Earnings call transcript: Altisource Q4 2024 beats EPS forecast, stock falls

Altisource Portfolio Solutions SA (ASPS) reported its fourth-quarter 2024 financial results, surpassing EPS expectations but falling short on revenue. The company posted an EPS of -$0.18, better than the forecasted -$0.24. Despite this earnings beat, the revenue of $38.4 million missed the forecast of $43.85 million. The stock responded negatively, dropping 5.3% in premarket trading to $0.738. According to InvestingPro data, the company’s current market capitalization stands at $65.26 million, with the stock trading significantly below its 52-week high of $2.75.

Key Takeaways

• Altisource beat EPS expectations but missed on revenue.
• The stock fell 5.3% in premarket trading following the earnings release.
• The company reported its highest quarterly service revenue since Q3 2021.
• Debt restructuring reduced the company’s debt significantly.
• New product launches in construction and LendersOne businesses reached $1 million in monthly revenue.

Company Performance

Altisource’s overall performance in Q4 2024 showed improvements in several areas. The company achieved its highest service revenue since Q3 2021, amounting to $38.4 million. Adjusted EBITDA for the quarter was $4.7 million, marking the strongest performance since Q3 2020. Altisource’s full-year total service revenue grew by 10% to $150 million, and adjusted EBITDA improved by $18.3 million to $17.4 million.

Financial Highlights

• Revenue: $38.4 million (Q4 2024), highest since Q3 2021
• Earnings per share: -$0.18, beating forecasted -$0.24
• Adjusted EBITDA: $4.7 million in Q4, strongest since Q3 2020
• Full-year total service revenue: $150 million, up 10% from 2023
• Debt reduced from $233 million to $172.5 million

Earnings vs. Forecast

Altisource’s EPS of -$0.18 exceeded the forecast of -$0.24, a positive surprise of 25%. However, the company missed its revenue forecast of $43.85 million, reporting $38.4 million instead, a shortfall of approximately 12.4%. The earnings beat was significant, given the company’s historical trend of underperformance in prior quarters.

Market Reaction

Despite the positive EPS surprise, Altisource’s stock fell 5.3% in premarket trading, reflecting investor concerns over the revenue shortfall. The stock’s current price of $0.738 is near its 52-week low of $0.432, indicating ongoing market challenges. InvestingPro data reveals the stock has declined over 71% in the past year, with particularly high price volatility. This decline contrasts with broader market trends, where many companies have seen positive stock movements following earnings beats. The company’s Financial Health Score of 1.68 (labeled as WEAK) suggests continued challenges ahead.

Outlook & Guidance

Looking ahead, Altisource projects 2025 service revenue to be between $165 million and $185 million, with adjusted EBITDA expected to range from $18 million to $23 million. The company anticipates a 16% growth in service revenue and an 18% increase in EBITDA. Altisource also expects to achieve its first positive operating cash flow since 2019. Current revenue growth stands at 5.19%, according to InvestingPro data, with net income expected to improve this year. Access the comprehensive Pro Research Report for detailed analysis of ASPS’s growth trajectory and financial outlook.

Executive Commentary

CEO Bill Shepro stated, "We believe we are positioned to diversify our revenue base and ramp business we have won, while maintaining cost discipline." He highlighted the successful launch of new products, noting, "We’ve launched basically from scratch to $1,000,000 a month in each of those businesses." Shepro also expressed a conservative outlook on the foreclosure market, saying, "We’re being very conservative and assuming it remains roughly the same."

Risks and Challenges

• Revenue shortfall could impact investor confidence.
• Market conditions in foreclosure and delinquency rates remain uncertain.
• Competition in the real estate and mortgage sectors continues to be intense.
• Macroeconomic pressures could affect consumer spending and mortgage origination.
• Potential regulatory changes could impact business operations.

Q&A

During the earnings call, analysts questioned the potential recovery of the foreclosure market and the impact of government loan modifications. The company confirmed a strong start to 2025 with positive performance in January and February, providing some reassurance to investors.

Full transcript - Altisource Portfolio Solutions SA (ASPS) Q4 2024:

Conference Operator: Good day and thank you for standing by. Welcome to Altisource Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. You.

Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Michelle Esterman, Chief Financial Officer. Please go ahead.

Michelle Esterman, Chief Financial Officer, Altisource: 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 sections in the company’s earnings release and quarterly slides as well as the risk factors contained in our 2023 Form 10 ks and our 2024 Form 10 ks once filed.

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’ll now turn the call over to Bill.

Bill Shepro, Chairman and Chief Executive Officer, Altisource: Thanks, Michelle, and good morning. I’ll begin on Slide four. We’re pleased with our full year and fourth quarter twenty twenty four performance as we continue to improve our financial results and win new business. In the face of serious market headwinds for both business segments, we had strong performance across the board. For the year, we grew total company service revenue by 10% and adjusted EBITDA by $18,300,000 In February 2025, we executed an exchange and maturity extension transaction with our lenders, significantly strengthening our balance sheet and reducing interest expense.

Turning to our financial performance in Slide five. For 2024, we generated $150,000,000 of service revenue, a 10% increase over 2023. The service revenue increase was driven by growth in both business segments. 2024 total company adjusted EBITDA of $17,400,000 represents an $18,300,000 improvement over 2023. The improvement was largely from the business segment’s service revenue growth and higher adjusted EBITDA margins and from the corporate segment’s lower adjusted EBITDA loss.

The business segments generated $44,600,000 of adjusted EBITDA at 29.7% adjusted EBITDA margins, representing a $10,400,000 improvement in adjusted EBITDA and a four sixty two basis points improvement in adjusted EBITDA margins compared to 2023. The corporate segment’s adjusted EBITDA loss declined by $7,900,000 or 22% to $27,200,000 primarily from efficiency initiatives. We also finished the year strong. As you can see on Slide six, fourth quarter service revenue of $38,400,000 marked the highest level since the third quarter of twenty twenty one and adjusted EBITDA of $4,700,000 was the strongest quarter since the third quarter of twenty twenty. Compared to the same period in 2023, fourth quarter ’20 ’20 ’4 service revenue grew by 19% and adjusted EBITDA grew by $4,500,000 dollars In February 2025, we completed an exchange and maturity extension transaction with our lenders, significantly strengthening our balance sheet and reducing interest expense.

We also closed a $12,500,000 super senior credit facility to fund the transaction costs and for general corporate purposes. Slide seven through nine provide additional information on these transactions. As a result of these transactions, we reduced our debt by over $60,000,000 from $233,000,000 to $172,500,000 Our new debt is comprised of $110,000,000 term loan, a $50,000,000 non interest bearing exit fee, which is reduced on a pro rata basis with the repayment of the term loan and a $12,500,000 super senior credit facility. The interest rate on the $110,000,000 term loan and the $12,500,000 super senior credit facility is SOFR plus six fifty basis points or 10.8 today. At today’s SOFR rate, this represents $13,400,000 in annual cash interest costs, which is an approximately $18,000,000 per year reduction in cash and PIK interest compared to our prior facility.

$158,600,000 of the new term loan matures on 04/30/2030, and $1,400,000 matures on 01/15/2029. The Supersenor credit facility matures on 02/19/2029. In connection with the transactions, the lenders exchanged $72,900,000 of debt for approximately 58,200,000.0 Altisource common shares, representing 63.5% of the pro form a equity of the company. To provide for the potential for pretransaction stakeholders to increase their ownership interest in the company as the share price increases, Altisource will be issuing warrants to pretransaction shareholders, penny warrant holders and restricted stock unitholders as of the February 14 record date. These warrants enable stakeholders to purchase approximately 114,500,000.0 common shares of Altisource at an exercise price of $1.2 per share.

This equates to 3.25 shares of Altisource common stock for each share of or right to common stock held. 50% of the warrants expire on 04/03/2029 and require the exercise price to be paid in cash to the company. The other 50% of the warrants expire on 04/30/2032 and require a net settlement through the forfeiture of shares to the company for the exercise price. We believe the transactions put the company on a much stronger financial footing and should be accretive to pre transaction shareholders in the medium to long term. The transactions also provide us with additional time to execute our turnaround plan by removing the April 2025 refinancing risk, improving Altisource’s balance sheet and leverage ratios and eliminating a major distraction for Altisource’s team, shareholders and customers.

Moving to Slide 10 and our countercyclical servicer and real estate segment. For 2024, service revenue of $120,000,000 was 11% higher than 2023 from the launch and growth of our renovation business and sales wins despite a market wide 6% decline in foreclosure starts and 14% decline in foreclosure sales. 2024 adjusted EBITDA of $42,100,000 for the segment was $5,000,000 or 14% higher than 2023. Adjusted EBITDA margins improved to 35.1% from 34.4%. Adjusted EBITDA growth and margin improvement reflects service revenue growth and cost reduction and efficiency initiatives, partially offset by revenue mix.

Slide 11 provides a summary of our service earned real estate sales wins and pipeline. For the year, we won new business that we estimate will generate 25,800,000 in annual service revenue on a stabilized basis over the next couple of years. We had significant sales wins in our Trustee, Hubzu and Granite businesses that should help contribute to 2025 service revenue growth. We ended the year with a servicer and real estate segment total weighted average sales pipeline of $29,400,000 of annual service revenue on a stabilized basis, most of which we anticipate will impact 2026 and beyond. Moving to our Origination segment on Slide 12.

20 20 four service revenue of $30,400,000 was 6% higher than 2023 and adjusted EBITDA improved by $5,400,000 to $2,500,000 This primarily reflects revenue growth in the Lenders one business from customer wins from our newer solutions, price increases and market share gains in our Trellix loan fulfillment business, partially offset by revenue declines in our other origination businesses that were impacted to a greater degree by lower purchase origination volumes. Adjusted EBITDA improved from revenue growth and stronger margins for certain business units from efficiency initiatives. For 2024, the Origination segment’s gross profit, gross profit margins, adjusted EBITDA and adjusted EBITDA margins all improved relative to 2023. Slide 13 provides a summary of our origination segment sales wins and pipeline. During a difficult origination market, our focus on helping our Lenders one member save money and better compete drove substantial interest in our solutions.

On an annualized stabilized basis, we won an estimated $12,600,000 in new business for the year. Our weighted average sales pipeline at the end of twenty twenty four was $13,200,000 with $2,400,000 of it in the contracting stage. Turning to our corporate segment on Slide 14. We continue to bring down our operating costs. 2024 corporate adjusted EBITDA loss of $27,200,000 was $7,900,000 or 22% better than 2023.

The lower adjusted EBITDA loss reflects our cost savings and efficiency initiatives. Moving to Slide 15. The business environment over the last few years has been very difficult for Altisource. The default market was virtually shut down in 2020 and has still not recovered. 2024 foreclosure starts were 35% lower than 2019 levels and foreclosure sales were 53% lower than 2019 levels.

Driven by low delinquency rates and home price appreciation, 2024 foreclosure starts were also 6% lower than 2023 and foreclosure sales were 14 lower than 2023. The origination market has also had its challenges. 2024 mortgage origination volume was 35% lower than 2019 levels, driven by higher interest rates. And while 2024 origination volume was higher than ’23, this was driven entirely by refinance activity with purchase volume down for the year. Despite this difficult default in origination market, we’ve won meaningful new business and implemented efficiency initiatives that helped drive 10% service revenue growth and an $18,300,000 improvement in adjusted EBITDA in 2024 compared to 2023.

Since 2021, we have grown adjusted EBITDA by almost $50,000,000 Turning to Slide 16 and our outlook for 2025. We believe our sales wins, improved margins and corporate cost structure position us for another year of service revenue and adjusted EBITDA growth and for the first time since 2019, positive operating cash flow. Based upon our current business and market expectations, which assumes roughly flat delinquency rates and 13% growth in origination volume, we are forecasting service revenue of $165,000,000 to 185,000,000 and adjusted EBITDA of $18,000,000 to $23,000,000 At the midpoint, this represents 16% annual service revenue growth and 18% adjusted EBITDA growth over 2024. We anticipate service revenue growth will be driven by the continued ramping of sales wins, converting pipeline opportunities to sales wins, price increases for certain services and growth of newer LendersOne solutions. We anticipate the adjusted EBITDA improvement will be driven by service revenue growth and higher business unit margins for many businesses, primarily from the full year benefit of twenty twenty four efficiency initiatives and scale, partially offset by product mix and a modest increase in corporate operating costs due to certain non recurring benefits in 2024.

From a cash flow perspective, we anticipate generating positive operating cash flow for the year. In closing, we believe we are positioned to diversify our revenue base and ramp business we have won, while maintaining cost discipline and significantly reducing corporate interest expense. To support longer term growth, we are focusing on accelerating the growth of certain of our businesses that we believe have tailwinds. When the default market returns to normal, we should also benefit from stronger revenue and adjusted EBITDA growth in our largest and most profitable businesses. I’ll now open up the call for questions.

Operator?

Conference Operator: Thank Our first question comes from the line of Ramin Kamali from

Ramin Kamali, Analyst: Hi, good morning. Thank you for the presentation and congrats on the results. Can you just comment on kind of some of the nature of some of the wins you’ve had across, I guess, originations and servicing, but also more importantly kind of talk about kind of the nature of the conversations you’re having with some of these potential opportunities pro form a or post restructuring or post transaction. Has that changed at all?

Bill Shepro, Chairman and Chief Executive Officer, Altisource: Great. Thanks, Ramin. Yes, we had a couple of initiatives last year focused primarily on our construction renovation business, our trustee business and what was the third Well, in the construction oh, I’m sorry, in our Lenders One origination business. In the construction business and in the Lenders One business, we launched two new products, one just under two years ago and one a year ago. And I’m proud to say that both of those products, the credit product and the renovation business, each did north of $1,000,000 a month.

I think it was in February of this quarter of this year. And so we’ve launched basically from scratch to $1,000,000 a month in each of those businesses through those initiatives last year. And we’re quite proud of those results. As we look to 2025, there are several areas we’re focused on. One is, I think we could take those two businesses, the renovation business and the origination business.

We’ve got the opportunity to more than double, I think, the monthly revenue of those businesses by the end of this year. We’ve got a very exciting pipeline in both those businesses and certainly completing the transaction with our lenders has helped in the conversation we’re having with our customers. We’re also looking at expanding our Hubzu business. Historically, Hubzu has primarily been focused on managing foreclosure auctions and REO auctions. We’ve recently done a soft launch of a commercial auction platform inside of Hubzu, and we’re also looking at selling non distressed residential auctions on that platform.

So more to come as we develop those two products. We’re continuing to grow our granite renovation sorry, construction risk management business. We had some success in growing the revenue and earnings in that business last year, and we see some tailwinds with some customer wins this year, again, I think helped by the transaction. And we’re also continuing to build out that renovation business I just discussed by adding additional customers. And then finally on Lenders one, we’re going to continue to grow the new product we launched, the credit product, and we’re looking to essentially launch and relaunch and grow our homeowners insurance product this year.

So we’ve got four or five initiatives that we think will contribute to our growth this year and help us diversify our customer base. We’re pretty excited about those.

Ramin Kamali, Analyst: I guess maybe one more question. Can you I guess we’re almost done with Q1. Can you give us some color on how things are trending thus far in 2025?

Bill Shepro, Chairman and Chief Executive Officer, Altisource: Yes, sure. We’ve started the year very strong from our perspective. We had a very good we’ve seen our unaudited, of course, January revenue and EBITDA results, which were quite strong. Revenue was in line with our plan. EBITDA was better than our plan.

February revenue also was right on target. We haven’t seen our February EBITDA yet, but I believe it’s going to perform well also. So I think we’re off to a really good start at or ahead of plan at plan on revenue and slightly ahead from an adjusted EBITDA perspective.

Ramin Kamali, Analyst: Excellent. Thanks.

Conference Operator: Thank you. Our next question comes from the line of Robert Hemowitz from Concise Capital.

Robert Hemowitz, Analyst, Concise Capital: Hey guys, congratulations on the transaction. Just want to start by asking about foreclosure starts seem to be picking up. And so I’m just curious when you think this starts to get reflected in results, what’s the lag time here?

Bill Shepro, Chairman and Chief Executive Officer, Altisource: Yes, it’s kind of interesting and we’ve not done a great job, I would say, forecasting what’s going to happen with foreclosure starts. And so in our plan for this year, we’re assuming that the market, the delinquency rates remain roughly flat. That said, I do think there is the market is wobbling a little bit. We ended the year from a delinquency rate perspective, both 30 plus and I think 90 plus ahead of where we were in the middle of the year, but just slightly ahead of where we were at the end of twenty twenty three. And so it hasn’t changed that much.

And then as you saw in our prepared remarks, foreclosure starts and sales were also down in 2024 compared to 2023. So from a modeling and forecasting perspective at Altisource, we’re being very conservative and assuming it remains roughly the same. I can tell you what we’re hearing anecdotally from our clients is that they’re getting ready and expecting an increase in foreclosure starts. The VA moratoriums on foreclosures ended in at the December. So we got a bit of a sort of one time set of referrals in January and February related to VA loans and that will then start to normalize on a go forward basis.

And our clients are telling us that they’re expecting delinquency rates will start to pick up. We’re monitoring unemployment. That’s usually a pretty good leading indicator. If you look at other credit assets like auto loans, credit card delinquencies, things like that, the delinquency rates are continuing to rise in those areas. At some point, it’s likely it will translate into mortgage delinquencies as well, but we haven’t seen it yet.

Robert Hemowitz, Analyst, Concise Capital: Thanks. That’s helpful. And you mentioned the VA moratorium. Are there other agencies that are, for lack of a better term, implementing unfriendly creditor type of policies that you see those types of policies coming to an end like the VA moratorium that might impact the business as well?

Bill Shepro, Chairman and Chief Executive Officer, Altisource: I mean, the big one is FHA. When interest rates were going down, they had a streamlined modification program that allowed delinquent borrowers to essentially refi into a new loan with a lower interest rate, if they could qualify for a mortgage with that lower interest rate. And then when rates were going up, no one could qualify for a streamlined refi anymore. And so the government initiated a new program where you could waive, don’t hold me to the exact number, but I think it’s 25% or you can defer 25% of the principal to the end of the loan. And if you could qualify for those payments, you could essentially mod that loan.

What we’re seeing though is that even after going through that process, those borrowers are continuing to default on those loans. And in the fourth quarter, we actually saw a pretty good size uptick in our FHA related revenue and a slight decline in our non FHA related revenue. And the decline in the non FHA revenue was a combination of two things. The revenue per delinquent loan went down a little bit due to typical seasonality. That was partially offset, however, because the number of delinquent loans we are managing went up a little bit on the non GSE.

And so I think we’re starting to see that FHA market open up a bit and there’s only so many times these borrowers can attempt to modify their loan and then go delinquent again before they’re going to ultimately go through the whole process. And I suspect that’s going to start to happen more this year under the new administration compared to the last.

Robert Hemowitz, Analyst, Concise Capital: Got it. Thanks. And for Q1, it’s not in your EBITDA guide, but you guys should see a sizable gain that should add some solid equity or reduce the negative equity position on the balance sheet, correct?

Bill Shepro, Chairman and Chief Executive Officer, Altisource: So I’ll let Michel get into sort of how it translates into the income statement and balance sheet. But in terms of from an EBITDA perspective, I think we did $4,700,000 of EBITDA in the fourth quarter. I think in the fourth quarter, look, we still haven’t closed out our books for February and we still have March, but I think we should be at the in that range or better in the first quarter than the fourth quarter. So we should, from a revenue perspective, I think see a very strong revenue quarter. We’ll probably see a similar probably, if not better results from an EBITDA perspective, in which case both will be better quarter than each quarter last year.

So we’re off to a very strong start. We’re happy with our performance out of the gate this year.

Michelle Esterman, Chief Financial Officer, Altisource: And from a book perspective, remember, we had the prior debt through February 19. So you’re going to see higher interest expense in the first quarter of the year than you will for the remaining quarters of ’25.

Robert Hemowitz, Analyst, Concise Capital: Okay. But you guys had a lot of, let’s say, PIK interest in Q4 that you’re never going to have to actually pay off. So you should realize some sort of gain there, right?

Bill Shepro, Chairman and Chief Executive Officer, Altisource: Yes. No, I think you’re going to see interest expense. We’re still finalizing all the accounting related to the transaction, but putting that aside interest expense is going to be coming down as we mentioned on the call from something like $32,000,000 a year to $13,400,000 a year on an annualized basis.

Robert Hemowitz, Analyst, Concise Capital: Okay. Thanks guys.

Conference Operator: Thank you. At this time, I would now like to turn the conference back over to Bill Shepro for closing remarks.

Bill Shepro, Chairman and Chief Executive Officer, Altisource: Thanks, operator. We’re pleased with our performance last year and believe we’re off to a good start in 2025. We appreciate all of your support. We’ll talk to you soon. Thank you.

Conference Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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