Good day, ladies and gentlemen and welcome to the Altisource Portfolio Solutions Fourth Quarter and Full Year Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Michelle Esterman, Chief Financial Officer. You may begin.

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 on Monday, 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 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 to discuss our vision and strategic initiatives for 2015 and Michelle will provide an overview of our 2014 financial performance. First I'd like to address the recent announcement that HLSS and New Residential have entered into a definitive agreement under which New Residential will acquire all of the outstanding shares of HLSS, subject to the approval of HLSS’ shareholders. We welcome a transaction that provides enhanced stability for Ocwen, HLSS and the mortgage servicing industry. We also appreciate new residential statements of commitment to Ocwen in both the call discussing the transaction and New Residential's earnings call. Of course we think these commitments should be memorialized in writing. Turning to our vision and strategic initiatives, at the highest level we have two objectives to increase shareholder value. The first objective is supporting Ocwen. Ocwen is a very important and strategic customer to us and we are very committed to doing everything we can to assist Ocwen in addressing the environmental issues they face. Second, it is more important than ever that if we increase our focus on our longer-term customer and product diversification initiatives. In this regard, we will continue to focus our attention on four strategic initiatives. These initiatives in no particular order include; one, growing our origination services and origination technology businesses; two, attracting new clients to our comprehensive default related businesses; three, expanding our innovative online real-estate marketplace; and four, growing our property management and renovation services businesses. Slide 8 to 10 set forth the operating metrics for these initiatives. As a fundamental element of our increased focus on customer growth and diversification, we've developed an integrated sales and marketing plan to support these four key initiatives. We recently centralized our sales…

Thank you, Bill. On Monday, we reported full year 2014 service revenues of $938.7 million, net income attributable to shareholders of $134.5 million and adjusted diluted earnings per share of $7.17. Slides 2 and 3 provide highlights of our results for the current quarter and year compared to prior periods. We are pleased with the 42% service revenue growth in 2014 over 2013 driven by growth in the number of loans on REALServicing, a higher percentage of homes sold through auction on Hubzu, and the full year inclusion of the November 2013 Equator acquisition. During 2014 our earnings grew at a much lower rate than our revenue. We incurred expenses for people and infrastructure to support a larger Ocwen. Additionally, we were supporting certain longer-term initiatives that had no revenue associated with them. As we have recently discussed in our investor call, given the current environment and our expectations with respect to Ocwen's growth some of these initiatives no longer mix sense on a risk adjusted return basis. Later in my remarks I'll provide you with an update on the plan we developed and are implementing to reduce cost and eliminate certain initiatives to be a leaner organization with a sharp focus on the initiatives Bill discussed. Turning to our gross profit margins, 2014 gross profit as a percentage of service revenues with 40% compared to 42% in 2013. The decline is primarily driven by a shift in revenue mix as the lower margin in technology services revenue growth outpaced the higher margin mortgage services revenue growth. Within the financial services segment the revenue growth from the lower margin customer relationship management business outpaced the higher margin mortgage charged off collections business. This was partially offset by gross profit margin improvements in the mortgage services segment from workforce efficiencies. Income…

Thank you. [Operator Instructions] Our first question comes from the line of Mike Grondahl of Piper Jaffray. Your line is now open.

The first question in the fourth quarter the gross margin on service revenue was about 32%. Do you see that as the low point and sort of a gradual increase in 2015, how do you think that plays out?

So I mean I think what we’ve provided you in our scenarios is pre-tax income margins for each of the segments. And we've also talked to you about our cost reduction initiatives, which will come both at the gross profit margin line and the operating income margin line, but if you see from the operating income margins they're roughly in line or similar to '14 so.

And then…

Sorry fourth quarter I was going to say fourth quarter our costs were considerably higher and we anticipate in 2015 on a run rate basis and that's why we have these initiatives in place to reduce cost, so I would not necessarily look at fourth quarter as a proxy for '15.

And then for Bill, Bill can you be a little bit more specific. What you're doing? What's new at Hubzu and really what you're working on there to kind of grow that business?

And I think we've two properties Mike one is Hubzu the other is owners.com that we're focused on. On Hubzu, we want to continue to sell our services to institutions like Ocwen and the top-10 bank that we recently sold to. And we're also going to be re-launching our preferred partner program where we focus on selling our auction services to our real-estate brokers and their consumers. And then on Owners, Owners historically with the marketing engine, our strategy there is to be the listing agent representing both sellers and buyers of homes. I don’t want to get much more than that Mike for competitive reasons, but at a 30,000 foot level that's the approach.

And one follow-up tied to the preferred partner program. So is that open back up for non-distressed properties, is that what you mean?

So we're going to focus on both the real-estate brokers that want to leverage auction as an additional tool in their toolkit to sell homes. We're also going to where we represent individuals on the owners.com site. We'll be able to leverage Hubzu to help those consumers sell their homes where we're the actual brokerage firm leveraging that program.

And then just a last question, you mentioned Lenders One, is there any new products you're working on there? What do you kind of see on the horizon that you can do to drive some value through there on the origination side?

So one, and I think I’ve said in the past we're really focused on being indispensible to the members, so we've recently hired a Head of our GPO our Group Purchasing Organization to really focus on all the non-mortgage services, so that every day when the members wake up they know that Altisource has their back in terms of lowering their cost of operations. That's not a huge needle mover in terms of earnings for us, but it builds a trust and credibility with the membership. The other thing we're doing is we're going to focus on some of these non-agency products where we can leverage the membership to distribute those products to Lenders and then we'll get a percentage of the origination amount, we call that a preferred investor fee and it'll be higher because it's not agency product. And we'll also provide a lot of the related services like due diligence, underwriting processing, title et cetera. And so we think if we could focus on driving those products, fewer of those products but are more unique. We could drive a lot more revenue and earnings to our origination business than we have historically.

And then lastly, do you expect some of those non-agency products to be available in 2015?

Yes, we anticipate launching some of these this year, a few of them.

Thank you. And our next question comes from Ryan Zacharia of JAM. Your line is now open.

I just want to understand with respect to the buyback what's changed from January 16th when you said you would consider the risks associated with Ocwen, but at that time I still thought it was prudent to repurchase stock?

Yes Ryan since we had the Investor Call, there are a couple of notices came out related to Ocwen and related to HLSS and while we think there's a very low likelihood that they'll be successful in their claims that they have alleged we just felt like from our perspective until there's more clarity around the evolution of those issues it makes more sense to build up our cash position to make sure we've enough cash to support the runway to accomplish our strategic initiatives, so it’s pretty much that simple.

And then just understanding kind of the investment in Ocwen's growth I mean Ocwen hasn’t grown for 18 months so I'm just trying to understand at what point, how do you guys made the term where you said okay it's not worth investing in Ocwen's growth because we don’t think the platform is growing?

And Ryan as I said at the beginning of my prepared remarks there's two objectives we have. One is to help Ocwen and a stable Ocwen is very good for us as you look in those scenarios they generate a lot of revenue and earnings for us, so everything we can do to help maintain a stable Ocwen is very important to us and at the same time we recognize they are not going to grow the way they were growing historically, in fact right now we have there some run-off in their portfolio, a decline in their portfolio, so we are very-very focused on our diversification initiatives as a way to replace some of that revenue and earnings that’s going away.

And then just two more quick questions, and so what happened in Q4 that was different from the January call’s expectations when you thought that adjusted earnings would be $0.38 to $0.51 a share?

I think we are only off a couple of pennies from what we projected Ryan, so it was just a minor clean up of the books between that call there.

And then just one last things can you just expand on your comments at the beginning of the call about memorializing in writing some of the commitments that were made on the NRZ, HLSS merger call?

Yes, sure, there is not much more we want to say beyond what we’ve said in the prepared remarks, but I think look NRZ and HLSS said all the right things at least from Altisource’s perspective in wanting to work with Ocwen which obviously benefits Altisource, we’d love to see those commitments made in writing and we’ll leave it to what HLSS and NRZ and Ocwen has to have a move forward.

Thank you. Our next question comes from the line of Matt Leavitt of Nomura. Your line is now open.

Just quickly looking at Page 12 of the presentation when you guys got through the 2015 scenarios, I just wanted to see if you guys could give some color about what accounts for the differences in the service revenue for delinquent loans from the non-GSE versus the GSE loans?

Yes, the difference is very simple on GSE loans, the GSEs take back the real estate once it becomes REO and on the private label securities we continue to manage the REO.

So you don’t contemplate a scenario where these might converge more?

Correct we don’t.

Thank you. Our next question comes from the line of Fred Small of Compass Point. Your line is now open.

A couple of questions on; first, what were the initiatives that you were supporting that had no revenue associated with them that you're sort of backing off now?

Yes, Fred we are not going to -- they are initiatives that we’re no longer supporting, so at this point we’re going to focus on the initiatives that we are supporting.

Well I guess how much of the sort of 80 million in cost saves that you discussed are associated with the non-revenue producing initiatives?

We haven’t broken that out Fred.

And then you mentioned in the sort of comments about the change in capital allocation plans that you might buyback the term loan in the future, would you need amendment to the term loan for that to happen?

No Fred, we didn’t say we’d buyback, we said we’d consider repurchasing essentially some of the debt and no, we don’t need an amendment to that.

Okay.

Not that I am aware of at least we don’t.

Is there anything that you would amend in the term loan, is there any sort of amendments you would make to the term loan potentially?

Not that we are aware Fred. I mean it's fair to say, it saying covenant life term loan we are in full compliance with the term loan, there is an excess cash flow provision, if our net debt-to-EBITDA ratio grows about the certain level which we think there is a lot headroom at this point. So, we’re -- and the loan matures in December of 2020.

And then just on the, I mean I guess Ocwen announced that they are selling an incremental what quarter of their GSE portfolio and that didn’t change your EPS guidance at all and so I just want to understand so what’s the -- can you give us a sense of the relative profitability contribution of GSE servicing to ASPS? And then also your expectations for the run-off of that portfolio that are baked in overtime or is the -- not to say the run-off but the timing on Ocwen’s actual sales?

Yes, Fred we provide in our assumption slides, our expectations for the sale of those portfolios, you will see it on Slide 12. And we don’t provide the actual timing, but we assume that most of that was taking place a little bit and after the first quarter and the majority is taking place in the second half of the first year which is roughly in line with how Ocwen is estimating they are going to sell those GSE servicing rights.

And then just on the profitability of GSE servicing?

I think the best thing you could do Fred is you essentially can do a lot based on the assumptions we provide you in the presentation in terms of how much revenue we make per loan, per year and you can estimate what our margins are in that business and I think that would allow you back into what the impact to our revenue is in earnings.

What I am trying to understand is are the margins materially different between the GSE and non-GSE loans?

Yes the margins on the GSE loans are lower because again we don’t manage the real estate.

Well that sort of gets to my next question. So can you give us a rough -- I know you break out Hubzu revenues but can you help us understand sort of what the profit contribution from Hubzu is to the overall mortgage services segment?

We don’t break that out separately although we do give you some metrics as to how many homes we sold. So I think you'll see our home sales were pretty robust in the fourth quarter and we expect them to be very robust going into the first quarter as well.

And the change in revenue per sale on the overall loans I noticed that the obviously the mix of non-offering related sales was up. What was the driver of lower revenue per sale quarter-over-quarter was it auction mix was it non-Ocwen?

Yes I don’t have it at my finger tips Fred although I think that may fluctuate a little bit quarter-to-quarter. But there is nothing fundamentally that’s changed related to that business.

And then last one on a revenue per loan basis when you run the numbers for the GSE revenue per delinquent loan versus historical it is down almost 50% in Q4 and the projections have the service revenue per delinquent loan for non-GSE loans remaining flat going forward. What's the difference there between a 50% drop and remaining 5.4 is on the revenue side is that just something must have changed on the GSE side that’s not changing on the non-GSE side?

So you mentioned Hubzu but Hubzu is not in the GSE. And I think you'll see historically that there is more variability on the GSE side, but a couple of things contributing to the change from the third quarter would have been lower revenue from properly preservation services, also the discontinuation of the Lender Placed Insurance brokerage line of business and we also boarded some GSE loans during the quarter. And sometimes when you have loans that board you won't necessarily see the all of the services being ordered in the quarter that’s quoted.

Ye but even the projection for 2015 sort of the same drop in revenue per delinquent loan is contemplated for GSEs versus non-GSEs. Lender Placed Insurance went away completely right from non-GSE and GSE. So I'm just trying to understand what -- how revenue on the non-GSE side stays flat but GSE revenue is down 40% or 50%?

Fred I think what you're seeing is in there are some price changes that we have that are going to take place in 2015 related the REO which is going to convert revenue that was in service revenue we weren’t recognizing we're only recognizing net revenue because the balance was a pass through expense and now we're going be recognizing the gross revenue as opposed to the net. And so you'll see reimbursable expense go down and the service revenue go up and that’s happening in the non-GSE on the PLS portfolio because we manage REO in the PLS portfolio and it is happening on the GSE portfolio because we don’t manage GSE REO.

So is there an impact to margins from that.

Yes I think Fred as we said on the last -- I think you should just listen to what we said on the last cal we had with you, because we said that some of our revenue per loan is going to be going up in some cases the pricing and it may result in more absolute dollars of earnings but lower margins. And in some cases the prices may be coming down which obviously would reduce margins and absolute dollars of earnings but net-net we think the overall impact to our income from the price changes going both directions won't be material. So I think that’s what we said on the last call.

And you can see the margins that we’re laying out in our scenarios on Slide 13 by segment.

Thank you. [Operator Instructions] Our next question comes from the line of Michael Fine of Carlson Capital. Your line is now open.

I am wondering if you could just help us think get some insight into how you're thinking about your capital structure. Some guys touched on the term loan and the share buybacks earlier in the call. But just is there anything you could tell us to help us figure out what the capital structure looks like in 12 months from now. I mean it's not often that you find a company with such good cash flow characteristics with the term loan trading at $0.80? What would change your mind or kind of how are you guys approaching that thinking about what to do with your excess capital?

I think today if you listen to the last call we had and today's call really what we want to do is build up the cash to support our -- give us runway or plenty of runway to support our longer-term growth initiatives. And while there is some uncertainty and there is different pieces of news coming out almost daily related as to the businesses we think it's a good approach, should something change and we get a lot more comfortable with the stability of our customers we'll revisit our capital allocation approach and at that time we would consider using some of our cash to potentially buy some of our debt back or also potentially to buy some of our shares back.

Thank you. And I'm showing no further questions at this time. I'd like to hand the call back over to Michelle Esterman for any closing remarks.

Thank you. Thank you for joining the call today and we look forward to talking to you next quarter.

Ladies and gentlemen, thank you for participating in today's conference. That does conclude today's program. You may all disconnect. Have a great day everyone.