Altisource Asset Management Corporation
Q1 2016 Earnings Call Transcript

Published: 9 May 2016

[Operator:]

Good day, ladies and gentlemen, and welcome to the Altisource Asset Management First Quarter 2016 Earnings Call. At this time, all participants are in a listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s call is being recorded. I’d now like to turn the call over to Robin Lowe, Chief Financial Officer. Sir, you may begin.

[Robin Lowe:]

Thank you, Shannon. Good morning, everyone, and thank you for joining us today. My name is Robin Lowe, excuse me, and I’m the Chief Financial Officer of Altisource Asset Management Corporation, which we refer to as AAMC. Before we begin, I want to remind you that a slide presentation is available to accompany our remarks. To access the slides, please logon to our website, www.altisourceamc.com. These slides provide additional information investors may find useful. As indicated on Slide 1, our presentation may contain certain forward-looking statements pursuant to the Safe Harbor provisions of the Federal Securities Laws. These forward-looking statements may be identified by reference to a future period or by uses of forward-looking terminology and may involve risks and uncertainties that could cause the company’s actual results to differ materially from the results discussed in the forward-looking statements. For an elaboration of the factors that may cause such a difference, please refer to the risk disclosure statement in our earnings release as well as the company’s filings with the Securities and Exchange Commission, including our year-end 2015 Form 10-K and our first quarter 2016 Form 10-Q that we have filed today. If you would like to receive our news releases, SEC filings, and other materials via e-mail, please register on the shareholders page of our website using the E-Mail Alert button. Joining me for today’s presentation is George Ellison, Chairman and Chief Executive Officer of AAMC. I would like to turn the call over to George.

[George Ellison:]

Thanks, Rob, and good morning, everyone. If you would please turn to Page 2 of our presentation, we’ll walk through the fourth quarter highlights, excuse me, fourth quarter highlights – first quarter, excuse me. A dividend of $0.15 per share was paid by RESI. AAMC managed the repurchase of $10 million of RESI stock, approximately 900,000 shares. We completed the repurchase of $2.3 million of AAMC common stock. We successfully closed another bulk sale for RESI of about 1,100 loans at approximately 99% of our balance sheet value. We are currently anticipating another sale for RESI this quarter, based on continuing opportunistic market conditions. RESI’s loan portfolio is now down to just over 5,000 loans. We successfully closed the portfolio purchase of about 600 rental homes for RESI, for a total of about 700 homes this quarter at an average growth yield of 11.3%. We increased Residential’s lease portfolio in the quarter to 2,700 homes, and increased the overall rental portfolio by 29% to about 3,500 homes. RESI’s net operating margin remains on track at 56%, as the team continues to push on this important metric. Stabilized rentals were 95% leased. Residential’s renewal rate was 77%, with an average rent increase of 6%. REO sales, which started picking up in the fourth quarter continued to improve from 389 homes last quarter to 686 this quarter, a 76% increase. I’ll now turn it back to Rob.

[Robin Lowe:]

Thank you, George. On Slides 3, 4 and 5, we show our financials. Effective January 1, 2016, AAMC adopted the provisions of Accounting Standards Update 2015-02 related to consolidation. As a result, we no longer consolidate the financials of Altisource Residential into our financial statements. We have applied ASU 2015-02 using the modified retrospective approach, which resulted in a cumulative effect adjustment to equity on January 1, 2016. As a result, periods ending prior to the adoption were not impacted. The adoption effectively removed those balances previously disclosed that related to residential and eliminated the amounts previously reported as noncontrolling interest in a consolidated affiliate. We continue to consolidate new source in our consolidated financial statements as a wholly-owned subsidiary. Subsequent to the adoption of ASU 2015-02, AAMC’s consolidated revenues consist primarily of management fees received from Altisource Residential under the related asset management agreement and interest in dividend income. Expenses consist primarily of salaries, employee benefits, equity-based compensation, legal and professional fees, and general and administrative expenses. Since the adoption did not impact 2015, we have provided certain non-GAAP information on Slide 4 that includes standalone financials for AAMC. This non-GAAP information should be viewed in addition to and not as an alternative for our reported results under GAAP. As shown on Slide 3, we reported a net loss of $940,000, or $0.50 per diluted share for the first quarter of 2016. The improvement over the prior quarter is mainly due to a one-time $6.9 million repayment in the fourth quarter of 2015 to Altisource Residential in accordance with the new asset management agreement. Revenues were $4.8 million for the first quarter of 2016, consisting mainly of fees from Altisource Residential and interested dividend income. Total expenses were $5.8 million, down from $6.4 million in the prior quarter, mainly due to lowest staff-related costs. I’ll now turn back over to George.

[George Ellison:]

Thanks, Rob. On Page 6, I’ll touch on AAMC growth initiatives. As we always point out, growing Altisource Residential is AAMC’s first priority. RESI’s growth and success is completely in line with AAMC. The first asset management contractual hurdle amount was reached in the first quarter. And as I mentioned on last quarter’s call, we will be adding resources soon in residential mortgage origination opportunities and are also considering some specially commercial real estate opportunities as well. I’ll now turn it back to the operator. Shannon?

[Operator:]

Thank you. [Operator Instructions] And I’m showing no questions at this time. I’d like to turn the call back over to the company for closing remarks.

[Robin Lowe:]

Thank you very much everyone for joining us today. Have a great day. Thank you.

[Operator:]

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. Have a wonderful day.