Exhibit 99.1
 
altisource3q2018_8k.jpg
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION CONTACT:
 
 
 
Michelle D. Esterman
 
Chief Financial Officer
 
T: +352 2469 7950
 
E: Michelle.Esterman@altisource.com


ALTISOURCE ANNOUNCES THIRD QUARTER FINANCIAL RESULTS

Luxembourg, October 25, 2018 - Altisource Portfolio Solutions S.A. (“Altisource” or the “Company”) (NASDAQ: ASPS) today reported financial results for the third quarter 2018, reporting service revenue of $196.9 million, operating income of $20.9 million, adjusted operating income(1) of $25.7 million, net income attributable to Altisource of $8.7 million, adjusted net income attributable to Altisource(1) of $12.2 million, diluted earnings per share of $0.49 and adjusted diluted earnings per share(1) of $0.69. During the third quarter of 2018, Altisource launched Project Catalyst, a program to better align the Company’s cost structure with anticipated revenue, and improve operating margins and performance.
Third quarter service revenue of $196.9 million decreased by 6% compared to the second quarter of 2018 primarily from fewer homes sold in the Company’s Buy-Renovate-Lease-Sell business. Third quarter service revenue decreased by 12% compared to the third quarter of 2017 primarily from the reduction in size of the Ocwen Financial Corporation (“Ocwen”) servicing portfolio and the Front Yard Residential Corporation (“RESI”) portfolio of non-performing loans and REO. These declines were partially offset by growth in the Owners.com® and Financial Services businesses.
Third quarter operating income of $20.9 million was 68% higher than the second quarter of 2018 and 55% higher than the third quarter of 2017 primarily from the $13.7 million gain on sale of the Rental Property Management business in the third quarter of 2018 and margin expansion from the initial benefits of Project Catalyst, partially offset by a $5.9 million third quarter 2018 reserve for sales tax and a $3.4 million third quarter 2018 restructuring expense related to Project Catalyst. Third quarter adjusted operating income(1) of $25.7 million was 17% higher than the second quarter of 2018 and 10% higher than the third quarter of 2017 from margin expansion from the initial benefits of Project Catalyst. Third quarter adjusted operating income(1) as a percentage of service revenue was 13.0% compared to 10.5% in both the second quarter of 2018 and the third quarter of 2017.
Third quarter 2018 diluted earnings per share was $0.49 and adjusted diluted earnings per share(1) was $0.69, compared to second quarter 2018 diluted earnings per share of $0.09 and adjusted diluted earnings per share(1) of $0.60. Third quarter adjusted diluted earnings per share was higher than the second quarter of 2018 from adjusted operating income growth. Third quarter 2018 adjusted diluted earnings per share was $0.09, or 12%, lower than the third quarter of 2017 primarily from a $1.5 million pretax gain on debt repurchase reflected in the third quarter of 2017 ($0.06 per diluted share) and $1.1 million of higher pretax interest expense from the April 2018 debt refinancing transaction ($0.04 per diluted share).
“The early benefits of Project Catalyst fueled earnings growth in the third quarter of 2018. Based upon a detailed analysis completed during the quarter, we established targeted annual run-rate cost savings between $65 million and $90 million with estimated one-time restructuring costs of between $25 million and $35 million. We are targeting to achieve more than half of the savings in 2019 with the full run-rate savings achieved in 2020. While there is a tremendous amount of work to achieve our targeted savings, Project Catalyst gives us greater confidence in our ability to grow Altisource’s adjusted pre-tax earnings in 2019 and improve our adjusted operating margins compared to this year,” said Chief Executive Officer William B. Shepro.
Mr. Shepro further commented, “We continued to win and onboard business from some of the largest and most well respected financial institutions in our industry, building a sizeable pipeline of future revenue. During the third quarter, we made excellent progress onboarding one of the largest institutional real estate and mortgage investors in the U.S. and two large servicers. We began receiving REO and foreclosure auction referrals from the institutional investor and expect to begin receiving referrals

1



from the two large servicer customers in the first quarter. When you combine our customer wins with Project Catalyst, we believe we are positioning Altisource for sustainable growth, margin expansion and greater operating flexibility - further advancing our competitive positioning.”
Third Quarter 2018 Highlights(2) 
Corporate
Generated $36.8 million of adjusted cash flows from operating activities(1) 
Ended the quarter with $147.8 million of cash, cash equivalents and marketable securities and $240.9 million of net debt less marketable securities(1) 
Ended the quarter with $51.7 million of short-term investments in real estate (inventory in the Buy-Renovate-Lease-Sell business)
Used the $15 million received from the sale of the Rental Property Management business to repay debt
Launched Project Catalyst to better align the Company’s cost structure with anticipated revenue, and improve operating margins and performance; incurred $3.4 million of restructuring costs in connection with Project Catalyst
Servicer Solutions
Began receiving REO auction referrals in August and foreclosure auction referrals in October from one of the largest institutional real estate and mortgage investors in the U.S. and anticipate that we will begin receiving short sale auction referrals from this customer in the first quarter of 2019
Made good progress onboarding a top-5 servicer customer for property inspection and preservation services and a top-10 servicer customer for REO asset management services, and anticipate that we will begin receiving referrals from both in the first quarter of 2019
Grew inventory of Hubzu homes from customers other than Ocwen, New Residential Investment Corp. and RESI by 43% to 1,920 compared to the end of the second quarter of 2018
Origination Solutions
Grew service revenue by 6% compared to the second quarter of 2018 in a challenging origination environment
Completed the onboarding of two fulfillment customers that we won in the first half of the year
Real Estate Investor Solutions
Sold the Rental Property Management business to RESI for $18 million, $15 million of which was received in the third quarter of 2018 and $3 million of which will be received upon the earlier of (1) a change of control of RESI and (2) August 2023; generated a pretax gain on the sale of this business of $13.7 million
Ended the quarter with 392 homes in the buy-renovate-lease-sell business, compared to 172 homes at the end of the third quarter of 2017
Consumer Real Estate Solutions
Grew service revenue by 16% and the number of home purchase and sale transactions by 17% compared to the second quarter of 2018; grew service revenue by 87% and the number of home purchase and sale transactions by 81% compared to the third quarter of 2017
Working with approximately 5,300 clients at the end of the third quarter 2018, compared to 4,200 clients at the end of the second quarter of 2018 and 2,000 clients at the end of the third quarter of 2017

2



Third Quarter 2018 Results Compared to Second Quarter 2018 and Third Quarter 2017:
(in thousands, except per share data)
Third Quarter 2018
 
Second Quarter 2018
 
Change
 
Third Quarter 2017
 
Change
Service revenue
$
196,906

 
$
208,861

 
(6
)%
 
$
224,308

 
(12
)%
Income from operations
20,918

 
12,426

 
68
 %
 
13,459

 
55
 %
Adjusted operating income(1)
25,693

 
21,880

 
17
 %
 
23,442

 
10
 %
Income before income taxes and non-controlling interests
16,129

 
3,071

 
425
 %
 
10,357

 
56
 %
Pretax income attributable to Altisource(1)
15,275

 
2,384

 
541
 %
 
9,552

 
60
 %
Adjusted pretax income attributable to Altisource(1)
18,268

 
14,739

 
24
 %
 
19,535

 
(6
)%
Net income attributable to Altisource
8,667

 
1,568

 
453
 %
 
6,961

 
25
 %
Adjusted net income attributable to Altisource(1)
12,193

 
10,557

 
15
 %
 
14,447

 
(16
)%
Diluted earnings per share
0.49

 
0.09

 
444
 %
 
0.38

 
29
 %
Adjusted diluted earnings per share(1)
0.69

 
0.60

 
15
 %
 
0.78

 
(12
)%
Cash flows from operating activities
20,397

 
31,822

 
(36
)%
 
34,612

 
(41
)%
Adjusted cash flows from operating activities(1)
36,796

 
27,791

 
32
 %
 
44,142

 
(17
)%
Adjusted cash flows from operating activities less additions for premises and equipment(1)
35,345

 
26,293

 
34
 %
 
42,315

 
(16
)%

Third quarter 2018 operating income includes a gain of $13.7 million in connection with the sale of the Rental Property Management business to RESI, restructuring charges of $3.4 million related to Project Catalyst and a reserve for sales taxes of $5.9 million (no comparable amounts in the second quarter 2018 and third quarter 2017)
Third quarter 2018 pretax income attributable to Altisource(1) includes a mark-to-market gain on our equity investment in RESI of $1.8 million (gain of $1.5 million in the second quarter 2018 and $0(3) in the third quarter 2017), a loss on debt refinancing of $0 (loss of $4.4 million in the second quarter 2018 and $0 in the third quarter 2017) and a gain on debt repurchase of $0 ($0 in the second quarter 2018 and $1.5 million in the third quarter 2017)
________________________
(1)
This is a non-GAAP measure that is defined and reconciled to the corresponding GAAP measure herein.
(2)
Applies to the third quarter 2018 unless otherwise indicated.
(3)
Effective January 1, 2018, mark-to-market adjustments of our investment in RESI are reflected in our results of operations in connection with the adoption of a new accounting principle (previously reflected in comprehensive income).
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 about management’s beliefs and expectations. These statements may be identified by words such as “anticipate,” “intend,” “expect,” “may,” “could,” “should,” “would,” “plan,” “estimate,” “seek,” “believe,” “potential” and similar expressions. Forward-looking statements are based on management’s beliefs as well as assumptions made by and information currently available to management. Because such statements are based on expectations as to the future and are not statements of historical fact, actual results may differ materially from what is contemplated by the forward-looking statements. Altisource does not undertake, and expressly disclaims, any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. The risks and uncertainties to which forward-looking statements are subject include, but are not limited to, our ability to retain existing customers and attract new customers and the potential for changes in our customer relationships, including the possibility of early termination of our Cooperative Brokerage Agreement with New Residential Investment Corp. or the possibility that we may not be successful in negotiating a satisfactory services agreement with New Residential Investment Corp.; various risks relating to 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, general economic and market conditions, behavior of customers, suppliers and/or competitors, technological developments, governmental regulations, taxes and policies, and other risks and uncertainties detailed in the “Forward-Looking Statements,” “Risk Factors” and other sections of Altisource’s Form 10-K, the Form 10-Q for the quarterly period ended June 30, 2018 and other filings with the Securities and Exchange Commission.

3



Webcast
Altisource will host a webcast at 11:00 a.m. EDT today to discuss our third quarter. 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.



4



 
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
(unaudited)
 
 
Three months ended
 September 30,
 
Nine months ended
 September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Service revenue
 
 
 
 
 
 
 
 
Mortgage Market
 
$
168,489

 
$
189,615

 
$
497,101

 
$
583,002

Real Estate Market
 
12,825

 
21,113

 
51,292

 
64,649

Other Businesses, Corporate and Eliminations
 
15,592

 
13,580

 
46,140

 
44,603

Total service revenue
 
196,906

 
224,308

 
594,533

 
692,254

Reimbursable expenses
 
6,815

 
9,866

 
23,970

 
31,786

Non-controlling interests
 
854

 
805

 
2,066

 
2,107

Total revenue
 
204,575

 
234,979

 
620,569

 
726,147

Cost of revenue
 
140,765

 
165,032

 
434,010

 
506,458

Reimbursable expenses
 
6,815

 
9,866

 
23,970

 
31,786

Gross profit
 
56,995

 
60,081

 
162,589

 
187,903

Operating expenses (income):
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
46,329

 
46,622

 
132,377

 
146,793

Gain on sale of business
 
(13,688
)
 

 
(13,688
)
 

Restructuring charges
 
3,436

 

 
3,436

 

Income from operations
 
20,918

 
13,459

 
40,464

 
41,110

Other income (expense), net:
 
 
 
 
 
 
 
 
Interest expense
 
(6,725
)
 
(5,599
)
 
(19,615
)
 
(16,862
)
Unrealized gain (loss) on investment in equity securities
 
1,782

 

 
(4,186
)
 

Other income (expense), net
 
154

 
2,497

 
(2,435
)
 
8,015

Total other income (expense), net
 
(4,789
)
 
(3,102
)
 
(26,236
)
 
(8,847
)
 
 
 
 
 
 
 
 
 
Income before income taxes and non-controlling interests
 
16,129

 
10,357

 
14,228

 
32,263

Income tax provision
 
(6,608
)
 
(2,591
)
 
(6,059
)
 
(7,615
)
 
 
 
 
 
 
 
 
 
Net income
 
9,521

 
7,766

 
8,169

 
24,648

Net income attributable to non-controlling interests
 
(854
)
 
(805
)
 
(2,066
)
 
(2,107
)
 
 
 
 
 
 
 
 
 
Net income attributable to Altisource
 
$
8,667

 
$
6,961

 
$
6,103

 
$
22,541

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.51

 
$
0.39

 
$
0.36

 
$
1.23

Diluted
 
$
0.49

 
$
0.38

 
$
0.35

 
$
1.20

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
17,033

 
18,023

 
17,184

 
18,337

Diluted
 
17,575

 
18,429

 
17,669

 
18,854

 
 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
 
Net income
 
$
9,521

 
$
7,766

 
$
8,169

 
$
24,648

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Reclassification of unrealized gain on investment in equity securities, net of income tax provision of $200, to retained earnings from the cumulative effect of an accounting change
 

 

 
(733
)
 

Unrealized (loss) gain on investment in equity securities, net of income tax benefit (provision) of $0, $2,054, $0, $(78)
 

 
(5,530
)
 

 
212

 
 
 
 
 
 
 
 
 
Comprehensive income, net of tax
 
9,521

 
2,236

 
7,436

 
24,860

Comprehensive income attributable to non-controlling interests
 
(854
)
 
(805
)
 
(2,066
)
 
(2,107
)
 
 
 
 
 
 
 
 
 
Comprehensive income attributable to Altisource
 
$
8,667

 
$
1,431

 
$
5,370

 
$
22,753


5



ALTISOURCE PORTFOLIO SOLUTIONS S.A.
SEGMENT FINANCIAL INFORMATION
(in thousands)
(unaudited)




 
 
Three months ended September 30, 2018
 
 
Mortgage Market
 
Real Estate Market
 
Other Businesses, Corporate and Eliminations
 
Consolidated Altisource
 
 
 
 
 
 
 
 
 
Revenue
 
 

 
 

 
 

 
 

Service revenue
 
$
168,489

 
$
12,825

 
$
15,592

 
$
196,906

Reimbursable expenses
 
6,617

 
185

 
13

 
6,815

Non-controlling interests
 
854

 

 

 
854

 
 
175,960

 
13,010

 
15,605

 
204,575

Cost of revenue
 
113,636

 
15,883

 
18,061

 
147,580

Gross profit (loss)
 
62,324

 
(2,873
)
 
(2,456
)
 
56,995

Operating expenses (income):
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
21,155

 
5,188

 
19,986

 
46,329

Gain on sale of business
 

 
(13,688
)
 

 
(13,688
)
Restructuring charges
 
901

 
74

 
2,461

 
3,436

Income (loss) from operations
 
40,268

 
5,553

 
(24,903
)
 
20,918

Total other income (expense), net
 
74

 
22

 
(4,885
)
 
(4,789
)
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes and
non-controlling interests
 
$
40,342

 
$
5,575

 
$
(29,788
)
 
$
16,129


 
 
Three months ended September 30, 2017
 
 
Mortgage Market
 
Real Estate Market
 
Other Businesses, Corporate and Eliminations
 
Consolidated Altisource
 
 
 
 
 
 
 
 
 
Revenue
 
 

 
 

 
 

 
 

Service revenue
 
$
189,615

 
$
21,113

 
$
13,580

 
$
224,308

Reimbursable expenses
 
8,842

 
1,008

 
16

 
9,866

Non-controlling interests
 
805

 

 

 
805

 
 
199,262

 
22,121

 
13,596

 
234,979

Cost of revenue
 
137,466

 
23,497

 
13,935

 
174,898

Gross profit (loss)
 
61,796

 
(1,376
)
 
(339
)
 
60,081

Selling, general and administrative expenses
 
28,006

 
4,208

 
14,408

 
46,622

Income (loss) from operations
 
33,790

 
(5,584
)
 
(14,747
)
 
13,459

Total other income (expense), net
 
26

 

 
(3,128
)
 
(3,102
)
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes and
non-controlling interests
 
$
33,816

 
$
(5,584
)
 
$
(17,875
)
 
$
10,357



6



ALTISOURCE PORTFOLIO SOLUTIONS S.A.
SEGMENT FINANCIAL INFORMATION
(in thousands)
(unaudited)




 
 
Nine months ended September 30, 2018
 
 
Mortgage Market
 
Real Estate Market
 
Other Businesses, Corporate and Eliminations
 
Consolidated Altisource
 
 
 
 
 
 
 
 
 
Revenue
 
 

 
 

 
 

 
 

Service revenue
 
$
497,101

 
$
51,292

 
$
46,140

 
$
594,533

Reimbursable expenses
 
22,793

 
1,143

 
34

 
23,970

Non-controlling interests
 
2,066

 

 

 
2,066

 
 
521,960

 
52,435

 
46,174

 
620,569

Cost of revenue
 
340,038

 
62,628

 
55,314

 
457,980

Gross profit (loss)
 
181,922

 
(10,193
)
 
(9,140
)
 
162,589

Operating expenses (income):
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
65,133

 
14,486

 
52,758

 
132,377

Gain on sale of business
 

 
(13,688
)
 

 
(13,688
)
Restructuring charges
 
901

 
74

 
2,461

 
3,436

Income (loss) from operations
 
115,888

 
(11,065
)
 
(64,359
)
 
40,464

Total other income (expense), net
 
86

 
36

 
(26,358
)
 
(26,236
)
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes and
non-controlling interests
 
$
115,974

 
$
(11,029
)
 
$
(90,717
)
 
$
14,228


 
 
Nine months ended September 30, 2017
 
 
Mortgage Market
 
Real Estate Market
 
Other Businesses, Corporate and Eliminations
 
Consolidated Altisource
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
Service revenue
 
$
583,002

 
$
64,649

 
$
44,603

 
$
692,254

Reimbursable expenses
 
29,071

 
2,665

 
50

 
31,786

Non-controlling interests
 
2,107

 

 

 
2,107

 
 
614,180

 
67,314

 
44,653

 
726,147

Cost of revenue
 
421,942

 
72,484

 
43,818

 
538,244

Gross profit (loss)
 
192,238

 
(5,170
)
 
835

 
187,903

Selling, general and administrative expenses
 
86,493

 
14,084

 
46,216

 
146,793

Income (loss) from operations
 
105,745

 
(19,254
)
 
(45,381
)
 
41,110

Total other income (expense), net
 
138

 

 
(8,985
)
 
(8,847
)
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes and
non-controlling interests
 
$
105,883

 
$
(19,254
)
 
$
(54,366
)
 
$
32,263





7



ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)



 
September 30,
2018
 
December 31,
2017
 
 
 
 
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
102,860

 
$
105,006

Investment in equity securities
44,967

 
49,153

Accounts receivable, net
46,929

 
52,740

Prepaid expenses and other current assets
81,622

 
64,742

Total current assets
276,378

 
271,641

 
 
 
 
Premises and equipment, net
52,026

 
73,273

Goodwill
84,027

 
86,283

Intangible assets, net
98,754

 
120,065

Deferred tax assets, net
304,383

 
303,707

Other assets
13,697

 
10,195

 
 
 
 
Total assets
$
829,265

 
$
865,164

 
 
 
 
LIABILITIES AND EQUITY
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
96,407

 
$
84,400

Current portion of long-term debt
34,440

 
5,945

Deferred revenue
12,955

 
9,802

Other current liabilities
7,912

 
9,414

Total current liabilities
151,714

 
109,561

 
 
 
 
Long-term debt, less current portion
346,544

 
403,336

Other non-current liabilities
7,866

 
12,282

 
 
 
 
Commitments, contingencies and regulatory matters
 
 
 
 
 
 
 
Equity:
 
 
 
Common stock ($1.00 par value; 100,000 shares authorized, 25,413 issued and 17,048 outstanding as of September 30, 2018; 100,000 shares authorized, 25,413 shares issued and 17,418 outstanding as of December 31, 2017)
25,413

 
25,413

Additional paid-in capital
118,625

 
112,475

Retained earnings
603,343

 
626,600

Accumulated other comprehensive income

 
733

Treasury stock, at cost (8,365 shares as of September 30, 2018 and 7,995 shares as of December 31, 2017)
(425,767
)
 
(426,609
)
Altisource equity
321,614

 
338,612

 
 
 
 
Non-controlling interests
1,527

 
1,373

Total equity
323,141

 
339,985

 
 
 
 
Total liabilities and equity
$
829,265

 
$
865,164





8



ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

 
Nine months ended
 September 30,
 
2018
 
2017
 
 
 
 
Cash flows from operating activities:
 

 
 

Net income
$
8,169

 
$
24,648

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
24,743

 
27,411

Amortization of intangible assets
21,311

 
27,143

Change in the fair value of acquisition related contingent consideration

 
24

Unrealized loss on investment in equity securities
4,186

 

Share-based compensation expense
6,150

 
3,237

Bad debt expense
2,408

 
3,101

Gain on early extinguishment of debt

 
(5,419
)
Amortization of debt discount
513

 
225

Amortization of debt issuance costs
739

 
625

Deferred income taxes
(676
)
 

Loss on disposal of fixed assets
723

 
2,776

Gain on sale of business
(13,688
)
 

Loss on debt refinancing
4,434

 

Changes in operating assets and liabilities:
 

 
 

Accounts receivable
4,515

 
21,543

Prepaid expenses and other current assets
(16,880
)
 
(17,272
)
Other assets
554

 
760

Accounts payable and accrued expenses
10,774

 
165

Other current and non-current liabilities
(14,325
)
 
(41,838
)
Net cash provided by operating activities
43,650

 
47,129

 
 
 
 
Cash flows from investing activities:
 

 
 

Additions to premises and equipment
(4,207
)
 
(7,485
)
Proceeds from the sale of business
15,000

 

Net cash provided by (used in) investing activities
10,793

 
(7,485
)
 
 
 
 
Cash flows from financing activities:
 

 
 

Proceeds from issuance of long-term debt
407,880

 

Repayments and repurchases of long-term debt
(436,821
)
 
(48,600
)
Debt issuance costs
(5,042
)
 

Proceeds from stock option exercises
3,576

 
2,084

Purchase of treasury shares
(21,771
)
 
(24,995
)
Distributions to non-controlling interests
(1,912
)
 
(2,143
)
Payment of tax withholding on issuance of restricted shares and stock option exercises
(608
)
 
(1,088
)
Net cash used in financing activities
(54,698
)
 
(74,742
)
 
 
 
 
Net decrease in cash, cash equivalents and restricted cash
(255
)
 
(35,098
)
Cash, cash equivalents and restricted cash at the beginning of the period
108,843

 
153,421

 
 
 
 
Cash, cash equivalents and restricted cash at the end of the period
$
108,588

 
$
118,323

 
 
 
 
Supplemental cash flow information:
 

 
 

Interest paid
$
17,889

 
$
16,203

Income taxes paid, net
4,162

 
15,445

 
 
 
 
Non-cash investing and financing activities:
 

 
 

Increase in payables for purchases of premises and equipment
$
12

 
$
52


9



ALTISOURCE PORTFOLIO SOLUTIONS S.A.
NON-GAAP MEASURES
(in thousands, except per share data)
(unaudited)




Adjusted operating income, pretax income attributable to Altisource, adjusted pretax income attributable to Altisource, adjusted net income attributable to Altisource, adjusted diluted earnings per share, adjusted cash flows from operating activities, adjusted cash flows from operating activities less additions to premises and equipment and net debt less marketable securities, 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 income from operations, income before income taxes and non-controlling interests, net income attributable to Altisource, diluted earnings per share, cash flows from 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-recurring items from earnings, cash flows from operating activities and long-term debt net of cash on-hand and marketable securities. 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-recurring items enables comparability to prior period performance and trend analysis.
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 income is calculated by removing intangible asset amortization expense, share-based compensation expense, gain on sale of business, sales tax accrual, litigation settlement loss and restructuring charges from income from operations. Pretax income attributable to Altisource is calculated by removing non-controlling interests from income before income taxes and non-controlling interests. Adjusted pretax income attributable to Altisource is calculated by removing intangible asset amortization expense, share-based compensation expense, unrealized gain (loss) on investment in equity securities, gain on sale of business, sales tax accrual, litigation settlement loss, restructuring charges, loss on debt refinancing and non-controlling interests from income before income taxes and non-controlling interests. Adjusted net income attributable to Altisource is calculated by removing intangible asset amortization expense (net of tax), share-based compensation (net of tax), unrealized gain (loss) on investment in equity securities (net of tax), gain on sale of business (net of tax), sales tax accrual (net of tax), litigation settlement loss (net of tax), restructuring charges (net of tax), loss on debt refinancing (net of tax) and foreign income tax reserves from net income attributable to Altisource. Adjusted diluted earnings per share is calculated by dividing net income attributable to Altisource after removing intangible asset amortization expense (net of tax), share-based compensation (net of tax), unrealized gain (loss) on investment in equity securities (net of tax), gain on sale of business (net of tax), sales tax accrual (net of tax), litigation settlement loss (net of tax), restructuring charges (net of tax), loss on debt refinancing (net of tax) and foreign income tax reserves by the weighted average number of diluted shares. Adjusted cash flows from operating activities is calculated by removing the cash payment related to the net litigation settlement loss and the increase (decrease) in short-term investments in real estate from cash flows from operating activities. Adjusted cash flows from operating activities less additions to premises and equipment is calculated by removing the cash payment related to the net litigation settlement loss, the increase (decrease) in short-term investments in real estate and additions to premises and equipment from cash flows from operating activities. Net debt less marketable securities is calculated as long-term debt, including current portion, minus cash and cash equivalents and marketable securities.

10



ALTISOURCE PORTFOLIO SOLUTIONS S.A.
NON-GAAP MEASURES
(in thousands, except per share data)
(unaudited)



Reconciliations of the non-GAAP measures to the corresponding GAAP measures are as follows:
 
Three months ended
 September 30,
 
Three months ended
June 30,
 
Nine months ended
 September 30,
 
2018
 
2017
 
2018
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
Income from operations
$
20,918

 
$
13,459

 
$
12,426

 
$
40,464

 
$
41,110

 
 
 
 
 
 
 
 
 
 
Intangible asset amortization expense
6,620

 
8,604

 
7,544

 
21,311

 
27,143

Share-based compensation expense
2,039

 
1,379

 
1,910

 
6,150

 
3,237

Gain on sale of business
(13,688
)
 

 

 
(13,688
)
 

Sales tax accrual
5,868

 

 

 
5,868

 

Litigation settlement loss
500

 

 

 
500

 

Restructuring charges
3,436

 

 

 
3,436

 

 
 
 
 
 
 
 
 
 
 
Adjusted operating income
$
25,693

 
$
23,442

 
$
21,880

 
$
64,041

 
$
71,490

 
 
 
 
 
 
 
 
 
 
Income before income taxes and non-controlling interests
$
16,129

 
$
10,357

 
$
3,071

 
$
14,228

 
$
32,263

 
 
 
 
 
 
 
 
 
 
Non-controlling interests
(854
)
 
(805
)
 
(687
)
 
(2,066
)
 
(2,107
)
Pretax income attributable to Altisource
15,275

 
9,552

 
2,384

 
12,162

 
30,156

Intangible asset amortization expense
6,620

 
8,604

 
7,544

 
21,311

 
27,143

Share-based compensation expense
2,039

 
1,379

 
1,910

 
6,150

 
3,237

Unrealized (gain) loss on investment in equity securities
(1,782
)
 

 
(1,533
)
 
4,186

 

Gain on sale of business
(13,688
)
 

 

 
(13,688
)
 

Sales tax accrual
5,868

 

 

 
5,868

 

Litigation settlement loss
500

 

 

 
500

 

Restructuring charges
3,436

 

 

 
3,436

 

Loss on debt refinancing

 

 
4,434

 
4,434

 

 
 
 
 
 
 
 
 
 
 
Adjusted pretax income attributable to Altisource
$
18,268

 
$
19,535

 
$
14,739

 
$
44,359

 
$
60,536

 
 
 
 
 
 
 
 
 
 
Net income attributable to Altisource
$
8,667

 
$
6,961

 
$
1,568

 
$
6,103

 
$
22,541

 
 
 
 
 
 
 
 
 
 
Intangible asset amortization expense, net
of tax
4,517

 
6,452

 
5,499

 
15,097

 
20,736

Share-based compensation expense, net
of tax
1,391

 
1,034

 
1,392

 
4,357

 
2,473

Unrealized (gain) loss on investment in equity securities, net of tax
(1,319
)
 

 
(1,134
)
 
3,097

 

Gain on sale of business, net of tax
(9,341
)
 

 

 
(9,341
)
 

Sales tax accrual, net of tax
4,004

 

 

 
4,004

 

Litigation settlement loss, net of tax
341

 

 

 
341

 

Restructuring charges, net of tax
2,345

 

 

 
2,345

 

Loss on debt refinancing, net of tax

 

 
3,232

 
3,232

 

Foreign income tax reserves
1,588

 

 

 
1,588

 

 
 
 
 
 
 
 
 
 
 
Adjusted net income attributable to Altisource
$
12,193

 
$
14,447

 
$
10,557

 
$
30,823

 
$
45,750

 
 
 
 
 
 
 
 
 
 

11



ALTISOURCE PORTFOLIO SOLUTIONS S.A.
NON-GAAP MEASURES
(in thousands, except per share data)
(unaudited)



 
Three months ended
 September 30,
 
Three months ended
June 30,
 
Nine months ended
 September 30,
 
2018
 
2017
 
2018
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.49

 
$
0.38

 
$
0.09

 
$
0.35

 
$
1.20

 
 
 
 
 
 
 
 
 
 
Intangible asset amortization expense, net of tax, per diluted share
0.26

 
0.35

 
0.31

 
0.85

 
1.10

Share-based compensation expense, net of tax, per diluted share
0.08

 
0.06

 
0.08

 
0.25

 
0.13

Unrealized (gain) loss on investment in equity securities, net of tax, per diluted share
(0.08
)
 

 
(0.06
)
 
0.18

 

Gain on sale of business, net of tax, per diluted share
(0.53
)
 

 

 
(0.53
)
 

Sales tax accrual, net of tax, per diluted share
0.23

 

 

 
0.23

 

Litigation settlement loss, net of tax, per diluted share
0.02

 

 

 
0.02

 

Restructuring charges, net of tax, per diluted share
0.13

 

 

 
0.13

 

Loss on debt refinancing, net of tax, per diluted share

 

 
0.18

 
0.18

 

Foreign income tax reserves, per diluted share
0.09

 

 

 
0.09

 

 
 
 
 
 
 
 
 
 
 
Adjusted diluted earnings per share
$
0.69

 
$
0.78

 
$
0.60

 
$
1.74

 
$
2.43

 
 
 
 
 
 
 
 
 
 
Calculation of the impact of intangible asset amortization expense, net of tax
 
 
 
 
 
 
 
 
 
Intangible asset amortization expense
$
6,620

 
$
8,604

 
$
7,544

 
$
21,311

 
$
27,143

Tax benefit from intangible asset amortization
(2,103
)
 
(2,152
)
 
(2,045
)
 
(6,214
)
 
(6,407
)
Intangible asset amortization expense, net
of tax
4,517

 
6,452

 
5,499

 
15,097

 
20,736

Diluted share count
17,575

 
18,429

 
17,553

 
17,669

 
18,854

 
 
 
 
 
 
 
 
 
 
Intangible asset amortization expense, net of tax, per diluted share
$
0.26

 
$
0.35

 
$
0.31

 
$
0.85

 
$
1.10

 
 
 
 
 
 
 
 
 
 
Calculation of the impact of share-based compensation expense, net of tax
 
 
 
 
 
 
 
 
 
Share-based compensation expense
$
2,039

 
$
1,379

 
$
1,910

 
$
6,150

 
$
3,237

Tax benefit from share-based compensation expense
(648
)
 
(345
)
 
(518
)
 
(1,793
)
 
(764
)
Share-based compensation expense, net
of tax
1,391

 
1,034

 
1,392

 
4,357

 
2,473

Diluted share count
17,575

 
18,429

 
17,553

 
17,669

 
18,854

 
 
 
 
 
 
 
 
 
 
Share-based compensation expense, net of tax, per diluted share
$
0.08

 
$
0.06

 
$
0.08

 
$
0.25

 
$
0.13

 
 
 
 
 
 
 
 
 
 

12



ALTISOURCE PORTFOLIO SOLUTIONS S.A.
NON-GAAP MEASURES
(in thousands, except per share data)
(unaudited)



 
Three months ended
 September 30,
 
Three months ended
June 30,
 
Nine months ended
 September 30,
 
2018
 
2017
 
2018
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
Calculation of the impact of the unrealized (gain) loss on investment in equity securities, net of tax
 
 
 
 
 
 
 
 
 
Unrealized (gain) loss on investment in equity securities
$
(1,782
)
 
$

 
$
(1,533
)
 
$
4,186

 
$

Tax provision (benefit) from the unrealized (gain) loss on investment in equity securities
463

 

 
399

 
(1,089
)
 

Unrealized (gain) loss on investment in equity securities, net of tax
(1,319
)
 

 
(1,134
)
 
3,097

 

Diluted share count
17,575

 
18,429

 
17,553

 
17,669

 
18,854

 
 
 
 
 
 
 
 
 
 
Unrealized (gain) loss on investment in equity securities, net of tax, per diluted share
$
(0.08
)
 
$

 
$
(0.06
)
 
$
0.18

 
$

 
 
 
 
 
 
 
 
 
 
Calculation of the impact of gain on sale of business, net of tax
 
 
 
 
 
 
 
 
 
Gain on sale of business
$
(13,688
)
 
$

 
$

 
$
(13,688
)
 
$

Tax expense from gain on sale of business
4,347

 

 

 
4,347

 

Gain on sale of business, net of tax
(9,341
)
 

 

 
(9,341
)
 

Diluted share count
17,575

 
18,429

 
17,553

 
17,669

 
18,854

 
 
 
 
 
 
 
 
 
 
Gain on sale of business, net of tax, per diluted share
$
(0.53
)
 
$

 
$

 
$
(0.53
)
 
$

 
 
 
 
 
 
 
 
 
 
Calculation of the impact of sales tax accrual, net of tax
 
 
 
 
 
 
 
 
 
Sales tax accrual
$
5,868

 
$

 
$

 
$
5,868

 
$

Tax benefit from sales tax accrual
(1,864
)
 

 

 
(1,864
)
 

Sales tax accrual, net of tax
4,004

 

 

 
4,004

 

Diluted share count
17,575

 
18,429

 
17,553

 
17,669

 
18,854

 
 
 
 
 
 
 
 
 
 
Sales tax accrual, net of tax, per diluted share
$
0.23

 
$

 
$

 
$
0.23

 
$

 
 
 
 
 
 
 
 
 
 
Calculation of the impact of litigation settlement loss, net of tax
 
 
 
 
 
 
 
 
 
Litigation settlement loss
$
500

 
$

 
$

 
$
500

 
$

Tax benefit from litigation settlement loss
(159
)
 

 

 
(159
)
 

Litigation settlement loss, net of tax
341

 

 

 
341

 

Diluted share count
17,575

 
18,429

 
17,553

 
17,669

 
18,854

 
 
 
 
 
 
 
 
 
 
Litigation settlement loss, net of tax, per diluted share
$
0.02

 
$

 
$

 
$
0.02

 
$

 
 
 
 
 
 
 
 
 
 

13



ALTISOURCE PORTFOLIO SOLUTIONS S.A.
NON-GAAP MEASURES
(in thousands, except per share data)
(unaudited)



 
Three months ended
 September 30,
 
Three months ended
June 30,
 
Nine months ended
 September 30,
 
2018
 
2017
 
2018
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
Calculation of the impact of restructuring charges, net of tax
 
 
 
 
 
 
 
 
 
Restructuring charges
$
3,436

 
$

 
$

 
$
3,436

 
$

Tax benefit from restructuring charges
(1,091
)
 

 

 
(1,091
)
 

Restructuring charges, net of tax
2,345

 

 

 
2,345

 

Diluted share count
17,575

 
18,429

 
17,553

 
17,669

 
18,854

 
 
 
 
 
 
 
 
 
 
Restructuring charges, net of tax, per diluted share
$
0.13

 
$

 
$

 
$
0.13

 
$

 
 
 
 
 
 
 
 
 
 
Calculation of the impact of the loss on debt refinancing, net of tax
 
 
 
 
 
 
 
 
 
Loss on debt refinancing
$

 
$

 
$
4,434

 
$
4,434

 
$

Tax benefit from the loss on debt refinancing

 

 
(1,202
)
 
(1,202
)
 

Loss on debt refinancing, net of tax

 

 
3,232

 
3,232

 

Diluted share count
17,575

 
18,429

 
17,553

 
17,669

 
18,854

 
 
 
 
 
 
 
 
 
 
Loss on debt refinancing, net of tax, per diluted share
$

 
$

 
$
0.18

 
$
0.18

 
$

 
 
 
 
 
 
 
 
 
 
Calculation of the impact of foreign income tax reserves
 
 
 
 
 
 
 
 
 
Foreign income tax reserves
$
1,588

 
$

 
$

 
$
1,588

 
$

Diluted share count
17,575

 
18,429

 
17,553

 
17,669

 
18,854

 
 
 
 
 
 
 
 
 
 
Foreign income tax reserves, per diluted share
$
0.09

 
$

 
$

 
$
0.09

 
$

 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
$
20,397

 
$
34,612

 
$
31,822

 
$
43,650

 
$
47,129

Net litigation settlement loss payment

 

 

 

 
28,000

Increase (decrease) in short-term investments in real estate
16,399

 
9,530

 
(4,031
)
 
22,283

 
11,619

Adjusted cash flows from operating activities
36,796

 
44,142

 
27,791

 
65,933

 
86,748

Less: Additions to premises and equipment
(1,451
)
 
(1,827
)
 
(1,498
)
 
(4,207
)</