net loss of $8.3 million in Q2 2024.

Market Reaction

Following the earnings announcement, Altisource’s stock experienced a decline of 8.59% in pre-market trading. The stock price dropped from $12.58 to $11.5 but later showed a modest recovery, closing at $10.96, a 1.72% increase from the last close. This movement reflects a mixed market reaction, possibly influenced by broader market conditions or investor concerns about sustaining growth without increased foreclosure starts or loan originations. Year-to-date, ASPS has delivered an impressive 108% return, according to InvestingPro data, though analysts anticipate challenges in achieving profitability this year. The stock’s beta of 0.22 suggests lower volatility relative to the broader market.

Outlook & Guidance

Altisource is targeting growth in five key business areas, including Renovation and Granite Construction Risk Management. The company is prepared to capitalize on potential increases in loan delinquencies and foreclosure activities. The estimated sales pipeline for the Servicer and Real Estate segment stands at $25.3 million in annual service revenue, while the Origination Segment projects $14.7 million.

Executive Commentary

CEO Bill Shepro expressed satisfaction with the company’s Q2 performance, highlighting the success of growth initiatives that do not rely on increased foreclosure starts. He emphasized the strong sales pipeline and new business wins, positioning the company well for potential market changes.

Risks and Challenges

• Sustaining growth without increased foreclosure starts or loan originations.
• Broader economic conditions impacting the mortgage market.
• Competition in the real estate and mortgage servicing sectors.
• Potential regulatory changes affecting the industry.

Q&A

During the earnings call, a single question from Shakar Minkovey addressed working capital. CEO Bill Shepro noted that there were no unusual working capital activities, indicating stability in the company’s financial operations.

Full transcript - Altisource Portfolio Solutions SA (ASPS) Q2 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to the Altisource Portfolio Solutions Second Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

You will then hear an automated message advising your hand was raised. To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker, Michelle Esterman, Chief Financial Officer. Please go ahead.

Michelle Esterman, Chief Financial Officer, Altisource Portfolio Solutions: Thank you, operator. We first want to remind you that the earnings release and quarterly slides are available on our website at www.altisource.com. These provide additional information investors may find useful. Our remarks today include forward looking statements, which involve a number of risks and uncertainties that could cause actual results to differ. Please review the forward looking statements section in the company’s earnings release and quarterly slides, as well as the risk factors contained in our 2024 Form 10 ks and our 2025 Form 10 Q filings.

These describe some factors that may lead to different results. We undertake no obligation to update statements, financial scenarios and projections previously provided or provided herein as a result of a change in circumstances, new information or future events. During this call, we will present both GAAP and non GAAP financial measures. In our earnings release and quarterly slides, you will find additional disclosures regarding the non GAAP measures. A reconciliation of GAAP to non GAAP measures is included in the appendix to the quarterly slides.

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

Bill Shepro, Chairman and Chief Executive Officer, Altisource Portfolio Solutions: Thanks, Michelle, good morning. I’ll begin on slide four. We are pleased with our second quarter performance. In a close to historically low delinquency environment, we grew service revenue, adjusted EBITDA, pre and post tax GAAP earnings, and GAAP earnings per share compared to the second quarter of last year. This is largely from our focus on growing our businesses that have tailwinds, cost discipline, lower interest expense, and the reversal of certain tax reserves related to our India operations.

Turning to slide five, compared to the second quarter of last year, we grew total company service revenue by 11% to $40,800,000 and adjusted EBITDA by 23% to $5,400,000 Service revenue growth primarily reflects the ramp of the renovation business and growth in the Lenders One and foreclosure trustee businesses. The improvement in total company adjusted EBITDA was largely from both business segments, service revenue and adjusted EBITDA growth, partially offset by a modest increase in the corporate segments adjusted EBITDA loss. The business segments generated 12,800,000 of adjusted EBITDA, representing an 11% or $1,300,000 improvement compared to the second quarter of twenty twenty four. The corporate segments adjusted EBITDA loss of $7,500,000 was slightly higher than the second quarter of last year. From a GAAP perspective, income before tax improved to $200,000 in the second quarter of twenty twenty five, compared to a loss of $7,600,000 in the second quarter of twenty twenty four.

This was primarily driven by higher adjusted EBITDA and lower interest expense from the new debt. Net income attributable to Altisource improved to $16,600,000 in the second quarter of twenty twenty five, compared to a net loss of $8,300,000 in the same quarter of 2024. The improvement in net income reflects an income tax benefit from the reversal of certain tax reserves related to our India operations. We ended the quarter with $30,000,000 in unrestricted cash. Moving to slide six and our largely countercyclical servicer and real estate segment.

Second quarter twenty twenty five service revenue of $32,000,000 was 10% higher than the second quarter of twenty twenty four, primarily from the ramp of the renovation business and growth in the foreclosure trustee business. Second quarter twenty twenty five adjusted EBITDA of $12,000,000 for the segment was $900,000 or 8% higher than the second quarter of twenty twenty four. Adjusted EBITDA margins declined to 37.4% from 38.1%. Adjusted EBITDA growth primarily reflects service revenue growth and lower SG and A. The slight decline in margins is from revenue mix with higher growth in the lower margin renovation business.

Slide seven provides a summary of our servicer and real estate sales wins and pipeline. For the second quarter, we won new business that we estimate will generate $1,100,000 in annual service revenue on a stabilized basis over the next couple of years. We ended the quarter with a service earned real estate segment estimated total weighted average sales pipeline of $25,300,000 of annual service revenue on a stabilized basis. Moving to our origination segment and slide eight. Second quarter twenty twenty five service revenue of $8,800,000 was 13% higher than the second quarter of twenty twenty four.

Adjusted EBITDA of $900,000 was $400,000 or 81% better than the same quarter last year. The increase in service revenue primarily reflects growth in the LendersOne business. Adjusted EBITDA growth primarily reflects stronger margins and service revenue growth. Slide nine provides a summary of our origination segment sales wins and pipeline. Our focus on helping our Lenders One members save money and better compete, continue to drive substantial interest in our solutions.

On an annualized stabilized basis, we won an estimated $3,300,000 in new business in the second quarter. Our estimated weighted average sales pipeline at the end of the quarter was $14,700,000 We are pleased with the progress we are making in developing our sales pipeline and are optimistic that our sales pipeline and recent sales wins will contribute to growth in our origination segment. Before discussing our corporate segment, please turn to slide 10, where we list the five businesses that we believe represent an outsized growth opportunity for Altisource over the next couple of years. These businesses include renovation, Granite Construction Risk Management, Lenders One, Hubzu Marketplace and Foreclosure Trustee. On this slide, we provide a summary of the opportunities and the status of each.

What’s important is that the success of these initiatives does not depend on an increase in foreclosure starts or sales, nor on a growing residential loan origination market. As you can see from the slide, we believe we are making solid progress against these initiatives and are optimistic that these initiatives represent a strong growth engine for the company. Of course, should The US economy deteriorate or origination volumes grow, we should be able to accelerate our growth even more. Turning to our corporate segment on slide 11. Second quarter twenty twenty five corporate adjusted EBITDA loss of $7,500,000 was $300,000 higher than the second quarter of twenty twenty four, largely from a prior year tech income benefit and higher unrealized foreign currency exchange losses.

Moving to slide 12 and the business environment in which we operate. Starting with the residential mortgage default market, ninety plus day mortgage delinquency rates remain near historic lows at 1.2% in May. Foreclosure starts increased by 15% in April 2025 compared to the same period in 2024. However, April 2025 foreclosure starts were 29% lower than the same period in 2019. Foreclosure sales for April 2025 increased by 10% compared to last year, but were 47% lower than the same period in 2019.

For the industry wide origination unit volume increased by 27% in the second quarter compared to the same quarter of last year, with purchase origination volume up by 5% and refinance activity increasing by 89%. For the full year, MBA’s July 2025 forecasts projects there will be 5,600,000 loans originated in 2025, a 12% increase compared to the full year 2024 and 3% lower than the MBA’s April 2025 forecast. Turning to slide 13. In closing, we are pleased with our second quarter results. We have a strong sales pipeline, are winning new business and ramping sales wins, while maintaining cost discipline and significantly reducing corporate interest expense.

To support longer term growth, we are focusing our efforts on accelerating the growth of those businesses that we believe have tailwinds in what remains a close to historically low delinquency environment. Should loan delinquencies, foreclosure starts and foreclosure sales increase, we believe we are well positioned to also benefit from stronger revenue and adjusted EBITDA growth in our largest and most profitable countercyclical businesses. I’ll now open up the call for questions. Operator?

Conference Operator: Thank you. At this time, we will begin our Q and A session. As a reminder, to ask a question during the call or during the session, I’m sorry, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Shakar Minkovey with Napier Park Global.

Your line is now open.

Shakar Minkovey, Analyst, Napier Park Global: Hey, guys. Good morning. Thanks for the call. Hope you’re well. Wanted to just one piece that sort of jumped out at me on the cash flow statement, and it looks like there’s a pretty meaningful working capital build.

Just trying to understand what that is.

Bill Shepro, Chairman and Chief Executive Officer, Altisource Portfolio Solutions: Hey, Shakur. It’s Bill. Yeah. With respect to working capital, I think, there’s sort of normal working capital activities, that are, being managed. I wouldn’t say there’s anything, that unusual in the quarter.

Okay. Yeah.

Shakar Minkovey, Analyst, Napier Park Global: I’ll take a closer look.

Bill Shepro, Chairman and Chief Executive Officer, Altisource Portfolio Solutions: Yeah. I’ll circle back. Thanks.

Conference Operator: Mhmm. Thank you so much for your question. I am showing no further questions at this time. I would now like to turn the call back to Bill Shuckrill for closing remarks.

Bill Shepro, Chairman and Chief Executive Officer, Altisource Portfolio Solutions: Thank you, operator. We’re pleased with our second quarter performance and believe we are set up well. Thanks for joining us today. Have a good day.

Conference Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.

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