Good day, ladies and gentlemen, and welcome to the Altisource Second Quarter 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, today’s conference is being recorded.I would now like to turn the call over to Ms. Michelle Esterman, Chief Financial Officer.

Thank you, operator. We first want to remind you that the earnings release, Form 10-Q 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 section in the company's earnings release, quarterly slides and Form 10-Q as well as the risk factors contained in our 2018 Form 10-K, which describe factors that may lead to different results. We undertake no obligation to update these statements as a result of 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 these 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 Chief Executive Officer. I'd now like to turn the call over to Bill.

Thanks, Michelle. Good morning and thank you for joining today's call. I'm pleased with our second quarter. We continue to make good progress in streamlining Altisource and focusing on our larger opportunities.We sold the majority of the BRS inventory, began selling our investment in RESI shares, supported Ocwen's migration to a new residential loan servicing system and completed the sale of the Financial Services business.After adjusting second quarter net debt for the July sale of the Financial Services business, we reduced net debt less marketable securities by 40% from a year ago to $167 million.With respect to our larger opportunities, we continue to win and onboard new business and develop our pipeline. As we believe Altisource is substantially undervalued and doesn't reflect the inherent value of our collection of businesses, we plan to continue to explore ways that could unlock this value.As you can see on slide 5, we generated $0.36 of adjusted diluted earnings per share, $16.2 million of adjusted operating income, $8.9 million of adjusted pre-tax income and $23.3 million of adjusted EBITDA on $190.5 million of service revenue.During the second quarter, our revenue earnings and cash flow were impacted by Ocwen's migration to its new servicing platform, which delayed referral volume and accounts receivable collections.We estimate that this temporarily impacted adjusted pre-tax income by $3.5 million to $4.5 million and accounts receivable collections by $15 million. We believe these are largely timing items and anticipate that in the second half of the year, we will receive most of the impacted referrals and receivables will return to a more normal level.Second quarter adjusted operating income margins of 8.5% were impacted by revenue mix from the sale of the BRS assets and the delay in referrals associated with Ocwen's servicing system migration.Excluding just the BRS sale, Q2 adjusted operating…

[Operator Instructions] Our first question will come from the line of Lee Cooperman from Omega Family Office.

Thank you. It is very frustrating in terms of the amount of money you've spent on stock repurchase and the results that you've achieved. And I'm just wondering if you can go into more detail or more granularity as to why you believe the stock is mispriced relative to the business value. That would be number one. Number two, what is the cash generation expectations for the full year that you're now looking at? And third, would you consider a sale of the entire company as opposed to divisional dispositions?

So, Lee, good morning. Let me take those in order. So with respect to the stock being mispriced, Lee, we have a collection of businesses that we believe are very valuable. We have a field services operation. We've got the marketplace which includes and Equator. And we've got our -- what we're calling origination and mortgage solutions businesses. Those businesses we believe are performing very well. And if you look at them individually, we believe they were trade at a higher multiple than they're currently trading for when you look at the enterprise value at Altisource today, if you look at them individually.And we also believe we're making very strong progress. The sales wins are really accelerating as I spent time walking through those on the call. And we believe if you combine those sales wins any softening of the economy and the collection of businesses that we believe are worth substantially more individually than they're -- than we're trading for today, the stock is a very good buy in our opinion.

Are you weighing in tax liabilities and dispositions? In other words, if you sold the entire company, you would be avoiding double taxation. If you sell off individual divisions, assuming you build good businesses, you have unrealized capital gains, which would trigger a tax liability as you sell individual businesses. Have you weighed that into your consideration?

Yes, Lee, we have taken that into consideration and I'll let Michelle respond.

Yes. So I think we've thought about that and believe that what Bill said is true. We do have large NOLs in Luxembourg and believe we could structure transactions in such a way that would beat taxation for us.

And then in terms of cash, sorry we...

Good, good. The other questions.

Yes. In terms of cash for the full year, we saw I think $15 million -- we should have collected we believe about $15 million more in collections on the revenue we generated in the second quarter than we did. And that was really a product of Ocwen's servicing transition and change in the way in which it pays its vendors. We're working very closely with Ocwen to bring those receivables down and anticipate making progress very good progress between now and the end of the year. And assuming that goes well, we still think we're looking at the $60 million to $70 million of adjusted operating cash for the year.

And would you say you have excess cash in the company now?

Yes. So since the end of the second quarter Lee, we sold the Financial Services business and we used that money to pay down our debt as is required by our agreement. And as we sell the RESI stock we're also required to use that cash to pay down the debt. And so again, we're comfortable with our -- very comfortable with our cash position.

So at the low-end $60 million cash generation there are about what 16 million shares outstanding now?

Yes, roughly.

So you're generating about $4 a share in cash?

Yes. And about 16.4 million shares outstanding on a fully diluted basis.

Right, right, right. And what about the last question? If somebody was courageous and wanted to try to buy the whole entity, is this something the Board would consider?

So Lee I think as -- I don't know that we're going to say much more than we've said in our prepared remarks. Right now we believe the collection of businesses are worth a lot more money and -- than Altisource is trading for today. And so we're going to continue to look at our options, which include – which may include selling some of the businesses, raising some equity in our earlier-stage businesses, and other options. And I think we'll just leave it at that for now.

Thank you.

Thanks, Lee.

Thank you. And our next question will be coming from Mike Grondahl from Northland Securities. You may begin.

Hi. Yeah. Good morning, Bill and Michelle. Just Ocwen is switching servicing systems. Would you say that the decrease in Hubzu sales is like a 100% timing? And what kind of gives you confidence that that'll come back? And when do you think it comes back? Have you begun to see it yet?

Yeah. So yes, we're already starting to see the referrals pick up, Mike. But basically, if you look at our revenue per delinquent loan, and then we look at that at a more granular level inside of Altisource, we believe the reason why that's come down – one of the primary reasons is because of the delay in referrals associated – there is two reasons. One is just sort of a normal QC work that goes it's associated with switching systems and we're switching both the servicing system and the REO management system.And the second is there's a grace period that Ocwen provides its servicers as part of changing the service and the legal servicing entity that's servicing their loans. And that also resulted in a delay in referrals. We believe that cost us roughly – Michelle, what was the number about $11 million?

$11 million of revenue.

Yeah, $11 million of revenue. And then when we break it down by product, Mike we got to the $3.5 million to $4.5 million of earnings. And yes, we are starting to see the referrals pick up.

Got it, got it. Any field services? And what's kind of coming from NRZ, any change in behavior there?

No, it's been business as usual as far as we can tell, Mike.

Got it. And then with the..,

But we are making – by the way what is interesting in that business is we're making a lot of progress adding new customers. And we're starting to see the growth so far this month over the same month last year, it's beginning to accelerate. And then we added a Top five bank. We're going to be in 10 states, hopefully by the end of this month. And we're making – we've just landed a very, very large win with that largest owner of real estate that's going to launch, we believe in the fourth quarter.So we're very pleased with the progress we're making in that business. And we're also very pleased with the progress we're making inside of Hubzu. We really have seen an acceleration of clients that have actually finally onboarded after years in some cases of winning a deal negotiating agreements, getting through all the compliance, and control requirements and finally onboarding. So we're really pleased with the acceleration, we're starting to see there as well.

Good, good. In terms of the sale of Financial Services and BRZ, do you have the rough 2Q contribution from both of those?

So in – with respect to the buy-renovate-sell business Michael, we actually sold those homes at a loss. And so they had a negative impact on our margins for the quarter. I think the sales price was $39 million. And I think today, we own two homes with a balance of about $400,000 of book value that we haven't sold yet. And then on the Financial Services business, we're not breaking it out in detail, but I think approximately $6 million of pre-tax for the year.

For the year, okay. And then the midpoint – go ahead.

The gain is approximately from the sale of that business we anticipate in July, you'll see roughly an $18 million gain from the sale. That's built into our updated scenarios.

Okay, okay. Your adjusted EPS under the new guidance, if you will it looks like it dropped from $2.23 to $1.82. Can you kind of give us a bridge walking that down? Is it simply Financial Services and BRS? Can you just help us understand the decrease kind of the components?

Sure, yeah. So a large component is the Financial Services business. And then think about when you sell a business as a carve-out there are some costs that didn't get sold that are left still at Altisource that we have to work to eliminate. So there are some additional costs related to that business that we're going to need to continue to eliminate.So it's the loss of the earnings from that business as well as some of those additional costs that we will work to eliminate. And then it's the delay from what we originally expected in onboarding some of these customers. We're starting to see that accelerate but it's going to impact our full year. And then lastly, I think we have modeled our debt balance to be a little bit lower at this point in time. And so interest expense is a little bit higher.

Got it. And then could you give a little bit more update on Pointillist and Owners and kind of the trends you're seeing there? And I think you said -- did you say you're going to invest $8.5 million in Pointillist? Is that like right now or over the course of the year, so just an update on both would be great?

Yes. So with respect to Pointillist our plan is -- we've completed all the legal documentation to establish this as a separate company. And we've worked with our Board and have agreed to essentially put $8.5 million in the company. And then the plan is even though we'll be consolidated on our income statement and balance sheet they're going to run on their own and be a standalone.And it will be -- our plan is for it to be an unrestricted subsidiary and anything we do with them in the future will have to be on an arm's length basis based upon our assessment of the performance of the business.And so that's the plan for Pointillist. They're making very good progress. They signed some attractive agreements and pilot programs during the quarter. We'll provide an update with more specificity on a later call, but they're making very good progress in terms of signing household names and have a very, very attractive pipeline that's both a direct pipeline and a pipeline through our channel partners. So we're very pleased.The strategy with Owners, Mike is to essentially do the same thing. It's just a little bit further behind. And with all the transactions we're working on we're catching up but we are working to do something similar with Owners.And Owners, we're continuing to make very good progress. We're continuing -- from a net revenue perspective, our model is changing a little bit. So our net revenue growth is still anticipated to be very attractive because under our evolving model we're going to keep more of the commission, but the gross revenue is a little bit -- the growth is a little bit slowed down from what we had originally anticipated. But on a net basis which is what really matters we're very pleased with the progress we're making.

Got it, got it. And then Project Catalyst is that kind of where you want it to be? Is there a lot of wood still to chop there? Kind of where are you there?

Yes. I mean the largest benefit we're still going to get from Project Catalyst is going to be the data center. So for the most part we're going to be moving completely off of our own data centers or in the data centers we lease into the cloud.And we estimate that that could save us about $8 million to $10 million next year once we complete the process. So on a run rate basis about $8 million to $10 million a year. And so that's a very important component of Project Catalyst. There's still some facilities consolidation and some automation initiatives where we're building some robotics to improve the efficiencies at some of our businesses.

Got it. And one last follow-up, the $18 million gain from selling the Financial Services business, so is that included in the $1.82?

No. So -- because we adjust out -- because that's sort of -- it's adjusted out of our adjusted earnings. So it's included in GAAP, but it's taken out of adjusted.

Okay. So the $1.82 is sort of clean. It doesn't include that benefit. Okay good. Thank you.

Yes. And Mike you'll see a reconciliation of that in the appendix.

Okay, got it.

[Operator Instructions] And I'm showing no further questions at this time. I'd like to turn the call back to Bill Shepro for closing remarks.

Great. Thanks everyone for attending the call. Appreciate your support.

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.