Altisource Portfolio Solutions SA :ASPS-US: Earnings Analysis: Q4, 2016 By the Numbers : February 23, 2017

Altisource Portfolio Solutions SA reports financial results for the quarter 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

  • Summary numbers: Revenues of USD 238.69 million, Net Earnings of USD -20.38 million.
  • Gross margins widened from 4.45% to 21.89% compared to the same period last year, operating (EBITDA) margins now 11.70% from 43.39%.
  • Year-on-year change in operating cash flow of -75.89% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth due to contribution of one-time items.

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):

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 238.69 252.76 255.81 250.14 270.61
Revenue Growth (%YOY) -11.79 -7.35 -4.68 4 5.74
Earnings (mil) -20.38 10.59 19.99 18.49 -45.1
Earnings Growth (%YOY) 54.8 -71.42 -56.49 400.11 -2837.85
Net Margin (%) -8.54 4.19 7.82 7.39 -16.66
EPS -1.08 0.54 1.02 0.92 -2.35
Return on Equity (%) -115.68 57.55 122.68 129.52 -240.89
Return on Assets (%) -11.8 6.19 11.5 10.25 -23.81

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Market Share Versus Profits

Revenues History
Earnings History

ASPS-US‘s change in revenue this period compared to the same period last year of -11.79% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ASPS-US is holding onto its market share. Also, for comparison purposes, revenues changed by -5.57% and earnings by -292.50% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 4.45% to 21.89%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

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 -75.89% 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

The company’s operating (EBIT) margins contracted from 9.29% to 3.14%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from -16.33% to -8.19%.

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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