Altisource Portfolio Solutions has spent the past year proving it can replace shrinking legacy revenue from Onity and Rhythm with business from a broader set of clients. The harder question heading into its third-quarter report on October 29 is whether that growth can start turning into profit. Revenue has been climbing for several quarters while adjusted EBITDA slipped last quarter. Meanwhile, the stock has fallen 17.4% since the last report, trailing the S&P 500 by more than 21 points. The market seems to doubt that the top-line story will carry over to the bottom line.
The Street is looking for earnings of $0.08 per share on revenue of about $48.1 million. Compared with last year's loss of a penny on $41.9 million in revenue, that is roughly 15% sales growth and a swing to profit. Measured against last quarter, the bar is more modest. Revenue of $50.7 million came in above what analysts now expect, so consensus assumes a slight sequential dip, with earnings edging up a penny. That fits management's own framing. Altisource indicated it expects third-quarter adjusted EBITDA to be roughly flat, improve in the fourth quarter, and keep it on track for its Project 45 goal of $45 million in run-rate adjusted EBITDA by late 2028. The outlook was reaffirmed rather than raised, and consensus appears to sit comfortably inside that conservative frame.
The most important evidence will come from the servicer and real estate business. HUBZU inventory, which management treats as a leading indicator, has swelled from 5,700 assets last September to 22,300 in June. Management has described a conversion window of roughly nine to twelve months for REO assets. Assets added late last year should begin producing auction and sales revenue now. If segment revenue and EBITDA show that lift, the industry backdrop would be validated as well: delinquent-plus-foreclosure loans were up 28% year over year in May. If inventory keeps piling up without a matching revenue step-up, that would suggest the conversion timeline is slipping.
The pipeline is the counterweight. The servicer and real estate sales pipeline has shrunk every quarter, from $24.4 million to $8.2 million, and quarterly wins fell to $5.2 million last period. Management has also flagged that Onity and Rhythm revenue keeps declining through this quarter before stabilizing in the fourth. A rebuilt pipeline, or at least a halt in the slide, would ease concerns that diversification is running out of fresh fuel. Origination looks healthier, with a $20 million weighted pipeline and revenue growth above 60%. However, its EBITDA has suffered from hiring and outside fees, so signs of operating leverage there would matter.
Cash flow deserves attention too. Operating cash flow swung to negative $6.6 million last quarter as receivables built up, and unrestricted cash fell to $23.2 million. For a company still paying down its term loan, a reversal of that working capital drag would reassure investors more than another revenue beat. Any concrete savings from the newly formalized AI and automation program would add credibility to the margin story.
Sentiment has warmed noticeably from near-neutral levels before the last report, even as the share price has gone the other way. At $5.37, the stock trades below its 200-day average of $6.23. It sits near the bottom of a post-earnings range of $5.00 to $6.74, which is itself lower than the prior quarter's range. That leaves room for a relief move if margins cooperate. Ultimately, this report hinges on whether Altisource can show that its growing inventory and diversified revenue are finally lifting EBITDA and cash. Revenue growth alone no longer appears to be enough to restore confidence.