Q3 2023 Altisource Portfolio Solutions SA Earnings Call
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Yes.
Good day, and thank you for standing by.
Welcome to the outsource third quarter 2023 earnings conference call.
At this time, all participants are in listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question. During this session you will need to press star one on your telephone.
You would then here an automated message advising your hand is raised.
To withdraw your question. Please press star one again.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to Michele estimate.
<unk> Financial Officer. Please go ahead.
Thank you operator, we first want to remind you that our earnings release Form 10-Q, and quarterly slides are available on our website at www dot out the source dotcom.
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 service your responses to the Covid pandemic together with the current economic environment makes it extremely difficult to predict the future state of the economy and the industries in which we operate as well as the potential impact on our resource.
Please review the forward looking statements sections in the company's earning really earnings release and quarterly slides as well as the risk factors contained in our 2022 Form 10-K, and 2023 form 10, Qs, which describe factors that may lead to different results.
We undertake no obligation to update statements financial scenarios and projections previously provided or providing here and 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.
Sure. Thanks Blayne for today's call is bill chaparral, our chairman and Chief Executive Officer, I'll now turn the call over to Bill.
Thanks, Michelle and good morning.
I'll begin on slide four we are pleased with our third quarter performance for the quarter, we generated $874000 of adjusted EBITDA.
$4 $4 million improvement over the second quarter of 2023, and a $7 $3 million improvement over the same quarter in 2022.
For the first nine months of 2023, we improved adjusted EBITDA by $16 $1 million compared to the same period last year.
Just on our current forecast, we anticipate positive company wide adjusted EBITDA for the fourth quarter and full year.
Turning to slide five during.
During the quarter, we generated $18 4 million in net proceeds from the sale of equity and used $10 million of the proceeds to reduce the principal balance of our term loan.
As a result of the debt reduction we eliminated 966000 penny warrants.
<unk> has an option to extend the maturity date of our term loan and revolver by one year to April 2026, and we will save an estimated $3 $4 million per year in interest expense.
Extending the maturity David Malone is subject to customary conditions and the payment of an extension fee as described in our 10-Q.
We ended the quarter with $36 6 million in cash and cash equivalents.
We continue to position out to source to take advantage of what we see as significant potential opportunities with existing and new customers in both of our segments over the coming years.
Walt market continues to normalize and we gained traction with our newer solutions that strengthen lenders one members performance.
As you can see on slide six our sales pipeline and wins in both of our segments remains strong.
Our consolidated weighted average pipeline at the end of our third quarter was an estimated $46 million of annual revenue on a stabilized basis, representing 34% of our annualized third quarter 2023 revenue.
We are also winning new business since last quarter, we won business that we estimate will generate $16 $9 million of annual revenue on a stabilized basis.
During the third quarter, we continued to onboard and gross sales wins from 2022, and 2023, which combined are now at a $13 $7 million annualized revenue run rate.
Turning to slide seven and our countercyclical servicer in real estate segment.
Third quarter, adjusted EBITDA of $10 million was $2 9 million or 42% higher than the same quarter in 2022.
Third quarter, adjusted EBITDA margins improved to 37% from 24% in the third quarter of last year.
Operator: Good day and thank you for standing by.
Adjusted EBIT growth and margin improvement reflect product mix and cost reduction and efficiency initiatives, partially offset by lower revenue.
Operator: Welcome to the Altisource, 3rd quarter, 2023, Ernie's conference call. At this time, all participants are in listen only mode. After the speakers presentation, there will be a question in the answer session. To ask a question during this session, you need to press star 11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.
The service revenue decline was primarily from our fourth quarter 'twenty to exit of low margin employee outsource business and fewer referrals in our lower margin field services business.
We also believe that the default market is continuing to recover as evidenced by recent year over year growth in referral volume and our pre foreclosure title and foreclosure trustee products.
Operator: Please be advised that today's conference is being recorded.
Michelle Esterman: I would now like to hand the conference over to Michelle Esterman Chief Financial Officer. Please go ahead. Thank you, operator. We first want to remind you that their earnings release form 10Q 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 service responses to the COVID pandemic, together with the current economic environment, make it extremely difficult to predict the future state of the economy and the industries in which we operate as well as the potential impact on our resource.
Both pre foreclosure title and first lien foreclosure trustee referrals were 42% higher for September one through October 20th compared to the same period in 2022.
For 2023, we anticipate that our servicer in real estate segment will have higher adjusted EBITDA and adjusted EBITDA margins compared to last year.
Michelle Esterman: 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 2022 form 10Q and 2023 form 10Qs which describe 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 GAP and non-GAP financial measures. In our earnings release and quarterly slides, you will find additional disclosures regarding the non-GAP measures. A reconciliation of GAP to non-GAP measures is included in the appendix to the quarterly slides.
Moving to slide eight and our servicer and real estate sales pipeline and wins at the end of the third quarter, our weighted average pipeline totaled $25 $6 million of annual revenue on a stabilized basis.
Pipeline declined compared to the prior quarter, primarily because we converted an estimated $15 $3 million of the pipeline into third quarter sales wins.
One of the more notable third quarter wins was the signing of a master services agreement and a statement of work to provide REO asset management brokerage auction valuation and field services on a portion of our reverse mortgage Servicers Oreo portfolio.
On a stabilized basis, we estimate that this new business represents $12 $8 million in annual revenue and a $3 million to $5 million per year in adjusted EBITDA.
We began receiving referrals in September and anticipate that we will reach revenue and earnings stabilization by the middle of 2024, if not sooner.
Turning to the macroeconomic environment on slide nine.
During the pandemic consumers benefited from stimulus checks.
Bill Shapiro: Secondly, for today's call is Bill Shapiro, our chairman and chief executive officer. I'll now turn the call over to Bill. Thanks, Michelle. Good morning. I'll begin on slide four. We are pleased with our third quarter performance. For the quarter, we generated $874,000 of adjusted EBITDA, a $4.4 million improvement over the second quarter of 2023, and a $7.3 million improvement over the same quarter in 2022. For the first nine months of 2023, we improved adjusted EBITDA by $16.1 million compared to the same period last year.
Expansion of mortgage and student loan payments and a historically low interest rate environment.
As a result consumer savings reached an all time high delinquencies declined credit scores improved and home values appreciated.
Since early 2022 mortgage foreclosure moratoriums and forbearance programs ended.
Borrowing costs soared and just this month student loan payments resumed.
As a result consumer savings declined to three 9% in August 2023% from 26% in March of 2021.
Credit card debt is at a record high.
Bill Shapiro: Based on our current forecast, we anticipate positive company-wide adjusted EBITDA for the fourth quarter and full year. Turning to slide five, during the quarter, we generated $18.4 million in net proceeds from the sale of equity, and used $10 million of the proceeds to reduce the principal balance of our term loan. As a result of the debt reduction, we eliminated 966,000 penny warrants, can exercise an option to extend the maturity date of our term loan and revolver by one year to April 2026, and we'll save an estimated $3.4 million per year in interest.
401, K hardship withdrawals were 36% higher in the second quarter of 2003 compared to the same quarter in 2022, and auto and credit card delinquencies continue to rise.
Early stage mortgage delinquency rates are also rising comparing September to June 2020, 394% more in mortgages are delinquent by one payment and 10, 7% more mortgages are behind by two payments.
The cracks in the housing market are beginning to appear for September 2023, the seasonally adjusted annual rate of home sales are down 15, 4% compared to September 2022, and then medium home sale price in September has declined since June 2023, so they are still up too.
8% compared to September 2022.
Bill Shapiro: We continue to position Alpha Source to take advantage of what we see as significant potential opportunities with existing and new customers in both of our segments over the coming years as the default market continues to normalize. As you can see on slide 6, our sales pipeline and wins in both of our segments remain strong. Our consolidated weighted average pipeline at the end of a third quarter was an estimated $46 million of annual revenue on a stabilized basis, representing 34% of our annualized third quarter 2023 revenue.
This is typical in the early stages of a housing downturn at first denial followed by capitulation.
Home affordability, which is highly correlated to home prices recently reached a near 40 year lows.
Our recent CNN business article explain that for home affordability to return to the 25 year average home prices would need to drop by 28% interest rates would need to decline by 400 basis points or income would need to increase by 60% or some combination thereof.
Naturally an increase in unemployment would accelerate this correction and result in increased delinquencies and foreclosures, particularly for low down payment mortgages and those loans that were originated over the last couple of years.
Bill Shapiro: We are also winning new business. Since last quarter we won business that we estimate will generate $16.9 million of annual revenue on a stabilized basis. During the third quarter we continue to onboard and grow sales wins from 2022 and 2023 which combined are now at a $13.7 million annualized revenue run rate.
We estimate that for every 1% increase in 30 day delinquency rates the addressable market for our default services would increase by $700 million.
Turning to slide 10 in our origination segment.
Bill Shapiro: Turning to slide 7 and our countercyclical service are in real estate segment. Third quarter adjusted EBITDA of $10 million was $2.9 million or 42% higher than the same quarter in 2022. Third quarter adjusted EBITDA margins improved to 37% from 24% in the third quarter of last year. Adjusted EBITDA growth and margin improvement reflect product mix and cost reduction and efficiency initiatives partially offset by lower revenue. The service revenue decline was primarily from our fourth quarter 22 exit of a low margin employee outsourced business and fewer referrals in our lower margin field services business.
We performed well in a difficult origination environment.
Third quarter revenue was roughly flat and adjusted EBITDA improved by $1 $3 million over the same period in 2022, despite a 10% decline in industry wide origination volume.
Revenue reflects customer wins from our newer lenders one solutions, which are designed to help our members save money.
We offset by our other origination businesses, which were impacted by continued challenges in the market.
For 2023, we anticipate our origination segment service revenue to outperform the Nba's forecasted 29% decline in the origination market and adjusted EBITDA to improve compared to 2022 from sales momentum and our lenders one business and cost savings and efficiency initiatives across the segment.
Bill Shapiro: We also believe that the default market is continuing to recover as evidenced by recent year over year growth in referral volume in our pre foreclosure title and foreclosure trustee products. Both pre foreclosure title and first lean foreclosure trustee referrals were 42% higher for September 1 through October 20 compared to the same period in 2022.
Okay.
Slide 11 provides a summary of our origination segment sales pipeline and wins.
A very difficult origination market, we remain focused on increasing adoption of our solutions that help our lenders one members save money.
Our weighted average sales pipeline as of September 30 is $24 million of annual revenue on a stabilized basis.
Bill Shapiro: For 2023 we anticipate that our service on real estate segment will have higher adjusted EBITDA and adjusted EBITDA margins compared to last year.
An estimated $1 7 million in new business during the third quarter.
From our 2022 and first half of the year 2023 sales wins, we recognized approximately $2 $8 million of revenue in the third quarter or $11 $1 million of revenue on an annualized basis.
Bill Shapiro: Moving to slide 8 in our service on real estate sales pipeline and wins at the end of the third quarter are weighted average pipeline total 25.6 million dollars of annual revenue on a stabilized basis. The pipeline declined compared to the prior quarter primarily because we converted an estimated 15.3 million dollars of the pipeline into third quarter sales wins.
Moving to our corporate segment on slide 12.
We continue to maintain cost discipline.
Third quarter adjusted EBIT loss in the corporate segment of $8 7 million was $3 1 million or 26% better than the same quarter in 2022.
Bill Shapiro: One of the more notable third quarter wins was the signing of a master services agreement and a statement of work to provide RIO asset management brokerage auction valuation and field services on a portion of a reverse mortgage services. On a stabilized basis, we estimate that this new business represents $12.8 million in annual revenue and a $3 to $5 million per year in adjusted EBITDA. We began receiving referrals in September and anticipate that we will reach revenue and earning stabilization by the middle of 2024, if not sooner.
For the year, we anticipate the corporate adjusted EBITDA loss to improve compared to 2022.
This reflects our July cost cutting and efficiency plan.
To conclude we continue to improve our adjusted EBITDA results, our third quarter, adjusted EBITDA was $7 $3 million better than the same period in 2022 and year to date, adjusted EBITDA of $16 $1 million better than the same period last year our.
Our sales pipeline and wins remained strong and we continue to aggressively manage our expenses.
Bill Shapiro: Turning to the macroeconomic environment in slide 9. During the pandemic, consumers benefited from stimulus checks, the suspension of mortgage and student loan payments, and a historically low interest rate environment. As a result, consumer savings reached an all-time high, delinquencies declined, credit scores improved, and home values appreciated.
We believe the strength of our sales wins and pipeline cost savings initiatives normalization of the default market and consumer weakness positions out the source for positive adjusted EBITDA in the fourth quarter and full year and attractive growth as we look to 2024 with potential upside if mortgage delinquency rates rise.
I will now open up the call for questions.
Bill Shapiro: Since early 2022, mortgage for closure moratoriums and forbearance programs ended, borrowing costs soared, and just this month's student loan payments resumed. As a result, consumer savings declined to 3.9% in August 2023, from 26% in March of 2021. Credit card debt is added a record high, 401k hardship withdrawals were 36% higher in the second quarter of 23 compared to the same quarter in 2022, and auto and credit card delinquencies continue to rise. Early stage mortgage delinquency rates are also rising, comparing September to June 2023, 9.4% more mortgages are delinquent by one payment, and 10.7% more mortgages are behind by two payments.
Thank you.
We will now conduct the question and answer session to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question.
Please press star one again.
Please standby, while a compile the Q&A roster.
Okay.
Our first question comes from Raj Sharma from B Riley. Please go ahead.
Hi.
Thank you for taking my question.
Really good results congratulations on the improvement in the EBITDA.
I had to.
<unk> on the industry wide foreclosure skirts and sales there seems to be a.
Maybe some early shoots of an improvement.
Bill Shapiro: The cracks in the housing market are beginning to appear. For September 2023, the seasonally adjusted annual rate of home sales are down 15.4% compared to September 2022, and the medium home sale price in September has declined since June 2023, though they are still up 2.8% compared to September 2022.
Also DS in full closure seemingly dropped.
Considerable relative to.
Earlier part of the year.
From 200 days down to 700.
Is that indicative of.
Anything of an improvement in the space in.
Bill Shapiro: This is typical in the early stages of a housing downturn, a first denial filed by capitulation. Home affordability, which is highly correlated to home prices, recently reached a near 40-year loan. A recent CNN business article explained that for home affordability to return to the 25-year average, home prices would need to drop by 28%. Interest rates would need to decline by 400 basis points, or income would need to increase by 60% for some combination thereof.
And could you comment could you give us a little bit more color on that.
And of course, the early delinquencies are rising and how soon.
Could that.
Chart showing up.
More significantly.
Annual results you think.
Hi, Raj this is bill thanks for your questions.
I think we are seeing.
Early indications that delinquency rates, particularly 30 and 60 days are starting to rise that's a pretty significant increase just from a couple of months ago.
Bill Shapiro: Naturally, an increase in unemployment would accelerate this correction and result in increased delinquencies and foreclosures, particularly for low down payment mortgages, and those loans that were originated over the last couple of years. We estimate that for every 1% increase in 30-day delinquency rates, the addressable market for our default services would increase by $700 million.
And we're also seeing here to bring it home if you will in our foreclosure trustee business and our.
Insured title search and foreclosure information report business, which our title searches related to the startup of a foreclosure and we saw a 42% increase.
In the months of September and month to date in October and referrals compared to the same time last year and the reason why we focused on our September and October is earlier in the month, we got some benefit from the restart in California. So we wanted to normalize for that so it does appear that.
Bill Shapiro: Turning to slide 10 and our origination segment. We performed well in a difficult origination environment. Third quarter revenue was roughly flat, and adjusted EBITDA improved by $1.3 million over the same period in 2022, despite a 10% decline in industry-wide origination violence.
Both industry wide and ended Alpha source, we're starting to see an increase in the earlier stage activities and referrals.
Bill Shapiro: Revenue reflects customer wins from our newer Lenders One Solutions, which are designed to help our members save money, partially offset by our other origination businesses, which were impacted by continued challenges in the market. For 2023, we anticipate our origination segment service revenue to outperform the MBAs, forecasted 29% decline in the origination market and adjusted EBITDA to improve compared to 2022. From sales momentum in our Lenders One Business and cost savings and efficiency initiatives across the segment.
And this could be a precursor over time as those as those foreclosures worked through the system for an increase in our higher margin well in our high margin <unk>.
REO auction.
<unk> or <unk>.
Yeah.
Okay.
Great and then.
Another question is on your recently announced cost cuts.
$2 5 million did you give.
Any sort of progress on that or any can you.
Bill Shapiro: Slide 11 provides a summary of our origination segment sales pipeline and wins. During a very difficult origination market, we remain focused on increasing adoption of our solutions that help our Lenders One members save money. Our weighted average sales pipeline as of September 30th is $20.4 million of annual revenue on a stabilized basis.
Comments on the ongoing cost cuts.
Sure I think today, we're at about $10 $5 million a year of annualized savings I think we achieved about $900000 of savings in the month of September.
We should be Michelle roughly at 12 for $12 5 million.
Bill Shapiro: We went and estimated 1.7 million in new business during the third quarter. From our 2022 and first half of the year 2023 sales wins, we recognized approximately $2.8 million of revenue in the third quarter or $11.1 million of revenue on an annualized basis.
Savings by the end of the year and then the balance of the savings the other the additional million million and half will come in the second half of next year.
Yes.
So we're making very good progress.
With that initiative.
Yes.
Bill Shapiro: Moving to our corporate segment in slide 12, we continue to maintain cost discipline. Third quarter adjusted EBITDA loss in the corporate segment of $8.7 million was $3.1 million or 26% better than the same quarter in 2022. For the year, we anticipate the corporate adjusted EBITDA loss to improve compared to 2022. This reflects our July cost cutting and efficiency plan.
I'll go back in line a question.
Question.
Great. Thanks Raj.
Thanks.
Thank you.
One moment for our next question.
And as a reminder.
If you would like to ask a question. Please press star one one and wait for your name to be announced.
Our next question comes from Mike Grondahl.
Bill Shapiro: To conclude, we continue to improve our adjusted EBITDA results. Our third quarter adjusted EBITDA was $7.3 million better than the same period in 2022. And year-to-day adjusted EBITDA is $16.1 million better than the same period last year. Our sales pipeline and wins remain strong and we continue to aggressively manage our expenses.
From Northland Securities. Please go ahead.
Hey, Bill and Michelle.
Two questions one.
Could you just talk a little bit about any.
Any visibility you have.
On an increase in hub inventory.
Bill Shapiro: We believe the strength of our sales wins and pipeline, cost savings, initiatives, normalization of the default market and consumer weakness, positions out the source for positive adjusted EBITDA in the fourth quarter and full year and attractive growth as we looked to 2024 with potential upside if mortgage delinquency rates rise.
Or when do you think that may begin to inflect.
And then secondly.
Just been sort of a base case for 'twenty four.
What are you sort of think of it is potential.
Potential cash flow or cash.
Just in a base case for 'twenty four.
Bill Shapiro: I'll now open up the call for questions. Thank you.
Hi, Mike It's bill so with respect to <unk> inventory, we spend a lot of time looking at how that business is performing and clearly it takes time for those new foreclosure initiations.
Operator: We will now conduct the question and succession. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while I compile the Q&A roster.
That increased quite substantially in the first quarter of 2022 to work their way through that system and get to the end.
And also.
We're also monitoring the conversion rate what percentage of of those foreclosures are actually converting to Rio.
Raj Sharma: Our first question comes from Raj Sharma from B. Raleigh. Please go ahead.
Oreo and we think given what's going on with the economy for all the reasons, we talked about when we discuss the macroeconomic environment and home affordability. We do think over time as those foreclosures continue through that process that that conversion rate will return certainly closer to what.
Raj Sharma: Hi. Thank you for taking the question. Really good results. Congratulations on the improvement in the EBITDA. I had a question on the industry wide foreclosure, you know, scarred some sales. There seems to be a maybe some early shoots of an improvement. Also, days in foreclosure seemingly dropped, but a considerable relative to Earlier a part of the year, you know, from 1200 days down to 700. Is that indicative of anything, you know, of an improvement in the space and could you comment, could you give a little bit more color on that. And of course, the early link with these are rising and how soon could that start showing up more significantly in your results, you think.
Like prior to the pandemic and so then it's just a matter of how long it takes for those that increase in foreclosures from the from the first quarter of 2022 to work its way through the system I think we've been guiding people that it's typically about 24 months and in some states it's faster in other states it slower.
To get through the foreclosure and then typically it's another six months to sell the Oreo. So those increase in foreclosure initiations typically take about 24 months to get to the sale and another to the foreclosure auction in another six months to be sold so we should start to see.
An increase going into next year.
From from those.
Bill Shapiro: All right, Rajiv, this is Bill. Thanks for your questions. So I think we are seeing, you know, early indications that the winkewincy rates, you know, particularly 30 and 60 days are starting to rise. That's a pretty significant increase just from a couple of months ago. And we're also seeing, you know, to bring it sort of home, if you will, in our foreclosure trustee business and our insured title search and foreclosure information report business, which our title search is related to the start of a foreclosure.
First quarter of 2022.
Initiations.
In terms of cash flow for next year, Mike, we're not providing guidance what I will say is we're making very good progress.
Proving.
The earnings for the company.
In the third quarter I was very pleased to see consistent.
Positive EBIT, each month and EBIT improved each month.
In the fourth quarter, you typically would see.
It's a seasonally slower period I think our revenue will be roughly in line with where it was in the third quarter, but higher than the fourth quarter of last year.
Bill Shapiro: We saw 42% increase in the months of September and month to date in October in referrals compared to the same time last year. And the reason why we focused on a September and October is earlier in the month we got some benefit from the restart in California, so we wanted to normalize for that. So it does appear that both industry wide and and developed the source, we're starting to see an increase in the earlier stage activities and referrals.
And we think our EBIT is going to continue to improve setting us up for a good <unk>.
Our run rate going into 2024.
Sure Mike.
Bill Shapiro: And this could be a precursor, you know, over time, as those as those foreclosures work through the system for an increase in our higher margin, well, in our high margin. Are you auction of business or hubs?
Steven.
Bill Shapiro: Great.
Okay, operator, I'm not sure if theres any additional questions.
As one last reminder, if you would like to ask a question. Please press star one one.
Raj Sharma: And then another question is on your recently announced cost cuts of 13.5 million. Could you give you know any sort of progress on that or any any comments on the ongoing cost cuts?
Okay.
Okay.
I am showing no further questions.
I'd now like to turn the conference over to Bill for final remarks.
Yes, thanks for joining today's call. We appreciate your support and we're very pleased with the progress we're making in improving the EBIT at the company.
Bill Shapiro: Sure. Yeah, I think today we're at about 10 and a half million dollars a year of annualized savings. I think we achieved about 900,000 dollars of savings in the month of September. We should be Michelle roughly at 12 or 12 and a half million dollars of savings by the end of the year and then the balance of the savings, the other, the additional million, a half will come on the second half of next year. That's right. So we're making very good progress with that initiative.
Growing our and strengthening our sales pipeline talk to you soon thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Operator: Yeah, thank you. I'll go back in line from the question. Thanks. Thank you. One moment for our next question. And as a reminder, if you would like to ask a question, please press star one one and wait for your name to be announced.
Okay.
Okay.
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Mike Grande: Our next question comes from Mike Grande from Northland Securities. Please go ahead. Hey Bill and Michelle, two questions.
Yes.
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Bill Shapiro: One, could you just talk a little bit about any visibility you have on an increase in a Hubso inventory or when you think that may begin to inflect. And then secondly, just in sort of a base case for 24, what do you sort of think of as potential cash flow or cash usage just in a base case for 24? Hi Mike, it's Bill. So with respect to Hubso inventory, we spend a lot of time looking at how that business is performing and clearly it takes time for those new foreclosure initiations that increase quite substantially in the first quarter of 2022 to work their way through that system and get to the end.
Bill Shapiro: And also, we're also monitoring the conversion rate, what percentage of those foreclosures are actually converting to REO. And we think, given what's going on with the economy, for all the reasons we talked about when we discussed the macro economic environment and home affordability, we do think over time as those foreclosures continue through that process, that that conversion rate will return certainly closer to what it looked like prior to the pandemic. And so then it's just a matter of how long it takes for those that increase in foreclosures from the from the first quarter of 2022 to work its way through the system.
Yes.
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Bill Shapiro: I think we've been guiding people that it's typically about 24 months and in some states it's faster and other states it's slower to get through the foreclosure and then typically it's another six months to sell the REO. So those increase in foreclosure initiations typically take about 24 months to get to the sale and another to the foreclosure auction and another six months to be sold. So we should start to see an increase going into next year from those first quarter of 2022 initiations.
Dan.
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Bill Shapiro: In terms of a cash flow for next year, Mike, we're not providing guidance. What I will say is we're making very good progress improving the earnings for the company. In the third quarter, I was very pleased to see consistent positive EBITDA each month and EBITDA improved each month. In the fourth quarter, you typically would see it's a seasonally slower period. I think our revenue will be roughly in line with where it was in the third quarter but higher than the fourth quarter of last year. And we think our EBITDA is going to continue to improve setting us up for a good run rate going into 2024.
Sure.
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Operator: As one last reminder, if you would like to ask a question, please press star 11.
No.
Dan.
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Operator: I am showing no further questions.
Bill Shapiro: I will now like to turn the conference over to Bill for final remarks. Thanks for joining today's call. We appreciate your support, and we're very pleased with the progress we're making in improving the EVA at the company and growing our and strengthening our sales pipeline. Talk to you soon. Thank you.
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Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Thank you very much, www.mesmerism.info www.mesmerism.info www.mesmerism.info www.mesmerism.info www.mesmerism.info www.mesmerism.info Michael Grondahl, William Shepro, Altisource Portfolio Solutions Michael Grondahl, William Shepro, Altisource Portfolio Solutions Michael Grondahl, William Shepro, Altisource Portfolio Solutions Michael Grondahl, William Shepro, Altisource Portfolio Solutions Michael Grondahl, William Shepro, Altisource Portfolio Solutions Michael Grondahl, William Shepro, Altisource Portfolio Solutions Michael Grondahl, William Shepro, Altisource Portfolio Solutions
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