Good day ladies and gentlemen and welcome to the Altisource first quarter earnings call. [Operator Instructions] As a reminder, today’s program is being recorded. I'd now like to introduce your host for today's program, Michelle Esterman, Chief Financial Officer. Please go ahead.

Thank you, Operator. We first want to remind you that the earnings release, Form 10-Q and quarterly slides are available on our web site at www.altisource.com. These provide additional information investors may find useful. Our presentation today contains forward-looking statements made pursuant to the Safe Harbor provisions of the federal securities law. Statements in this conference call and in our press release issued earlier today, which are other than historical fact, are forward-looking statements. Factors that might cause actual results to differ materially are discussed in our earnings release as well as our public filings. The company disclaims any intent or obligation to publicly update or revise any forward-looking statements regardless of whether new information becomes available, future developments occur or otherwise. Joining me for today's call is Bill Shepro, our Chief Executive Officer. I would now like to turn the call over to Bill.

Thanks, Michelle. Good morning and thank you for joining today's call. This morning I plan on providing a review of our vision and an update on the progress we are making on our 2015 strategic initiatives, Michelle will discuss our financial performance. Before I start, I'd like to address HLSS’ recent sale of its assets to New Residential. We believe the amendment of the between Ocwen and HLSS demonstrates New Residential's commitment to a long-term relationship with Ocwen. Our understanding is the amendment removes New Residential's ability to transfer servicing away from Ocwen due to a servicer rating downgrade for the next two years and extends the initial six-year agreements by up to an additional two years. This provides enhanced stability for Ocwen and the mortgage servicing industry, and of course it is good for Altisource. Turning to the quarter, I am very pleased with our first quarter accomplishments. Not only are we executing on our growth initiatives we outlined for you earlier this year, we came together as an organization making good progress against our cost-reduction plan. While the full impact of our cost-reduction efforts are not reflected in the first quarter earnings, as these activities occurred throughout the quarter, and we expect to achieve higher cost savings in the second quarter, we continue to believe that 2015 adjusted pretax income of $136 million at the midpoint of our scenarios is reasonable. Michelle will discuss this in greater detail in a couple of minutes. Turning to our vision, Altisource's vision is to become the premiere real estate and mortgage marketplace, offering both the services and the platform to order and deliver the services to the marketplace participants. Within these markets, we are leading with innovative technology-led solutions, facilitating transactions related to home purchases and sales, home rentals, home maintenance,…

Thank you, Bill. This morning we reported first quarter 2015 service revenue of $207.8 million, adjusted net income attributable to shareholders of $11.8 million, and adjusted diluted earnings per share of $0.56. Net income includes $13.6 million of expenses related to terminated employees and contractors and other out of the ordinary items. Absent these items, adjusted net income attributable to shareholders would have been $24.3 million. Slides 2 through 6 provide highlights of our results for the current quarter compared to prior periods. We are pleased with the results for the quarter, our progress on our cost-reduction initiatives, and continue to believe that the 2015 adjusted pretax income of $136 million at the midpoint of our scenarios is reasonable. Turning to service revenue, despite the lower number of delinquent non-GSE loans in Ocwen's portfolio, in the first quarter of 2015, compared to the same quarter in 2014, service revenue only decreased by 1% over the same period. The decrease in revenue was primarily from the November 2014 discontinuation of the lender placed insurance brokerage business, fewer orders for property valuation services, and lower Equator revenue. In 2014, Equator revenue included the amortization of acquisition related deferred revenue, which was fully amortized by November of 2014. These declines were almost entirely offset by impressive growth in Hubzu revenue from a higher number of both Ocwen and non-Ocwen homes sold. Adjusted net income attributable to shareholders in the first quarter of 2015 was 76% lower than the first quarter of 2014, primarily from revenue mix in the mortgage services and financial services segments, continued investment in some of our technology services businesses, closing certain costs through 2014 that we worked to eliminate during the first quarter of 2015, and other out of the ordinary items. As you can see on Slide 4,…

Certainly. [Operator Instructions] Our first question comes from the line of Mike Grondahl from Piper Jaffray. Your question, please.

Yeah, thanks, guys. My first question, just with the non-GSE delinquent loans, the revenue per quarter of $390 was a little bit higher than what I was thinking. Any new services that you’re supplying or what kind of pushed that number higher?

Hi, Mike. It’s primarily the greater number of sales we had through Hubzu.

Okay. So mix with Hubzu. Okay.

Yes, correct.

And then, the average non-GSE delinquent loans was $310,000. Any actions or activity that caused that number to bounce around a little bit? It was maybe just a little lower than what we’d thought?

Yeah, I mean, Mike, what you usually see with delinquency rates is the drop is the highest in the first quarter because borrowers often use their bonus payment for their tax refunds to make payments on their mortgage. So, historically, you’ve seen the drop – the largest in the first quarter and smaller amounts throughout the rest of the year.

Okay. Just kind of turning to Hubzu, is there anymore of an update there kind of as it relates to Ocwen and short sales or kind of what you’re doing for third parties and some of the RFPs you might have mentioned?

Mike, with respect to Ocwen, I would say it’s business as usual. With respect to third parties, I mean, we had business with I think four customers that contributed to the first quarter growth in our Hubzu sales, and we’re in active dialogue with others on the institutional side. And we’re also very focused on our overall online real estate business that we’re very excited about.

Bill, can you – what do you mean by the online real estate? You mean owners.com?

Owners and Hubzu.

Okay.

So, Owners, I think, last year, had sold 15,000 packages to retail sellers of their homes. So one of our objectives is to substantially grow that business and to provide all the services that a seller would typically use associated with the sale of their transaction. And so we believe we’re executing well against our strategy to accomplish that.

Got it, okay. Well, 15,000 is quite a bit. And then just looking at – a couple quarters ago, we talked about some potential pricing studies as it relates to the prices you’re charging Ocwen. Is there any update on those studies, or sort of third parties that are looking at it?

Mike, from our perspective, there's no new news to report. We continue to believe that for the services we provide, if you compare like services, we're charging pricing that's within the market range or within the range of market.

Okay. Thank you. I’ll jump back in the queue. Thanks, guys.

Thank you. Our next question comes from the line of Jade Rahmani from KBW. Your question, please.

Yes, hi, Jade from KBW. Just wanted to ask on the cooperative initiative in the rental space, can you talk about the addressable opportunity for that beyond Altisource residential? How do you look at the size of that market, and what the potential penetration could be for this cooperative?

Sure. We are primarily going after the smaller and mid-sized investors of rental homes, as well as those that are in the fix and flip business. And it's a very large market. I think there is something like 14 million residential homes that are rented. And we're – we just announced the launch of the cooperative a week ago or so. And we are at a conference and it was the IMN conference a couple of days ago and the feedback I got from the conference was very, very positive. I think we had over 70 or 80 meetings, a lot of very strong positive reaction from the people that met with us at the conference. So we are very optimistic that we’re going to be able to add real value to those types of investors in the space. And that Altisource either directly or through our preferred partners and vendors will be able to help them improve their operations and lower their cost.

Okay.

And that leverages something we do today, both in the cooperative space as well as the work we provide to Altisource residential.

And how many properties are currently being serviced through the overall platform?

So we are not going to release any information related to RESI or MAC until after they release, but I think if you look in our slide deck we indicate what those numbers were at the end of last quarter.

Okay. So far the property services are pretty much all related to RESI.

So we manage today Ocwen's REO and REO for some other customers at Altisource, in addition to that we are managing RESI’s REO and rental portfolio.

And is it your feeling that over time the addressable – or your penetration within the small investors is – I mean, likely to exceed RESI's overall portfolio size given how big that market is?

Sure. Let me give you just one example. If you look at Lenders One, when we bought Lenders One in February of 2010, my recollection was they are about 3% or 3.5% of the mortgage market. Today, our membership comprises close to - or about 17% or 18% of the market and that’s over five, six year period of time. So we are very optimistic that we know how to develop and grow the membership of a cooperative and that we also believe that we can directly provide some of the services for the membership or leverage our relationship with preferred investors and preferred vendors to provide those services at a lower cost.

Okay. Thanks very much.

Thank you. Our next question comes from the line of Ryan Zacharia from JAM. Your question please.

Hi guys, thanks for taking the question. I just have one with respect to the data access agreement. Could you describe what that was and how it could be canceled without incident? Is it in any way going to impair your ability to service Ocwen's portfolio? Or might you have to incur an incremental expense from an unaffiliated third party because you're not getting the data through the access agreement.

No, Ryan. We are buying the data with an eye towards developing new products where we can leverage those data and develop new products. We decided not to pursue that business and terminated the agreement effective April 01.

Okay. Thanks.

Thank you. Our next question comes from the line of Henry Coffey from Sterne Agee. Your question please.

Sterne Agee CRT. Good morning everyone. If we go back to page 11, in the fourth quarter, you had 787 rental properties included in your management network. Is that how we should read that? What we're all trying to figure out is how much of those are from Ocwen-related parties, and what do the new adds look like from the three or four other relationships you've developed plus the rental platform?

Yeah, Henry, on page 11 you are talking about the 787?

Yeah.

So that’s all maybe we would have been – if you look a couple rows above it says Altisource residential’s current portfolio that all have to do with Altisource residential.

Okay. And so what does the count look like in terms of new clients, not Altisource residential related?

So, on the renovation property management and the leasing business, today we're performing that service just for Altisource residential. With the launch of Residential Investor One a week ago, we think that opens up the opportunity for us to provide those services to others.

And it's primarily – it's in essence, it's kind of like a commercial version of Angie's list in that you it's a way to order services, manage services, get a plumber into a disparate location, is that how we should understand the service offering?

Yeah, it’s not quite delivered in the same way as Angie's list is, but yes, we will provide all the services associated with buying a home, rehabbing the home, leasing the home, and managing the home. And then…

So if you were to take over my empire of one rental unit, I could give my tenant a 1-800 number to call or something when there's a leak or –

That’s right.

Or a roof issue or something, and then that would just get provided on a fee per item basis or a fee per month?

Yeah. Look, Altisource can provide that service directly to you or we would leverage a network of vendors who could provide that service. And the way we charge would be normally a percentage of the rent.

Can you tell us what the percentage is or how it compares to other offerings?

No, I don’t think we are prepared at this point to publicly disclose it. Our view is we will be charging more than we charge Altisource residential but substantially less than what the market would be.

Okay. Turning to the balance sheet, how many shares of HLSS stock did you end up buying, and do you hold them all still?

It was a little over 1.6 million shares.

And we’ve liquidated some of those shares, we don’t have the exact number, Henry.

And then the rest will come through in the cash distribution on the 27th?

That’s right. We may liquidate some before the end of this week otherwise I think on Monday is the cash distribution for the majority of the proceeds.

Great. And then in terms of looking at your debt structure, I know you've got $5.9 million of current debt. When is the next serious maturity coming up?

Our debt amortizes at 1% per year and the balance is due in December of 2020.

Alright, thank you very much.

Thank you. Our next question comes from the line of Matt Boyd from Numera. Your question please.

Good morning, guys. I was just hoping – I know you guys as per the statement this morning, no intention to repurchase shares right now. But I just wanted to see if you guys could give some more color on how you were thinking more generally about capital allocation going forward. Especially in light of what has been some pretty positive developments at Ocwen since your last call?

Yeah. I think as we said on the call, we’re just going to continue to evaluate the environment. We have the authority to purchase shares back or order buyback but we want to make sure we are doing in a prudent way and we’ll continue to evaluate the environment. There is not much more we could add at this point.

Alright, that's fair. And then last year, during an investor call, last March, you guys provided a very helpful slide that drew out how you're thinking about the growth opportunity, three, four, and five years out, among your different business lines. I just wanted to know if you could provide some more color on how you're thinking about the growth opportunity a few years out, and if your expectations have changed materially since the last time you spoke about them.

I think that originally included a scenario where Ocwen didn't grow at all and a scenario where Ocwen grew. We have not revisited at least for this purpose for the call those scenarios. So it’s something we will think about and consider for the future.

All right. Sure. That’s fair. So is there – and then in terms of lastly the scenarios that you provided, I know you said that the targets seem reasonable to you. After the first quarter, is there anymore color can you provide about how you’re thinking about the scenario A and B for this year, and is B still kind of an achievable target? Even on the high-end? Or should we really be thinking about the mid-point?

I think what we said on the call is that we believe the $136 million of pretax, which is the mid-point of the scenario is reasonable.

Right, okay. Okay, that's it. Thanks, Bill.

Thank you.

Thank you. Our next question comes from the line of Betsi Hill from Napier Park Global. Your question, please.

Thank you for taking my question. First question is it appears that the bulk of the accounts receivable were Ocwen build receivables. Any comments on that? Are you expecting those to be collected in Q2, and do you have any other comments on working capital flows potentially in Q2? Thanks.

Yeah, so our receivables can fluctuate from quarter-to-quarter and we don’t see any issues with collectability.

Any further color on for example our accrued expenses at a typical run rate? Do you expect that to be a source of cash as you build them again?

Yeah, I mean, you will notice it came down quite a bit in the first quarter and it does vary from quarter to quarter. I mean, is it going to be a source of cash, I mean, that’s just – as move through our 2015, we are going to incur expenses and I would expect it to be in line with the types of expenses that we are incurring. So, in June, I might expect it to be higher, which would be a source of cash because our costs are higher as we are providing property management services and others and towards the end of the year, lower. But that’s just generally speaking.

We also had repaid bonuses in the first quarter as well, which was a large amount of cash that went out that will continue to build up. That payable will build up as the year progresses.

Right.

So that should improve, on a quarterly basis, the operating cash flow metrics.

Okay. And then lastly, could you just remind me of – do you recall last year’s annual cost of the data feed expenditure?

No, we don’t have that in front of us, but it was roughly $10 million in the first quarter of this year.

Great, thank you.

Thank you. Our next question comes from the line of Matt Gruppo from CIFC Asset Management. Your question, please.

Guys, a lot of the questions have already been answered. But just on the stock repurchase plan, is it correct that kind of no additional shares have been purchased since mid-February of this year?

That’s correct, Matt.

Okay. And there’s about a million shares remaining under the existing plan. And then after that, you have to kind of go back to the board for approval for any additional purchases?

Yeah, we have to go back to the shareholders, yes.

All right. And then the last thing on the HLSS shares, just last question, do you expect to kind of receive the full – is it the $27 million, $26 million that you're holding at fair value? Do you expect to see that full amount back with the payouts? I think you mentioned it’s likely to be received next week.

Yeah, I mean, I think if you look at both the price that it’s trading at today as well as the distribution amounts, including the $0.70. Those are both higher amounts than where the stock was at March 31. And so, the $3.3 million unrealized loss that you see in the financials reflects the difference between what we paid in the March 31 price. So we would expect to reverse a portion of that loss.

Did that answer your question?

Yes, thank you.

Thank you. Our next question comes from the line Mike Grondahl from Piper Jaffray. Your question, please.

Yes, guys, is there any update on how much cash you need to kind of run the business or kind of the runway and the investments you have in front of you? And kind of as part of that, the working capital, which went against you this quarter, do you think you’ll get most of that back throughout the year?

So I think we – I don’t think we’ve established a certain amount. But we certainly have more cash on hand right now than we need to run the business. In terms of working capital, working capital actually went up $10 million, but the $30 million of our working capital is in HLSS stock.

Yeah, Mike, I think we are expecting to spend per capita for the year $30 million to #35 million --

$35 million, yeah.

-- capital for the year. And, of course, we are going to generate a lot of cash as the year progresses.

Right.

So we are not prepared to talk on this call what we think the minimum level of cash is that we should have. But between the cash we have in place today and the significant cash we are going to generate as the year progresses, we think we are in a very strong position.

Okay, and then just one more question. With Ocwen selling a lot of the agency loans that they have, I think we can pretty easily tell that you guys don’t make much revenue on the agency delinquent loans. But could you remind us in your technology services division where you kind of have the seat license per loan, if you will, that you charge Ocwen for just a fee for a GSE loan versus a non-GSE loan?

So, Mike, we license residential loan servicing system to Ocwen and we get paid by the loan. We don’t publicly disclose how much we earn per loan per month. But as Ocwen sells some of its GSE portfolio, that will reduce the fees that we earn on real servicing. And then it will depend on the timing for Ocwen’s sale of its non-performing GSE loans as to when we will start losing some of that revenue. My understanding is these earlier sales are primarily performing loans, while we’ll lose the real servicing technology fee, but we will continue to be providing default or pre-foreclosure default related services on the non-performing loans. Until those – until there’s – until or they’re sold, if they are sold.

Got you. And then, I guess, just a follow-up to that. Do you make more per month per loan for non-GSE loans?

No, on technology, Mike, the fee is the same. We don’t differentiate on our real servicing technology.

Got you. Got it. Got it. Thank you.

Thank you. Our next question comes from the line of Ramin Kamali from Credit Suisse. Your question, please.

Hi, good afternoon, and thank you for taking my call guys. Just wanted to focus on the technology services segment. Seems like the margins continue to drift lower. Understanding you’re continuing to invest in that part of the business to support the growth, but how should we be thinking about the margins in that segment on a go-forward basis? I have a couple more.

Sure. If you take a look at the slides and our scenarios, we give you a sense as to what we think the margins will be for that business for the year, and I think they are slightly better than where they are at in the first quarter. I don’t have it in my fingertips, but it is provided to you in our slide presentation.

And then in the Q, you noted that related party revenue kind of on a per segment basis, it seems like it ticked higher year-over-year in tech services from $35 million to $47 million. Is that – should we expect that to drift back lower or how should we be thinking about that related party revenue to Ocwen?

Yeah, I mean, what you saw in the first quarter of 2015 was you had more Equator-deferred related – acquisition – deferred revenue included in revenue and that impacted that percentage amount.

In 2014.

In 2014, right.

And that wasn’t there in 2015.

It wasn’t there in 2015, that’s right.

And then the $14 million or so of kind of nonrecurring costs, you provide that on a segment basis?

No, we didn’t break it out on a segment basis.

I can tell you, it impacted – we have cost savings across all the segments in corporate, but we don’t break it out by segment.

Okay. I’ll follow up more offline. Thanks, guys.

Great.

Thank you. Your next question comes from the line of Alex Townsend from Bank of America.

Hey. Thanks for taking the question. One on Hubzu, and I know that you don’t provide a specific stat for kind of like the service revenue per house sold. But if I try to get some implied figures there by looking at the balances of the total homes and the total service revenue contribution, the stat for Q1 2015 is probably $630,000, which is up materially from Q1 2014. So I was just looking for maybe some general commentary on kind of the pricing or the revenue contribution at Hubzu?

Sure. Some of that depends on the mix of homes sold by auction, where we earn a buyer’s premium. So I think that mix was higher in the first quarter of this year than last year. And it also just depends on the services we provide on those homes.

Okay. So no fundamental changes to the pricing dynamics of that segment/

No.

Okay. And then just on one of the footnotes in the operating metric slides, there’s a commentary on excluding revenue generated from the post-foreclosure services to RESI. I was just hoping you could provide a little more color on what drove that adjustment? And then in context of the prior investor materials from January 15, where there was commentary around potential reclassification between service revenues and kind of the pass-through piece of the business, if there was any update on your plans to make that adjustment?

Sure. Just with respect to RESI, we are hired directly by Altisource Residential, and so we didn’t believe it was appropriate to include in that metric, that’s why we made the change. And in terms of – there was a service we are going to provide in our real service, property preservation and inspection, where we are changing the way in which we charge Ocwen and that was implemented I think in the middle of February. So some of revenue – we are going to see a – service revenue will increase as a result of that change. Under the prior pricing, more of that was passed-through revenue and not service revenue. Under the revised pricing, a greater percentage of the fees will be included in service revenue.

Okay.

And that’s just starting around the middle of --

Okay. So that did partially impact this quarter, and then will continue ongoing in 2015?

Thant’s correct.

And then just I guess if we’re thinking about historical comparisons, if previously that was business that was booked as reimbursable expenses that had no margin contribution, but now it’s being moved over to service revenue, does that also imply that there’s incremental margin generation from that piece of business?

So much depends on the mix of services we provide. It’d be very difficult to provide you an answer to that question.

Okay. But the – like the fundamental rationale for the reclassification, was it based on any sort of change in the service itself, or how you’re being compensated for it?

No, it’s a change in how – it’s the change in the methodology for how we are paid and I think we should leave it at that. But basically, the way in which we get paid for our service has changed at our customer’s request and so we’ve agreed the change, and that change is the way in which we account for that revenue.

That’s helpful, thanks.

[Operator Instructions] Our next question is a follow-up from the line of Henry Coffey from Sterne Agee CRT.

Thank you for the plug. If I’m looking at page 4 in the slide deck, the $5.8 million of compensation costs for terminated employees, can we assume that they were quote essentially all non-revenue-generating employees? With that $5.8 million gone, you could still have accomplished the same level of revenue?

Yes, you could assume that Henry.

And then going back to your view that the – sort of the mid-point of your guidance is the achievable focus point. That’s sort of pointing towards back-end earnings in the 250-plus level, particularly if we – you know, you realize the starting point is at about $1.16. What would change from the current equation to get you there?

So, Henry, if you look on page 4, we show you what our first quarter would have been had we not incurred those costs, the employee costs for the full quarter. And then…

Right. Yeah, it comes to about $1.16 a share.

Yes, that’s $24 million of post-tax. And then on top that, we said we are eliminating the data fee, we have a plan to reduce additional unit costs associated with outside goods and services. We’ve already implemented the plan, but we are going to have seasonally higher volume going into the quarter. We’ve also consolidated some facilities. And just when you go into the second quarter, it’s a seasonally stronger – second and third quarter are seasonally stronger for the services we provide, most to the services we provide. And so we should look at that.

Did you put a number on eliminating the data access?

I think we said in the first quarter, it was approximately $10 million. So that was roughly the run rate.

And then looking at your 10-Q, the percentage of business from Ocwen, a very large drop in mortgage services, offset by an uptick in technology services. Can you – I’m assuming that may have something to do with either the higher cost that Ocwen is going through in terms of managing regulatory items, or it could have had do with software development. Can you give us some sense on what went on in technology services? Between you and Ocwen?

Yeah, no – nothing. In technology services, the reason why Ocwen is a greater percentage is we were generating deferred revenue from the acquisition of Equator that ran out. And so when that ran out, our non-Ocwen business became a smaller percentage of the total revenue because we are no longer booking deferred revenue from Equator. It’s that simple.

Thank you.

Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Michelle Esterman for any further remarks.

Thank you, everyone, for joining today. We look forward to talking to you next quarter.