Altisource Portfolio Solutions SA :ASPS-US: Earnings Analysis: Q3, 2016 By the Numbers : October 31, 2016

Altisource Portfolio Solutions SA reports financial results for the quarter ended September 30, 2016.

Highlights

  • Summary numbers: Revenues of USD 252.76 million, Net Earnings of USD 10.59 million.
  • Gross margins narrowed from 31.69% to 25.61% compared to the same period last year, operating (EBITDA) margins now 15.65% from 21.96%.
  • Change in operating cash flow of -32.60% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

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):

2015-09-30 2015-12-31 2016-03-31 2016-06-30 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 272.82 270.61 250.14 255.81 252.76
Revenue Growth (%YOY) -5.18 5.74 4 -4.68 -7.35
Earnings (mil) 37.05 -45.1 18.49 19.99 10.59
Earnings Growth (%YOY) -12.39 -2837.85 400.11 -56.49 -71.42
Net Margin (%) 13.58 -16.66 7.39 7.82 4.19
EPS 1.82 -2.35 0.92 1.02 0.54
Return on Equity (%) 202.44 -240.89 129.52 122.68 57.55
Return on Assets (%) 19.46 -23.81 10.25 11.5 6.19

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, ASPS-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if ASPS-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -1.19% and earnings by -47.04% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 31.69% to 25.61%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 21.96% to 15.65% in this time frame. For comparison, gross margins were 25.93% and EBITDA margins were 15.55% in the previous period.

Cash Versus Earnings – Sustainable Performance?

ASPS-US‘s year-on-year change in operating cash flow of -32.60% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 14.88% to 7.48% and (2) one-time items that contributed to a decrease in pretax margins from 15.10% to 7.44%

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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