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Press release from GlobeNewswire (a Nasdaq OMX company)

Altisource Announces Fourth Quarter and Full Year Results

Wednesday, February 13, 2013

Altisource Announces Fourth Quarter and Full Year Results06:00 EST Wednesday, February 13, 2013LUXEMBOURG, Feb. 13, 2013 (GLOBE NEWSWIRE) -- Altisource™ (Nasdaq:ASPS) today reported net income attributable to Altisource of $110.6 million or $4.43 per diluted share for the year ended December 31, 2012, an increase in net income and diluted earnings per share from the year ended December 31, 2011 of 56% and 60%, respectively. Service revenue was $466.9 million for the year ended December 31, 2012, a 39% increase when compared to the year ended December 31, 2011. "2012 was a very strong year for Altisource. We focused on providing high quality services to our largest customer, Ocwen Financial Corporation ("Ocwen"), while intensifying our efforts on our strategic initiatives to diversify and expand our revenue base," said William Shepro, Chief Executive Officer of Altisource. Net income attributable to Altisource was $30.3 million or $1.20 per diluted share for the quarter ended December 31, 2012, an increase in net income and diluted earnings per share from the quarter ended September 30, 2012 of 12% and 11%, respectively. Fourth quarter 2012 operating profit margins increased from 26% in the third quarter of 2012 to 27%. William Erbey, Chairman of the Board of Directors, commented, "We are very pleased with the fourth quarter margin expansion particularly given that we incurred $2.7 million of costs in the fourth quarter related to the creation and separation of the residential asset businesses and we were growing the staff required to support the approximate doubling of Ocwen's private label servicing portfolio." Highlights for the year ended December 31, 2012 include: Capitalized Altisource Residential Corporation ("Residential") and Altisource Asset Management Corporation ("AAMC") with $100.0 million and $5.0 million, respectively, and distributed ownership in these entities to Altisource shareholders; Relaunched the consumer real estate portal under the new HubzuTM brand; over 25,000 real estate owned ("REO") assets were sold through Hubzu during the year; Recognized origination related service revenue of $37.8 million, representing a 72% increase over the year ended December 31, 2011; Prepared for 2013 growth from Ocwen's December 28, 2012 acquisition of Homeward Residential Holdings, Inc. ("Homeward Residential") and its  anticipated acquisition of a portion of the Residential Capital, LLC ("Residential Capital") loan servicing portfolio and Borrowed $200.0 million under a seven-year senior secured term loan facility. The increase in net income is primarily from stronger service revenue growth in the higher margin Mortgage Services segment relative to the other segments. This was driven by the servicing portfolio growth experienced by Ocwen and expanded origination related services to the Lenders One members. Gross profit as a percentage of service revenue was 43% for the year ended December 31, 2012 compared to 44% for the year ended December 31, 2011. The decline in gross profit margin is primarily attributable to the costs incurred to develop the rental property management businesses and higher costs in the Technology Services segment to support the accelerated development of the next generation vendor technologies. The Company's next generation technologies are expected to help the Company and its customers substantially reduce employee and vendor costs while maintaining high quality. Excluding the costs to develop the rental property management business and separate Residential and AAMC, the Company's gross profit as a percentage of service revenue was 44% for the year ended December 31, 2012. Income from operations as a percentage of service revenue improved to 27% for the year ended December 31, 2012 compared to 26% for the year ended December 31, 2011 as selling, general and administrative expenses are growing at a slower pace than service revenue. The benefit was partially offset by the costs incurred to develop the rental property management business. Excluding the costs to develop the rental property management business and separate Residential and AAMC, the Company's income from operations as a percentage of service revenue was 28% for the year ended December 31, 2012.Separation of Residential and AAMC In December 2012, the Company completed the capitalization and separation of Residential and AAMC into two separate publicly traded companies. In addition, Altisource completed its platform to provide residential property management, lease brokerage and renovation management services to Residential. Residential and AAMC plan to enter the growing residential single-family rental market with Residential acquiring residential related assets and AAMC providing asset management and advisory services to Residential. With $100 million of initial equity, the Company believes Residential is poised to execute on its strategy of achieving above market returns by acquiring non-performing loans at a lower cost than directly acquiring real estate owned and operating at a lower cost than its competitors.Outlook As a result of the growth recently experienced by Ocwen and its announced plans for future growth, the Company expects 2013 to be a strong year and 2014 to be a stronger year. The mortgage servicing industry continues to experience a shift of servicing from traditional financial institutions to non-bank servicers. Altisource believes Ocwen has significant competitive advantages and will continue to grow as a result of the changing landscape, providing growth to Altisource. The Homeward Residential and Residential Capital servicing platforms are expected to be boarded on the Altisource platform during 2013 with the full year benefit experienced in 2014. Further, the Company expects to experience margin expansion in 2014 as it benefits from the operating leverage of the platform.Forward-Looking Statements This press release contains forward-looking statements that involve a number of risks and uncertainties. Those forward-looking statements include all statements that are not historical fact, including statements about management's beliefs and expectations. Forward-looking statements are based on management's beliefs as well as assumptions made by and information currently available to management. Because such statements are based on expectations as to future economic performance and are not statements of historical fact, actual results may differ materially from those projected. The Company undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. The risks and uncertainties to which forward-looking statements are subject include, but are not limited to: Altisource's ability to retain existing customers and attract new customers; general economic and market conditions; governmental regulations, taxes and policies; availability of adequate and timely sources of liquidity; and other risks and uncertainties detailed in the "Forward-Looking Statements," "Risk Factors" and other sections of the Company's Form 10-K and other filings with the Securities and Exchange Commission.Webcast Altisource will host a webcast at 11:00 a.m. EST today to discuss fourth quarter results. A link to the live audio webcast will be available on the Company's website through the Investor Relations home page. Those who want to listen to the call should go to the website fifteen minutes prior to the call to register, download and install any necessary audio software. A replay of the conference call will be available via the website approximately two hours after the conclusion of the call and will remain available for approximately 30 days.About Altisource Altisource Portfolio Solutions S.A. (Nasdaq:ASPS) is a global provider of services focused on high-value, technology-enabled knowledge-based solutions principally related to real estate and mortgage portfolio management, asset recovery and customer relationship management. Additional information is available at www.altisource.com.ALTISOURCE PORTFOLIO SOLUTIONS S.A.CONSOLIDATED STATEMENT OF OPERATIONS(Dollars in thousands, except per share data)          Financial Results           Results of operations are as follows for the three and twelve months ended December 31:             Three months ended Year ended  2012 2011 2012 2011           Service revenue          Mortgage Services  $ 91,982  $ 77,174  $ 351,908  $ 224,942  Financial Services  14,879  16,164  63,979  69,231  Technology Services  20,205  14,979  74,189  56,094  Eliminations  (5,327)  (3,962)  (23,147)  (15,509)    121,739  104,355  466,929  334,758 Reimbursable expenses  18,301  25,141  96,147  82,074 Non-controlling interests  1,061  2,460  5,284  6,855 Total revenue  141,101  131,956  568,360  423,687 Cost of revenue  69,115  59,323  270,054  193,775 Reimbursable expenses  18,301  25,141  96,147  82,074 Gross profit  53,685  47,492  202,159  147,838 Selling, general and administrative expenses  20,227  16,644  74,712  62,131 Income from operations  33,458  30,848  127,447  85,707 Other (expense) income, net:          Interest expense   (1,171)  (18)  (1,210)  (85)  Other (expense) income, net  (688)  (73)  (1,588)  288  Total other (expense) income, net  (1,859)  (91)  (2,798)  203 Income before income taxes and non-controlling interests  31,599  30,757  124,649  85,910 Income tax provision  (245)  (2,566)  (8,738)  (7,943) Net income  31,354  28,191  115,911  77,967 Net income attributable to non-controlling interests  (1,061)  (2,460)  (5,284)  (6,855) Net income attributable to Altisource  $ 30,293  $ 25,731  $ 110,627  $ 71,112           Earnings per share:         Basic   $ 1.30  $ 1.09  $ 4.74  $ 2.92 Diluted  $ 1.20  $ 1.02  $ 4.43  $ 2.77           Weighted average shares outstanding:         Basic  23,389 23,692 23,358 24,373 Diluted 25,162 25,142 24,962 25,685           Transactions with related parties:         Revenue  $ 80,736  $ 76,367  $ 338,227  $ 245,262 Selling, general and administrative expenses  $ 629  $ 541  $ 2,430  $ 1,893 Other income  $ 86  --   $ 86  --   ALTISOURCE PORTFOLIO SOLUTIONS S.A.CONSOLIDATED BALANCE SHEETS(Dollars in thousands, except per share data)         December 31,   2012 2011 ASSETS       Current assets:     Cash and cash equivalents  $ 105,502  $ 32,125 Accounts receivable, net 88,955 52,005 Prepaid expenses and other current assets 7,618 5,002 Deferred tax assets, net 1,775 1,133 Total current assets 203,850 90,265       Premises and equipment, net 50,399 25,600 Deferred tax assets, net 4,073 4,373 Intangible assets, net 56,586 64,950 Goodwill  14,915 14,915 Investment in equity affiliate 12,729 14,470 Loan to Ocwen 75,000 -- Other assets  11,674 9,586       Total assets  $ 429,226  $ 224,159       LIABILITIES AND EQUITY       Current liabilities:     Accounts payable and accrued expenses  $ 58,976  $ 44,867 Current portion of long-term debt 2,000 -- Current portion of capital lease obligations  233 634 Other current liabilities  10,423 9,939 Total current liabilities 71,632 55,440       Long-term debt, less current portion 196,027 -- Capital lease obligations, less current portion -- 202 Other non-current liabilities 1,738 2,574       Commitments and contingencies           Equity:     Common stock ($1.00 par value; 100,000 shares authorized; 25,413 issued and 23,427 outstanding as of December 31, 2012; 25,413 issued and 23,405 outstanding as of December 31, 2011)  25,413  25,413 Additional paid-in-capital  86,873  83,229 Retained earnings  124,127  126,161 Treasury stock, at cost (1,986 shares as of December 31, 2012 and 2,008 shares as of December 31, 2011)  (77,954)  (72,048) Altisource equity  158,459  162,755       Non-controlling interests  1,370  3,188 Total equity  159,829  165,943       Total liabilities and equity  $ 429,226  $ 224,159CONTACT: Michelle D. Esterman Chief Financial Officer T: +352 2469 7950 E: michelle.esterman@altisource.lu