ASPS

Good day, and thank you for standing by. Welcome to the Altisource Portfolio Solutions first quarter 2026 earnings call. At this time, all participants are in a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one again. Please be advised that this conference is being recorded. I would now like to introduce your speaker for today, Michelle Esterman, Chief Financial Officer. Please go ahead.

Thank you, operator. We first want to remind you that the earnings release and quarterly slides are available on our website at www.altisource.com. These provide additional information investors may find useful. Our remarks today include forward-looking statements, which include a number of risks and uncertainties that could cause actual results to differ. Please review the forward-looking statements sections in the company's earnings release and quarterly slides, as well as the risk factors contained in our 2025 Form 10-K. These describe some factors that may lead to different results. We undertake no obligation to update statements, financial scenarios, and projections previously provided or provided herein as a result of a change in circumstances, new information, or future events. During this call, we will present both GAAP and non-GAAP financial measures. In our earnings release and quarterly slides, you will find additional disclosures regarding the non-GAAP measures.

A reconciliation of GAAP to non-GAAP measures is included in the appendix to the quarterly slides. Joining me for today's call is Bill Shepro, our Chairman and Chief Executive Officer. I will now turn the call over to Bill.

Thanks, Michelle Esterman, and good morning. I'll begin on slide four. We're off to a strong start this year. For the quarter, we grew service revenue and pre-tax GAAP earnings compared to the first quarter of 2025 from sales wins and lower debt-related interest and transaction costs. More importantly, we are seeing strength in both business segments. The origination segment's first quarter service revenue and EBITDA growth compared to last year accelerated from sales wins and a stronger origination market. The servicer and real estate segment is positioned extremely well, with Hubzu inventory at 17,200 homes as of the end of the first quarter and exciting first quarter sales wins in the title and foreclosure trustee businesses. We anticipate this momentum to continue as the year progresses. Turning to slide five.

For the first quarter, we generated service revenue of $45.1 million, a 10% increase over the first quarter of 2025. This was driven by 71% growth in service revenue in our Origination segment, primarily from sales wins in our Lenders One business. Origination segment revenue growth is partially offset by a 5% revenue decline in our Servicer and Real Estate segment, primarily from a one-time 2025 pricing adjustment benefit in our foreclosure trustee business. Total company adjusted EBITDA declined by $800,000 due to revenue mix, including higher revenue in the lower margin Origination segment, lower revenue in the Servicer and Real Estate segment, and modestly higher corporate costs. Moving to slide six. The company generated first quarter pre-tax GAAP income of $400,000 compared to a $4.5 million loss in the first quarter of 2025.

This improvement was primarily attributable to lower interest expense and debt exchange transaction expenses incurred last year. Net cash provided by operating activities was $4.5 million, a $9.4 million improvement compared to the first quarter of 2025. We ended the quarter with $30.3 million in unrestricted cash. Turning to slide seven and our counter-cyclical servicer and real estate segment. First quarter 2026 service revenue of $31.4 million decreased 5% from the same quarter last year. The revenue decline was primarily attributable to a one-time 2025 pricing adjustment benefit in our foreclosure trustee business and lower volume in our renovation business. First quarter servicer and real estate segment adjusted EBITDA of $10.8 million decreased by 10% compared to the same quarter last year, primarily from the lower revenue in the foreclosure trustee business that I just discussed.

Slide eight summarizes our servicer and real estate segment sales wins and pipeline. For the quarter, we won an estimated $12.4 million in annualized stabilized service revenue wins. Two of the larger first quarter wins were in our higher margin foreclosure trustee and title businesses. Toward the end of the first quarter, we began receiving referrals from this new business. We anticipate referral growth and earnings from these wins to accelerate as the year progresses. We ended the quarter with a servicer and real estate segment total weighted average sales pipeline of $11.7 million on a stabilized basis. Turning to slide nine and our growing Hubzu inventory.

As mentioned in our March call, we recently onboarded two larger Hubzu wins. Driven by these and other recent customer wins, total Hubzu inventory has more than tripled since September 30th and stands at 17,200 assets as of March 31st and over 18,800 assets as of earlier this week. We anticipate revenue from these wins to grow during the year as REO and foreclosure referrals proceed to sale. We are forecasting full-year service revenue growth in our servicer and real estate segment from the significant growth in Hubzu inventory and recent sales wins. Our forecast assumes that our revenue growth is partially offset by lower Onity and Rithm revenue based on our estimated timing for both the service transfer of nity servicing to Rithm and the transition of the cooperative brokerage agreement REO assets from Altisource to Rithm. Moving to slide 10 in our origination segment.

We are continuing to demonstrate strong service revenue and adjusted EBITDA growth. First quarter 2026 service revenue of $13.7 million was 71% higher than the first quarter of 2025. Adjusted EBITDA more than doubled to $1.2 million in the first quarter of 2026 from $500,000 in the same period last year. The acceleration of the origination segment's revenue and EBITDA growth in the first quarter of 2026 reflects sales wins and a stronger market. Slide 11 outlines our origination segment sales wins and pipeline. During the quarter, we secured an estimated $4.7 million in wins, primarily in Lenders One, and ended the quarter with an estimated $17.2 million weighted average sales pipeline. Based upon the sales wins, sales pipeline, and forecasted market conditions, we are anticipating strong full-year service revenue growth in our origination segment. Turning to slide 12 and our corporate segment.

First quarter 2026 corporate adjusted EBITDA loss was $7.6 million, reflecting a modest increase compared to the first quarter of 2025. Looking forward, we believe corporate costs should remain relatively stable as revenue grows. Moving to slide 13 and the business environment. We continue to operate in an environment with both low delinquency rates and origination volume, though the market trends appear to be changing. 90+ day mortgage delinquency rates increased from 1.45% in December 2025 to 1.6% in February. As of February 28, 2026, there were 612,000 late-stage delinquent mortgages, a 9% increase since December. This marks the highest level of late-stage delinquent mortgages since July 2022. Foreclosure starts for January and February of 2026 were 5% higher than the same period in 2025, and foreclosure sales were 27% higher, although both remain significantly below pre-pandemic levels.

For the origination market, first quarter 2026 mortgage origination unit volume increased 42% compared to the first quarter 2025, driven by a 91% increase in refinance volume and a 19% increase in purchase volume. The MBA projects 5.7 million loans will be originated in 2026, representing 4% growth over 2025. To conclude, I'm pleased with the first quarter performance and how we are positioned for the year. In addition to 10% service revenue growth and exciting sales wins that should support future growth, we improved pre-tax GAAP earnings by $4.9 million and cash provided by operating activities by $9.4 million compared to the first quarter of 2025. As the year progresses, we believe Onity and Rithm will continue to become a smaller percentage of our revenue base, and total company service revenue and EBITDA will be more balanced between our segments.

I am proud of what the team has accomplished this quarter and am excited about our future. I'll now open up the call for questions. Operator?

Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. You'll hear the automated message advising your hand is raised. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. Our first question today will be coming from the line of Timothy D'Agostino of B. Riley Securities. Your line is open.

Thank you so much. Congrats on the quarter. My first question is on the sales pipeline in the Servicer and Real Estate segment. I guess just understanding the quarter-over-quarter move a little bit more from $19.3 million to $11.7 million. It'd be great to just kind of understand why it decreased. I know earlier in the call you had mentioned it's at this stabilized level. Just understanding that language and what we should expect from the pipeline going forward throughout the year. Thank you.

Yeah. Hey, Tim. Good morning, and we appreciate you covering Altisource. The difference in the pipeline reflects the $10 or $11 million in sales wins I discussed in the call. It's just simply partially offset by some increases in the sales pipeline. We'll be working very diligently to rebuild that pipeline, but the change reflects the fact that we had over $10 million, I think it was $11 million in sales wins.

in the first quarter.

Okay, great. Understood on that. Thank you. Just as a second one, net cash provided by operating activities, as you highlighted earlier in the call, at $4.5 million, significant increase year-over-year. I guess, not really asking for guidance, but as we look to the second quarter, third quarter, fourth quarter, should we expect this to be positive or are there items later in the year that maybe could turn this back negative? Just trying to get an understanding if net cash is going to continue to be positive throughout the year, as that's a pretty important and great milestone you all hit in the first quarter.

Michelle, do you want to take that?

Yeah, I'm happy to. Yes, I think we guided earlier in the year to positive cash flow, operating cash flow for the year. You do see fluctuations from quarter to quarter depending on revenue growth, et cetera. Yes, we do anticipate positive cash flow for the year.

Okay, great. On that positive cash flow, is that more supported by the Servicer and Real Estate segment or Origination segment? I know Hubzu is one of the higher margin businesses, but just getting a better understanding of maybe the driver of the net cash provided. Thank you.

Sure. You can see in our slides what our EBITDA is broken out between Servicer and Real Estate and Origination. They both have positive EBITDA. You do have larger EBITDA in Servicer and Real Estate, so more of the cash flow does come from that segment. As Bill mentioned, we expect that to become more balanced as we move through time.

Okay, great. Thank you so much. I'll jump back in the queue.

Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. There are no more questions in the queue. I would like to turn the call back over to Bill for closing remarks. Please go ahead.

Thanks, operator. We're very pleased with the first quarter performance. We're particularly pleased that our Hubzu inventory is standing at roughly 18,800 assets as of earlier this week, and we think we're set up very well for continued growth during the year. Thanks for joining us today.

This does conclude today's conference call. You may all disconnect.

Good day, and thank you for standing by. Welcome to the Altisource Portfolio Solutions S.A. fourth quarter 2025 earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Michelle D. Esterman, Chief Financial Officer. Please go ahead.

Thank you, operator. We first want to remind you that the earnings release and quarterly slides are available on our website at www.altisource.com. These provide additional information investors may find useful. Our remarks today include forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ. Please review the forward-looking statements section in the company's earnings release and quarterly slides, as well as the risk factors contained in our 2025 Form 10-K. These describe some factors that may lead to different results. We undertake no obligation to update statements, financial scenarios, and projections previously provided or provided herein as a result of a change in circumstances, new information, or future events. During this call, we will present both GAAP and non-GAAP financial measures. In our earnings release and quarterly slides, you will find additional disclosures regarding the non-GAAP measures. A reconciliation of GAAP to non-GAAP measures is included in the appendix to the quarterly slides. Joining me for today's call is William B. Shepro, our Chairman and Chief Executive Officer. I will now turn the call over to William.

Thanks, Michelle, and good morning. I will begin on slide four with our 2025 highlights. We are pleased with our full-year 2025 results. We grew service revenue, adjusted EBITDA, and GAAP earnings compared to 2024. These improvements reflect disciplined execution, lower interest expense, and strong sales wins across both business segments. The strong sales wins, including fourth quarter wins estimated to generate $13,200,000 in stabilized annual revenue, should put us in a strong position to mitigate the impact of anticipated legacy revenue losses, materially diversify Altisource Portfolio Solutions S.A.'s revenue base, and support our growth. We are particularly excited by the growth of our HUBZU inventory from recent sales wins. HUBZU's foreclosure auction and REO inventory grew by 137% since the end of the third quarter to 13,500 assets as of mid-February. Turning to slide five. Service revenue for 2025 increased by 7% to $161,300,000 with sales wins in both segments contributing to the growth. The business segment's adjusted EBITDA improved by $3,000,000, or 7%, to $47,600,000, and total company adjusted EBITDA improved by $900,000, or 5%, to $18,300,000, driven by higher revenue, partially offset by revenue mix and modestly higher corporate costs. Moving to slide six, we improved total company 2025 GAAP loss before income taxes to $14,100,000 from $32,900,000 in 2024. This was primarily driven by lower interest expense from the new capital structure, partially offset by $3,600,000 of debt exchange transaction expenses and a $7,500,000 loss from a legacy litigation settlement. 2025 net cash used in operating activities would have been close to zero if you exclude the debt exchange transaction expenses and $1,200,000 of higher first quarter cash interest expense related to the prior debt agreement. Adjusting for these items, net cash used in operating activities improved by approximately $60,000,000 over the last five years. We ended the year with $26,600,000 in unrestricted cash. Turning to slide seven. Fourth quarter 2025 service revenue was $39,900,000, up 4% from the fourth quarter of last year, driven by growth in the origination segment. Fourth quarter 2025 business segment adjusted EBITDA of $11,400,000 was flat to the fourth quarter 2024, while higher fourth quarter 2025 corporate segment costs resulted in total company adjusted EBITDA of $4,000,000 for the quarter. The corporate segment's costs were $700,000 higher than the prior year primarily from foreign currency fluctuations. Our fourth quarter GAAP loss before income taxes and noncontrolling interests improved to $8,100,000 from $8,400,000 in the fourth quarter 2024, primarily from lower interest expense partially offset by a $7,500,000 loss from a legacy litigation settlement. Before turning to the segment updates, I want to address developments related to Rithm. As we discussed last quarter, the cooperative brokerage agreement between Altisource Portfolio Solutions S.A. and Rithm, which I will refer to as the CBA, expired on 08/31/2025. Despite the expiration of the CBA, at Rithm's discretion, we continue to manage CBA REO assets and receive new referrals with limited exceptions. From a 2026 guidance perspective, which I will review shortly, we assume that this business will roll off during the first half of this year. With respect to Onity, Rithm provided notice in the fourth quarter that it is terminating its servicing agreements with Onity. As the service transfers occur, we expect a reduction in our foreclosure trustee, title, and field service referrals from Onity tied to these portfolios. Our 2026 guidance assumes that the Onity-serviced Rithm-owned MSRs transfer to Rithm during the first half of this year. Although we would prefer to retain this business, we believe that our sales wins, once stabilized, should more than offset the anticipated reduction in service revenue and EBITDA from the Rithm- and Onity-related changes. As a result, the midpoint of our 2026 guidance reflects service revenue growth and close to flat adjusted EBITDA, with Rithm and Onity representing a significantly smaller share of our revenue base by 2026. Turning to slide eight in our countercyclical Servicer and Real Estate segment. 2025 service revenue of $126,000,000 increased 5% from last year, reflecting a full year of the newer renovation business and growth across foreclosure trustee, Granite, and field services, partially offset by fewer home sales in the marketplace business. 2025 Servicer and Real Estate segment adjusted EBITDA increased by 6% to $44,600,000, with adjusted EBITDA margins higher due to revenue mix. Slide nine summarizes our Servicer and Real Estate segment wins and pipeline. In 2025, we won an estimated $20,600,000 in annualized stabilized service revenue wins, including $11,500,000 in fourth quarter wins. Two of the larger fourth quarter wins were in our higher-margin marketplace business unit, which we also refer to as HUBZU. The first was an REO asset management and foreclosure auction agreement with a residential loan servicer, and the second a CWCOT first-chance foreclosure auction agreement with an existing customer. We ended the year with a Servicer and Real Estate segment total weighted average sales pipeline of $19,300,000 on a stabilized basis. The pipeline includes a couple of larger opportunities for our trustee and title businesses that we are optimistic should close in the second quarter, if not sooner. Turning to slide 10 and our growing HUBZU inventory. We onboarded the two new HUBZU wins I just discussed and are off to a strong start. As of February 15, total HUBZU inventory stands at 13,500 assets, compared to 5,700 assets as of September 30. These two wins were significant contributors to this growth. We anticipate revenue from these customers to grow during the year as REO and foreclosure referrals proceed to sale. Moving to slide 11 and our Origination segment. 2025 service revenue grew 16% to $35,200,000. Adjusted EBITDA increased 19% to $2,900,000, with margins improving modestly. Service revenue growth was driven by continued expansion in the Lenders One business, including onboarding the forecasted $11,200,000 in third quarter wins. Due to these wins, the Origination segment service revenue growth accelerated in the fourth quarter, increasing 40% year over year. For 2026, we anticipate strong year-over-year service revenue and adjusted EBITDA growth for the Origination segment as recently won business continues to grow and scale, and we convert our sales pipeline to wins. Slide 12 outlines our Origination segment sales wins and pipeline. We secured an estimated $1,800,000 in wins, primarily in Lenders One, and ended the year with an estimated $14,900,000 weighted average sales pipeline. We are actively engaging with several large prospects and anticipate additional wins in 2026. Turning to slide 13 in our Corporate segment. 2025 corporate adjusted EBITDA loss was $29,300,000, reflecting a year-over-year increase in costs primarily related to nonrecurring benefits in 2024 and higher foreign currency expenses in 2025. We believe corporate costs should remain relatively stable as revenue grows. Moving to slide 14 and the business environment. We have been operating in a challenging environment with both low delinquency rates and origination volume, though recent indicators are improving. Ninety-plus-day mortgage delinquency rates modestly increased to 1.45% in December 2025. As of 12/31/2025, there were 560,000 late-stage delinquent mortgages, the highest level since February 2023. In 2025, foreclosure starts grew by 25% and foreclosure sales grew by 17% compared to 2024, although still significantly below pre-pandemic levels. We believe the increase over 2024 reflects the end of the VA foreclosure moratoriums, rising FHA delinquency rates, and a softening real estate market. We anticipate that borrowers may face additional pressure in 2026 given the fourth quarter implementation of the April 2025 FHA mortgagee letter that extends the time between loan modifications from every 18 months to every 24 months. For the origination market, total 2025 mortgage origination unit volume increased 19%, driven by a 92% increase in refinance volume, partially offset by a 2% decline in purchase volume. For 2026, the MBA projects 5,800,000 loans originated, or 7% year-over-year growth, with a forecasted 8% increase in refinance volume and a 6% increase in purchase volume. Turning to slide 15 and our 2026 outlook. We are forecasting service revenue of $165,000,000 to $185,000,000 and adjusted EBITDA of $15,000,000 to $20,000,000. At the midpoint, this represents 8.5% service revenue growth and close to flat adjusted EBITDA. Revenue growth assumptions include roughly flat industry-wide rates, the MBA's forecasted origination volume growth, and our estimated timing for the onboarding and ramp of sales wins, conversion of pipeline opportunities, and price increases for certain services, partially offset by the assumed loss of business related to the CBA and Rithm's termination of its servicing agreements with Onity. The projected adjusted EBITDA reflects forecasted service revenue growth and scale efficiencies, partially offset by product mix and modest growth in corporate segment costs. The forecast range for service revenue and adjusted EBITDA primarily reflects timing differences in the potential loss of business related to the CBA and Onity service transfers and the ramp in business from sales wins and pipeline conversion. At the midpoint of the guidance, we are forecasting to generate positive operating cash flow for the year. Moving to slides sixteen and seventeen. Our 2026 outlook is supported by momentum in the businesses we believe offer the greatest long-term growth potential: Lenders One, HUBZU Marketplace, foreclosure trustee, title, Granite, renovation, and field services. The anticipated growth of these businesses forms the foundation for Altisource Portfolio Solutions S.A.'s Project 45 strategic initiatives, our company-wide objective to achieve a run rate of $45,000,000 in adjusted EBITDA by 2028. While individual businesses and support group contributions to this initiative may vary, we believe the businesses we identify best position Altisource Portfolio Solutions S.A. for meaningful, diversified growth. Turning to slide 18. We believe we are positioned to diversify our revenue base, ramp newly won business, maintain cost discipline, and lower corporate interest expense in 2026. The Project 45 initiatives, supported by our 2025 sales wins, should help mitigate the impact from anticipated Rithm-related revenue losses and support a stronger, more resilient Altisource Portfolio Solutions S.A. I am proud of what the team has accomplished in 2025, and I am excited about our prospects for 2026 and beyond. I will now open up the call for questions. Operator?

Please press 11 on your touch-tone phone and wait for your name to be announced. To withdraw your question, please press 11 again. Showing no questions at this time. I would like to turn the call back to William B. Shepro for closing remarks.

Thank you, operator. We are pleased with our 2025 performance and believe we are set up well for continued growth. Thanks for joining our call today.

This concludes today's conference call. Thank you for participating. You may now disconnect.