Altisource Portfolio Solutions SA (ASPS) 2015 Q1 法說會逐字稿

Welcome to the Altisource first quarter earnings call. (Operator Instructions) I'd now like to introduce Michelle Esterman, Chief Financial Officer.

Thank you, operator. We first want to remind you that the earnings release form 10Q, and quarterly slides are available at our website at WWW.Altisource.com. Our presentation today contains forward-looking statements, made pursuant to the Safe Harbor Provisions of the Federal Securities law.

Statements in this conference call and in our press release issued earlier today which are other than historical fact are forward-looking statements. Factors that might cause actual results to differ materially are discussed in our earnings release as well as our public filings. The company disclaims any intent or obligation to publicly update or revise any forward-looking statements regardless of whether new information becomes available, future developments occur, or otherwise.

Joining me for today's call is Bill Shepro, our Chief Executive Officer.

Thanks, Michelle. Good morning, and thank you for joining today's call.

This morning I plan on providing a review of our vision and an update on the progress we are making on our 2015 strategic initiatives. Michelle will discuss our financial performance.

Before I start I'd like to address HOSS's recent sale of its assets to New Residential. We believe the amendment of the agreements between Ocwen and HOSS demonstrates New Residential's commitment to a long-term relationship with Ocwen. Our understanding is the amendment removes New Residential's ability to transfer servicing away from Ocwen due to a servicer rating downgrade for the next two years and extends the initial six-year agreements by up to an additional two years. This provides enhanced stability for Ocwen and the mortgage servicing industry, and of course it is good for Altisource.

Turning to the quarter, I am very pleased with our first quarter accomplishments. Not only are we executing on our growth initiatives we outlined for you earlier this year, we came together as an organization making good progress against our cost-reduction plan.

While the full impact of our cost-reduction efforts are not reflected in the first quarter earnings, as these activities occurred throughout the quarter, and we expect to achieve higher cost savings in the second quarter. We continue to believe the 2015 adjusted pretax income of $136 million at the mid-point of our scenarios is reasonable.

Michelle will discuss this in greater detail in a couple of minutes.

Turning to our vision, Altisource's vision is to become the premiere real estate and mortgage marketplace, offering both the services and the platform to order and deliver the services to the marketplace participants. Within these markets, we are leading with innovative technology-led solutions, facilitating transactions related to home purchases and sales, home rentals, home maintenance, mortgage origination, and mortgage servicing.

We bring value by providing easy, efficient, comprehensive, and transparent marketplaces to conduct transactions. Our 2015 strategic initiatives as set forth on slide 7, are centered on advancing our vision for Altisource, while diversifying and growing our customer and revenue base.

We're making good progress on the four initiatives we outlined on our last call and believe we are largely on track to achieve the objectives we set out for this year. These initiatives are growing our origination services and origination technology businesses; attracting clients to our comprehensive default-related businesses, expanding our innovative online real estate marketplace and growing our property management and renovation services businesses.

To grow our origination services and origination technology businesses, we have a multidisciplinary team of Altisource senior leaders who have developed four objectives for 2015. One, increase the numbers of Lenders One, and wholesale one members, and mortgage builder customers; two, sell more origination related products and services to the members, Mortgage Builder, Hubzu, and Owners.com customers; three, expand offerings to the members to include non origination related products and services; and four, increase member loan sales to secondary market investors with a focus on developing non agency products.

The Lenders One members continue to represent a growing percentage of the US origination market, increasing to 18% in the first quarter of 2015. During the first quarter, the number of Lenders One and wholesale members increased by eight, and we believe we are on track to achieve our membership growth objectives for the year.

With respect to Mortgage Builder, we have focused our attention on upgrading Architect, our loan origination system offering to address the TILA-RESPA integrated disclosure rule. We're also conducting training to assist our clients in preparing for the August 1, 2015 required implementation date.

We expect to begin offering certain of Altisource's origination-related services through the Mortgage Builder marketplace in the second quarter of 2015. We believe these efforts will strengthen our relationships with the mortgage builder customer base allowing us to capture a greater share of services they purchase.

We're making solid progress against our goal of selling more origination-related services to the members, Mortgage Builder, Hubzu and Owners customers.

Our realigned sales team is focusing on larger opportunities and working to better communicate the Altisource value proposition. For example, during the first quarter, we closed over 1,000 origination title Owners. A 26% increase from the fourth quarter of 2014, and there were approximately 1,000 pending orders at the end of the quarter, a 59% increase over the end of 2014.

To increase the non-origination related services we provide to the Lenders One members and our other cooperatives, we are packaging the relevant product and service solutions we'll offer to our members. We are actively engaged with over 50 vendors for the provision of these products and services. Once fully implemented, we believe these solutions will reduce our members' operating costs.

Finally we made good progress during the quarter to increase loan sales to secondary market investors. During the quarter, we added seven new preferred investors, including Flagstar Bank, the first top-10 mortgage lender to join the program since the financial crisis.

Our second initiative is to grow revenue from our comprehensive default-related businesses by expanding the services we provide to our existing customer base and attracting new customers. We are making progress.

As you can see on slide 10, the number of non-Ocwen homes hold on Hubzu has been increasing nicely, quadrupling from the third quarter of 2014 to the fourth quarter, and nearly doubling from the fourth quarter of 2014 to the first quarter of this year. During the quarter, as you can see on slide 13, we recognized $10 million of default-related service revenue from non-Ocwen customers, an increase of 27% from the fourth quarter of 2014. As potential customers have learned more about Altisource and the extent of our capabilities, our sales team is fielding more requests for a proposal from a broader range of market participants. We believe we are well positioned to achieve the default related service revenue objective of $45 million to $55 million we set forth in our scenario.

Our third initiative is expanding our innovative online real estate marketplace. Our mission is to be the leading residential real estate marketplace by demystifying the offer and closing process, giving consumers more control over their transactions, and delivering outstanding value on every sale.

To achieve this we have four objectives. First, relaunch Hubzu and Owners.com to deliver a world-class shopping experience; second, create an evolved and powerful brand that reflects our mission and carves out a clear differentiated space in the market; third, built a multi channel marketing and advertising campaign to drive buyers and sellers to Hubzu and Owners; and fourth deliver the suite of integrated services associated with a home sale transaction into the Hubzu and Owners marketplaces. These objectives will help us provide a better experience for home sellers and buyers and capture a greater percentage of services purchased during transaction.

Our last initiative is growing our property management and renovation services business. We are pleased with the revenue growth we are experiencing from Altisource residential. During the first quarter of 2015, we generated $11.5 million of service revenue from assets owned by RESI, a $6.3 million increase from the first quarter of 2014. We are well positioned to continue to support RESI as it grows and converts more loans to REO and rental properties.

In addition to supporting RESI, we have leveraged the expertise we've built in cooperative development through Lenders One and Wholesale One with the first quarter launch of our newest cooperative, Residential Investor One. Residential Investor One will serve the very large market of small and medium sized single-family rental investors, providing its members savings and efficiencies through lower priced goods and services, reduced real estate brokerage commissions and better financing terms.

Some of these services may be offered by Altisource directly. For example, a real estate brokerage, title insurance and closing businesses can assist our members in the acquisition and sale of their investment properties and our GPO organization and property management business can lower costs for home repair, maintenance, and property management services.

Finally during the first quarter, we continue to improve our compliance management system by enhancing our customer complaint tracking and escalation process, and incorporating our contractual and regulatory compliance testing into the system.

In summary, I am pleased with the progress we made in the first quarter, believe we are largely on track to achieve the objectives we established for the year, and look forward to updating you on these throughout the year.

Thank you, Bill.

This morning we reported first quarter 2015 service revenue of $207.8 million, adjusted net income attributable to share holders of $11.8 million, and adjusted diluted earnings per share of $0.56. Net income includes $13.6 million of expenses related to terminated employees and contractors and other out of the ordinary items. Absent these items, adjusted net income attributable to share holders would have been $24.3 million.

Slides 2-6 provide highlights of our results for the current quarter compared to prior periods. We are pleased with the results for the quarter and our progress on our cost-reduction initiative, and continue to believe that the 2015 adjusted pretax income of $136 million at the mid-point of our scenarios is reasonable.

Turning to service revenue, despite the lower number of delinquent non-GSE loans in Ocwen's portfolio, in the first quarter of 2015, compared to the same quarter in 2014, service revenue only decreased by 1% over the same period. The decrease in revenue was primarily from the November 2014 discontinuation of the lender placed insurance brokerage business, fewer orders for property valuation services, and lower equator revenue.

In 2014, equator revenue included the amortization of acquisition related deferred revenue, which was fully amortized by November of 2014. These declines were almost entirely offset by impressive growth in Hubzu revenue from a higher number of both Ocwen and non Ocwen homes sold.

Adjusted net income attributable to share holders in the first quarter of 2015 was 76% lower than the first quarter of 2014, primarily from revenue mix in the mortgage services and financial services segment, continued investment in some of our technology services businesses, [closing] certain costs through 2014 that we worked to eliminate during the first quarter of 2015, and other out of the ordinary items.

As you can see on slide 4, we recognized items totaling $13.6 million associated with terminated employees and contractors and an unrealized loss on HOSS stock in the first quarter of 2015. During the first quarter we incurred $4.5 million of severance for employees that were eliminated in connection with our cost savings initiative, including $5.8 million of compensation expense related to the period of time prior to termination of these employees and contractors and recognized an unrealized loss on HOSS stock of $3.3 million.

Between March 10 and March 17 of 2015, we acquired $30 million of HOSS stock to provide us with the ability to vote for or against the announced sale of HOSS stock to New Residential. As a result of the termination of the initially announced transaction, the subsequent sale of HOSS's assets to New Residential, and HOSS's announcement of intention to liquidate at a higher price than the March 31 closing price, we expect to reverse a portion of the loss later this year.

We're largely complete with the execution of our cost savings plan, and expect to realize the majority of the run rate benefit of the reductions in the second quarter of 2015. In addition to the first quarter benefit of the items I just discussed, we will benefit in the second quarter from the March 31, 2015 elimination of the data access fees, lower unit cost for outside fees and services on seasonally higher revenue, and the termination of the lease on a larger facility.

We enter the second quarter as a leaner organization focused on a smaller number of key initiatives. From a cash perspective, we used $15.9 million of cash to support our operations in the first quarter of 2015. Operating cash flow was largely impacted by lower net income and changes in working capital.

With respect to working capital, accounts payable and accrued expenses were $27.6 million lower at March 31st, 2015 than at end of 2014. The reduction was largely related to the payment of annual bonuses, and the timing of other cash payments.

Second, accounts receivable increased by $15.1 million from the end of 2014, negatively impacting our operating cash flow. During the first quarter, we also used cash to purchase $30 million of HOSS common stock, invest $3.9 million in facilities and technology, and purchase $4 million of our common stock.

As a capital light services business, we expect to generate significant cash from our operations in 2015. With some of the Ocwen-related uncertainties addressed as a result of the agreement it reached with HOSS and New Residential, we are assessing our capital allocations strategy.

While we intend to build our cash balance throughout the year to provide us with runway to support our growth initiatives, we may repurchase some of our stock and debt based on the environment. In closing, we have a lot of exciting opportunities in front of us, and are well positioned to achieve our strategic initiatives to diversify and grow our revenue and customer base.

I'd now like to open the call up for questions. Operator?

(Operator Instructions) Our first question comes from the line of Mike Grondahl of Piper Jaffray.

Yes, thanks. My first question, just with the non-GSE delinquent loans, the revenue per quarter of $390 was a little bit higher than what I was thinking. Any new services that you're supplying, or what pushed that number higher?

Hey, Mike. It's primarily the greater number of sales we had through Hubzu.

Okay. So mix with Hubzu. Okay.

Yes, mix. And then the average non GSE delinquent loans was $310,000. Any actions or activity that caused that number to bounce around a little bit? It was maybe just a little lower than what we'd thought?

Yes, Mike, what you usually see with delinquency rates is the drop is the highest in the first quarter because borrowers often use their bonus payment for their tax refunds to make payments on their mortgage. So historically you've seen the drop -- the largest in the first quarter and smaller amounts through the rest of the year.

Okay. Just turning to Hubzu, is there anymore of an update there as it relates to Ocwen and short sales or what you're doing for third parties and some of the RFPs you might have mentioned?

Yes, Mike, with respect to Ocwen, I would say it's business as usual. With respect to third parties, we had business with I think four customers that contributed to the first quarter growth in our Hubzu sales, and we're in active dialogue with others on the institutional side. And we're also very focused on our overall online real estate business that we're very excited about.

Bill, can you -- what do you mean by the online real estate? Owners.com?

Owners and Hubzu.

Okay.

So Owners last year I think had sold 15,000 packages to retail sellers of their homes. So one of our objectives is to substantially grow that business and to provide all the services that a seller would typically use associated with the sale of their transaction. And so we believe we're executing well against our strategy to accomplish that.

Got it, okay -- well, 15,000, quite a bit. And then just looking at -- a couple quarters ago, we talk about some potential pricing studies as it relates to the prices you're charging Ocwen. Is there any update on those studies, or sort of third parties that are looking at it?

From our perspective, there's no new news to report. We continue to believe that for the services we provide, if you compare like services, we're charging pricing that's within the market range. Or within the range of market.

Okay. Thank you. I'll jump back in the queue.

Thank you. Our next question comes from the line of Jade Rahmani from KBW.

Yes, just wanted to ask the cooperative initiative in the rental space, can you talk about the addressable opportunity for that beyond Altisource residential? How do you look at the size of that market, and what the potential penetration could be for this cooperative?

So sure. We're primarily going after the smaller and mid sized investors of rental homes, as well as those that are in the fix and flip business. And it's a very large market. I think there's something like 14 million residential homes that are rented.

And we're very -- we just announced the launch of the cooperative a week ago or so. And we're at a conference, and it was the IMN conference a couple days ago, and the feedback I got from the conference was very, very positive. I think we had over 70 or 80 meetings, a lot of very strong positive reaction from the people that met with us at the conference.

So we're very optimistic that we're going to be able to add real value to those types of investors in the space. And that Altisource either directly or through our preferred partners and vendors will be able to help them improve their operations and lower their cost.

Okay.

And that leverages something we do today, both in our cooperative space as well as the work we provide to Altisource residential.

And how many properties are currently being serviced through the overall platform?

We're not going to release any information related to RESI or MAC until after they release. But if you look in our slide deck, we indicate what those numbers were at the end of last quarter.

Okay. So far the property service are pretty much all related to RESI.

We manage today Ocwen's REO, and REO for some other customers at Altisource. In addition to, that we're managing RESI's REO and rental portfolio.

And is it your feeling that over time the addressable -- or your penetration within the small investors is -- I mean, likely to exceed RESI's overall portfolio size given how big that market is?

Sure, well, let me give you just one example. If you look at Lenders One, when we bought Lenders One in February of 2010, my recollection was they're about three or 3.5% of the mortgage market. Today our membership comprises close to 17% or 18% of the market. And that's over five, 6-year period of time.

So we're very optimistic that we know how to develop and grow the membership of a cooperative. And that we also believe that we could directly provide some of the services to the membership or leverage our relationship with preferred investors and preferred vendors to provide those services at a lower cost.

Okay. Thanks very much

Thanks.

Thank you. Our next question comes from the line of Ryan Zacharia from JAM.

Thanks for taking the question. I just have one with respect to the data access agreement. Could you describe what that was and how it could be canceled without incident? Is it in any way going to impair your ability to service Ocwen's portfolio? Or might you have to incur an incremental expense from an unaffiliated third party because you're not getting the data through the access --

Ryan, -- no, Ryan, we're buying the data with an eye toward developing new products where we can leverage that data and develop new products. We've decided not to pursue that business, and terminated the agreement effective April 1.

Okay, thanks.

Thank you. Our next question come froms the line of Henry Coffey from Stern AG.

Stern AGCRT. If we go back to page 11, in the fourth quarter, you had 787 rental properties included in your management network. Is that how we should read that? What we're all trying to figure out is how much of those are from Ocwen-related parties, and what do the new adds look like from the three or four other relationships you've developed plus the rental platform?

Yes, Henry, on page 11, you're talking about the 787?

Yes.

Sorry, that's all -- maybe we could have been -- if you look a couple rows above it says Altisource residential's current portfolio. That all has to do with Altisource residential.

Okay. And so what does the count look like in terms of new clients, not Altisource residential related?

So excuse me, on the rental -- on the renovation property management and leasing business, today we're performing that service just for Altisource residential. With the launch of Residential Investor One a week ago, we think that opens up the opportunity for us to provide those services to others.

And it's primarily -- it's in essence, it's kind of like a commercial version of Angie's list in that you it's a way to order services, manage services, get a plumber into a disparate location, is that how we should understand the service offering?

Yes, it's not quite delivered in the same way as Angie's list is, but yes, we will provide all the services associated with buying a home, rehabbing the home, leasing the home, and managing the home. And then --

So if you were to take over my empire of one rental unit, I could give my tenant a 1-800 number to call or something when there's a leak or --

That's right.

Or a roof issue or something, and then that would just get provided on a fee per item basis or a fee per month?

Yes, Altisource could provide that service directly to you or we would leverage a network of vendors who could provide that service. And the way we charge would be normally a percentage of the rent.

Can you tell us what the percentage is or how it compares to other offerings?

No, I don't think we're prepared at this point to publicly disclose it. Our view is it will be -- we'll be charging more than we charge Altisource residential. But substantially less than what the market rate would be.

Okay. Turning to the balance sheet, how many shares of HOSS stock did you end up buying, and do you hold them all still?

It was a little over 1.6 million shares.

And we've started -- we've liquidated some of those shares. We don't have the exact number; Henry.

And then the rest will come through in the cash distribution on the 27th?

That's right. We may liquidate some before the end of this week, otherwise I think on Monday is the cash distribution for the majority of the proceeds.

Great. And then in terms of looking at your debt structure, I know you've got $5.9 million of current debt. When is the next serious maturity coming up?

Our debt amortizes at 1% per year, and the balance is due in December of 2020.

All right, thank you very much.

Thank you. Our next question comes from the line of Matt Lee Boyd from Numera.

Good morning, guys. I was just hoping -- you know you as per the statement this morning, no intention to repurchase shares right now. But I just wanted to see if you guys could give some more color on how you were thinking more generally about capital allocation going forward. Especially in light of what has been some pretty positive developments at Ocwen since your last call.

Yes I think as we said on the call, we're just going to continue to evaluate the environment. We have the authority to purchase shares back or to buy debt. But we want to make sure we do it in a prudent way, and we'll continue to evaluate the environment. There's not much more we can add at this point.

All right, that's fair. And then last year, during an investor call, last March, you provided a very helpful slide that drew out how you're thinking about the growth opportunity, three, four, and five years out, among your different business lines. I just wanted to know if you could provide some more color on how you're thinking about the growth opportunity a few years out, and if your expectations have changed materially since the last time you spoke about them.

Well, I think that originally included a scenario where Ocwen didn't grow at all, and a scenario where Ocwen grew.

Right.

We have not revisited at least for this purpose for the call those scenarios. But it's something we'll think about and consider for the future.

All right. Sure. That's fair. So is there -- and then in terms of lastly the scenarios that you provided, I know you said that the targets seem reasonable to you. After the first quarter.

Is there anymore color can you provide about how you're thinking about the scenario A and B for this year, and is B still kind of an achievable target? Even on the high end? Or should we really be thinking about the mid-point?

I think what we said on the call is that we believe the $136 million of pretax, which is the mid-point of the scenario is reasonable.

Right, okay. That's it, thanks.

Thank you.

Thank you, our next question comes from the line of Betsy Hill from Napier Park Global. Your question, please.

Thank you for taking my question. First question is it appears that the bulk of the accounts receivable were Ocwen build receivables. Any comments on that? Are you expecting those to be collected in Q2, and do you have any other comments on working capital flows potentially in Q2?

Our receivables can fluctuate from quarter to quarter, and we don't see any issues with collectability.

Any further color on for example our accrued expenses at a typical run rate? Do you expect that to be a source of cash as you build them again?

Yes, you'll notice it came down quite a bit in the first quarter. And it does vary from quarter to quarter.

I mean, is it going to be a source of cash, that's just -- as we move through the 2014 -- 2015, we're going to incur expenses, and I would expect it to be in line with the types of expenses that we've been incurring. So in June I might expect it to be higher, which would a source of cash. Because our costs are higher as we're providing property management services in others, and towards the end of the year, lower. But that's just generally speaking.

We also had a -- we paid bonuses in the first quarter as well, which was a large amount of cash that went out that will continue to build up. That payable will build up as the year progresses.

Right.

So that should improve on a quarterly basis the operating cash flow metrics.

Okay. And then lastly, could you just remind me of -- do you recall last year's annual cost of the data feed expenditure?

No, we don't have that in front of us. But it was roughly $10 million in the first quarter of this year.

Great, thank you.

Thank you, our next question comes from the line of Matt Gruppo from CIFC asset management. Your question, please?

Yes. A lot of the questions have already been answered. But just on the stock repurchase plan, is it correct that no additional shares have been purchased since mid-February this year?

That's correct, Matt.

Okay. And there's about a million shares remaining under the existing plan. And after that, you have to go back to the board for approval for any additional purchases?

Yes, we have to go back to the shareholders, yes.

All right. And the last thing on the HOSS shares, just the last question, do you expect to receive the full -- is it the $27, $26 million that you're holding at fair value? Do you expect to see that full amount back with the payouts? I think you mentioned it's likely to be received next week.

Yes, I mean I think if you look at both the price that it's trading at today as well as the distribution amount including the $0.70, those are both higher amounts than where the stock was at March 31st. And so the $3.3 million unrealized loss you see in the financials reflects the difference between what we paid in the March 31st price. So we would expect to reverse a portion of that loss.

Did that answer your question?

Yes, thank you.

Thank you. Our next question comes from the line of Mike Grondahl from Piper Jaffray. Your question, please.

Yes, guys, is there any update on how much cash you need to run the business or kind of the runway and the investments you have in front of you? And as part of that, the working capital which went against you this quarter, do you think you'll get most of that back through the year?

Yes, I think we -- I don't think we've established a certain amount. But we certainly have more cash on hand right now than we need to run the business. In terms of working capital, working capital actually went up $10 million. But $30 million of our working capital is in HOSS stock.

Yes, Mike I think we're expecting to spend per capita for the year $30 million to $35 million for the year. And we're going to generate a lot of cash as the year progresses. So we're not prepared to talk on this call when we think the minimum level of cash is that we should have, but between the cash that we have in place today and the significant cash we're going to generate as the year progresses we think we're in a very strong position.

Okay, and just one more question. With Ocwen selling a lot of the agency loans that they have, I think we can pretty easily tell that you don't make much revenue on the agency delinquent loans. But could you remind us in your technology services division where you have the seat license per loan, if you will, that you charge Ocwen for just a fee for a GSE loan versus a non-GSE loan?

So Mike, we license residential loan servicing systems to Ocwen, and we get paid by the loan. We don't publicly disclose how much we earn per loan per month. But as Ocwen sells some of its GSE portfolio, that will reduce the fees we earn on real servicing.

And then it will depend on the timing for Ocwen's sale of its nonperforming GSE loans, as to when we'll start losing some of that revenue. My understanding is these earlier sales are primarily performing loans, while we'll lose the real servicing and technology fee, but we'll be continuing to be providing default or preforeclosure default related services on the nonperforming loans. Until those -- until there's -- or until they're sold. If they are sold.

Got you. And just a follow-up to that, do you make more per month per loan for non-GSE loans?

No, on technology Mike, the fee is the same. We don't differentiate.

Got you.

On our servicing technology.

Got it. Got it. Thank you.

Thank you. Our next question comes from the line of Rami Camaly of Credit Suisse.

Good afternoon, and thank you for taking my call. Just wanted to focus on the technology services segment. Seems like the margins continue to drift lower. Understanding you're continuing to invest in that part of the business to support the growth, but how should we be thinking about the margins in that segment on a go-forward basis? And I have a couple more.

Sure, if you take a look at the slides in our scenarios, we give you a sense as to what we think the margins will be for that business for the year, and I think they're slightly better than where they're at in the first quarter. I don't have it at my fingerprints, but it is provided to you in our slide presentation.

And then in the Q, you noted that earlier party revenue on a per segment basis, it seems like it ticked higher year-over-year in tech services from 35 to 47. Is that -- should we expect that to drift back lower or how should we be thinking about that related party revenue to Ocwen?

Yes, I mean, what you see in the first quarter of the 2015 was, you had more Equator-deferred acquisition -- deferred revenue included in revenue, and that impacted that percentage amount.

In 2014.

In 2014, right

And that wasn't there in 2015.

It wasn't there in 2015, that's right.

And the $14 million or so of -- under nonrecurring costs, you provide that on a segment basis?

No, we didn't break it out on a segment basis.

I can tell you, it impacted -- we did have cost savings across all the segments in corporate, but we don't break it out by segment.

Okay. I'll follow up more offline. Thank.

Great.

Thank you. Our next question comes from the line of Alex Townsend from Bank of America.

Thanks for taking the question. One on Hubzu, and I know that you don't provide a specific stat for the service revenue per house sold. But if I try to get some implied figures there by looking at the balances of the total homes and the total service revenue contribution, the staff for Q1 2015 is probably $630,000, which is up materially from Q1 2014. So looking for general commentary on the pricing or the general contribution at Hubzu?

Sure. Some of that depends on the mix of homes sold by auction, where we earn a buyer's premium. So I think that mix was higher in the first quarter of this year than last year. And it also just depends on the services we provide on those homes.

Okay. So no fundamental changes to the pricing dynamics of that segment.

No.

Okay. And then just on one of the footnotes in the operating metric slides, there's a commentary on excluding revenue generated from the post-foreclosure services to RESI. I was just hoping you could provide a little more color on what drove that adjustment? And then in context of the prior investor materials from January 15, where there was commentary around general classification between service revenues and the pass-through piece of the business, if there was any update on your plans to make that adjustment?

Sure. With respect to RESI, we're hired directly by Ocwen Source Residential, so we didn't think it was appropriate to include it in that metric. That's why we made that change. And in terms of -- there was a service we were going to provide, an REO service, property preservation and inspection, where we were changing the way in which we charge Ocwen, and that was implemented I think in the middle of February.

So some revenue -- we're going to see -- service revenue will increase as a result of that change. Under the prior pricing, more of it was passed through revenue and not service revenue. Under the revised pricing, a greater percentage of the fees will be included in service revenue. And that's just starting around the middle --

Okay. So that did partially impact this quarter, and then will continue ongoing in 2015?

That's correct.

And then just if we're thinking about historical comparisons, if previously that was business that was booked as reimbursable expenses that had no margin contribution, but now it's being moved over to service revenue, does that imply that there's incremental margin generation from that piece of business?

So much depends on the mix of services we provide. It'd be very difficult to provide you an answer to that question.

Okay. But the -- like the fundamental rationale for the reclassification, was it based on any sort of change in the service itself, or how you're being compensated for it?

No, it's a change in how -- it's a change in the methodology for how we're paid, and I think we should leave it at that. But basically, the way in which we get paid for our services changed at our customer's request, so we've agreed to the change, and the change is the way in which we account for that revenue.

That's helpful, thanks.

Thank you.

(Operator Instructions)

Our next question is a follow-up from the line of Henry Coffey from Sterne Agee CRT.

Thank you for the plug. If I'm looking at page 4 in the slide deck, the $5.8 million of compensation costs for terminated employees, can we assume that they were quote essentially all non-revenue-generating employees? With that $5.8 million gone, you could still have accomplished the same level of revenue?

Yes, you could assume that, Henry.

And then going back to your view that the -- sort of the mid-point of your guidance is the achievable focus point. That's sort of pointing towards back-end earnings in the 250-plus level, particularly if we -- you know, you realize the starting point's at about $1.16. What would change from the current equation to get you there?

Henry, if you look on page 4, we show what you our first quarter would have been had we not incurred those costs, the employee costs for the full quarter.

Right, right, yes, it comes to about $1.16 a share.

Yes, that's $24 million of post-tax. And on top of that, we said we're eliminating the data fee, we have a plan to reduce additional unit costs associated with outside goods and services. We've already implemented the plan, but we're going to have seasonally higher volume going into the quarter. We've also consolidated some facilities, and just when you go into the second quarter, it's a seasonally stronger -- the second and third quarter are seasonally stronger for most of the services we provide. So (multiple speakers) --

Did you put a number on eliminating the data access?

No, I think we said in the first quarter it was approximately $10 million, so that was roughly the run rate.

And then looking at your 10-Q, the percentage of business from Ocwen, a very large drop in mortgage services, offset by an uptick in technology services. Can you -- I'm assuming that may have something to do with either the higher cost that Ocwen is going through in terms of managing regulatory items, or it could have had do with software development. Can you give us some sense on what went on in technology services? Between you and Ocwen?

Yes, no -- nothing. In technology services, the reason why Ocwen is a greater percentage is we were generating deferred revenue from the acquisition of Equator that ran out. And so when that ran out, our non-Ocwen business became a smaller percentage of the total revenue, because the deferred -- we're no longer booking deferred revenue from Equator. It's that simple.

Thank you.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Michelle Estherman for any further remarks.

Thank you everyone for joining today, we look forward to talking to you next quarter.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.