Altisource Announces Fourth Quarter and Full Year 2022 Financial Results

LUXEMBOURG, March 30, 2023 (GLOBE NEWSWIRE) -- Altisource Portfolio Solutions S.A. (“Altisource” or the “Company”) (NASDAQ: ASPS), a leading provider and marketplace for the real estate and mortgage industries, today reported financial results for the fourth quarter and full year 2022.

“I am encouraged by our progress in 2022 and early 2023 as we execute on our plan to recover from the impact of the COVID-19 pandemic. In 2022, we grew revenue and Adjusted EBITDA in our countercyclical Servicer and Real Estate segment as we began to benefit from the restart of the default market, product mix and cost savings. We also grew our sales pipeline and wins, improved our Gross Profit margins to 15% from 4% and reduced our Adjusted EBITDA loss by $15 million. In February, we amended and extended our term loan and revolver to April 2025 with an option to extend both to April 2026 upon satisfying certain conditions,” said Chairman and Chief Executive Officer William B. Shepro.

Mr. Shepro further commented, “As we look to 2023, we anticipate revenue growth, margin expansion and positive Adjusted EBITDA driven by a continuing recovery of the default market, sales pipeline growth and wins, a lower cost base and scale. There is potential revenue and Adjusted EBITDA upside in our countercyclical default business from a softening of the broader economy and the significant number of servicing portfolios reported to be in the market for sale if acquired by our customers.”

2022 Highlights⁽¹⁾

Corporate and Financial:

• Focused on growing the sales pipeline, improving operational efficiencies, reducing costs, and strengthening liquidity as the Company continued to seek to mitigate the impacts of the COVID-19 pandemic, governmental moratoriums and loss mitigation measures that affect the timing of the recovery of the market for default-related services
• Reduced 2022 Corporate and Others costs by $31.0 million, representing a 32% reduction, compared to 2021
• Ended 2022 with $51.0 million of cash and cash equivalents
• Ended 2022 with $196.2 million of net debt⁽³⁾
• Fourth quarter Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”)⁽³⁾ of $0.6 million
• On February 14, 2023, the Company executed amendments to its senior secured term loans and revolving credit facility (together, “Credit Agreements”) that, among other things, extended the maturity dates to April 2025, with an option to extend to April 2026, subject to certain terms and conditions⁽²⁾
• On February 14, 2023, Altisource generated approximately $21 million in net proceeds from the sale of its common stock (after deducting the underwriting discounts and commissions and other offering expenses)  
• On February 22, 2023, the Company used $20 million of the proceeds of the offering to repay a portion of its term loans

Business and Industry:

• The Servicer and Real Estate segment continues to benefit from the restart of the default business and efficiency initiatives with 47% gross profit growth on 4% service revenue growth compared to 2021
• Industrywide foreclosure initiations were 368% higher in 2022, compared to 2021 (although still 45% lower than the pre-COVID-19 period in 2019)⁽⁴⁾, as the foreclosure market is beginning to recover following expiration of the Federal government’s foreclosure moratorium on July 31, 2021 and the Consumer Financial Protection Bureau’s temporary loss mitigation measures on December 31, 2021
• Industrywide foreclosure sales were 39% higher in 2022, compared to 2021 (although still 67% lower than the same pre-COVID-19 period in 2019)⁽⁴⁾
• The Servicer and Real Estate segment and Origination segment had strong sales wins which we estimate represent $9.4 million and $21.6 million, respectively, of annualized revenue on a stabilized basis
• The weighted sales pipeline in the Servicer and Real Estate segment at year-end 2022 represents $41 million to $51 million in estimated annual revenue on a stabilized basis based upon our forecasted probability of closing
• The weighted sales pipeline in the Origination segment at year-end 2022 represents $20 million to $25 million in estimated annual revenue on a stabilized basis based upon our forecasted probability of closing

2022 Financial Results

Full Year 2022

• Service revenue of $144.5 million
• Loss before income taxes and non-controlling interests of $(47.6) million
• Net loss attributable to Altisource of $(53.4) million
• Adjusted EBITDA⁽³⁾ of $(16.6) million

Fourth Quarter 2022

• Service revenue of $32.8 million
• Loss before income taxes and non-controlling interests of $(8.2) million
• Net loss attributable to Altisource of $(11.3) million
• Adjusted EBITDA⁽³⁾ of $0.6 million

Fourth Quarter and Full Year 2022 Results Compared to the Fourth Quarter and Full Year 2021 (unaudited):

• Fourth quarter and full year 2022 loss before income taxes and non-controlling interests include:
  • Incentive compensation accrual reversal of $4.2 million for the fourth quarter and full year 2022 compared to $0.2 million for the fourth quarter and full year 2021
  • Technology and communications accrual reversal of $1.9 million from the repricing of a technology agreement for the fourth quarter and full year 2022, compared to $0.0 million for the fourth quarter and full year 2021
  • Expenses related to cost savings initiatives and other of $0.6 million and $1.7 million for the fourth quarter and full year 2022, respectively, compared to $0.4 million and $3.6 million, for the fourth quarter and full year 2021, respectively.
  • (Loss) gain on sale of the Pointillist business of $(0.2) million for the fourth quarter and full year 2022 compared to $88.9 million, for the fourth quarter and full year 2021
  • Losses from Pointillist of $0.0 million for the fourth quarter and full year 2022 compared to $1.5 million and $8.6 million for the fourth quarter and full year 2021, respectively
• In the fourth quarter 2022, the Company did not receive the anticipated refund of approximately $5.0 million in U.S. taxes and $3.5 million in escrow funds from the Pointillist sale.   The Company received the tax refund in the first quarter 2023 and currently believes it will receive the Pointillist sale escrow funds by year-end 2023 subject to potential reduction for an escrow claim

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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 that relate to, among other things, future events or our future performance or financial condition. These statements may be identified by words such as “anticipate,” “intend,” “expect,” “may,” “could,” “should,” “would,” “plan,” “estimate,” “seek,” “believe,” “potential” or “continue” or the negative of these terms and comparable terminology. Such statements are based on expectations as to the future and are not statements of historical fact. Furthermore, forward-looking statements are not guarantees of future performance and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the risks discussed in Item 1A of Part I “Risk Factors” in our Form 10-K filing with the Securities and Exchange Commission, as the same may be updated from time to time in our Form 10-Q filings. We caution you not to place undue reliance on these forward-looking statements which reflect our view only as of the date of this report. We are under no obligation (and expressly disclaim any obligation) to update or alter any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any such statement is based. The risks and uncertainties to which forward-looking statements are subject include, but are not limited to, risks related to the COVID-19 pandemic, customer concentration, the timing of the anticipated increase in default related referrals following the expiration of foreclosure and eviction moratoriums and forbearance programs, the timing of the expiration of such moratoriums and programs, and any other delays occasioned by government, investor or servicer actions, the use and success of our products and services, our ability to retain existing customers and attract new customers and the potential for expansion or changes in our customer relationships, technology disruptions, our compliance with applicable data requirements, our use of third party vendors and contractors, our ability to effectively manage potential conflicts of interest, macro-economic and industry specific conditions, our ability to effectively manage our regulatory and contractual obligations, the adequacy of our financial resources, including our sources of liquidity and ability to repay borrowings and comply with our Credit Agreement, including the financial and other covenants contained therein, as well as Altisource’s ability to retain key executives or employees, behavior of customers, suppliers and/or competitors, technological developments, governmental regulations, taxes and policies. The financial projections and scenarios contained in this press release are expressly qualified as forward-looking statements and, as with other forward-looking statements, should not be unduly relied upon. We undertake no obligation to update these statements, scenarios and projections as a result of a change in circumstances, new information or future events.

Webcast

Altisource will host a webcast at 8:30 a.m. EDT today to discuss our fourth quarter and full year 2022 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 an integrated service provider and marketplace for the real estate and mortgage industries. Combining operational excellence with a suite of innovative services and technologies, Altisource helps solve the demands of the ever-changing markets we serve. Additional information is available at www.Altisource.com.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
NON-GAAP MEASURES
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(unaudited)

Adjusted operating loss, pretax (loss) income attributable to Altisource, adjusted pretax loss attributable to Altisource, adjusted EBITDA, adjusted net loss attributable to Altisource, adjusted diluted loss per share, net cash used in operating activities less additions to premises and equipment and net debt, which are presented elsewhere in this earnings release, are non-GAAP measures used by management, existing shareholders, potential shareholders and other users of our financial information to measure Altisource’s performance and do not purport to be alternatives to (loss) income from operations, (loss) income before income taxes and non-controlling interests, net (loss) income attributable to Altisource, diluted (loss) earnings per share, net cash used in operating activities and long-term debt, including current portion, as measures of Altisource’s performance. We believe these measures are useful to management, existing shareholders, potential shareholders and other users of our financial information in evaluating operating profitability and cash flow generation more on the basis of continuing cost and cash flows as they exclude amortization expense related to acquisitions that occurred in prior periods and non-cash share-based compensation, as well as the effect of more significant non-operational items from earnings, cash flows from operating activities and long-term debt net of cash on-hand. We believe these measures are also useful in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Furthermore, we believe the exclusion of more significant non-operational items enables comparability to prior period performance and trend analysis. Specifically, management uses adjusted net loss attributable to Altisource to measure the on-going after tax performance of the Company because the measure adjusts for the after tax impact of more significant non-recurring items, amortization expense relating to prior acquisitions (some of which fluctuates with revenue from certain customers and some of which is amortized on a straight-line basis) and non-cash share-based compensation expense which can fluctuate based on vesting schedules, grant date timing and the value attributable to awards. We believe adjusted net loss attributable to Altisource is useful to existing shareholders, potential shareholders and other users of our financial information because it provides an after-tax measure of Altisource’s on-going performance that enables these users to perform trend analysis using comparable data. Management uses adjusted diluted loss per share to further evaluate adjusted net loss attributable to Altisource while taking into account changes in the number of diluted shares over the comparable periods. We believe adjusted diluted loss per share is useful to existing shareholders, potential shareholders and other users of our financial information because it also enables these users to evaluate adjusted net loss attributable to Altisource on a per share basis. Management uses Adjusted EBITDA to measure the Company’s overall performance (with the adjustments discussed earlier with regard to adjusted net loss attributable to Altisource) without regard to its capitalization (debt vs. equity) or its income taxes and to perform trend analysis of the Company’s performance over time. Our effective income tax rate can vary based on the jurisdictional mix of our income. Additionally, as the Company’s capital expenditures have significantly declined over time, it provides a measure for management to evaluate the Company’s performance without regard to prior capital expenditures. Management also uses Adjusted EBITDA as one of the measures in determining bonus compensation for certain employees. We believe Adjusted EBITDA is useful to existing shareholders, potential shareholders and other users of our financial information for the same reasons that management finds the measure useful. Management uses net debt in evaluating the amount of debt the Company has that is in excess of cash and cash equivalents and equity securities. We deduct investment in equity securities from debt in arriving at this measure because our Senior Secured Term Loan requires the Company to use any proceeds from the sale of equity securities to repay the Senior Secured Term Loan. We believe net debt is useful to existing shareholders, potential shareholders and other users of our financial information for the same reasons management finds the measure useful.

Altisource operates in several countries, including Luxembourg, India, the United States and Uruguay. The Company has differing effective tax rates in each country and these rates may change from year to year. In determining the tax effects related to the adjustments in calculating adjusted net loss attributable to Altisource and adjusted diluted loss per share, we use the tax rate in the country in which the adjustment applies or, if the adjustment is recognized in more than one country, we separate the adjustment by country, apply the relevant tax rate for each country to the applicable adjustment, and then sum the result to arrive at the total adjustment, net of tax. In 2019, the Company recognized a full valuation allowance on its net deferred tax assets in Luxembourg. Accordingly, for 2022 and 2021, the Company has an effective tax rate of close to 0% in Luxembourg.Following the 2019 creation of Pointillist as a separate legal entity, Altisource had no ongoing obligation to fund Pointillist, Pointillist was positioned to and focused on raising third-party capital and Pointillist was an unrestricted subsidiary under our Senior Secured Term Loan. Additionally, Pointillist was not part of Altisource’s core, normal, recurring business. For these reasons, in 2020 we began adding back the losses of Pointillist in calculating adjusted net loss attributable to Altisource, adjusted diluted loss per share, and Adjusted EBITDA.

It is management’s intent to provide non-GAAP financial information to enhance the understanding of Altisource’s GAAP financial information, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies. The non-GAAP financial information should not be unduly relied upon.

Adjusted operating loss is calculated by removing intangible asset amortization expense, share-based compensation expense, Pointillist losses, gain on sale of business and cost of cost savings initiatives and other from (loss) income from operations. Pretax (loss) income attributable to Altisource is calculated by removing non-controlling interest from (loss) income before income taxes and non-controlling interests. Adjusted pretax loss attributable to Altisource is calculated by removing non-controlling interest, intangible asset amortization expense, share-based compensation expense, Pointillist losses, gain on sale of business and cost of cost of cost savings initiatives and other from (loss) income before income taxes and non-controlling interests. Adjusted EBITDA is calculated by removing the income tax provision, interest expense (net of interest income), depreciation and amortization, intangible asset amortization expense, share-based compensation expense, Pointillist losses, gain on sale of business and cost of cost of cost savings initiatives and other from net (loss) income attributable to Altisource. Adjusted net loss attributable to Altisource is calculated by removing intangible asset amortization expense, net of tax, share-based compensation expense, net of tax, Pointillist losses, net of tax, gain on sale of business, net of tax, cost of cost savings initiatives and other, net of tax, and certain income tax related items from net (loss) income attributable to Altisource. Adjusted diluted loss per share is calculated by dividing net (loss) income attributable to Altisource after removing intangible asset amortization expense, net of tax, share-based compensation expense, net of tax, Pointillist losses, net of tax, gain on sale of business, net of tax, cost of cost savings initiatives and other, net of tax and certain income tax related items by the weighted average number of diluted shares. Net cash used in operating activities less additions to premises and equipment is calculated by removing additions to premises and equipment from net cash used in operating activities. Net debt is calculated as long-term debt, including current portion, minus cash and cash equivalents.

Reconciliations of the non-GAAP measures to the corresponding GAAP measures are as follows:

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Note: Amounts may not add to the total due to rounding.