Good day, ladies and gentlemen, and welcome to the Altisource Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Ms. Michelle Esterman. Ma'am, you may begin.

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 that investors may find useful. We anticipate filing the Form 10-Q next week. 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. 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 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, Michelle. Good morning, and thank you for joining today's call. Next month marks our fifth anniversary as a standalone public company. During this 5-year period, we've had tremendous service revenue and earnings growth, and have focused on providing best-in-class services, developing new services, driving down costs through efficiency and technology initiatives and investing in our future. At separation, we said we wanted to be capital light and grow our revenue and earnings at 15% to 20% per year and we've done exactly what we set out to do. In the last 5 years, service revenue has grown at an annual rate of 43%, net income and earnings per share at a rate of 47% and operating cash flow at a rate of 44%. I sincerely want to thank all of the employees of Altisource for the significant achievement. Our success over the last 5 years is a testament to their vision, hard work and commitment to Altisource and to our customers. This morning, I plan on spending a few minutes providing a progress update on our 2014 strategic initiatives. Michelle will provide an overview of our financial performance and Bill will discuss our first quarter operations and initiatives in more detail. We have 4 strategic areas of focus in 2014: First, ensure we have a robust world-class compliance management system; second, advance our real estate marketplace vision through Hubzu and our residential rental property management business; third, advance our mortgage marketplace vision supporting Ocwen and Lenders One; and fourth, to pool our cash to repurchase Altisource shares when trading at attractive prices and acquire companies that help support the mortgage and real estate marketplace vision. We're making good progress on each of these initiatives. Beginning with compliance. We continue to focus on developing a world-class compliance management system…

Thank you, Bill. This morning, we reported record second quarter 2014 service revenue of $263.2 million, net income attributable to shareholders of $54.1 million and diluted earnings per share of $2.24. Slides 4 through 6 provide highlights of our results for the current quarter compared to prior periods. We are very pleased with our operating results as we continue to focus on compliance, quality and efficiency initiatives, expanding service offerings and investing in our next-generation technologies and other growth initiatives. Compared to the first quarter of 2014, service revenue increased 25% as we experienced the full benefit of the loans that Ocwen bordered [ph] on REALServicing in 2013. Seasonally higher property preservation services, seasonally higher home sales on Hubzu, a greater percentage of Hubzu homes sold through auctions and growth in our insurance services business. As you can see on Slide 10, service revenue per delinquent loan for non-GSE loans, the primary driver of our default-related services revenue, increased from $362 in the first quarter of 2014 to $485 in the second quarter of 2014. The increase was primarily driven by the same factors that contributed to service revenue growth. Net income attributable to shareholders in the second quarter of 2014 was 37% higher than the first quarter of 2014, primarily from revenue growth in the asset management services business within the Mortgage Services segment. From a cash perspective, we generated $75.2 million of operating cash flow in the second quarter of 2014, representing $0.29 for every dollar of service revenue. We used cash during the quarter to repurchase $44.9 million of Altisource's common stock, representing 415,000 shares at an average purchase price of $108.24 per share, and to invest $17.6 million in facilities and technologies to support our growth. At the end of the quarter, our cash balance was…

Thanks, Michelle. During the quarter, we focused on providing high-quality compliant services to Ocwen, Lenders One, Altisource Residential and our other customers, while diligently executing on our 2014 strategic initiatives to diversify and expand our revenue base. This morning, I'll discuss our mortgage and real estate marketplaces in greater detail. Turning to our mortgage marketplace. We are focused on a number of objectives. I'll discuss 3 with you today. First, growing mortgage services operating margins; second, continuing to expand the services we offer; and third, growing origination-related service revenue. Beginning with margins in our Mortgage Services segment. Overall pretax income margins in the Mortgage Services segment remain consistent with the first quarter of 2014 at 37%. During the second quarter of 2014, we continued to execute against our plan to increase margins, leveraging scale, technology and workforce efficiencies. We have made good progress. 2 things are happening to keep the margins in the overall segment from reflecting the success we're having in our default-related services. First, as I'll discuss with you in a minute, we're expanding the services we are providing in our insurance services businesses. In connection with this expansion, we are incurring expenses to build and develop the business, capabilities and staff. Second, we have more staff in our origination-related and rental property management businesses than currently are required in order to support our future growth. In time, we believe mortgage services pretax income margins will increase. Turning to the continued expansion of our services. Part of the success we have experienced at Altisource in the last 5 years has been from the development and roll out of new services. We continually evaluate adjacent and complementary services that we can develop or acquire to support our customers and our long-term growth. During the second quarter of 2014, we…

[Operator Instructions] Our first question comes from Mr. Mike Grondahl of Piper Jaffray.

The first question, could you help us a little bit, just bridge the $370 range that you used to be in of service revenue per delinquent, non-GSE loan? Just up to that $485 that you got in the quarter. Just help us think about the increase there and what's driving it and how sustainable it is.

Sure, Mike. So you have a couple of things going on. One is seasonality. So you usually have higher property preservation services and higher home sales during the second and third quarters of every year. And also, we've continued to increase the percentage of homes sold on Hubzu through auctions. And then we've also had some growth in our insurance services business that contributed to that.

And I guess, could you just detail the insurance services a little bit more? Because I guess that's some new products now that you're offering. Could you just give us an example of maybe 1 or 2 of those?

Yes. So -- I think I gave you an example of 3 in my remarks. But we're prepared -- we're doing a loss strap [ph] work, which is basically when there's an insurance claim on a house, we and the insurance company has to make a payment. We make sure that those payments are made appropriately.

So that's -- did you call that a lost strategy or just repeat that ...

Loss strap processing.

Okay, and then in terms of sort of the stickiness of your mortgage default book, any comments there on sort of the outlook for runoff or boardings and what not, sort of what you see?

Yes. Mike, I would just look -- we gave you some good information in the slide presentation around our -- around what percentage of the portfolio we expect to be delinquent over time. I think that's a good place to turn too. And then you can make your assumptions. I don't think we provide you with a CPR, but you can make your own assumptions on a CPR.

Okay, and then just lastly. I think you mentioned in the prepared remarks, there are a couple of new third parties that you're talking to for Hubzu. What kind of timeline do you think those are on?

Yes, we've been working on these for probably close to 1 year now. Maybe -- we are talking to these clients even pre the Equator acquisition and then with the Equator acquisition, they've been -- we've been leveraging their relationships to help move them along. So there's very active dialogue with the 2 firms in particular. But there's not much more I can say. We're under a nondisclosure agreement.

Thank you. Our next question comes from Mr. Henry Coffey of Sterne Agee. Henry J. Coffey - Sterne Agee & Leach Inc., Research Division: Michelle, could you help me out here? Can you go over the details of the write down of the Oasis contract for me again?

Do you mean Equator? Henry J. Coffey - Sterne Agee & Leach Inc., Research Division: Equator. I'm sorry. Yes.

No, no, no. That's okay. So we have projections -- in purchase accounting, you record the fair value of what you believe the contingent payout will be. And we evaluated today, what we expected that to be and it was lower than what we anticipated when we purchased Equator, so mark it to market every quarter and we adjusted it.

So let me take [indiscernible] with regard to. We had a forecast of what we thought Equator could do when we purchased Equator. And they had a forecast of what they thought they could do. The difference between those 2 is really related to our -- the incentive payment that they were eligible for. And that amount actually ended up being almost -- was -- highly influenced the actual amount of goodwill that we had in the transaction as well. It was an input to that. We're actually doing as well as we thought we would do with regard to it -- I mean, Michelle, you can comment, we may be doing slightly better, but that does not mean that we're going to believe we're going to hit the projections that were given by the sellers. And as a result, you had an adjustment to both the incentive fee that you're paying, which was almost exactly offset or it was the amount of write down to the goodwill as well. So it had virtually no impact on earnings. Henry J. Coffey - Sterne Agee & Leach Inc., Research Division: So what it can -- can you give me the sort of debits and credits to the actual numbers?

At the end of the day...

They are recorded in the P&L?

Sure. At the end of the day, Henry, there's a $300,000 or $400,000 pickup to earnings, I think there's a net impact. And Michelle, you can tell him where are they recorded.

Sure [indiscernible] Henry J. Coffey - Sterne Agee & Leach Inc., Research Division: You're writing down an asset and you're writing down a liability.

No, we're taking the income and liability and we're writing down an asset. Yes.

That's right and they are both reflective as components of selling, general and administrative expenses. Henry J. Coffey - Sterne Agee & Leach Inc., Research Division: And then on the buyback. I know on the slide deck, you gave a sense of what you can do. But then you talked about this new accordion feature. Is the way to interpret Page 7 simply to assume that you're going to be able to buy back another $200 million worth of stock above and beyond what your existing senior secured term loan will let you do?

That's right. That's right. That's where the $288 million I referred to came from. Henry J. Coffey - Sterne Agee & Leach Inc., Research Division: And obviously, that's already covered by your existing authorization, correct?

Yes.

Right. Yes. Henry J. Coffey - Sterne Agee & Leach Inc., Research Division: Standing on the sidelines, as an investor is, should we say this is the first time that, that's really been put out there? I know you've talked about it before. But do we view this as kind of either an increase in potential or -- how should we read into that?

We referred to it last quarter, Henry, in terms of what steps we had to take to get into this position. And I think we're fairly close to that. We're just -- we're trying to be as clear as we can with respect to it. We still have to upsize the bond, but we think that's -- we are -- information today is that's accomplishable and do the final steps with Luxembourg. Henry J. Coffey - Sterne Agee & Leach Inc., Research Division: So the goal -- I remember the goal was out there in the first quarter and now you basically crossed the goal line.

I think we said, we think, it will be completed soon.

We're at the 1 year outline, Henry

Let's put it this way, we're well within the red zone. Let's put it that way.

Let's go back to some hockey terms. You remember that blue line thing, right? Henry J. Coffey - Sterne Agee & Leach Inc., Research Division: The -- when we look at the dynamics driving the quarter, obviously, trends and the number of delinquent loans being serviced are significant. If you look forward into 2015 as you've done in the past, should we be thinking about more loans forwarding [ph]? Should we simply just look at whatever is going on at Ocwen? Should we think of maybe as a number of loans being -- delinquent loans being managed stays the same, but the revenue increases as you work through the resolution? How should we think about that for 2015?

Henry, we're not going to comment on Ocwen's ability to acquire additional servicing rights, but we hope for the best and plan for the worst is our approach. So we're building a business that we believe can grow. Obviously, we'll grow a lot faster if Ocwen acquires additional servicing rights and if they don't, we're trying to position ourselves to grow without Ocwen buying servicing rights. And then signing up a few... Henry J. Coffey - Sterne Agee & Leach Inc., Research Division: Exactly. No. I think that's helpful. Looking at your real estate management platform, the rental business, what sort of dialogues are you having with other entrepreneurs out there managing large pools of homes regarding the use of the platform?

So today, Henry, we're really focused on the Altisource Residential business. Although, I think at some point in the future, there will be other opportunities and we have a broader strategy with respect to the rental business that we don't want to get into today. But right now, we're really focused on supporting the Altisource Residential businesses growth.

And our next question comes from Chris Gamaitoni of Autonomous.

Can you give us the update on the percentage of homes from Hubzu that was sold at auction this quarter?

I think it was a little over 80%.

80%. And what's the -- the mortgage services revenue increased pretty significantly. What kind of the sub line items that you're disclosed in your Q drove that? I'm just trying to see what exact services were, whether it's seasonal or not, what saw the big increase.

Yes, I think what drove it was, as Michelle mentioned in her remarks, asset management and insurance services were the 2 biggest drivers.

And was insurance mostly seasonal on like because of higher -- more basically title checks on higher sales or was there something else. I'm just trying to figure out how much was the new or how much was seasonal?

Yes. But there was some growth in the title business, which is a subset of the insurance services business, but this new product contributed a lot to revenue growth. It did not contribute at all to earnings growth because we're still in the process of ramping it up. And then [indiscernible]

[indiscernible] the loss strap.

Correct.

Okay, perfect. That's very helpful. And then on mortgage services. It was 2 basis points this quarter. I think you had given for the year was 4.5. It's pretty hard to get there with the back half of the year. Maybe give us an update on the outlook.

Sure. I mean, we still have a lot of work to do with respect to Lenders One and I'm not happy -- I see opportunity is as great as it's ever been and we need to do a much better job executing. A part of the solution is getting the technology in place, which we're not going to have in place till sometime next year. And we have to develop -- we basically have to be indispensable to the members and develop the vendor products and services that we can offer to them at a lower price. The members are very open to it. We've just had a lot of other areas we've been focusing on and we need to turn our attention, and that's where -- that's required us to bring in some more employees into the organization and to get some more focus on the technology side. The opportunity is still there, as I said earlier. We just have a lot more work to do to capture it.

Okay, perfect. And what was the -- there's a nice increase in revenue in the technology services line. I was just wondering what the driver of that was.

Yes. I think compared to the first quarter, that's primarily just the growth of Ocwen's servicing portfolio and the related infrastructure type services that we do to support Ocwen as it grows.

And our next question comes from Fred Small of Compass Point. Fred Small - Compass Point Research & Trading, LLC, Research Division: I was wondering Bill, if you could just talk a little bit more about economics of Mortgage Builder business that you bought? Sort of how they -- what's sort of the economic model there and in terms of how they generate revenue? Is it selling seeds [ph]? Is it on a per transaction basis? And then just what do you think they -- what do you think you need to do -- I'm assuming that the members of Lenders One, who are already using that are -- have current vendors in place that they buy services from. What do you need to do to displace or win that business and what verticals do you think you'll focus on?

Yes. So first, Fred, I think the way to look at Mortgage Builder, it's very consistent with our marketplace strategy. If you look today, we have a residential loan servicing system. With Equator, we really have a robust default management system that handles REO, bankruptcy and eviction. And now with Mortgage Builder, we have an origination system and across all those processes, we can develop a marketplace where those users can order and receive services from Altisource or from other vendors. And so that's the overall strategy. I mean, it's a $15 million purchase price. So I wouldn't look at it in terms of -- it doesn't move the needle from an earnings perspective. It may be neutral to modestly accretive. I mean, it's a very small transaction. And the way they build our clients would be similar to what you would expect. There's some legacy clients but on a subscription license model and some newer clients that are moving more to a by-the-drink. Fred Small - Compass Point Research & Trading, LLC, Research Division: Okay, got it. And you said the number you give was 19% of Lenders One members are -- currently use Mortgage Builder?

That's correct. Fred Small - Compass Point Research & Trading, LLC, Research Division: And would you expect to be able to convert more or do you know sort -- or most of the current -- did the other members -- is there sort of a -- are 50% of them on Ellie Mae or is there another sort of key technology where -- that has been market channel among Lenders One?

Yes, and I think you'd see that the Lenders One member are disbursed across the origination. Ellie Mae obviously has a big market share, so you'd find a lot of members on Ellie Mae system. I mean -- we believe that we will be able to use this as a tool to help the members make more money and save money. And we think we'll be able to convert additional members on to the platform. Mortgage Builder has been a preferred vendor of Lenders One for some time now. And we think with a more financially strong owner of the company, they'll be able to close some transactions, which they otherwise lost because of their size.

But at the end of day, [indiscernible] fits into our overall strategy, then this company in and of itself being very big needle mover for Altisource. Fred Small - Compass Point Research & Trading, LLC, Research Division: Okay, got it. I mean, just in terms -- maybe last one on Mortgage Builder. In terms of revenues that you can generate from -- via the purchase, do you think it'll push you closer to the original target that -- even though it probably wasn't included in the original target, will it push you closer to that original target of 4.5 basis points that you talked about at the end of 2013?

Yes. Fred, I think it'll certainly help -- and by the way I didn't answer your question. There are -- Mortgage Builder already has a marketplace, but they don't provide all of the services that are available or that you would normally expect in the marketplace and Altisource could supplement some of those services as a way we could pick up business from their existing customers. Fred Small - Compass Point Research & Trading, LLC, Research Division: Okay, got it. And can you give an example -- I mean, as to what clarification or what do you think as an example.

Evaluation, closing title, quality control or underwriting would be some examples. Fred Small - Compass Point Research & Trading, LLC, Research Division: Okay, got it. And without the sort of -- without the additional expenses that you sort of went through that are muting the mortgage services margin, how much do you see -- I mean, the revenue per transaction and the revenue for -- per delinquent loan were up huge in the quarter. How much do you think overall mortgage services margin could've been up without the expenses?

I mean, I think we -- and this is very ballpark numbers, but we're probably incurring anywhere from I would say, Michelle, tell me if you agree $400,000 to $700,000 of additional expenses in order to support the growth.

[indiscernible] Fred Small - Compass Point Research & Trading, LLC, Research Division: Per month. Okay, got it. And then just on the -- Q4 balance sheet numbers were different versus in the release today versus the K. Is that due to the Equator financials and the changes there?

Right. So accounting requires you to retrospectively adjust if you have purchased price true-ups. When you finalize your purchase accounting, you push it all the way back in time. So it's purchase accounting related. Fred Small - Compass Point Research & Trading, LLC, Research Division: Got it. And so I'm assuming then that the Q1 balance sheet is different also?

That's right. Fred Small - Compass Point Research & Trading, LLC, Research Division: And will you file -- will that get refiled or will those be sort of filed as amendments, the true-ups?

It does not -- the way it works with quarterly, you only present the balance sheet in the quarter that you file it because the comparative period is always the end of the prior year. So you don't restate the prior and on-period [ph] balance sheet in public filings. Fred Small - Compass Point Research & Trading, LLC, Research Division: Then last one, just with the -- you said 80% running through auction on Hubzu, I think. Is that right?

Yes, a little over 80% is my recollection. Fred Small - Compass Point Research & Trading, LLC, Research Division: Little over 80% and the overall revenue per delinquent loan at $480 -- I think that was $485 for non-GSE loans? What's the -- where -- is there a peak to that, you think? Is there a number you think that can't go. If 100% of Hubzu was running through auction, would that number be substantially higher?

Yes. We're not going to give any specific guidance as to where the number could go, but there are incrementally additional services we could provide. I think we talked last quarter a bit about short sales, a greater percentage of homes sold through auction. There's other services potentially that we're not providing today. So we're not going to give any guidance on where that number could go. But as Michelle pointed out, there is some seasonality to it in the summer months, but some of that increase is very sustainable for the longer term.

[Operator Instructions] I do see a follow-up question from Mr. Mike Grondahl of Piper Jaffray.

How should we think about SG&A going forward? Does that just sort of stay elevated as you're supporting some of this growth and whatnot?

Yes, so I think, we -- SG&A has gone up a little bit from Hubzu marketing and higher amortization expense in the quarter, but we think it'll stabilize.

Mike, we're spending a little bit more money on some compliance-related, employees, things like that, but we do expect it to stabilize going ...

Okay, great. And just -- I think I know the answer to this, but the Hubzu pricing for third parties. That's the same as Ocwen, correct? That all got ...

Yes, Mike. As it pertains to the -- to distressed REO, it's the same across the board.

Right. Okay, good. And have any of those sort of forward projections or sort of ways to think about the business? Any reason those weren't in there?

No, we just don't update that each quarter, Mike.

At this time, I'm showing no further questions. I'd like to turn the call back over to management.

Thank you for joining the call today. Have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes your program. You may all disconnect. Everyone have a great day.