Altisource Portfolio Solutions SA :ASPS-US: Earnings Analysis: 2016 By the Numbers : February 22, 2017

Altisource Portfolio Solutions SA reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Altisource Portfolio Solutions SA – Walker & Dunlop, Inc. and PennyMac Financial Services, Inc. Class A (WD-US and PFSI-US) that have also reported for this period.

Highlights

  • Gross margins narrowed from 29.80% to 25.04% compared to the same period last year, operating (EBITDA) margins now 15.02% from 18.34%.
  • Year-on-year change in operating cash flow of -35.08% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 997.39 1051.68 1079.09 769.26 568.58
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 28.69 41.6 134.48 129.97 110.63
Earnings Growth (YOY) -31.02 -69.07 3.47 17.49 55.57
Net Margin 2.88 3.96 12.46 16.9 19.46
EPS 1.46 2.02 5.69 5.19 4.43
Return on Equity 50.13 88.78 135.03 81.85 67.92
Return on Assets 4.05 5.49 17.78 22.52 33.86

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Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 29.80% to 25.04%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 18.34% to 15.02% in this time frame. For comparison, gross margins were 29.80% and EBITDA margins were 18.34% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

ASPS-US‘s change in operating cash flow of -35.08% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Margins

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Altisource Portfolio Solutions SA engages in the provision of real estate services. It operates through the following segments: Mortgage Services, Financial Services, and Technology Services. The Mortgage Services segment includes asset management, insurance, residential property valuation, default management, and origination management services. The Financial Services segment deals with asset recovery and customer relationship management. The Infrastructure Services segment supplies software applications and information technology infrastructure under the following trademarks: REALServicing, REALTrans, REALRemit, REALDoc, and Equator’s Solutions. The company was founded on November 4, 1999 and is headquartered in Luxembourg.

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