Altisource Portfolio Solutions Third Quarter 2026 Earnings Call - ALTISOURCE PORTFOLIO SOLUTIONS SA

Explicit Guidance:

• EBITDA Target: Goal to achieve $45 million of run-rate adjusted EBITDA by the fourth quarter of 2028 (Project 45 objective).
• Q4 2026 Outlook: Anticipation of higher adjusted EBITDA in the fourth quarter driven by the ramp of customer wins, operating leverage, and efficiency initiatives.
• Revenue Growth Forecast: Expectation that fourth-quarter origination service revenue will remain strong compared to the prior year.
• Margin Trajectory: Forecast for improved adjusted EBITDA margins in the coming quarters and significant margin expansion over the near-to-mid term.
• Corporate Costs: Expectation that corporate costs will remain relatively stable as the business grows.
• Share-Based Compensation: Anticipation of share-based compensation expenses stabilizing back to first/second quarter 2026 levels in the fourth quarter.

Business-Segment Outlook:

• Servicer and Real Estate: Anticipates a "visible path" to continued growth as recently won business ramps toward stabilized volumes over the next several quarters; expects a greater portion of incremental revenue to contribute to EBITDA (margin expansion) as new business "seasons."
• HUBZoo Inventory: With inventory at 26,000 assets (up 16% QoQ), expects a larger number of assets to advance to sale, supporting future transaction volumes and revenue growth.
• Origination Segment: Driven by market share gains and customer adoption; pipeline includes $18.5 million weighted average of stabilized annual revenue (up from $6.3 million in wins this quarter), reinforcing confidence in outperforming the broader market.
• Diversification: Non-Onity/Rhythm customers now represent 72% of service revenue (up from 65% last quarter); continued shift reduces concentration risk and enhances revenue durability.

Market and Competitive Outlook:

• Default Market: Believes sustained increase in foreclosure activity (currently up 20% YoY) could provide additional volume upside.
• Origination Market: Forecasts the broader market to originate 5.3 million loans in 2026 (6% YoY growth per MBA); confident the company will outperform this baseline due to wins and pipeline.
• Customer Behavior: Lenders are responding positively to solutions that lower costs and improve execution, validating current adoption trends.
• Market Recovery: Any sustained market recovery is expected to provide additional upside to current growth trajectories.

Macro / Industry Outlook:

• Industry Volumes: Acknowledges industry volumes remain below pre-pandemic norms but notes indicators (seriously delinquent loans, foreclosure starts) are moving higher.
• Interest Rate Environment: Not explicitly discussed in this transcript.
• Regulation/Tariffs: Not mentioned.

Strategic Initiatives:

• Project 45: Core strategic framework to reach $45M run-rate EBITDA by Q4 2028 via customer wins, operating leverage, and cost discipline.
• AI and Automation: Expanding AI-enabled workflows across field services, valuations, finance, and corporate support; developing AI software for construction risk management, commercial loan servicing, and real estate asset management. Expected to improve scalability and shorten development cycles.
• Capacity Additions/Capex: Continued investment in talent and capabilities to support growth in the origination segment; no specific capex numbers provided, but focus is on "efficiency initiatives" and "operating leverage."
• M&A/Restructuring: Wind-down of the Rhythm Cooperative Brokerage Agreement and transfer of Rhythm's Ownity Service Loans to Rhythm completed; actively replacing this revenue through organic wins.

Risks and Headwinds to Outlook:

• Market Volatility: Default and origination markets remain below normalized levels; failure of market indicators to improve could limit upside.
• Revenue Mix: Recent revenue growth has included higher proportions of lower-margin origination segment business, temporarily impacting company-wide gross and EBITDA margins.
• Implementation Lag: New customer wins and inventory growth require time to "season" and translate into full EBITDA contribution.
• Unforeseen Circumstances: Standard forward-looking statement risks regarding risks, uncertainties, and factors that could cause results to differ from projections.

Management Tone on the Future:

• Confidence: "Very confident" in the ability to significantly grow EBITDA margins over the coming quarters.
• Strategic Validation: Statements characterize the current quarter as "further evidence that Altisource's growth strategy is gaining traction."
• Optimism: Positioned to generate "stronger earnings, increased operating leverage, and durable stakeholder value" with potential upside if market conditions improve.

Miscellaneous:

• Share Repurchases/Debt: Opportunistically retired $900,000 of term loans during the quarter; ended with $25.1 million in unrestricted cash.
• Backlog Metrics: End-of-quarter weighted average pipeline for origination segment stands at $18.5 million in stabilized annual revenue; total pipeline for Servicer and Real Estate at $12.8 million.