Altisource Asset Management Corp Com

Good day, and welcome to the AAMC Investor Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Donya Sawyer. Please go ahead.

Good morning, everyone, and welcome to AAMC's Q1 2023 Annual Earnings Conference Call. I'm Donya Sawyer, the new Chief Operating Officer of Lending Operations at AAMC. Before we begin, I would like to remind everyone that certain statements made during this conference call may constitute forward-looking statements covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature. As described under risk factors in our annual report on Form 10-K, forward-looking statements are subject to a variety of risks and uncertainties that could cause the company's actual results to differ from its beliefs, expectations, estimates, and projections. Consequently, you should not rely on these forward-looking statements as predictions of future events. Statements made during this conference call are made as of today's date, and the company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. As previously mentioned, today's call is being recorded, and a link to this webcast will be posted to our website later today. With that, joining me for today's call is our Chief Executive Officer, Jason Kopchak. Jason will provide an update on our first quarter 2023 activity, review additional corporate developments, and present an overview of our outlook for the year ahead. We will then open the line for questions. Lastly, materials for this call can be found in our investor presentation, which was issued earlier this morning. Related information can also be found on the stockholders' page of our website at www.altasourceamc.com. And now, I'll turn it over to Jason.

Thank you, Donya. It has been but seven short weeks since we last spoke. However, a lot was accomplished in that time. As a reminder, we are a capital light originator of private credit products. In our business model, for every dollar of capital that we deploy, we can originate $10 of assets to sell. Once we achieve normalized operations, we turn our loans on average weekly with a net margin of 150 basis points. This means that we expect to earn $7.50 for every dollar of capital deployed at the beginning of the year. On slide A, assuming $20 million in weekly production, the original $2 million of capital required would grow to $17.5 million at the end of the year. Therefore, as we grow faster, we would expect to generate more XX cash. Given the progress that we have made in building our loan production facility and pipeline, we have let the closed loan portfolio runoff to position our capital to be available for wholesale and the direct-to-borrower originations, which reduce interest income for the quarter. Even still, first quarter earnings improved by $1.1 million, reducing the first quarter loss to $3 million on revenue of $2.1 million. Our product mix includes both short-duration, one- to two-year-term, high-yielding fixed-income assets with a gross weighted average coupon of 9.5% to 12%. secured by one to four family residential or multi-family residential properties going through value improvements, also known as residential transitional loans or RTLs, as well as long-duration interest-only secured by income-producing residential properties, also known as DSCR loans. Unlike our peers, we do not use loan securitizations or banks as an exit for our loans. Instead, we establish individual criteria or a buy box to sell loans to institutions with permanent capital such as insurance companies, endowments, and pension funds. Our investors do not have the infrastructure to originate, yet potentially have over a trillion dollars allocated to alternative fixed income assets. I have 15 years of experience in unique relationships with these institutions. As a reminder, once we have secured our takeout investor, we then go to originate these assets, these loans, via our three channels, direct-to-borrower, wholesale, and broker channel. Turning to our accomplishments. In Q1, we hired Diane Sawyer as COO of both Allgent Lending, direct to borrower platform, and Alternative Lending Group, our wholesale lending platform. She has made an immediate impact with the build out of our loan production operations across all origination channels and manages relationships with institutional buyers. We added three additional takeout investors, two of which have insurance money. We are in talks with several additional takeout investors. In 2022, we were primarily a buyer of closed residential transitional loans, but as of mid-January of 2023, as planned, we turned on our direct-to-borrower origination channel, and in late March, we did a soft rollout of our wholesale platform. As a reminder, there is materially more revenue and profits to be earned from originating a loan versus purchasing a closed loan. Furthermore, if the customer experience is good, these borrowers often finance multiple projects each year. In the fixed income market, there's significantly more demand for self-originated paper. Turning to our Q2 2023 goals in operating metric standards. To go live with our wholesale platform. Another goal of ours is to go live with our direct-to-broker channel. For the RTLs, our expected gross revenue per loan is in excess of 350 basis points. For term and DSCR loans, our expected gross revenue per loan is in excess of 250 basis points. Once stabilized, our cost to process a loan is expected to be $160 per file. This represents a significant competitive advantage due to having our loan production principally conducted in Bangalore, India. Our expected average loan size for RTLs is approximately 500K. Our expected average loan size for DSCR loans is approximately 300K. As we are still in the process of setting up our loan production lines, there is no guarantee that all loans in our current pipeline will close. However, as of May 10th, our pipeline consists of the following. Direct-to-borrower origination pipeline is approximately 75 million. The wholesale channel has a committed volume of 45 million. On slide B, the $62 million pipeline from a direct-to-borrow channel represents net submissions of $38 million over the past seven weeks, with a net of $11 million of closings. The $45 million pipeline from the wholesale channel represents a net submission of $37 million over the past seven weeks, net of $7 million of loan closings. We plan on rolling out our broker direct channel this week. For the past seven weeks, our net submissions averaged 10.7 million per week and have grown substantially over the period. We expect continued growth in all three channels. By the way of example, on slide C, in the wholesale channel, we presently have five clients. Client one had net submissions of 29.5 million and has been active since March 1st. We have 100% participation of their sales force, which has four loan offers. Client two has net submissions of 15 million, has been active since March 9th. We have approximately 2% participation of their sales force, which is approximately 250 loan officers. Client three has net submissions of a half million dollars, has been active since April 27th, and we have approximately 5% of their sales force, which is 11 loan officers. Client four, we go live with them this week, has approximately 600 loan officers. Client five, we will go live the week of June 1st has approximately 2,000 loan officers. In summary, we're experiencing strong demand for our products from both the perspective of the borrowers and our takeout investors. Hence, we are perfecting, we are focused on perfecting and scaling our operations. I'm excited by the team's accomplishments since I joined as CEO last July. I'm looking forward to ramping our performance through the year. With that, I'll turn the call back to the operator for questions.