Altisource Portfolio Solutions S.A.(ASPS) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company anticipates generating positive cash flow in the second half of 2022 as it returns to revenue growth on a significantly reduced cost structure [5][12] - Cash costs, excluding outside fees and services for the nine months ended September 30, were $40.7 million, which is 26% lower than the same period in 2020 [13] Business Line Data and Key Metrics Changes - The default business revenue could grow on a stabilized basis to between $227 million and $296 million, depending on delinquency levels [9] - Third quarter Hubzu referrals were 107% higher than the same quarter in 2020, indicating a positive trend in the default business [8] - The origination business is expected to see 40% to 50% revenue growth despite a forecasted 33% decline in origination volume in 2022 [11] Market Data and Key Metrics Changes - Foreclosure initiations in the third quarter were 28% higher than the second quarter, but still more than 85% lower than pre-pandemic levels [7] - The single-family investor market is more than 7 times larger than the REO sales market, with an estimated 1 million investment homes sold per year compared to 140,000 foreclosures in 2019 [9] Company Strategy and Development Direction - The company is executing on its strategic plan in the originations business, which is expected to be a significant driver for growth [5] - The anticipated sale of the equity interest in Pointillist is expected to strengthen the balance sheet by adding an estimated $100 million in cash at closing [6][14] Management's Comments on Operating Environment and Future Outlook - Management believes the default offerings are poised for significant revenue and earnings growth as the operating environment normalizes post-pandemic [5] - The company is optimistic about growth opportunities in both the origination and default businesses in 2022 [15] Other Important Information - The sale of Pointillist is expected to close before the end of the year, generating a pre- and post-tax gain of $107 million [14] - The company is focused on reducing costs further, with expectations to lower facilities costs by approximately $1.5 million to $2 million on a run rate basis by the end of next year [30] Q&A Session Summary Question: What are the big drivers behind the expected 40% to 50% growth in origination revenue? - The company expects growth from the launch of the tri-merge credit product, a suite of employment verification solutions, and the preferred investor program [17] Question: What level of revenues is needed to generate cash flow? - The company anticipates meaningful revenue growth next year, with expectations for improvement in revenue and EBITDA as the year progresses [18] Question: Has the outlook for the default services business changed? - The change in outlook is primarily due to current delinquency rates being lower than previously anticipated, affecting potential service revenues [24] Question: Are there opportunities for new sales in the default services business? - The company expects to grow not only with existing clients but also to add new clients as the market opens up [28] Question: When is the Pointillist sale expected to close? - The sale is expected to close by the end of the fourth quarter, with no feedback received on the filed HSR applications so far [34]