Hello and thank you for joining us. Welcome to Altisource's Fourth Quarter 2023 Earnings Conference Call. Currently, all participants are in listen-only mode. After the presentations, we will have a question-and-answer session. I will now turn the call over to Michelle Esterman, Chief Financial Officer. You may begin.

Thank you, operator. We first want to remind you that the earnings release, Form 10-K, 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. In addition to the usual uncertainty associated with forward-looking statements, the continuing impacts of government and servicer responses to the COVID-19 pandemic, government fiscal policies, and current economic conditions make it extremely difficult to predict the future state of the economy and the industry in which we operate as well as the potential impact on Altisource. 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 describing 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 will now turn the call over to Bill.

Thanks, Michelle, and good morning. I'll begin on Slides 4 and 5. We're pleased with our performance in 2023 as we continue to strengthen our financial position and win new business, which has not fully ramped. In the face of serious market headwinds for both business segments, service revenue in the Servicer and Real Estate segment was only 4% lower than 2022 and service revenue in the Origination segment outperformed the overall market with a decline of 11% compared to a 36% decline in industry-wide residential origination volume. We improved total company adjusted EBITDA by $15.7 million compared to 2022 and by $30.8 million compared to 2021. Our 2023 total company adjusted EBITDA improvement is largely from product mix, higher margins in our businesses, and lower corporate operating costs. The 2023 adjusted EBITDA margins in the business segments improved by 680 basis points to 25.1% and the corporate segment's adjusted EBITDA loss declined by 18.4% to $35.1 million. Company-wide, we generated positive adjusted EBITDA for five of the last six months of 2023, including $520,000 in December. We're off to a good start in 2024, generating $900,000 of adjusted EBITDA in January. During 2023, we won new business, strengthened our sales pipeline, and took steps to improve our balance sheet. I'll discuss our wins and sales pipeline in greater detail in a few minutes. With respect to the balance sheet, we reduced the principal balance of our term loan by $23.1 million or 9.4% and extended the maturity date of our term loan and revolver to April 2025 with the option to extend both by another year, subject to meeting certain conditions. Turning to Slide 6 and our 2024 forecast. We believe our sales wins, enhanced margins, and lower corporate costs position us for strong revenue and adjusted EBITDA growth. Based upon our current expectations for the market in which we operate, which assumes only a modest benefit for post-COVID increases in closure starts and 17% growth in industry-wide origination volume, we are forecasting $155 million to $180 million in service revenue and $17.5 million to $22.5 million in adjusted EBITDA. This represents 13% to 32% service revenue growth and an $18.4 million to $23.4 million improvement in adjusted EBITDA over 2023. We forecast that the service revenue growth will be driven by the continued ramping of our 2023 sales wins, 2024 sales wins, and price increases for certain services. We anticipate that the 2024 adjusted EBITDA improvement will be driven by; one, revenue growth; two, higher business unit margins, primarily from the full year benefit of 2023 cost savings and efficiency initiatives, price increases, and scale; and three, lower corporate operating costs from the full year benefit of 2023 cost savings and efficiency initiatives. While it is still early in the year, we are off to a good start in January with adjusted EBITDA of $900,000. As we look beyond 2024, we anticipate that our businesses will also benefit from the ramp of sales wins, continued recovery of the default market, and normalized origination volumes. Slide 7 provides a summary of our 2024 strategic initiatives. As you can see, we established four initiatives to support long-term growth. First, accelerate business development efforts on solutions where we believe Altisource is a strong performer, generates high margins, and where we forecast market tailwinds. Several of our businesses generate strong margins, and we believe are in high demand as servicers prepare for a rise in delinquencies and originators look to improve their profitability. We plan to focus our business development efforts on these offerings. Second, deliver strong operational efficiency and manage costs to drive higher gross profit and adjusted EBITDA margins. We plan to continue to evaluate and implement processes to streamline operations and reduce costs in those businesses and corporate departments that we believe will generate the greatest impact on profitability and performance. Third, strengthen customer relationships and cross-sell other solutions to existing customers to gain wallet share. We have hundreds of revenue-generating customers. We believe that there is a significant opportunity to grow business with our existing customer base through strong performance and cross-selling other solutions. Fourth, launch new offerings intended to help Lenders One members improve their profitability. We believe that there is a significant opportunity to improve Lenders One members' profitability and grow our revenue and earnings by launching new solutions that leverage the Lenders One members' collective buying power. Moving to Slide 8 and our countercyclical Servicer and Real Estate segment. For 2023, service revenue declined by 4%, which reflects growth in certain higher-margin businesses that support the earlier stage of the default process, offset by modestly lower service revenue from the fourth quarter 2022 exit of a low-margin employee outsourced business and fewer referrals in our lower margin field services business. We improved the Servicer and Real Estate segment's adjusted EBITDA and adjusted EBITDA margins. 2023 adjusted EBITDA of $37.1 million was $5.9 million or 18.8% higher than 2022, and adjusted EBITDA margins improved to 34.4% from 27.9%. Adjusted EBITDA growth and margin improvement reflect product mix and benefits from cost reduction and efficiency initiatives partially offset by modestly lower service revenue. Slide 9 provides a summary of our Servicer and Real Estate sales wins and pipeline. For the year, we won new business that we estimate will generate $58.4 million in annual revenue on a stabilized basis over the next couple of years. We had a couple of significant sales wins in the fourth quarter. The first was signing agreements to provide renovation services for one of the larger owners of REO assets. We anticipate that we will start to receive the first renovation referrals toward the end of the first quarter and ramp as the year progresses. The second win was an expansion of wallet share with an existing customer in our higher margin trustee business. We started to receive an increase in referrals in January and anticipate referral volumes to grow steadily through the summer. We ended the year with a total weighted average sales pipeline of $30.1 million of annual revenue on a stabilized basis, most of which will impact 2025 and beyond. There are a few larger late-stage opportunities in the pipeline worth noting. We are currently negotiating an agreement to provide REO auction services for a loan servicer and their real estate agents. We are also discussing market share expansion with one of our REO asset management customers. And finally, we are negotiating agreements to provide trustee services for a couple of non-bank loan servicers. We hope to have more to report on these exciting opportunities with our first quarter earnings call. For 2024, we anticipate that our Servicer and Real Estate segment service revenue and adjusted EBITDA will improve considerably compared to 2023 from the continued ramp of 2023 sales wins, conversion of sales wins to revenue, price increases for certain services, and the full year benefit of 2023 cost savings and efficiency initiatives. Our Hubzu and later-stage REO offerings forecast assumes only a modest benefit from the post-COVID increase in foreclosure starts. Turning to the macroeconomic environment on Slide 10. There are early signs of consumer financial stress, which could be precursors to a rise in 90-plus day mortgage delinquency rates. Consumer savings have declined, debt is growing, early-stage delinquency rates are rising, and home affordability ended 2023 at a near 10-year low. Credit card debt is at record highs. Balances on home equity lines of credit have grown for seven consecutive quarters. 401(k) hardship withdrawals continue to grow and early-stage auto and credit card delinquencies continue to rise. According to the Federal Reserve Bank of New York, credit card and auto loans that are becoming delinquent are rising above pre-pandemic levels, signaling increased financial stress. Early-stage mortgage delinquency rates are also rising, comparing December 2023 to December 2022, 15% more mortgages are delinquent by one payment and 16% more mortgages are behind by two payments. Moving to our origination segment on Slide 11. Our Originations segment performed well in a difficult origination environment. Despite the 36% decline in industry-wide residential origination volumes in 2023 compared to 2022, the origination segment outperformed the market with a revenue decline of only 11% and an adjusted EBITDA improvement of $1.9 million. This reflects revenue growth in the Lenders One business from customer wins from our newer solutions, partially offset by revenue declines in our other origination businesses that were impacted to a greater degree by lower origination volumes. Adjusted EBITDA improved from cost savings and efficiency initiatives. For 2023, the Origination segment's gross profit, gross profit margins, adjusted EBITDA, and adjusted EBITDA margins all improved relative to 2022. Slide 12 provides a summary of our Origination segment sales wins and pipeline. During a very difficult origination market, our focus on helping our Lenders One members save money and better compete drove substantial interest in our solutions. On an annualized stabilized basis, we won an estimated $10.3 million in new business for the year. Our weighted average sales pipeline at the end of 2023 was $18 million, with $4 million of the $18 million in the contracting stage. For 2024, we anticipate our Origination segment service revenue to outperform the forecasted 17% increase in industry-wide origination volume, and adjusted EBITDA to improve considerably compared to 2023. This is from sales momentum in our Lenders One business, the full year benefit of 2023 cost savings and efficiency initiatives, January 2024 price increases for certain of our services, and the launch of new solutions that help Lenders One members improve their profitability. On the new solution front, we are planning a soft launch of Lenders One homeowners insurance in the first quarter. Through this program, we will work with an insurance technology partner and over 40 insurance carriers across 50 states to provide Lenders One members' borrowers with access to competitively priced homeowners insurance. We believe the regular launch of new solutions to Lenders One members, combined with greater adoption of our existing solutions, will strengthen our value proposition for Lenders One members and support further revenue and earnings growth in our Origination segment. Turning to our Corporate segment on Slide 13. We continue to bring down our operating costs. 2023 adjusted EBITDA loss of $35.1 million was $7.9 million or 18% better than 2022. The lower adjusted EBITDA loss reflects our cost savings and efficiency initiatives. For 2024, we anticipate adjusted EBITDA loss to improve compared to 2023 from the full year benefit of 2023 cost savings and efficiency initiatives. Moving to Slide 14, the environment over the last few years created a perfect storm for Altisource. The default market was virtually shut down in 2020 and is still not fully recovered. More recently, there has been a dramatic increase in interest rates, significantly reducing mortgage origination volumes and increasing our corporate interest expense. While these events negatively impacted service revenue in both our business segments, the Servicer and Real Estate segments businesses that primarily support earlier-stage foreclosure activities grew and the Origination segment outperformed the 36% decline in origination volume. Even still, we improved adjusted EBITDA by more than $30 million over the last two years. Additionally, we've won meaningful new business that should continue to ramp in 2024 and have a strong sales pipeline to support growth in 2025 and beyond. As a result, we believe we are positioned to achieve 13% to 32% service revenue growth and adjusted EBITDA of between $17.5 million and $22.5 million in 2024. When the default market returns to normal and interest rates decline, we should benefit from stronger revenue and adjusted EBITDA growth and lower corporate interest expense. I'll now open up the call for questions.

Thank you. Our first question comes from Raj Sharma with B. Riley. Your line is open.

Thank you for answering my questions and for providing guidance for the first time in several years. Bill, could you discuss some of the new products launched on the Lenders One Origination side, particularly the credit reporting? Can you provide more details on that and how it's performing in the first half of the year?

Thank you, Raj, and good morning. It's interesting to note that we became a credit reporting agency in 2021 and started working with our first customer in January 2022. Since then, we have expanded to 30 customers. Last month, our revenue from the credit reporting business and related white label services was about $900,000. We expect to exceed a $1 million monthly run rate by March or April. This illustrates how we can successfully launch a new product, roll it out to our members, and achieve $1 million in monthly revenue, equating to $12 million annually. Our strategy with Lenders One in our Origination business focuses on collaborating with our members to understand their needs and challenges. We then utilize their collective buying power to introduce new programs that help them increase their earnings and compete more effectively. One example is homeowners insurance. We are partnering with an insure tech company to launch a program this quarter that assists our members, their loan officers, and borrowers in obtaining quotes for homeowners insurance with minimal friction. We are excited about this initiative. While it is still in the early stages, we appreciate that we earn a commission on each policy originated, creating an annuity for our revenue as borrowers renew their policies in future years. Another product we are preparing to launch is a flood insurance program, Lenders One Flood Insurance. We are collaborating with a partner to provide our members with affordable flood insurance policies. The overarching strategy is to roll out these offerings, gain traction, which in turn enhances our buying power, ultimately lowering costs and yielding better pricing for our members. This should increase both adoption and profitability for our members and for us. We are enthusiastic about these new programs and remain optimistic that the new initiatives we introduce yearly will support future revenue and earnings growth.

Thank you. Moving on to the Default Services segment, with the slower conversion into REOs, are you focusing more on the earlier part of the foreclosure process? Is that accurate?

Yes. So, Raj, what we're seeing is the early-stage delinquencies, as I pointed out on our call, look like they're starting to pick up. Foreclosure initiations have picked up substantially from the time of the pandemic, although not quite back at the levels they were at prior to the pandemic. We haven't yet seen those early 2022 foreclosures make it all the way to the end. We are focusing on those early-stage activities, where we see a good lift in referral volumes. For example, in the fourth quarter, in our Trustee business and our Foreclosure Title Search business, we saw about a 30% increase in referral volumes compared to the fourth quarter of the prior year. That trend is continuing in the first quarter of this year. Our guidance assumes we'll get a lift in some of those earlier stage activities, but we're only assuming a modest lift at the end. As the market continues to stabilize, we think there is some upside to what we're forecasting. Because we're not yet seeing that increase in conversion rates at the end, we're being conservative in our guidance approach.

Got it. Thanks. And then just last question for me. On the fiscal 2024 guidance, can you talk about perhaps the cadence? Is there a slight rise in foreclosure activity? Is the guidance largely back half loaded?

Yes. From a revenue perspective, I think in the first quarter, March is a tough comp for us for a variety of reasons. January and February revenue was roughly 8% to 9% higher service revenue than the same time last year, better than every month last year other than March. We're off to a good start from a revenue perspective. I talked about our EBITDA being $900,000 in January. We expect February to continue to be strong. To answer your question, revenue will ramp as we grow. We believe we've largely won the customers necessary for revenue growth this year; it's just a matter of timing for onboarding and ramping those customers. Our revenue forecast range reflects either wins that are already signed or those we have verbal commitments for. As we ramp throughout the year, we expect revenue and EBITDA to grow. I would expect our revenue for the first quarter to be close to last year's service revenue despite the tough March comp, with better EBITDA compared to last year. It's paramount that we ramp these customers we've already won and received verbal commitments from.

Great. Thank you for answering the questions. I'll take it offline. Thanks.

Great. Thanks Raj.

Our next question comes from Mike Grondahl with Northland. Your line is open.

Hey Bill, good morning. How would you describe your outlook for Hubzu inventory over the course of 2024?

And Michelle, you can jump in as well. I think we're being very conservative on Hubzu inventory. We are focusing on what we can control. What we can control are a lot of these sales wins and earlier-stage foreclosure starts, and we are making significant progress in that area, which we think will drive significant revenue and EBITDA growth. However, we want to be more modest in our projections for Hubzu until we see the conversion rate from foreclosure starts back to pre-pandemic levels. Michelle, I don't have the inventory projection in front of me, but I think it's fair to say we expect very modest growth there, Mike.

Got it. And Slide 9 lays out a bunch of wins in a dollar amount. But as it's been for a while, revenue from those wins really lags. Is 2024 and 2025 kind of the years that the growth in revenue catches up with those strong sales wins? How do we think about that conversion?

Yes. The bottom line is it takes time from when you win to when you ramp. Of course, things can happen with customers; they could go out of business or change market shares. There is a static relationship in the $58.4 million, and a couple of larger wins, such as the new REO renovation business, have significant potential for us, and we haven't launched it yet. We're getting our first referrals hopefully in the next week or two from that, and we believe it can be very significant for revenue. We also launched a new construction lending program in our Granite business, which has been ramping, but we're not yet stabilized from a revenue perspective. Kevin, can you help me out here? I think we're getting an attractive number of referrals, and it will take time to convert those into revenue. However, we're ramping it nicely, and we anticipate continued market share growth from that customer. Overall, it takes time from these wins to generating revenue and earnings, but they are attractive wins with strong margins. We expect to continue ramping this year and next.

Got it. Got it. Lastly, any milestones related to the debt this year to remind us about? Or not that any amounts do or anything, but just any milestones you need to reach during 2024 for the debt?

Yes. I think we've made strong progress in a very tough environment, as I talked about in the prepared remarks. The pandemic impacted the default market, and higher interest rates have hit the origination market in a challenging combination. Despite this, we've improved our EBITDA over the last couple of years by over $30 million, and we're forecasting a $21 million to $22 million improvement this year. We're going in the right direction towards strong margins and EBITDA, with costs in line. As we continue to grow, we plan to refinance the debt. Right now, we have time; the debt matures in April 2025. We have an automatic right, subject to some conditions regarding an extension fee and complying with reps and warrants for another year. We feel good about our position. Our focus is on growing adjusted EBITDA to set the company up for refinancing the debt and potentially reducing our interest expenses.

Got it. Hey, thank you.

Thanks Mike.

Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Bill for closing remarks.

Great. Thank you, operator. We're pleased with our financial performance and sales wins in 2023 and believe this sets us up really well for this year. Thanks for joining.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.