• Service Revenue: $38.2 million for the quarter, an 11.8% increase year-over-year and a 3.5% increase sequentially.
• Adjusted EBITDA: $3.6 million for the quarter, a $2.8 million improvement year-over-year, but an $800,000 decline sequentially.
• Cash and Cash Equivalents: $28.3 million at the end of the quarter.
• Adjusted EBITDA Margin: Improved to 11.3% year-to-date compared to negative 1.1% in the same period last year.
• Servicer and Real Estate Segment Revenue Growth: 4.7% sequentially and 13% year-over-year.
• Renovation Business Referrals: Over 70 referrals since launch, with an average renovation cost of close to $100,000 per property.
• Origination Segment Adjusted EBITDA Improvement: $1.4 million year-over-year and $400,000 sequentially.
• Corporate Adjusted EBITDA Loss: $7.2 million for the quarter, a 17% improvement year-over-year.

• Warning! GuruFocus has detected 4 Warning Signs with ASPS.

Release Date: October 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Altisource Portfolio Solutions SA achieved a 11.8% year-over-year increase in service revenue, marking the strongest quarterly performance in 12 quarters.
• The company reported a $2.8 million improvement in adjusted EBITDA compared to the third quarter of 2023, driven by higher service revenue and lower corporate costs.
• The newly launched Renovation business has shown rapid growth, becoming one of the larger business lines within six months of launch.
• Altisource Portfolio Solutions SA has successfully added new clients in both the Servicer and Real Estate segment and the Origination segment, contributing to a diversified revenue stream.
• The company maintains strong cost discipline, with a 17% improvement in corporate adjusted EBITDA loss compared to the third quarter of 2023.

Negative Points

• The company faced a decline in serious delinquency rates, foreclosure starts, and foreclosure sales, impacting its higher-margin businesses.
• Higher SG&A costs, including legacy indemnity claims and bad debt expense, negatively affected adjusted EBITDA results.
• The Renovation business launched later than anticipated, resulting in a slower ramp-up and impacting expected EBITDA.
• Market conditions, including lower foreclosure starts and sales, have been less favorable than anticipated, affecting revenue from the Hubzu, trustee, and title businesses.
• The company anticipates achieving close to the low end of its guidance due to market challenges and slower-than-expected business ramp-up.

Q & A Highlights

Q: Can you elaborate on the impact of the foreclosure market on your business and the performance of the Renovation business? A: The foreclosure market has not performed as expected, with starts and sales lower than anticipated, impacting our higher-margin businesses. However, we are adding new clients in early-stage processes and seeing growth in our Renovation business, which has received over 70 referrals since its launch, with each renovation costing around $100,000. We expect this business to ramp up further.

Q: Could you provide more details on the Renovation business and its potential impact on revenue? A: The Renovation business, launched in late April, has quickly become one of our larger business lines. We generated $1.5 million in revenue in Q3, up from a few hundred thousand in Q2. We anticipate further growth as we onboard another renovation customer and actively market to others.

Q: What are the factors contributing to the higher SG&A costs and legacy indemnity claims? A: Higher SG&A costs, including professional services and bad debt, impacted our quarter by about $350,000. The bad debt is expected to be collectible, and the higher legal fees are due to legacy matters. These factors, along with market impacts, cost us approximately $3 million in EBITDA for the quarter.

Q: How is the Origination segment performing, and what is the outlook? A: The Origination segment saw improved EBITDA due to cost savings and efficiency initiatives. We added several new clients in the credit and insurance sectors. Despite market fluctuations, we continue to focus on launching new products and increasing client adoption to drive growth.

Q: What is your outlook on the foreclosure market and its potential impact on your business? A: The foreclosure market remains below pre-pandemic levels, but we see early signs of potential changes, such as increased home inventories. While delinquency rates have decreased, we believe the market will eventually normalize, and we are positioning ourselves to benefit from this when it occurs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.