Good day, and thank you for standing by. Welcome to the Altisource Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michelle Esterman, Chief Financial Officer. Please go ahead.

Thank you, operator. We first want to remind you that the earnings release and quarterly slides are available on our website at www.altisource.com. These provide additional information investors may find useful. Our remarks today include forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ. Please review the forward-looking statements sections in the Company's earnings release and quarterly slides, as well as the risk factors contained in our 2023 Form 10-K and our 2024 Form 10-K once filed. These describe some factors that may lead to different results. We undertake no obligation to update statements, financial scenarios and projections previously provided or provided herein as a result of a change in circumstances, new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. In our earnings release and quarterly slides, you will find additional disclosures regarding the non-GAAP measures. A reconciliation of GAAP to non-GAAP measures is included in the appendix to the quarterly slides. Joining me for today's call is Bill Shepro, our Chairman and Chief Executive Officer. I'll now turn the call over to Bill.

Thanks, Michelle, and good morning. I'll begin on Slide 4. We are pleased with our full-year and fourth quarter 2024 performance as we continue to improve our financial results and win new business. In the face of serious market headwinds for both business segments, we had strong performance across the board. For the year, we grew total company service revenue by 10% and adjusted EBITDA by $18.3 million. In February 2025, we executed an exchange and maturity extension transaction with our lenders, significantly strengthening our balance sheet and reducing interest expense. Turning to our financial performance in Slide 5. For 2024, we generated $150 million of service revenue, a 10% increase over 2023. The service revenue increase was driven by growth in both business segments. 2024 total company adjusted EBITDA of $17.4 million, represents an $18.3 million improvement over 2023. The improvement was largely from the business segments, service revenue growth and higher adjusted EBITDA margins and from the corporate segments lower adjusted EBITDA loss. The business segments generated $44.6 million of adjusted EBITDA at 29.7% adjusted EBITDA margins, representing a $10.4 million improvement in adjusted EBITDA and a 462 basis points improvement in adjusted EBITDA margins compared to 2023. The corporate segments adjusted EBITDA loss declined by $7.9 million or 22% to $27.2 million, primarily from efficiency initiatives. We also finished the year strong. As you can see on Slide 6, fourth quarter service revenue of $38.4 million, marked the highest level since the third quarter of 2021 and adjusted EBITDA of $4.7 million was the strongest quarter since the third quarter of 2020. Compared to the same period in 2023, fourth quarter 2024 service revenue grew by 19% and adjusted EBITDA grew by $4.5 million. In February 2025, we completed an exchange and maturity extension transaction with our…

Thank you. [Operator Instructions] Our first question comes from the line of Ramin Kamali from CSAM.

Hi, good morning. Thank you for the presentation and congrats on the results. Can you just comment on kind of some of the nature of some of the wins you’ve had across, I guess, originations and servicing, but also more importantly kind of talk about kind of the nature of the conversations you are having with some of these potential opportunities pro forma or post restructuring or post transaction? Has that changed at all?

Great. Thanks, Ramin. Yes, we had a couple of initiatives last year focused primarily on our construction renovation business, our trustee business and, what was the third. Well, in the construction – oh, I’m sorry, in our Lenders One origination business. In the construction business and in the Lenders One business, we launched two new products, one just under two years ago and one a year ago. And I’m proud to say that both of those products, the credit product and the renovation business, each did north of $1 million a month. I think it was in February of this quarter of this year. And so we’ve launched basically from scratch to $1 million a month in each of those businesses through those initiatives last year. And we are quite proud of those results. As we look to 2025, there are several areas we are focused on. One is, I think we could take those two businesses, the renovation business and the origination business. We’ve got the opportunity to more than double, I think, the monthly revenue of those businesses by the end of this year. We’ve got a very exciting pipeline in both those businesses and certainly completing the transaction with our lenders has helped in the conversation we are having with our customers. We are also looking at expanding our Hubzu business. Historically, Hubzu has primarily been focused on managing foreclosure auctions and REO auctions. We’ve recently done a soft launch of a commercial auction platform inside of Hubzu, and we are also looking at selling non-distressed residential auctions on that platform. So more to come as we develop those two products. We are continuing to grow our granite renovation – sorry, construction risk management business. We had some success in growing the revenue and earnings in that business last year, and we see some tailwinds with some customer wins this year, again, I think helped by the transaction. And we are also continuing to build out that renovation business I just discussed by adding additional customers. And then finally on Lenders One, we are going to continue to grow the new product we launched, the credit product, and we are looking to essentially launch and relaunch and grow our homeowners insurance product this year. So we’ve got four or five initiatives that we think will contribute to our growth this year and help us diversify our customer base. We are pretty excited about those.

I guess maybe one more question. I guess we are almost done with Q1. Can you give us some color on how things are trending thus far in 2025?

Yes, sure. We’ve started the year very strong from our perspective. We had a very good – we’ve seen our unaudited, of course, January revenue and EBITDA results, which were quite strong. Revenue was in line with our plan. EBITDA was better than our plan. February revenue also was right on target. We haven’t seen our February EBITDA yet, but I believe it’s going to perform well also. So I think we are off to a really good start at or ahead of plan at plan on revenue and slightly ahead from an adjusted EBITDA perspective.

Excellent. Thanks.

Thank you. [Operator Instructions] Our next question comes from the line of Robert Heimowitz from Concise Capital.

Hey guys, congratulations on the transaction. Just want to start by asking about – foreclosure starts seem to be picking up. And so I’m just curious when you think this starts to get reflected in results, what’s the lag time here?

Yes, it’s kind of interesting and we’ve not done a great job, I would say, forecasting what’s going to happen with foreclosure starts. And so in our plan for this year, we are assuming that the market, the delinquency rates remain roughly flat. That said, I do think there is – the market is wobbling a little bit. We ended the year from a delinquency rate perspective, both 30 plus and I think 90 plus ahead of where we were in the middle of the year, but just slightly ahead of where we were at the end of 2023. And so it hasn’t changed that much. And then as you saw in our prepared remarks, foreclosure starts and sales were also down in 2024 compared to 2023. So from a modeling and forecasting perspective at Altisource, we are being very conservative and assuming it remains roughly the same. I can tell you what we are hearing anecdotally from our clients is that they are getting ready and expecting an increase in foreclosure starts. The VA moratoriums on foreclosures ended in at the end of December. So we got a bit of a sort of one-time set of referrals in January and February related to VA loans and that will then start to normalize on a go forward basis. And our clients are telling us that they are expecting delinquency rates will start to pick up. We are monitoring unemployment. That’s usually a pretty good leading indicator. If you look at other credit assets like auto loans, credit card delinquencies, things like that, the delinquency rates are continuing to rise in those areas. At some point, it’s likely it will translate into mortgage delinquencies as well, but we haven’t seen it yet.

Thanks. That’s helpful. And you mentioned the VA moratorium. Are there other agencies that are, for lack of a better term, implementing unfriendly creditor type of policies that you see those types of policies coming to an end like the VA moratorium that might impact the business as well?

I mean, the big one is FHA. When interest rates were going down, they had a streamlined modification program that allowed delinquent borrowers to essentially refi into a new loan with a lower interest rate, if they could qualify for a mortgage with that lower interest rate. And then when rates were going up, no one could qualify for a streamlined refi anymore. And so the government initiated a new program where you could waive, don’t hold me to the exact number, but I think it’s 25% or you can defer 25% of the principal to the end of the loan. And if you could qualify for those payments, you could essentially mod that loan. What we are seeing though is that even after going through that process, those borrowers are continuing to default on those loans. And in the fourth quarter, we actually saw a pretty good size uptick in our FHA-related revenue and a slight decline in our non-FHA-related revenue. And the decline in the non-FHA revenue was a combination of two things. The revenue per delinquent loan went down a little bit due to typical seasonality. That was partially offset, however, because the number of delinquent loans we are managing went up a little bit on the non-GSE. And so I think we are starting to see that FHA market open up a bit and there is only so many times these borrowers can attempt to modify their loan and then go delinquent again before they are going to ultimately go through the whole process. And I suspect that’s going to start to happen more this year under the new administration compared to the last.

Got it. Thanks. And for Q1, it’s not in your EBITDA guide, but you guys should see a sizable gain that should add some solid equity or reduce the negative equity position on the balance sheet, correct?

So I’ll let Michelle get into the sort of how it translates into the income statement and balance sheet. But in terms of from an EBITDA perspective, I think we did $4.7 million of EBITDA in the fourth quarter. I think in the fourth quarter, look, we still haven’t closed out our books for February and we still have March, but I think we should be in that range slower or better in the first quarter than the fourth quarter. So we should, from a revenue perspective, I think see a very strong revenue quarter. We’ll probably see a similar probably, if not better results from an EBITDA perspective, in which case both will be better quarter than each quarter last year. So we are off to a very strong start. We are happy with our performance out of the gate this year.

And from a book perspective, remember, we had the prior debt through February 19. So you are going to see higher interest expense in the first quarter of the year than you will for the remaining quarters of 2025.

Okay. But you guys had a lot of, let’s say, PIK interest in Q4 that you are never going to have to actually pay off. So you should realize some sort of gain there, right?

Yes. No, I think you are going to see interest expense. We are still finalizing all the accounting related to the transaction, but putting that aside interest expense is going to be coming down as we mentioned on the call from something like $32 million a year to $13.4 million a year on an annualized basis.

Okay. Thanks, guys.

Thank you. [Operator Instructions] At this time, I would now like to turn the conference back over to Bill Shepro for closing remarks.

Thanks, operator. We are pleased with our performance last year and believe we are off to a good start in 2025. We appreciate all of your support. We will talk to you soon. Thank you.

This concludes today’s conference call. Thank you for participating. You may now disconnect.