Good day, ladies and gentlemen, and welcome to the Altisource First Quarter Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Mark Kearns, Chief Accounting Officer. Sir, you may begin.

Thank you, operator. Let me begin by introducing myself. My name is Mark Kearns. I am Altisource's Chief Accounting Officer. While Michelle Esterman, our Chief Financial Officer, would like to be here today, she's on maternity leave, which is required under Luxembourg law. Michelle will be back for next quarter's call. We first want to remind you that the earnings release, Form 10-Q and the quarterly slides are available on our website 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 today for today's call are Bill Erbey, our Chairman; and Bill Shepro, our Chief Executive Officer. I would now like to turn the call over to Bill Erbey.

Thank you, Mark, and good morning, and thank you for joining today's call. This morning, I would like to discuss an issue that has been raised by a number of our shareholders: Altisource's ability to continue to grow its revenue and earnings. Granted the default and origination markets are a challenging environment, however, we believe we are well-positioned to grow through the cyclical changes anticipated in each of these markets. From inception, Altisource's strategy has been to grow its long-term earnings by 15% per year, as the capital-light company, generates sustained to operating cash flow, irrespective of the economic cycle we're in. As you can see on Slide 4, even with limited benefit from Ocwen's acquisition of the Homeward Residential servicing platform and no benefit from Ocwen's acquisition of the ResCap servicing platform and Ally Bank servicing rights, we grew service revenue by 18% in the first quarter of 2013 compared to the first quarter of 2012. Profit margins did not improve proportionally due to the technology and corporate investments we are making to support our future growth and that carrying of Mortgage Services employees and facilities expense in anticipation of the near doubling of the number of non-GSE loan serviced by Ocwen on REALServicing by the fourth quarter of 2013. As you can see from Slide 6, our growth has significantly outpaced our plan, fueled in large part by Ocwen's continued expansion. The success that we've experienced in our default related services has matched the meaningful success we've had in our other businesses. Since inception, service revenue from non-default related Mortgage Services has grown 104% per year, while our default related Mortgage Services have grown by 67%. To some degree, we're a victim of our own success. To provide other avenues of growth beyond default-related services, we are primarily…

Thank you, Bill. This morning, we reported first quarter 2013 service revenue of $127.6 million, net income attributable to shareholders of $27.5 million, and diluted earnings per share of $1.10. Slides 4 and 5 provide highlights of our results from current quarter compared to prior periods. We're very pleased with our operating results, given the limited benefit in the quarter from the Ocwen acquisition of the Homeward platform, and no benefit from the ResCap servicing platform and the Ally servicing rights. Further, the Mortgage Services segment is almost fully staffed to support the near doubling of the number of non-GSE loans on REALServicing by the fourth quarter of 2013. Compared to the fourth quarter of 2012, service revenue increased 5% to primarily to residential valuation services and modest increases in referrals from Ocwen's servicing portfolio, as a result of Ocwen's Homeward servicing platform acquisition, along with existing customer growth and new customer wins and our customer relationship Management business lines within financial services. The majority of the revenue from the Homeward portfolio was generated following the boarding of the loans on REALServicing during the second half of the first quarter. As you can see on Slide 15, service revenue per delinquent loan for non-GSE loans, the primary driver of our default-related services revenue increased from $346 in the fourth quarter of 2012 to $354 in the first quarter of 2013. The increase was due to a heightened level of valuation services, primarily in connection with the Homeward portfolio boarding. Service revenue per delinquent loan in both the fourth quarter and the first quarter was constrained by a higher percentage of delinquent loans and foreclosure that were on hold during both quarters. Net income attributable to shareholders in the first quarter of 2013 was slightly lower than the fourth quarter of…

Thanks, Mark. Turning to our 2013 strategic growth areas, our initiatives are, one, supporting Ocwen's growth; two, expanding origination-related service revenue; three, deploying Hubzu to the non-distressed home sales market; four, providing property management, REITs management and renovation management services to Altisource Residential; and five, growing revenue and improving the earnings in our financial services segment. Our first initiative and primary focus is providing services to Ocwen's growing servicing portfolio and on boarding the loans from Ocwen's acquisition of the Homeward Residential, ResCap and Ally servicing portfolios. Through April 1, 2013, all of the Homeward non-GSE loans were boarded on REALServicing, with the majority boarded toward the end of the quarter. We anticipate boarding the ResCap non-GSE loans on REALServicing before the end of the third quarter. We expect the Homeward, ResCap and Ally GSE loans to be boarded on REALServicing during the first quarter of 2014. As you are aware, we closed on the purchase of the ResCap fee-based transaction with Ocwen on April 12 for $128.75 million, with $80 million paid at closing and the remaining $48.75 million payable over up to the next 5 months. With regard to margins, we are continuing to execute against our plan to increase margins in our default-related services business. We are very pleased with our fourth quarter results, particularly given that our Mortgage Services segment is almost fully staffed to support the near doubling of the non-GSE loans and REALServicing by the fourth quarter of 2013. Our plan also includes improving our efficiency and the provisioning of our default-related services business, and bringing certain services provided by vendors in-house at a lower total cost. We continue to anticipate the default services margins to increase by 7 percentage points over 2012 by the end of this year after amortizing the intangible assets…

[Operator Instructions] And our first question comes the from the line of Carter Malloy from Stephens.

Actually, given that you've laid out some revenue scenarios over the next 3, 4 years, could you actually give us a little bit of sensitivity, what that means for the current year in terms of how to model 2013? In other words, rather than me having to get a protractor and a ruler trying figure this out, just what you guys are implying, you think, 2013 revenues will be?

Carter, this is Bill. I think you could see we're forecasting 2013 to be better than 15% growth service revenue over 2012. And we weren't planning on giving a specific revenue numbers for each year, but just to give you some sense, by 2017, we're estimating that under scenario 1, we'd have roughly $950 million of service revenue; and under scenario 2, about $1.45 billion of service revenue.

That's very helpful. And then on the buyback, I'm just a little unclear here. So the $40 million Luxembourg law allows you -- that's for the remainder of the year?

No, that's as of today or as of the end of the year, our first quarter, Carter. We have the ability under Luxembourg law to buy back about $40 million worth of shares. That increases each month by roughly our retained earnings in Luxembourg, which would not include the modest earnings we have in U.S. and in India unless those earnings are, of course, dividend up to Luxembourg. So that will increase each month in Luxembourg, less, of course, to any share buybacks we do during the quarter.

And then -- but you're saying that the senior secured term loan does not allow you to buy back any further?

There's some baskets there. We used up the baskets in the first quarter, Carter. Those begin to rebuild I believe in the third quarter, but we're asking for an amendment. In fact, we have a lenders call later today for this, the -- for the -- pulling the $200 million on the accordion on our senior secured term loan. And as part of that amendment, we're going to ask to increase our share buyback capacity.

Okay. So maybe -- but it's safe to say you guys -- anticipation obviously is that you'll continue buying back at this type of a pace.

Yes.

Okay, great. And then one other thing on the origination business, just given the depredation [ph] going forward for that, what was the blip and the sequential downtick form fourth quarter to first quarter on the revenue?

Yes, there's a little bit of decline in the origination market from the fourth quarter to first quarter. So some of the stabilized services, Carter, that we are providing historically as opposed to our new services that we're developing and growing even though they're growing very quickly didn't quite offset some of the stabilized services that were already rolled out to the members on a more stabilized basis.

Okay. I never realized it was like $500,000. It's not -- certainly not a big deal there. And then lastly, on the financial services, you guys referred to one new CRM customers, another one coming on in the third quarter plus the charged-off mortgage business. And that's enough, you think, to drive the 20-something percent growth going from negative in 1Q to 25% overall that you have in your scenario assumptions?

Sorry, I'm not -- Carter, I'm not sure what you're...

Sorry. So if I look at Slide 13, the financial services annual growth rate implied for 2013 is...

Yes, we're very comfortable with the numbers we provided on Page 13. The charged-off business is a very exciting opportunity for us. ResCap was providing those services, they had a business unit that was providing the services on the ResCap loans. Those employees now work for Altisource, and we also signed a service agreement to do the work on Ocwen's legacy portfolio. We feel pretty good about that business.

And can you explain the revenue mechanics of that business to Altisource?

Yes. We are on a -- and I don't want to go into too much detail but we are on a contingency fee based on percentage of what we collect. And it's -- the margins in that business should be at the same or higher level than our Mortgage Services margins.

Our next question comes from the line of Mike Grondahl with Piper Jaffray.

Could you repeat the cash flow numbers again that went with Slide 13? Those were just spoken quickly, and I just didn't get some of them.

Sure. And you're talking about the percentage of operating cash as a percentage of our market cap, Mike? Or you're thinking about the revenue number we expect to generate in 2017?

No, the cash flow as a percent of market cap, based under 1 and 2.

That was in your section, I think, Bill.

It is. In scenario #1, we will generate between 82% and 114% of our current market capitalization. That's scenario 2, I'm sorry. We'll generate between 82% and 114% of our current market capitalization in scenario 2. And between 59% and 83% of our current market capitalization in scenario 1. And then also, the difference between 82% and 114% is between 25% and 35% operating cash flow as a percentage of service revenue.

Got you. Okay. So that would be over 2013 to 2017?

That's correct. We still have -- we still need -- means we still have a business that's growing fairly rapidly at that point and in addition to this [ph].

Yes. No, it's great. And the detail on a lot of those, let's call them corporate initiatives or growth initiatives is very helpful. In terms of Hubzu and outside distressed business, you guys mentioned other servicers and asset management. How close are you to signing somebody up there? I mean, are you talking to more than one party? Or just -- can you give us a sense for that?

Yes. Mike, we're in active conversations with 3 or 4 different asset management companies and servicers to provide that service. So I would say we're in very active conversations.

Okay, good. In terms of any origination revenue from Ocwen's originations that came with the Homeward acquisition, have you started to recognize any ASPS revenue associated with those? And when could that start?

It's pretty modest, Mike. We are providing some work for Ocwen today, primarily around their directed -- their HARP program. And so we started generating some title insurance and closing revenue in the first quarter, but I would say that the work with Ocwen is still ramping up.

And because those are basically Ocwen originations, do you expect to get a decent chunk of that revenue per origination?

I think it -- Mike, it depends on the originations. It's certainly on the retail direct-to-consumer side, yes. On the other side, it depends on the correspondent side, it depends on the depths of the relationship that we have with that originator.

Okay. And then you mentioned how you're working with Lenders One to potentially offer them some jumbo, reverser. I think it was sub-prime mortgages. Can you just help us flesh that out of that? Is that a -- how would you do that? How does that work?

Lenders One has an enormous distribution capacity. We will basically work with basically investors/lenders to offer products that they find attractive through our members. I mean, our members today pretty much deliver Fannie, Freddie, Ginnie product. We would like to expand our market basket, particularly given the -- I think, the lower origination volume that's going to be occurring this year and at lower margins, generally, for our members. So we're trying to get them additional products to help them on the top line side, and also for higher-margin products and they can get with Fannie, Freddie, Ginnie.

And, Bill, do you basically need to find the buyers of that product? Meaning, Lenders One could originate it if they have an outlet for that jumbo paper or reverse paper. Is that the thought?

My view is it's not so much fronted to buyers. We think the buyers are there. As a matter fact, their -- people trying to create pipelines or conduits for those products. Ours is how do we, in fact, commercialize that. It's all about execution. How do we basically put a product together so it's easy for our members to distribute.

Say that last part, you kind of broke off.

Yes, I'm sorry, the catering service here is in a little noisy. It's more about execution. We know there are people out there who want to buy this product. The question then is, how do you package it up so you make it easy for our members to be able to distribute it to their client base.

Okay, okay. And then the boarding process, in general, is that going how you guys have sort of envisioned it? I guess, I'm a little curious why the GSE doesn't get boarded earlier than 1Q '14?

Yes, Mike. So the first answer is, yes. The process is going as we expected. On the GSE process, we just want to make sure that all the -- everything is from a compliance perspective, is in place to service the Fannie loans and to comply with all of ResCap's obligations before we service, transfer those onto REALServicing. And so that's all going along in accordance with our project plan and the type of timing.

Okay. And then lastly, if Ocwen was to announce another large acquisition sort of near-term, do you guys have the capacity to the be ready to process that?

Yes.

Our next question comes from the line of Steve Eisman with Emrys Partners.

My questions have been asked and answered.

[Operator Instructions] I'm showing our next question comes from the line of Ryan Zacharia from JAM.

First, one is just on Hubzu. When do you think, in your timeline, that will be ready to be spun?

Ryan, we don't think it will happen this year. We want to demonstrate that we can grow the non-distressed business and diversify our client base some more before we go forward with the separation there.

And with respect to the lenders meeting that you have today, I mean, what are -- what's the ask with respect to the repurchase? Is it similar to the authority you had exhausted in Q1?

We expect to be able to purchase, at least, an additional $80 million of shares. At least, have the ability to purchase, at least, an additional $80 million of shares this year, subject, of course, to the Luxembourg law limitation, which, again, that capacity will grow each month.

Right. And then just a final question, I guess, touching on Mike's question with respect to the boardings. So the GSE business will come in the first quarter of 2014. How should we think about the non-GSE business? How lumpy is that going to be? How much of it is going to come kind of in the second quarter versus the fourth quarter?

Yes. The non-GSE business from the ResCap portfolio will board during the third quarter, so we'll get the full run rate benefit of that in the fourth quarter.

I'm not showing any further questions at this time. I'd like to turn the call back over to Mr. Mark Kearns for closing remarks.

Thank you for joining today's call, and we look forward to speaking with you again next quarter.

Thank you.

Thank you. Bye.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.