Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) Q4 2024 Earnings Conference Call March 13, 2025 8:30 AM ET Company Participants Michelle Esterman - Chief Financial Officer William Shepro - Chairman and Chief Executive Officer Conference Call Participants Ramin Kamali - Credit Suisse Robert Heimowitz - Concise Capital Operator Good day, and thank you for standing by. Welcome to the Altisource Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the s ...

ALTISOURCE FOURTH QUARTER 2024 SUPPLEMENTARY INFORMATION MARCH 13, 2025 DISCLAIMER This presentation 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 ...

Company Performance - In 2024, the company achieved a total Service revenue of $150.4 million, representing a 10% increase from 2023, and an Adjusted EBITDA of $17.4 million, which was $18.3 million higher than the previous year [4][7] - The fourth quarter of 2024 saw Service revenue of $38.4 million, a 19% increase compared to the same quarter in 2023, marking the highest quarterly Service revenue since Q3 2021 [4][6] - The company ended 2024 with $29.8 million in cash and cash equivalents [4] Financial Highlights - The Adjusted EBITDA margin improved to 29.7% in 2024 from 25.1% in 2023, driven by efficiency initiatives and cost savings [4][7] - The company reported a net loss attributable to Altisource of $(35.6) million for the full year 2024, a 37% improvement compared to $(56.3) million in 2023 [8][7] - The diluted loss per share decreased to $(1.25) in 2024 from $(2.51) in 2023, reflecting a 50% improvement [8][7] Business Segments - Service revenue in the Servicer and Real Estate segment increased by 11% to $120 million, while the Origination segment saw a 6% increase to $30 million [7] - The company generated estimated potential annualized Service revenue of $25.8 million from sales wins in the Servicer and Real Estate segment and $13.6 million in the Origination segment [7] Market Outlook - For 2025, the company is guiding Service revenue between $165 million and $185 million, and Adjusted EBITDA between $18 million and $23 million, indicating a projected growth of 16% in Service revenue and 18% in Adjusted EBITDA compared to 2024 [3][2] - The company anticipates maintaining cost discipline while diversifying its revenue base and ramping up business won [3][2]

Revenue Performance - Altisource reported a 10% increase in total Company Service revenue, reaching $150.4 million in 2024 compared to 2023[5]. - In Q4 2024, Service revenue was $38.4 million, a 19% increase from Q4 2023, marking the highest quarterly revenue since Q3 2021[5]. - The Servicer and Real Estate segment saw an 11% increase in Service revenue to $120 million, while the Origination segment increased by 6% to $30 million[6]. - The Company expects 2025 Service revenue to be between $165 million and $185 million, representing a projected 16% growth over 2024[4]. EBITDA and Profitability - Adjusted EBITDA for the full year 2024 was $17.4 million, an increase of $18.3 million from 2023, with margins improving to 29.7% from 25.1%[5]. - Altisource's Adjusted EBITDA guidance for 2025 is between $18 million and $23 million, indicating an 18% growth compared to 2024[4]. - For the year ended December 31, 2024, Altisource reported an adjusted operating income of $14,821,000, compared to an adjusted operating loss of $(2,282,000) for 2023[29]. - Adjusted EBITDA for the year ended December 31, 2024, was $17,387,000, compared to an adjusted EBITDA of $(909,000) for 2023, indicating a significant turnaround[29]. - The business segments adjusted EBITDA for the year ended December 31, 2024, was $44,607,000, compared to $34,212,000 in 2023, reflecting a 30.5% increase[31]. Cash and Debt Management - The Company ended 2024 with $29.8 million in cash and cash equivalents[5]. - A Term Loan Exchange Transaction was executed, reducing annual cash interest expenses by approximately $18 million[6]. - Cash and cash equivalents decreased to $29,811 million as of December 31, 2024, down from $32,522 million in 2023[18]. - The net debt as of December 31, 2024, was $202,989 thousand, an increase from $191,563 thousand at the end of 2023[35]. Losses and Improvements - Net loss attributable to Altisource for the year 2024 was $35,636 million, an improvement from a net loss of $56,290 million in 2023[16]. - The company reported a comprehensive loss of $8,769 million in Q4 2024, compared to a comprehensive loss of $13,151 million in Q4 2023[16]. - The net loss attributable to Altisource for the year ended December 31, 2024, was $(35,636,000), a decrease from $(56,290,000) in 2023, representing a 36.7% improvement[31]. - The company reported a loss before income taxes and non-controlling interests of $(32,867,000) for 2024, down from $(52,348,000) in 2023, reflecting a 37.1% reduction[29]. Operating Activities - Net cash used in operating activities for 2024 was $(5,025) million, a significant improvement from $(21,833) million in 2023[20]. - The company reported a net cash used in operating activities of $(1,401) thousand for the three months ended December 31, 2024, an improvement from $(4,238) thousand in the same period of 2023[35]. Tax and Amortization - Altisource's effective tax rate in Luxembourg is close to 0% for 2023 and 2024 due to a full valuation allowance on net deferred tax assets recognized in 2019[23]. - The company incurred $5,080,000 in intangible asset amortization expense for the year ended December 31, 2024, consistent with the previous year[29]. - The total intangible asset amortization expense for the year ended December 31, 2024, was $5,080 thousand, slightly down from $5,182 thousand in 2023[33]. Share-Based Compensation - Share-based compensation expense for the year ended December 31, 2024, was $4,737,000, down from $5,069,000 in 2023, indicating a 6.6% decrease[29]. - Share-based compensation expense, net of tax, for the year ended December 31, 2024, was $4,122 thousand, down from $4,409 thousand in 2023[33].

Core Viewpoint - Altisource Portfolio Solutions S.A. is set to report its earnings for the fourth quarter and full year of 2024 on March 13, 2025, with a press release and presentation available on its website [1]. Group 1: Earnings Report - The earnings report will cover both the fourth quarter and the full year of 2024 [1]. - A conference call is scheduled for 8:30 a.m. EDT on the same day to discuss the results [2]. - A live audio webcast of the conference call will be accessible on Altisource's website, with a replay available approximately two hours after the call [2]. Group 2: Company Overview - Altisource Portfolio Solutions S.A. operates as an integrated service provider and marketplace for the real estate and mortgage industries [3]. - The company combines operational excellence with innovative services and technologies to address the demands of changing markets [3].

Core Insights - Lenders One Cooperative is celebrating its 25th anniversary at the annual summit in Cancun, Mexico, highlighting its commitment to supporting independent mortgage bankers, banks, and credit unions [1][5] - Since March 2024, Lenders One has added 39 new members and enhanced its service offerings to help members increase profitability and improve decision-making [2][5] - The cooperative's members collectively originated approximately $372 billion in mortgages during 2023, making it the largest retail mortgage entity in the U.S. [6] Membership and Growth - The addition of 39 new members reflects the value proposition of Lenders One amid a challenging mortgage origination environment [2] - The cooperative continues to focus on maximizing revenue, reducing costs, and sharing best practices among its members [6] Service Offerings - Lenders One provides a variety of direct solutions, including credit, flood, fraud, insurance, verifications, fulfillment services, quality control, title and escrow, valuations, and vendor management [3] - Recent enhancements to direct solutions include: - ScoreNavigator® for detailed credit health analysis [4] - L1 Verification of Assets powered by FinLocker® for asset and payroll verification [4] - L1 Flood for flood zone determinations, now powered by ServiceLink® [4] - L1 Insurance for competitive homeowner insurance quotes [4] - Blend and Blue Sage for digital origination and lending platforms [4] Capital Markets and National Programs - Lenders One has expanded its Capital Markets and National Programs offerings, adding 8 new Preferred Providers to support various facets of the mortgage business [4] - The cooperative's suite of services aims to enhance competitiveness and profitability for its members [3][4]

Core Viewpoint - Altisource Portfolio Solutions S.A. has successfully completed a significant financial restructuring through the Term Loan Exchange Transactions and the establishment of a Super Senior Facility, aimed at strengthening its balance sheet and positioning the company for sustainable long-term growth and value creation [2][3][4] Financial Transactions - The Term Loan Exchange Transactions involved the exchange of $232.8 million in senior secured term loans for a new first lien loan of $160 million and approximately 58.2 million common shares [3][4] - The New Facility consists of a $110 million interest-bearing loan and a $50 million non-interest-bearing exit fee, with a maturity date of April 30, 2030 [5][6] - The Super Senior Facility, amounting to $12.5 million, was executed to fund transaction costs and for general corporate purposes, maturing on February 19, 2029 [4][6] Interest Rates and Repayment Terms - The interest rate on the New Debt is set at SOFR plus 6.50% per annum, with a 3.50% SOFR floor, while the Exit Fee carries a 0% interest rate [5][6] - Mandatory and voluntary prepayments under the New Facility will be allocated on a pro rata basis between the New Debt and the Exit Fee [5] - Beginning with the fiscal year ending December 31, 2025, a portion of the company's excess cash flow will be used to prepay the Super Senior Facility and the New Facility [6] Stakeholder Warrants - Shareholders approved the issuance of Stakeholder Warrants, allowing holders to purchase approximately 114.5 million shares of common stock at $1.20 per share [4][7] - Stakeholder Warrants will provide the ability to purchase approximately 3.25 shares for each share held, with different expiration dates for the two halves of the warrants [7] Future Reporting - Detailed descriptions of the Term Loan Exchange Transactions and the Super Senior Facility will be provided in a Current Report on Form 8-K to be filed by Altisource [8]

Core Points - Altisource Portfolio Solutions S.A. has successfully closed its Term Loan Exchange Transactions and entered into a $12.5 million Super Senior Facility, which is expected to strengthen its balance sheet and support long-term growth [1][2][3] Group 1: Term Loan Exchange Transactions - The Term Loan Exchange Transactions involved the exchange of $232.8 million in senior secured term loans for a new first lien loan of $160 million and approximately 58.2 million common shares [3] - The new facility consists of a $110 million interest-bearing loan and a $50 million non-interest-bearing exit fee [3][5] - A portion of the principal amount of the exchanged loans, approximately $1.4 million, matures on January 15, 2029 [4] Group 2: Super Senior Facility - The Super Senior Facility, executed on February 19, 2025, is intended to fund transaction costs related to the Term Loan Exchange and for general corporate purposes [4] - The maturity date of the Super Senior Facility is February 19, 2029, with an original issue discount of 10.0% [6] - The interest rate on the Super Senior Facility is SOFR plus 6.50% with a 3.50% SOFR floor [6] Group 3: Stakeholder Warrants - Shareholders approved the issuance of transferable warrants allowing stakeholders to purchase approximately 114.5 million shares of common stock at $1.20 per share [4][7] - Stakeholder Warrants will allow stakeholders to purchase approximately 3.25 shares for each share held, with half expiring on April 2, 2029, and the other half on April 30, 2032 [7] Group 4: Financial Terms and Conditions - The interest rate on the new debt is SOFR plus 6.50% per annum with a 3.50% SOFR floor, and the exit fee has an interest rate of 0% [5][6] - Mandatory and voluntary prepayments under the new facility will be allocated on a pro rata basis between the new debt and the exit fee [5] - Beginning with the fiscal year ending December 31, 2025, a portion of excess cash flow will be used for prepayment of the Super Senior Facility and the New Facility [5][6]

Core Viewpoint - Altisource Portfolio Solutions S.A. announced a proposed issuance of transferable Warrants to its stakeholders, contingent upon shareholder approval and completion of related transactions [1][2]. Summary by Relevant Sections Warrant Distribution - The Warrant Distribution will occur within 60 days after the Distribution Record Date of February 14, 2025, with a potential Distribution Date by April 15, 2025 [2]. - The distribution is subject to shareholder approval of proposals outlined in the Proxy Statement filed with the SEC [1][2]. Terms of the Warrants - Stakeholders will receive two types of Warrants: Cash Exercise Stakeholder Warrants and Net Settle Stakeholder Warrants, each entitling the holder to purchase 1.625 shares of Common Stock at an initial exercise price of $1.95 per Warrant [3][6]. - The Company will not issue fractional shares; any fractional entitlement will be rounded down to the nearest whole number [3]. Listing and Agreement - The Company intends to apply for listing the Warrants on the Nasdaq Global Select Market, although approval is not guaranteed [4]. - The issuance of the Warrants will be governed by a Warrant Agent Agreement with Equiniti Trust Company, LLC [5]. Additional Information - Altisource is an integrated service provider for the real estate and mortgage industries, offering innovative services and technologies [8]. - Shareholders are encouraged to review the Proxy Statement and related documents for important information regarding the proposed transactions [9].

Core Viewpoint - Altisource Portfolio Solutions S.A. has entered into a binding transaction support agreement with lenders to restructure its existing debt, aiming to significantly improve its financial position and support long-term growth [1][2]. Debt Restructuring Details - The agreement will reduce the company's current outstanding debt obligations from $231 million to $172.5 million, a reduction of $58 million or 25% [2]. - The new debt structure includes an up to $110 million interest-bearing first lien loan, a $50 million non-interest-bearing exit fee, and a $12.5 million super senior credit facility [2]. - The maturity date of the new facility will be extended by five years to April 30, 2030 [2]. Financial Impact - The restructuring is expected to decrease the company's annual cash and paid-in-kind (PIK) interest by approximately $18 million, with cash interest reduced by about $9 million and PIK interest also reduced by approximately $9 million [2]. - The interest rate on the new debt and super senior facility is set at SOFR + 6.50%, compared to the existing term loans' rate of SOFR + 8.75% [2]. Equity and Warrants - Lenders under the new facility will receive approximately 57.9 million common shares of Altisource, representing 63.5% of the pro forma outstanding shares post-transaction [2]. - Existing shareholders and certain stakeholders will be granted warrants to purchase approximately 115 million common shares at an exercise price of $1.20 per share, potentially mitigating dilution from shares issued to lenders [2]. Management Commentary - The CEO expressed satisfaction with the transaction support agreement, highlighting that it would strengthen Altisource's balance sheet and position the company for sustainable long-term growth [2]. Additional Information - The transactions are subject to certain terms and conditions, including the negotiation and execution of definitive agreements and necessary approvals from the company's Board of Directors and shareholders [3]. - Further details are available in a presentation posted on the company's Investor Relations website [4].