Altisource Portfolio Solutions S.A. (“Altisource” or the “Company”)
(NASDAQ: ASPS), a leading provider and marketplace for the real
estate and mortgage industries, today reported financial results
for the third quarter 2022.
“I am encouraged by our third quarter results
and performance. During the quarter, we focused on improving
segment margins, growing sales wins and reducing costs. Our
Servicer and Real Estate segment continues to benefit from the
restart of the default business and operational efficiencies with
45% year-over-year Adjusted EBITDA growth on 14% service
revenue growth. In our Origination segment, we had strong sales
wins that we estimate represent $10 million of annualized revenue
on a stabilized basis,” said Chairman and Chief Executive Officer
William B. Shepro.
Mr. Shepro further commented, “The market
tailwinds from the restart of the default market, sales wins and
cost discipline, should help us return to growth and create
substantial value for our stakeholders. Our countercyclical default
business should further benefit from a deteriorating economic
environment.”
Third Quarter
2022
Highlights(1)
Corporate and Financial:
- Ended the third
quarter 2022 with $63.8 million of cash and cash equivalents, a 75%
increase from the third quarter of 2021
- Ended the third
quarter 2022 with $183.4 million of net debt(2), a 21% reduction
from the third quarter of 2021
- Third quarter
Adjusted earnings before interest, tax, depreciation and
amortization (“EBITDA”)(2) loss of $6.5 million represents a $1.1
million improvement over the third quarter of 2021
- Reduced third
quarter 2022 Corporate costs by $5.9 million, representing a 25%
reduction, compared to the third quarter 2021 from the sale of
Pointillist, costs savings initiatives and the assignment of sales
and marketing employees to the segments beginning on January 1,
2022
Business Highlights:
- The Servicer and
Real Estate segment continues to benefit from the restart of the
default business with 45% year-over-year Adjusted EBITDA(2) growth
on 14% service revenue growth
- The Origination
segment had strong sales wins that we estimate represent $10
million of annualized revenue on a stabilized basis
- The current
unweighted sales pipeline in the Servicer and Real Estate business
is approximately $116 million on a stabilized basis, representing
$32 million to $40 million in annual revenue based upon our
forecasted probability of closing
- The current
unweighted sales pipeline in the Origination business is
approximately $83 million on a stabilized basis, representing $21
million to $26 million in annual revenue based upon our forecasted
probability of closing
Industry Highlights:
- Industrywide
foreclosure initiations were 271% higher for the three months ended
September 30, 2022, compared to the same period in 2021
(although still 51% lower than the same pre-COVID-19 period in
2019)(3), as the foreclosure market is beginning to recover
following expiration of the Federal government’s foreclosure
moratorium on July 31, 2021 and the CFPB’s temporary loss
mitigation measures on December 31, 2021
- Industrywide
foreclosure sales were 30% higher for the three months ended
September 30, 2022, compared to the same period in 2021 (although
still 65% lower than the same pre-COVID-19 period in 2019)(3)
- Industrywide
mortgage originations are forecasted to be 55% lower for the three
months ended September 30, 2022, compared to the same period
in 2021(4)
Third Quarter
2022 Financial Results
- Service revenue of $36.3
million
- Gross profit of $4.0 million,
representing 11% of service revenue
- Loss before income taxes and
non-controlling interests of $(14.5) million
- Adjusted pre-tax loss attributable
to Altisource(2) of $(11.4) million
- Adjusted EBITDA(2) of $(6.5)
million
- Net loss attributable to Altisource
of $(14.4) million, or $(0.89) per diluted share
- Adjusted net
loss attributable to Altisource(2) of $(11.3) million, or $(0.70)
per diluted share
Third Quarter
2022 Results Compared to the
Third Quarter 2021
(unaudited):
| (in thousands, except per
share data) |
Third Quarter 2022 |
|
Third Quarter 2021 |
|
% Change |
|
Year-to-DateSeptember 30,
2022 |
|
Year-to-DateSeptember 30,
2021 |
|
% Change |
| Service revenue |
$ |
36,290 |
|
|
$ |
41,626 |
|
|
(13 |
) |
|
$ |
111,691 |
|
|
$ |
133,672 |
|
|
(16 |
) |
| Loss from operations |
|
(10,563 |
) |
|
|
(14,028 |
) |
|
25 |
|
|
|
(29,349 |
) |
|
|
(47,159 |
) |
|
38 |
|
| Adjusted operating
loss(2) |
|
(7,422 |
) |
|
|
(8,279 |
) |
|
10 |
|
|
|
(20,514 |
) |
|
|
(26,122 |
) |
|
21 |
|
| Loss before income taxes and
non-controlling interests |
|
(14,453 |
) |
|
|
(17,898 |
) |
|
19 |
|
|
|
(39,396 |
) |
|
|
(57,040 |
) |
|
31 |
|
| Pretax loss attributable to
Altisource(2) |
|
(14,586 |
) |
|
|
(17,839 |
) |
|
18 |
|
|
|
(39,864 |
) |
|
|
(56,889 |
) |
|
30 |
|
| Adjusted pretax loss
attributable to Altisource(2) |
|
(11,445 |
) |
|
|
(12,350 |
) |
|
7 |
|
|
|
(31,029 |
) |
|
|
(36,715 |
) |
|
15 |
|
| Adjusted EBITDA(2) |
|
(6,454 |
) |
|
|
(7,572 |
) |
|
15 |
|
|
|
(17,208 |
) |
|
|
(22,824 |
) |
|
25 |
|
| Net loss attributable to
Altisource |
|
(14,389 |
) |
|
|
(18,269 |
) |
|
21 |
|
|
|
(42,074 |
) |
|
|
(58,746 |
) |
|
28 |
|
| Adjusted net loss attributable
to Altisource(2) |
|
(11,303 |
) |
|
|
(12,646 |
) |
|
11 |
|
|
|
(31,823 |
) |
|
|
(37,899 |
) |
|
16 |
|
| Diluted loss per share |
|
(0.89 |
) |
|
|
(1.15 |
) |
|
23 |
|
|
|
(2.62 |
) |
|
|
(3.71 |
) |
|
29 |
|
| Adjusted diluted loss per
share(2) |
|
(0.70 |
) |
|
|
(0.80 |
) |
|
13 |
|
|
|
(1.98 |
) |
|
|
(2.40 |
) |
|
18 |
|
| Cash flows used in operating
activities |
|
(6,509 |
) |
|
|
(18,358 |
) |
|
65 |
|
|
|
(32,293 |
) |
|
|
(41,133 |
) |
|
21 |
|
| Cash flows used in operating
activities less additions to premises and equipment(2) |
|
(6,738 |
) |
|
|
(18,790 |
) |
|
64 |
|
|
|
(33,156 |
) |
|
|
(42,258 |
) |
|
22 |
|
-
Third quarter 2022 loss from operations includes expenses related
to cost savings initiatives and other of $0.5 million compared to
$0.5 million for the third quarter of 2021 ($1.1 million and $3.2
million for the year-to-date September 30, 2022 and 2021,
respectively). Third quarter and year-to-date September 30, 2021
loss from operations includes losses from Pointillist of $2.1
million and $7.1 million, respectively (no comparable amounts in
2022)
- Third quarter 2022 and third
quarter 2021 net loss attributable to Altisource includes $0.2
million and $0.3 million, respectively ($2.0 million and $1.3
million for year-to-date September 30, 2022 and 2021, respectively)
of expense for certain income tax items related to adjustments to
foreign income tax reserves and withholding tax on previously
accrued taxes related to a large one-time repatriation of cash from
certain of our subsidiaries
________________________ (1)
Applies to 2022 unless otherwise indicated (2)
This is a non-GAAP measure that is defined and reconciled to
the corresponding GAAP measure herein (3) Based
on data from Black Knight’s Mortgage Monitor reports and Black
Knight’s First Look at September 2022 Mortgage Data (4)
Based on data from the October 23, 2022 and September 19,
2022 MBA Mortgage Finance Forecast
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 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,” “plan,” “estimate,” “seek,” “believe,” “potential” or
“continue” or the negative of these terms and comparable
terminology. Such statements are based on expectations as to the
future and are not statements of historical fact. Furthermore,
forward-looking statements are not guarantees of future performance
and involve a number of assumptions, risks and uncertainties that
could cause actual results to differ materially. Important factors
that could cause actual results to differ materially from those
suggested by the forward-looking statements include, but are not
limited to, the risks discussed in Item 1A of Part I “Risk Factors”
in our Form 10-K filing with the Securities and Exchange
Commission, as the same may be updated from time to time in our
Form 10-Q filings. We caution you not to place undue reliance on
these forward-looking statements which reflect our view only as of
the date of this report. We are under no obligation (and expressly
disclaim any obligation) to update or alter any forward-looking
statements contained herein to reflect any change in our
expectations with regard thereto or change in events, conditions or
circumstances on which any such statement is based. The risks and
uncertainties to which forward-looking statements are subject
include, but are not limited to, risks related to the COVID-19
pandemic, customer concentration, the timing of the anticipated
increase in default related referrals following the expiration of
foreclosure and eviction moratoriums and forbearance programs, the
timing of the expiration of such moratoriums and programs, and any
other delays occasioned by government, investor or servicer
actions, the use and success of our products and services, our
ability to retain existing customers and attract new customers and
the potential for expansion or changes in our customer
relationships, technology disruptions, our compliance with
applicable data requirements, our use of third party vendors and
contractors, our ability to effectively manage potential conflicts
of interest, macro-economic and industry specific conditions, 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, behavior of customers,
suppliers and/or competitors, technological developments,
governmental regulations, taxes and policies. The financial
projections and scenarios contained in this press release are
expressly qualified as forward-looking statements and, as with
other forward-looking statements, should not be unduly relied upon.
We undertake no obligation to update these statements, scenarios
and projections as a result of a change in circumstances, new
information or future events.
Webcast
Altisource will host a webcast at 10:00 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.
|
|
|
FOR FURTHER INFORMATION CONTACT: |
|
|
|
Michelle D. Esterman |
|
Chief Financial Officer |
|
T: (770) 612-7007 |
|
E: Michelle.Esterman@altisource.com |
ALTISOURCE PORTFOLIO SOLUTIONS
S.A.CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS(in thousands, except per share
data)(unaudited)
| |
|
Three months ended September
30, |
|
Nine months ended September
30, |
| |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
| |
|
|
|
|
|
|
|
|
|
Service revenue |
|
$ |
36,290 |
|
|
$ |
41,626 |
|
|
$ |
111,691 |
|
|
$ |
133,672 |
|
|
Reimbursable expenses |
|
|
1,957 |
|
|
|
1,416 |
|
|
|
6,158 |
|
|
|
5,365 |
|
|
Non-controlling interests |
|
|
133 |
|
|
|
201 |
|
|
|
468 |
|
|
|
712 |
|
|
Total revenue |
|
|
38,380 |
|
|
|
43,243 |
|
|
|
118,317 |
|
|
|
139,749 |
|
|
Cost of revenue |
|
|
32,430 |
|
|
|
39,251 |
|
|
|
98,453 |
|
|
|
129,497 |
|
|
Reimbursable expenses |
|
|
1,957 |
|
|
|
1,416 |
|
|
|
6,158 |
|
|
|
5,365 |
|
|
Gross profit |
|
|
3,993 |
|
|
|
2,576 |
|
|
|
13,706 |
|
|
|
4,887 |
|
| Selling, general and
administrative expenses |
|
|
14,556 |
|
|
|
16,604 |
|
|
|
43,055 |
|
|
|
52,046 |
|
| |
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(10,563 |
) |
|
|
(14,028 |
) |
|
|
(29,349 |
) |
|
|
(47,159 |
) |
|
Other income (expense), net: |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(4,349 |
) |
|
|
(3,755 |
) |
|
|
(11,439 |
) |
|
|
(10,672 |
) |
|
Other income (expense), net |
|
|
459 |
|
|
|
(115 |
) |
|
|
1,392 |
|
|
|
791 |
|
|
Total other income (expense), net |
|
|
(3,890 |
) |
|
|
(3,870 |
) |
|
|
(10,047 |
) |
|
|
(9,881 |
) |
| |
|
|
|
|
|
|
|
|
| Loss before income taxes and
non-controlling interests |
|
|
(14,453 |
) |
|
|
(17,898 |
) |
|
|
(39,396 |
) |
|
|
(57,040 |
) |
|
Income tax benefit (provision) |
|
|
197 |
|
|
|
(430 |
) |
|
|
(2,210 |
) |
|
|
(1,857 |
) |
| |
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(14,256 |
) |
|
|
(18,328 |
) |
|
|
(41,606 |
) |
|
|
(58,897 |
) |
| Net (income) loss attributable
to non-controlling interests |
|
|
(133 |
) |
|
|
59 |
|
|
|
(468 |
) |
|
|
151 |
|
| |
|
|
|
|
|
|
|
|
|
Net loss attributable to Altisource |
|
$ |
(14,389 |
) |
|
$ |
(18,269 |
) |
|
$ |
(42,074 |
) |
|
$ |
(58,746 |
) |
| |
|
|
|
|
|
|
|
|
|
Loss per share: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.89 |
) |
|
$ |
(1.15 |
) |
|
$ |
(2.62 |
) |
|
$ |
(3.71 |
) |
|
Diluted |
|
$ |
(0.89 |
) |
|
$ |
(1.15 |
) |
|
$ |
(2.62 |
) |
|
$ |
(3.71 |
) |
| |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
16,087 |
|
|
|
15,831 |
|
|
|
16,051 |
|
|
|
15,816 |
|
|
Diluted |
|
|
16,087 |
|
|
|
15,831 |
|
|
|
16,051 |
|
|
|
15,816 |
|
| |
|
|
|
|
|
|
|
|
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Comprehensive loss, net of tax |
|
$ |
(14,256 |
) |
|
$ |
(18,328 |
) |
|
$ |
(41,606 |
) |
|
$ |
(58,897 |
) |
|
Comprehensive (income) loss attributable to non-controlling
interests |
|
|
(133 |
) |
|
|
59 |
|
|
|
(468 |
) |
|
|
151 |
|
| |
|
|
|
|
|
|
|
|
|
Comprehensive loss attributable to Altisource |
|
$ |
(14,389 |
) |
|
$ |
(18,269 |
) |
|
$ |
(42,074 |
) |
|
$ |
(58,746 |
) |
ALTISOURCE PORTFOLIO SOLUTIONS
S.A.CONSOLIDATED BALANCE
SHEETS(in thousands, except for per share
data)(unaudited)
| |
September 30,2022 |
|
December 31,2021 |
| |
|
|
|
|
ASSETS |
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
63,812 |
|
|
$ |
98,132 |
|
|
Accounts receivable, net |
|
14,335 |
|
|
|
18,008 |
|
|
Prepaid expenses and other current assets |
|
21,704 |
|
|
|
21,864 |
|
|
Total current assets |
|
99,851 |
|
|
|
138,004 |
|
| |
|
|
|
|
Premises and equipment, net |
|
4,970 |
|
|
|
6,873 |
|
|
Right-of-use assets under operating leases |
|
5,965 |
|
|
|
7,594 |
|
|
Goodwill |
|
55,960 |
|
|
|
55,960 |
|
|
Intangible assets, net |
|
33,010 |
|
|
|
36,859 |
|
|
Deferred tax assets, net |
|
6,023 |
|
|
|
6,386 |
|
|
Other assets |
|
5,503 |
|
|
|
6,132 |
|
| |
|
|
|
|
Total assets |
$ |
211,282 |
|
|
$ |
257,808 |
|
| |
|
|
|
|
LIABILITIES AND EQUITY |
|
Current liabilities: |
|
|
|
|
Accounts payable and accrued expenses |
$ |
41,456 |
|
|
$ |
46,535 |
|
|
Deferred revenue |
|
4,050 |
|
|
|
4,342 |
|
|
Other current liabilities |
|
3,095 |
|
|
|
3,870 |
|
|
Total current liabilities |
|
48,601 |
|
|
|
54,747 |
|
| |
|
|
|
|
Long-term debt |
|
244,844 |
|
|
|
243,637 |
|
|
Deferred tax liabilities, net |
|
8,849 |
|
|
|
9,028 |
|
|
Other non-current liabilities |
|
17,508 |
|
|
|
19,266 |
|
| |
|
|
|
|
Commitments, contingencies and regulatory matters |
|
|
|
| |
|
|
|
|
Equity (deficit): |
|
|
|
|
Common stock ($1.00 par value; 100,000 shares authorized, 25,413
issued and 16,117 outstanding as of September 30, 2022; 15,911
outstanding as of December 31, 2021) |
|
25,413 |
|
|
|
25,413 |
|
|
Additional paid-in capital |
|
148,197 |
|
|
|
144,298 |
|
|
Retained earnings |
|
131,124 |
|
|
|
186,592 |
|
|
Treasury stock, at cost (9,296 shares as of September 30, 2022
and 9,502 shares as of December 31, 2021) |
|
(414,102 |
) |
|
|
(426,445 |
) |
|
Altisource deficit |
|
(109,368 |
) |
|
|
(70,142 |
) |
| |
|
|
|
|
Non-controlling interests |
|
848 |
|
|
|
1,272 |
|
|
Total deficit |
|
(108,520 |
) |
|
|
(68,870 |
) |
| |
|
|
|
|
Total liabilities and deficit |
$ |
211,282 |
|
|
$ |
257,808 |
|
ALTISOURCE PORTFOLIO SOLUTIONS
S.A.CONSOLIDATED STATEMENTS OF CASH
FLOWS(in
thousands)(unaudited)
| |
Nine months ended September
30, |
|
|
|
2022 |
|
|
|
2021 |
|
| |
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
Net loss |
$ |
(41,606 |
) |
|
$ |
(58,897 |
) |
| Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
|
Depreciation and amortization |
|
2,700 |
|
|
|
3,479 |
|
|
Amortization of right-of-use assets under operating leases |
|
2,254 |
|
|
|
6,340 |
|
|
Amortization of intangible assets |
|
3,849 |
|
|
|
8,183 |
|
|
Share-based compensation expense |
|
3,899 |
|
|
|
2,510 |
|
|
Bad debt expense |
|
578 |
|
|
|
1,268 |
|
|
Amortization of debt discount |
|
495 |
|
|
|
499 |
|
|
Amortization of debt issuance costs |
|
712 |
|
|
|
623 |
|
|
Deferred income taxes |
|
(329 |
) |
|
|
8 |
|
|
Loss on disposal of fixed assets |
|
1 |
|
|
|
117 |
|
|
Other non-cash items |
|
— |
|
|
|
137 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
|
3,095 |
|
|
|
1,846 |
|
|
Prepaid expenses and other current assets |
|
160 |
|
|
|
598 |
|
|
Other assets |
|
363 |
|
|
|
1,439 |
|
|
Accounts payable and accrued expenses |
|
(5,014 |
) |
|
|
(2,738 |
) |
|
Current and non-current operating lease liabilities |
|
(2,444 |
) |
|
|
(6,958 |
) |
|
Other current and non-current liabilities |
|
(1,006 |
) |
|
|
413 |
|
|
Net cash used in operating activities |
|
(32,293 |
) |
|
|
(41,133 |
) |
| |
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
Additions to premises and equipment |
|
(863 |
) |
|
|
(1,125 |
) |
|
Proceeds from the sale of business |
|
346 |
|
|
|
3,000 |
|
|
Net cash (used in) provided by investing activities |
|
(517 |
) |
|
|
1,875 |
|
| |
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
Proceeds from revolving credit facility |
|
— |
|
|
|
20,000 |
|
|
Debt issuance costs |
|
— |
|
|
|
(531 |
) |
|
Proceeds from convertible debt payable to related parties |
|
— |
|
|
|
1,200 |
|
|
Distributions to non-controlling interests |
|
(892 |
) |
|
|
(1,804 |
) |
|
Payments of tax withholding on issuance of restricted share units
and restricted shares |
|
(1,051 |
) |
|
|
(936 |
) |
|
Net cash (used in) provided by financing activities |
|
(1,943 |
) |
|
|
17,929 |
|
| |
|
|
|
|
Net decrease in cash, cash equivalents and restricted cash |
|
(34,753 |
) |
|
|
(21,329 |
) |
|
Cash, cash equivalents and restricted cash at the beginning of the
period |
|
102,149 |
|
|
|
62,096 |
|
| |
|
|
|
|
Cash, cash equivalents and restricted cash at the end of the
period |
$ |
67,396 |
|
|
$ |
40,767 |
|
| |
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
Interest paid |
$ |
10,167 |
|
|
$ |
9,373 |
|
|
Income taxes paid, net |
|
2,556 |
|
|
|
2,736 |
|
|
Acquisition of right-of-use assets with operating lease
liabilities |
|
797 |
|
|
|
6,976 |
|
|
Reduction of right-of-use assets from operating lease modifications
or reassessments |
|
(172 |
) |
|
|
(5,665 |
) |
| |
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
Net decrease in payables for purchases of premises and
equipment |
$ |
(65 |
) |
|
$ |
(47 |
) |
ALTISOURCE PORTFOLIO SOLUTIONS
S.A.NON-GAAP MEASURES(in
thousands, except per share
data)(unaudited)
Adjusted operating loss, pretax loss
attributable to Altisource, adjusted pretax loss attributable to
Altisource, adjusted EBITDA, adjusted net loss attributable to
Altisource, adjusted diluted loss per share, cash flows used in
operating activities less additions to premises and equipment and
net debt, 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 loss from operations, loss before income taxes and
non-controlling interests, net loss attributable to Altisource,
diluted loss per share, cash flows used in 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-operational items from earnings, cash flows from operating
activities and long-term debt net of cash on-hand. 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-operational items enables comparability to prior period
performance and trend analysis. Specifically, management uses
adjusted net loss attributable to Altisource to measure the
on-going after tax performance of the Company because the measure
adjusts for the after tax impact of more significant non-recurring
items, amortization expense relating to prior acquisitions (some of
which fluctuates with revenue from certain customers and some of
which is amortized on a straight-line basis) and non-cash
share-based compensation expense which can fluctuate based on
vesting schedules, grant date timing and the value attributable to
awards. We believe adjusted net loss attributable to Altisource is
useful to existing shareholders, potential shareholders and other
users of our financial information because it provides an after-tax
measure of Altisource’s on-going performance that enables these
users to perform trend analysis using comparable data. Management
uses adjusted diluted loss per share to further evaluate adjusted
net loss attributable to Altisource while taking into account
changes in the number of diluted shares over the comparable
periods. We believe adjusted diluted loss per share is useful to
existing shareholders, potential shareholders and other users of
our financial information because it also enables these users to
evaluate adjusted net loss attributable to Altisource on a per
share basis. Management uses Adjusted EBITDA to measure the
Company’s overall performance (with the adjustments discussed
earlier with regard to adjusted net loss attributable to
Altisource) without regard to its capitalization (debt vs. equity)
or its income taxes and to perform trend analysis of the Company’s
performance over time. Our effective income tax rate can vary based
on the jurisdictional mix of our income. Additionally, as the
Company’s capital expenditures have significantly declined over
time, it provides a measure for management to evaluate the
Company’s performance without regard to prior capital expenditures.
Management also uses Adjusted EBITDA as one of the measures in
determining bonus compensation for certain employees. We believe
Adjusted EBITDA is useful to existing shareholders, potential
shareholders and other users of our financial information for the
same reasons that management finds the measure useful. Management
uses net debt in evaluating the amount of debt the Company has that
is in excess of cash and cash equivalents and equity securities. We
deduct investment in equity securities from debt in arriving at
this measure because our Senior Secured Term Loan requires the
Company to use any proceeds from the sale of equity securities to
repay the Senior Secured Term Loan. We believe net debt is useful
to existing shareholders, potential shareholders and other users of
our financial information for the same reasons management finds the
measure useful.
Altisource operates in several countries,
including Luxembourg, India, the United States and Uruguay. The
Company has differing effective tax rates in each country and these
rates may change from year to year. In determining the tax effects
related to the adjustments in calculating adjusted net loss
attributable to Altisource and adjusted diluted loss per share, we
use the tax rate in the country in which the adjustment applies or,
if the adjustment is recognized in more than one country, we
separate the adjustment by country, apply the relevant tax rate for
each country to the applicable adjustment, and then sum the result
to arrive at the total adjustment, net of tax. In 2019, the Company
recognized a full valuation allowance on its net deferred tax
assets in Luxembourg. Accordingly, for 2022 and 2021, the Company
has an effective tax rate of close to 0% in Luxembourg.
Following the 2019 creation of Pointillist as a
separate legal entity, Altisource had no ongoing obligation to fund
Pointillist, Pointillist was positioned to and focused on raising
third-party capital and Pointillist was an unrestricted subsidiary
under our Senior Secured Term Loan. Additionally, Pointillist was
not part of Altisource’s core, normal, recurring business. For
these reasons, in 2020 we began adding back the losses of
Pointillist in calculating adjusted net loss attributable to
Altisource, adjusted diluted loss per share, and Adjusted
EBITDA.
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 loss is calculated by
removing intangible asset amortization expense, share-based
compensation expense, cost of cost savings initiatives and other
and Pointillist losses from loss from operations. Pretax loss
attributable to Altisource is calculated by removing
non-controlling interests from loss before income taxes and
non-controlling interests. Adjusted pretax loss attributable to
Altisource is calculated by removing non-controlling interests,
intangible asset amortization expense, share-based compensation
expense, cost of cost savings initiatives and other and Pointillist
losses from loss before income taxes and non-controlling interests.
Adjusted EBITDA is calculated by removing the income tax provision,
interest expense (net of interest income), depreciation and
amortization, share-based compensation expense, cost of cost
savings initiatives and other and Pointillist losses from net loss
attributable to Altisource. Adjusted net loss attributable to
Altisource is calculated by removing intangible asset amortization
expense (net of tax), share-based compensation expense (net of
tax), cost of cost savings initiatives and other (net of tax),
Pointillist losses (net of tax), and certain income tax related
items, net from net loss attributable to Altisource. Adjusted
diluted loss per share is calculated by dividing net loss
attributable to Altisource after removing intangible asset
amortization expense (net of tax), share-based compensation expense
(net of tax), cost of cost savings initiatives and other (net of
tax), Pointillist losses (net of tax) and certain income tax
related items by the weighted average number of diluted shares.
Cash flows used in operating activities less additions to premises
and equipment is calculated by removing additions to premises and
equipment from cash flows used in operating activities. Net debt is
calculated as long-term debt, including current portion, minus cash
and cash equivalents.
Reconciliations of the non-GAAP measures to the
corresponding GAAP measures are as follows:
| |
Three months ended September
30, |
|
Nine months ended September
30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
| |
|
|
|
|
|
|
|
|
Loss from operations |
$ |
(10,563 |
) |
|
$ |
(14,028 |
) |
|
$ |
(29,349 |
) |
|
$ |
(47,159 |
) |
| |
|
|
|
|
|
|
|
|
Intangible asset amortization expense |
|
1,281 |
|
|
|
2,673 |
|
|
|
3,849 |
|
|
|
8,183 |
|
|
Share-based compensation expense |
|
1,320 |
|
|
|
431 |
|
|
|
3,899 |
|
|
|
2,510 |
|
|
Cost of cost savings initiatives and other |
|
540 |
|
|
|
490 |
|
|
|
1,087 |
|
|
|
3,228 |
|
|
Pointillist losses |
|
— |
|
|
|
2,155 |
|
|
|
— |
|
|
|
7,116 |
|
| |
|
|
|
|
|
|
|
|
Adjusted operating loss |
$ |
(7,422 |
) |
|
$ |
(8,279 |
) |
|
$ |
(20,514 |
) |
|
$ |
(26,122 |
) |
| |
|
|
|
|
|
|
|
| Loss
before income taxes and non-controlling interests |
$ |
(14,453 |
) |
|
$ |
(17,898 |
) |
|
$ |
(39,396 |
) |
|
$ |
(57,040 |
) |
| |
|
|
|
|
|
|
|
|
Non-controlling interests |
|
(133 |
) |
|
|
59 |
|
|
|
(468 |
) |
|
|
151 |
|
|
Pretax loss attributable to Altisource |
|
(14,586 |
) |
|
|
(17,839 |
) |
|
|
(39,864 |
) |
|
|
(56,889 |
) |
|
Intangible asset amortization expense |
|
1,281 |
|
|
|
2,673 |
|
|
|
3,849 |
|
|
|
8,183 |
|
|
Share-based compensation expense |
|
1,320 |
|
|
|
431 |
|
|
|
3,899 |
|
|
|
2,510 |
|
|
Cost of cost savings initiatives and other |
|
540 |
|
|
|
490 |
|
|
|
1,087 |
|
|
|
3,228 |
|
|
Pointillist losses |
|
— |
|
|
|
1,895 |
|
|
|
— |
|
|
|
6,253 |
|
| |
|
|
|
|
|
|
|
|
Adjusted pretax loss attributable to Altisource |
$ |
(11,445 |
) |
|
$ |
(12,350 |
) |
|
$ |
(31,029 |
) |
|
$ |
(36,715 |
) |
| |
|
|
|
|
|
|
|
|
Net loss attributable to Altisource |
$ |
(14,389 |
) |
|
$ |
(18,269 |
) |
|
$ |
(42,074 |
) |
|
$ |
(58,746 |
) |
| |
|
|
|
|
|
|
|
|
Income tax (benefit) provision |
|
(197 |
) |
|
|
430 |
|
|
|
2,210 |
|
|
|
1,857 |
|
|
Interest expense (net of interest income) |
|
4,137 |
|
|
|
3,755 |
|
|
|
11,121 |
|
|
|
10,700 |
|
|
Depreciation and amortization |
|
2,135 |
|
|
|
3,817 |
|
|
|
6,549 |
|
|
|
11,662 |
|
|
Share-based compensation expense |
|
1,320 |
|
|
|
431 |
|
|
|
3,899 |
|
|
|
2,510 |
|
|
Cost of cost savings initiatives and other |
|
540 |
|
|
|
490 |
|
|
|
1,087 |
|
|
|
3,228 |
|
|
Pointillist losses |
|
— |
|
|
|
1,774 |
|
|
|
— |
|
|
|
5,965 |
|
| |
|
|
|
|
|
|
|
| Adjusted EBITDA |
$ |
(6,454 |
) |
|
$ |
(7,572 |
) |
|
$ |
(17,208 |
) |
|
$ |
(22,824 |
) |
| |
|
|
|
|
|
|
|
|
Net loss attributable to Altisource |
$ |
(14,389 |
) |
|
$ |
(18,269 |
) |
|
$ |
(42,074 |
) |
|
$ |
(58,746 |
) |
| |
|
|
|
|
|
|
|
|
Intangible asset amortization expense, net of tax |
|
1,279 |
|
|
|
2,670 |
|
|
|
3,842 |
|
|
|
8,172 |
|
|
Share-based compensation expense, net of tax |
|
1,148 |
|
|
|
325 |
|
|
|
3,446 |
|
|
|
2,284 |
|
|
Cost of cost savings initiatives and other, net of tax |
|
449 |
|
|
|
464 |
|
|
|
937 |
|
|
|
2,832 |
|
|
Pointillist losses, net of tax |
|
— |
|
|
|
1,895 |
|
|
|
— |
|
|
|
6,253 |
|
|
Certain income tax related items |
|
210 |
|
|
|
269 |
|
|
|
2,026 |
|
|
|
1,306 |
|
| |
|
|
|
|
|
|
|
|
Adjusted net loss attributable to Altisource |
$ |
(11,303 |
) |
|
$ |
(12,646 |
) |
|
$ |
(31,823 |
) |
|
$ |
(37,899 |
) |
| |
|
|
|
|
|
|
|
|
Diluted loss per share |
$ |
(0.89 |
) |
|
$ |
(1.15 |
) |
|
$ |
(2.62 |
) |
|
$ |
(3.71 |
) |
| |
|
|
|
|
|
|
|
|
Intangible asset amortization expense, net of tax, per diluted
share |
|
0.08 |
|
|
|
0.17 |
|
|
|
0.24 |
|
|
|
0.52 |
|
|
Share-based compensation expense, net of tax, per diluted
share |
|
0.07 |
|
|
|
0.02 |
|
|
|
0.21 |
|
|
|
0.14 |
|
|
Cost of cost savings initiatives and other, net of tax, per diluted
share |
|
0.03 |
|
|
|
0.03 |
|
|
|
0.06 |
|
|
|
0.18 |
|
|
Pointillist losses, net of tax, per diluted share |
|
— |
|
|
|
0.12 |
|
|
|
— |
|
|
|
0.40 |
|
|
Certain income tax related items per diluted share |
|
0.01 |
|
|
|
0.02 |
|
|
|
0.13 |
|
|
|
0.08 |
|
| |
|
|
|
|
|
|
|
|
Adjusted diluted loss per share |
$ |
(0.70 |
) |
|
$ |
(0.80 |
) |
|
$ |
(1.98 |
) |
|
$ |
(2.40 |
) |
| |
|
|
|
|
|
|
|
|
Calculation of the impact of intangible asset amortization expense,
net of tax |
|
|
|
|
|
|
|
|
Intangible asset amortization expense |
$ |
1,281 |
|
|
$ |
2,673 |
|
|
$ |
3,849 |
|
|
$ |
8,183 |
|
|
Tax benefit from intangible asset amortization |
|
(2 |
) |
|
|
(3 |
) |
|
|
(7 |
) |
|
|
(11 |
) |
|
Intangible asset amortization expense, net of tax |
|
1,279 |
|
|
|
2,670 |
|
|
|
3,842 |
|
|
|
8,172 |
|
|
Diluted share count |
|
16,087 |
|
|
|
15,831 |
|
|
|
16,051 |
|
|
|
15,816 |
|
| |
|
|
|
|
|
|
|
|
Intangible asset amortization expense, net of tax, per diluted
share |
$ |
0.08 |
|
|
$ |
0.17 |
|
|
$ |
0.24 |
|
|
$ |
0.52 |
|
| |
|
|
|
|
|
|
|
|
Calculation of the impact of share-based compensation expense, net
of tax |
|
|
|
|
|
|
|
|
Share-based compensation expense |
$ |
1,320 |
|
|
$ |
431 |
|
|
$ |
3,899 |
|
|
$ |
2,510 |
|
|
Tax benefit from share-based compensation expense |
|
(172 |
) |
|
|
(106 |
) |
|
|
(453 |
) |
|
|
(226 |
) |
|
Share-based compensation expense, net of tax |
|
1,148 |
|
|
|
325 |
|
|
|
3,446 |
|
|
|
2,284 |
|
|
Diluted share count |
|
16,087 |
|
|
|
15,831 |
|
|
|
16,051 |
|
|
|
15,816 |
|
| |
|
|
|
|
|
|
|
|
Share-based compensation expense, net of tax, per diluted
share |
$ |
0.07 |
|
|
$ |
0.02 |
|
|
$ |
0.21 |
|
|
$ |
0.14 |
|
| |
|
|
|
|
|
|
|
|
Calculation of the impact of cost of cost savings initiatives and
other, net of tax |
|
|
|
|
|
|
|
|
Cost of cost savings initiatives and other |
$ |
540 |
|
|
$ |
490 |
|
|
$ |
1,087 |
|
|
$ |
3,228 |
|
|
Tax benefit from cost of cost savings initiatives and other |
|
(91 |
) |
|
|
(26 |
) |
|
|
(150 |
) |
|
|
(396 |
) |
|
Cost of cost savings initiatives and other, net of tax |
|
449 |
|
|
|
464 |
|
|
|
937 |
|
|
|
2,832 |
|
|
Diluted share count |
|
16,087 |
|
|
|
15,831 |
|
|
|
16,051 |
|
|
|
15,816 |
|
| |
|
|
|
|
|
|
|
| Cost
of cost savings initiatives and other, net of tax, per diluted
share |
$ |
0.03 |
|
|
$ |
0.03 |
|
|
$ |
0.06 |
|
|
$ |
0.18 |
|
| |
|
|
|
|
|
|
|
|
Calculation of the impact of Pointillist losses, net of tax |
|
|
|
|
|
|
|
|
Pointillist losses |
$ |
— |
|
|
$ |
1,895 |
|
|
$ |
— |
|
|
$ |
6,253 |
|
|
Tax benefit from Pointillist losses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Pointillist losses, net of tax |
|
— |
|
|
|
1,895 |
|
|
|
— |
|
|
|
6,253 |
|
|
Diluted share count |
|
16,087 |
|
|
|
15,831 |
|
|
|
16,051 |
|
|
|
15,816 |
|
| |
|
|
|
|
|
|
|
|
Pointillist losses, net of tax, per diluted share |
$ |
— |
|
|
$ |
0.12 |
|
|
$ |
— |
|
|
$ |
0.40 |
|
| |
|
|
|
|
|
|
|
|
Certain income tax related items resulting from: |
|
|
|
|
|
|
|
|
Foreign income tax reserves/other |
|
210 |
|
|
|
269 |
|
|
$ |
2,026 |
|
|
$ |
1,306 |
|
|
Certain income tax related items |
|
210 |
|
|
|
269 |
|
|
|
2,026 |
|
|
|
1,306 |
|
|
Diluted share count |
|
16,087 |
|
|
|
15,831 |
|
|
|
16,051 |
|
|
|
15,816 |
|
| |
|
|
|
|
|
|
|
|
Certain income tax related items per diluted share |
$ |
0.01 |
|
|
$ |
0.02 |
|
|
$ |
0.13 |
|
|
$ |
0.08 |
|
| |
|
|
|
|
|
|
|
| Cash
flows used in operating activities |
$ |
(6,509 |
) |
|
$ |
(18,358 |
) |
|
$ |
(32,293 |
) |
|
$ |
(41,133 |
) |
|
Less: additions to premises and equipment |
|
(229 |
) |
|
|
(432 |
) |
|
|
(863 |
) |
|
|
(1,125 |
) |
| |
|
|
|
|
|
|
|
| Cash
flows used in operating activities less additions to premises and
equipment |
$ |
(6,738 |
) |
|
$ |
(18,790 |
) |
|
$ |
(33,156 |
) |
|
$ |
(42,258 |
) |
| |
|
|
|
|
|
|
|
| |
September 30,2022 |
|
September 30,2021 |
| |
|
|
|
|
Senior secured term loan |
$ |
247,204 |
|
|
$ |
247,204 |
|
|
Credit Facility |
|
— |
|
|
|
20,000 |
|
|
Less: Cash and cash equivalents |
|
(63,812 |
) |
|
|
(36,492 |
) |
| |
|
|
|
|
Net debt(1) |
$ |
183,392 |
|
|
$ |
230,712 |
|
________________________
Note: Amounts may not add to the total due to
rounding.
(1) September 30, 2021 excludes $1.3 million of
Pointillist debt that is convertible into Pointillist equity
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