Altisource (ASPS) Q4 2025 Earnings Call Transcript

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DATE

Wednesday, March 4, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — William B. Shepro

TAKEAWAYS

• 2025 Service Revenue -- $161.3 million, up 7%, reflecting higher sales wins across both business segments.
• Adjusted EBITDA -- Total company adjusted EBITDA rose 5% to $18.3 million, driven by higher revenue partly offset by changes in revenue mix and moderately higher corporate costs.
• HUBZU Inventory Growth -- HUBZU foreclosure auction and REO inventory increased 137% from September 30 to 13,500 assets as of mid-February, following two significant new agreements.
• Net GAAP Loss Before Income Taxes -- Improved to $14.1 million loss from $32.9 million loss, primarily due to lower interest expense, partially offset by $3.6 million debt exchange expenses and a $7.5 million legacy litigation settlement.
• Operating Cash Flow -- Net cash used in operating activities would have been near zero excluding $3.6 million in debt exchange expenses and $1.2 million higher interest expense earlier in the year.
• Year-End Cash -- Unrestricted cash ended at $26.6 million.
• Fourth Quarter Service Revenue -- $39.9 million, up 4%, lifted by origination segment growth.
• Servicer and Real Estate Segment Revenue -- $126 million for 2025, up 5%, with adjusted EBITDA of $44.6 million, up 6% and aided by revenue mix improvements.
• Origination Segment Revenue -- $35.2 million for 2025, up 16%, with adjusted EBITDA rising 19% to $2.9 million and a 40% year-over-year increase in Q4 service revenue.
• Sales Wins -- Secured $20.6 million in annualized new Servicer and Real Estate segment contracts (including $11.5 million in Q4) and $1.8 million in new Origination segment wins during 2025.
• Weighted Average Sales Pipeline -- Servicer and Real Estate segment: $19.3 million at year-end; Origination segment: $14.9 million.
• Rithm and Onity Agreements -- Expiration and expected roll-off or termination in the first half of 2026 are forecasted to reduce related revenue and EBITDA, but company guidance assumes new sales wins will offset these declines.
• Corporate Segment Costs -- 2025 corporate adjusted EBITDA loss was $29.3 million, with an increase mainly from the absence of 2024 nonrecurring benefits and higher foreign currency expense.
• 2026 Outlook -- Projected service revenue of $165 million to $185 million and adjusted EBITDA of $15 million to $20 million, assuming revenue offsets from new business against Rithm and Onity roll-off.
• Project 45 Strategic Initiative -- Multi-year objective launched to achieve a $45 million adjusted EBITDA run rate by 2028, with targeted growth in Lenders One, HUBZU Marketplace, foreclosure trustee, title, Granite, renovation, and field services.

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RISKS

• Shepro noted that the termination of the Rithm cooperative brokerage agreement and the transfer of Onity-serviced Rithm-owned MSRs are expected to "our foreclosure trustee, title, and field service referrals," and company guidance assumes these roll-offs will lower related revenue and EBITDA in 2026.
• A $7.5 million loss was recognized in 2025 due to a legacy litigation settlement, partially offsetting GAAP loss improvement.
• Corporate segment costs increased due to "higher foreign currency expenses" and the ending of "nonrecurring benefits in 2024," impacting adjusted EBITDA.

SUMMARY

Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) highlighted 2025 growth in core service revenue and adjusted EBITDA, supported by robust sales wins and expanded HUBZU inventory. Management introduced a multi-year plan for scale, framing Project 45 as the path to $45 million in adjusted EBITDA by 2028. Guidance assumes that roll-offs from expiring Rithm and Onity relationships will be balanced by ramping new wins in higher-margin businesses. The company expects to generate positive operating cash flow in 2026, contingent on stable pipeline conversion and recognized price increases.

• Shepro stated that HUBZU's recent new agreements contributed notably to inventory growth, supporting 2026 revenue momentum as foreclosure and REO pipelines proceed to sale.
• Origination segment growth accelerated in the fourth quarter, driven by onboarding of $11.2 million in wins, and is projected for continued outperformance owing to a $14.9 million pipeline.
• Industry data cited includes a 19% increase in 2025 origination unit volume, underpinned by a 92% rise in refinance activity, with the Mortgage Bankers Association projecting 7% origination growth for 2026.
• Management highlighted a competitive environment, with low delinquency rates and origination volume, but noted that "recent indicators are improving" in key operational segments.

INDUSTRY GLOSSARY

• REO: Real Estate Owned; properties acquired by lenders after an unsuccessful foreclosure auction.
• CBA: Cooperative Brokerage Agreement; a contract for managing and selling real estate owned by third parties.
• MSR: Mortgage Servicing Rights; contractual rights to service a pool of mortgage loans in exchange for a fee.
• CWCOT: Claims Without Conveyance of Title; a HUD foreclosure sales process enabling lenders to sell foreclosed properties while bypassing title transfer to HUD.

Full Conference Call Transcript

William B. Shepro: 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?

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.

William B. Shepro: 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.

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

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