Altisource Q2 Revenue Up 11 Percent

Key Points

• - Revenue (GAAP) rose 11% to $43.3 million in Q2 2025, reflecting year-over-year improvement in Adjusted EBITDA across both major business segments.

• - Net income turned positive at $16.6 million, driven by an $18.5 million one-time tax reserve reversal for India in Q2 2025.

• - But underlying operating cash flow (non-GAAP) remained negative.

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Altisource Portfolio Solutions (NASDAQ:ASPS), a provider of services and technology for the mortgage and real estate industries, published its Q2 2025 earnings on July 24, 2025. The most notable news was a sharp swing to positive net income (GAAP), largely due to a substantial tax benefit from reversing reserves tied to prior uncertainties with Indian tax positions. Revenue climbed 11% to $43.3 million, up from $39.1 million in the same quarter last year, with adjusted EBITDA (non-GAAP) rising 23% to $5.4 million. With no available analyst consensus, it is not possible to gauge this quarter’s results against Street expectations. Overall, the second quarter showed stronger service revenue and profitability compared to the same period in 2024, but the headline numbers were heavily influenced by non-operational gains and persistent cash outflows.

Business Overview and Strategic Focus

Altisource is a specialized services and technology company concentrated in the mortgage, real estate, and loan origination markets. It offers a portfolio of technology platforms and business process services supporting mortgage servicing, property management, and mortgage origination. Key product lines include technology solutions such as Equator, a loan servicing platform, and RentRange, which provides data analytics for real estate investment.

Its growth strategy depends on deep relationships with major clients, technology-enabled solutions, and effective management of debt and overall financial leverage. One customer, Onity, accounts for a substantial portion of revenue, leading to client concentration risk. The company also emphasizes innovation in software-as-a-service (SaaS) and automation, while actively managing debt and seeking opportunities in evolving regulatory and market conditions.

Quarter Highlights: Revenue Growth, One-Off Gains, and Debt Moves

During Q2 2025, Altisource saw service revenue rise 11%, supported by improvements in Adjusted EBITDA in both the Servicer and Real Estate, and Origination segments. Service revenue increased by $3.9 million year over year, Segment-level margins increased slightly. However, gross margin on service revenue dipped from 34% in Q2 2024 to 32% in Q2 2025 (GAAP). This decline occurred despite top-line growth.

The most significant profit driver was the $18.5 million reversal of reserves related to uncertain Indian tax positions, including $9.6 million for taxes and $9.0 million for accrued interest. This non-operational item transformed the company’s net income for the period; without it, adjusted net income would have been much lower at $2.2 million (non-GAAP). Excluding this effect, adjusted diluted earnings per share (non-GAAP) moved to $0.19 from a loss a year earlier, demonstrating improvement, but on a much smaller scale than the GAAP figures.

Debt reduction and restructuring were also major features. After a term loan exchange in Q1 2025, long-term debt consisted of a $160.0 million senior secured term loan and a $12.5 million super senior term loan, compared to $232.8 million at the end of 2024, aided by a $12.5 million Super Senior facility and $45.4 million in equity issued in exchange for debt. Net debt (non-GAAP) at quarter end was $142.2 million. This reduction is expected to lower annual GAAP interest expense to approximately $9.5 million, creating future savings in cash flow and improving the balance sheet. The company also implemented a 1-for-8 reverse stock split on May 28, reducing shares outstanding and altering share price dynamics.

Despite the positive headline results, operating cash flow (GAAP) remained negative at ($0.3) million for the quarter and ($5.3) million for the first six months of 2025. Negative cash flow from operations (GAAP) signals continued pressure on the ability to fund future investments internally, even as the company works to stabilize its financial base. Corporate and other segment losses offset improvements in the main business lines, underscoring ongoing challenges with cost discipline outside core operating units. No dividend was declared or paid during the quarter. ASPS does not currently pay a dividend.

Industry and Market Context

Market conditions during the quarter shaped Altisource’s growth in important ways. The broader mortgage industry saw a modest pickup: foreclosure initiations were up 22% for the five months ended May 31, 2025 compared to the same period in 2024, but volumes remain well below pre-pandemic levels, with foreclosure initiations still 22% lower than in 2019 and foreclosure sales 51% below that benchmark for the same period. Mortgage origination volumes rose 14% for the six months ended June 30, 2025 compared to the same period in 2024, driven mainly by a 58 % jump in refinancing activity, while purchase activity fell slightly.

However, management noted that the current environment remains “close to historically low” in terms of industry delinquencies, continuing to constrain organic growth for foreclosure- and default-related services, as referenced in recent disclosures. The company reported some wins in new business during the period, estimating annualized stabilized service revenue from sales wins of $1.1 million in its Servicer and Real Estate business and $3.3 million in Origination.

Technology remains a central theme, but the company reported no quantitative progress on platforms like Equator or in SaaS adoption metrics. Management continues to describe technology-enabled solutions as an area of focus, yet offered no new data to measure this area’s contribution during the period.

Regulatory factors impacted results through the tax reversal in India—removing significant uncertainty and legal overhang. Though management underscored that regulation remains an ever-present aspect of operating in the mortgage and real estate services sector.

Outlook and What to Watch

Management offered no explicit financial guidance for the next quarter or the full year. Executives highlighted their expectation that higher industry defaults and foreclosure volumes would boost results in Altisource’s most profitable business lines. They noted a weighted average sales pipeline between $36 million and $44 million in potential annualized service revenue, with the majority of future opportunities likely to be realized in 2026 and beyond.

The company remains focused on growing business lines with favorable industry trends, managing costs, and building financial flexibility following the recent debt restructuring. Investors may want to monitor whether operating cash flow can turn positive, how well sales pipeline wins convert to recurring revenues, and any changes in client concentration or major contract renewals.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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