Altisource Portfolio Solutions SA Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Full-year 2024 saw total company service revenue grow 10% and adjusted EBITDA increase by $18.3 million. Fourth quarter 2024 service revenue was $38.4 million (highest since Q3 2021) and adjusted EBITDA was $4.7 million (strongest since Q3 2020).
• In February 2025, completed an exchange and maturity extension transaction with lenders, reducing debt by over $60 million, strengthening the balance sheet, and reducing interest expense. Also closed a $12.5 million super senior credit facility.
• Won new business across segments, with servicer and real estate winning $25.8 million in annualized service revenue and origination winning $12.6 million in new business annually.
• Corporate segment reduced adjusted EBITDA loss through cost savings and efficiency initiatives.

Segment Performance

• Servicer and Real Estate Segment: In 2024, service revenue was $120 million, a 11% increase from 2023. Adjusted EBITDA was $42.1 million, a $5 million (14%) improvement from 2023, with adjusted EBITDA margins at 35.1%. The segment won new business estimated to generate $25.8 million in annual service revenue and ended the year with a $29.4 million sales pipeline.
• Origination Segment: 2024 service revenue was $30.4 million, a 6% increase from 2023. Adjusted EBITDA improved by $5.4 million to $2.5 million. The segment won an estimated $12.6 million in new business annually and had a $13.2 million weighted average sales pipeline at year-end.
• Corporate Segment: 2024 adjusted EBITDA loss was $27.2 million, a $7.9 million (22%) improvement from 2023, driven by cost savings and efficiency initiatives.

Guidance

• Forecasts 2025 service revenue of $165 million to $185 million and adjusted EBITDA of $18 million to $23 million, reflecting 16% service revenue growth and 18% adjusted EBITDA growth from 2024.
• Anticipates positive operating cash flow for 2025, driven by sales wins, margin improvement, and corporate cost structure. Growth efforts focus on expanding renovation, origination, Hubzu, and Lenders One businesses.
• Expects strong Q1 2025 performance with revenue in line with plan and EBITDA potentially better than Q4 2024.

Risks

• Market headwinds for business segments, including continued low foreclosure starts and sales, and challenges in the origination market due to higher interest rates.
• Potential impact of changing delinquency rates and unemployment on mortgage delinquencies, which could affect foreclosure and origination activities.
• Uncertainty around the timing and extent of moratoriums ending (e.g., VA, FHA) and their impact on delinquency and business operations.

Question and Answer

Q: Can you comment on the nature of wins across originations and servicing and changes in conversations with customers post-restructuring?

A: Launched new products in renovation, origination, Hubzu, and Lenders One. For example, commercial and non-distressed residential auctions on Hubzu, growth in granite construction risk management, and plans to grow homeowners insurance on Lenders One. The transaction with lenders has helped in customer conversations.

Q: How are things trending in Q1 2025?

A: Started the year strong with January revenue in line with plan and EBITDA better than plan. February revenue on target, with revenue expected to be strong and EBITDA likely performing well.

Q: When will foreclosure starts be reflected in results and impact business?

A: Delinquency rates are monitored, with VA moratoriums ending and other agencies (e.g., FHA) potentially impacting. While not seen yet, unemployment is a leading indicator, and delinquencies in other credit assets may translate to mortgages.

Q: Will Q1 see a gain reducing negative equity on the balance sheet?

A: Interest expense will be higher in Q1 due to prior debt, but revenue is expected to be strong. Adjusted EBITDA in Q1 is likely to be in a similar range or better than Q4 2024, with a strong start to the year.