Altisource Asset Management Corp (NASDAQ: ASPS) reported Q1 EPS of ($0.76), $0.19 worse than the analyst estimate of ($0.57). Revenue for the quarter came in at $91 million versus the consensus estimate of $76.12 million.

Second Quarter 2020 Financial Results

• Second quarter 2020 service revenue of $91.0 million was 52% lower than the second quarter 2019 primarily from the 2019 sale, discontinuation and exit from certain businesses (resulting in a 33% decline in service revenue), including the July 1, 2019 sale of the Financial Services Business, lower REALServicing revenue from Ocwen’s migration to another servicing system, the discontinuation of the Buy-Renovate-Lease-Sell (“BRS”) business and the wind down of Owners.com. In addition, Service revenue was lower from COVID-19 pandemic related governmental restrictions and changing vendor and consumer behavior on demand for Field Services, Marketplace and default related services in Mortgage and Real Estate Solutions, the reduction in the size of Ocwen’s portfolio and NRZ’s more aggressive sale of homes at the foreclosure auction (which reduces our real estate owned auction, brokerage, field services and title service revenue). These decreases were partially offset by a 5% increase in revenue from customers other than Ocwen, NRZ and RESI in our Field Services, Marketplace and Mortgage and Real Estate Solutions businesses from new customer on-boardings, market share expansion with existing customers, and higher origination related volumes driven by lower interest rates and business development efforts.
• Second quarter 2020 loss from operations of $(17.8) million was lower than second quarter 2019 income from operations of $5.4 million primarily as a result of lower revenue (as discussed above), changes in service mix with lower revenue from higher margin Marketplace businesses, the impact of the July 1, 2019 sale of the Financial Services business and higher restructuring costs. These decreases were partially offset by lower selling, general and administrative expenses and the benefits of our COVID-19 cash cost savings measures and higher revenue in the second quarter of 2019 from the sale of the majority of our BRS portfolio that resulted in a $1.8 million loss.
• Second quarter 2020 adjusted operating loss(1) of $(4.8) million compared to adjusted operating income(1) of $15.5 million in the second quarter 2019, primarily from the impact of revenue declines discussed above, partially offset by the benefits of our COVID-19 cash cost savings measures.
• Second quarter 2020 loss before income taxes and non-controlling interests of $(33.7) million compared to income before income taxes and non-controlling interests of $11.9 million in the second quarter 2019, primarily from an unrealized loss on our investment in RESI of $(11.2) million in the second quarter 2020 compared to an unrealized gain on our investment in RESI of $11.8 million in the second quarter 2019 and lower operating income discussed above, partially offset by lower interest expense.
• Second quarter 2020 adjusted pretax loss attributable to Altisource(1) of $(10.0) million compared to adjusted pretax income attributable to Altisource(1) of $8.9 million in the second quarter 2019, primarily from lower adjusted operating income(1) discussed above, partially offset by lower interest expense.
• Second quarter 2020 adjusted EBITDA(1) of $(2.1) million compared to adjusted EBITDA(1) of $19.5 million in the second quarter 2019, primarily from lower adjusted operating income(1) discussed above, excluding the decrease in depreciation and amortization of premises and equipment.
• Second quarter 2020 net loss attributable to Altisource of $(35.1) million compared to $(5.8) million for the second quarter 2019, primarily due to lower income before income taxes and non-controlling interests discussed above, partially offset by a lower tax provision driven by a deferred tax adjustment of $12.3 million from an income tax rate change in Luxembourg in the second quarter 2019.
• Second quarter 2020 adjusted net loss attributable to Altisource(1) of $(11.8) million compared to adjusted net income attributable to Altisource(1) of $5.9 million for the second quarter 2019, primarily from lower adjusted pretax income attributable to Altisource(1) discussed above, partially offset by a lower tax provision excluding the Luxembourg deferred tax adjustment discussed above.
• Second quarter 2020 loss per diluted share of $(2.25) compared to $(0.36) for the second quarter 2019, primarily due to higher net loss attributable to Altisource discussed above, partially offset by fewer diluted shares outstanding from share repurchases during 2019.
• Second quarter 2020 adjusted loss per share(1) of $(0.76) compared to $0.36 earnings per share for the second quarter 2019, primarily due to lower adjusted net income attributable to Altisource(1) discussed above, partially offset by fewer diluted shares outstanding from share repurchases during 2019.

“In the second quarter, Altisource faced an unprecedented and challenging business environment as a result of the COVID-19 pandemic. As anticipated, Altisource’s second quarter financial results reflect this impact with industrywide foreclosure initiations down by approximately 85% and lender completed foreclosures down by 75% compared to the second quarter of 2019. Despite this difficult environment, we acted quickly to reduce costs, work to mitigate the impact to our customers and support the safety of our employees. As result, the vast majority of our staff are working from home and we were able to preserve cash, ending the quarter with $68 million in cash and cash equivalents.”

“We anticipate this short to medium term pressure on our default related businesses to continue with governmental forbearance programs and moratoriums temporarily preventing servicers from pursuing foreclosure of delinquent loans and with the news from Ocwen that an MSR investor instructed it to move certain referrals for field services to another service provider beginning in July. To address these challenges and protect our business, we are developing a plan to further reduce our costs. Based upon our current planning, we are forecasting Altisource to generate 2021 service revenue of $250 million to $270 million, adjusted EBITDA of $35 million to $43 million and adjusted EBITDA margins of 14% to 16%,” said Chairman and Chief Executive Officer William B. Shepro.

Mr. Shepro further commented, “Longer term, we believe that the overall market for our default related services will stabilize at a much higher rate than it was before the pandemic began, positioning Altisource to become a stronger, more diversified and fast growing company.”

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