UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2011


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-34354

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

(Exact name of Registrant as specified in its Charter)


Luxembourg		~~Not applicable~~
(State or other jurisdiction of incorporation or organization)		Not applicable (I.R.S. Employer Identification No.)

291, ~~Route~~route d’Arlon

L-1150 Luxembourg
Grand Duchy of Luxembourg
(Address of principal executive offices) (Zip Code)

+352 2469 7900
Registrant’s telephone number

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yesþ Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yesoþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act):


Large accelerated filero	Accelerated filerþ	~~Accelerated~~Non-accelerated filerþo	~~Non-accelerated filer~~o	Smaller reporting companyo
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yeso Noþ

As of ~~April~~July 15, 2011, there were ~~25,412,748~~24,505,125 outstanding shares of the registrant’s shares of beneficial ~~interest.~~interest (excluding 907,623 shares held as treasury stock).

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

FORM 10-Q


	Page

PART I — Financial Information

Item 1 Interim Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets		3

Condensed Consolidated Statements of Operations		4

Condensed Consolidated ~~Statement~~Statements of Equity		5

Condensed Consolidated Statements of Cash Flows		6

Notes to Condensed Consolidated Financial Statements

Note 1 — Organization and Basis of Presentation		7

Note 2 — Transactions with Related Parties		8

Note 3 — Accounts Receivable, Net		9

Note 4 — Prepaid Expenses and Other Current Assets		910

Note 5—5 — Premises and Equipment, ~~net~~Net		10

Note 6 — Goodwill and Intangible, ~~Assets, net~~Net		10

Note 7 — Accounts Payable, Accrued Expenses and Other Current Liabilities		1112

Note 8 — Equity Based Compensation		1213

Note 9 — Cost of Revenue		1315

Note 10 — Selling, General and Administrative Expenses		1415

Note ~~11—~~11 — Other Income (Expense), Net		1416

Note 12 — Earnings Per Share		1516

Note 13 — Commitments and Contingencies		1516

Note 14 — Segment Reporting		1517

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		1720

Item 3 Quantitative and Qualitative Disclosures about Market Risk		3338

Item 4 Controls and Procedures		3338

PART II — Other Information

Item 1 Legal Proceedings		3439

Item 1A Risk Factors		3439

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds		3439

Item 3 Defaults Upon Senior Securities		3439

Item 4 (Removed and Reserved)		3439

Item 5 Other Information		3439

Item 6 Exhibits		3440

SIGNATURES

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION


Item 1.		Interim Condensed Consolidated Financial Statements (Unaudited)

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, Except ~~Per~~per Share Data)


		March 31,			December 31,				June 30,			December 31,
		2011			2010				2011			2010

ASSETS	ASSETS							ASSETS

Current Assets:
Cash and Cash Equivalents		$	26,324		$	22,134			$	35,032		$	22,134
Accounts Receivable, net			53,008			53,495				52,495			53,495
Prepaid Expenses and Other Current Assets			9,445			13,076				4,405			13,076
Deferred Tax Assets, net			641			551				633			551

Total Current Assets			89,418			89,256				92,565			89,256

Restricted Cash			1,222			1,045				1,222			1,045
Premises and Equipment, net			16,910			17,493				16,814			17,493
Deferred Tax Assets, net			892			1,206				490			1,206
Intangible Assets, net			70,292			72,428				69,269			72,428
Goodwill			11,836			11,836				12,537			11,836
Investment in Equity Affiliate			1,113			—				3,328			—
Other Non-Current Assets			4,708			4,536
Other Non-current Assets										6,824			4,536


Total Assets		$	196,391		$	197,800			$	203,049		$	197,800


LIABILITIES AND EQUITY	LIABILITIES AND EQUITY							LIABILITIES AND EQUITY

Current Liabilities:
Accounts Payable and Accrued Expenses		$	26,606		$	35,384			$	27,625		$	35,384
Capital Lease Obligations — Current			694			680				651			680
Other Current Liabilities			6,180			5,616				3,574			5,616

Total Current Liabilities			33,480			41,680				31,850			41,680

Capital Lease Obligations — Non-current			689			852				541			852
Other Non-current Liabilities			3,027			3,370				2,782			3,370

Commitments and Contingencies (Note 13)
Commitment and Contingencies (Note 13)

Equity:
Common Stock ($1.00 par value; 100,000 shares authorized; 25,413 shares issued and 24,715 outstanding in 2011; 25,413 shares issued and 24,881 outstanding in 2010)			25,413			25,413
Common Stock ($1.00 par value; 100,000 shares authorized; 25,413 shares issued and 24,586 outstanding in 2011; 25,413 shares issued and 24,881 outstanding in 2010)										25,413			25,413
Retained Earnings			71,954			58,546				84,744			58,546
Additional Paid-in-Capital			80,085			79,297
Treasury Stock, at cost ($1.00 par value; 698 and 532 shares in 2011 and 2010, respectively)			(19,798	)		(14,418	)
Additional Paid-in Capital										80,676			79,297
Treasury Stock, at cost ($1.00 par value; 827 and 532 shares in 2011 and 2010, respectively)										(24,442	)		(14,418	)

Altisource Equity			157,654			148,838				166,391			148,838

Non-controlling Interests			1,541			3,060				1,485			3,060

Total Equity			159,195			151,898				167,876			151,898


Total Liabilities and Equity		$	196,391		$	197,800			$	203,049		$	197,800

See accompanying notes to condensed consolidated financial ~~statements.~~statements.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, Except Per Share Data)


	Three Months Ended						Three Months Ended						Six Months Ended
	March 31,						June 30,						June 30,
	2011			2010			2011			2010			2011			2010

Revenue	$	88,670		$	60,974		$	93,268		$	71,348		$	181,938		$	132,321
Cost of Revenue		54,949			39,354			63,097			44,375			118,046			83,729


Gross Profit		33,721			21,620			30,171			26,973			63,892			48,592
Selling, General and Administrative Expenses		16,254			12,069			13,904			12,476			30,158			24,545


Income from Operations		17,467			9,551			16,267			14,497			33,734			24,047

Other Income (Expense), net		344			(72	)		270			40			614			(32	)


Income Before Income Taxes and Non-controlling Interests		17,811			9,479			16,537			14,537			34,348			24,015

Income Tax Provision		(1,687	)		(2,385	)
Income Tax (Provision) Benefit								(1,847	)		3,107			(3,534	)		722


Net Income		16,124			7,094			14,690			17,644			30,814			24,737

Net Income Attributable to Non-controlling Interests		(1,299	)		(787	)		(1,305	)		(1,297	)		(2,604	)		(2,084	)


Net Income Attributable to Altisource	$	14,825		$	6,307		$	13,385		$	16,347		$	28,210		$	22,653


Earnings Per Share:
Basic	$	0.60		$	0.26		$	0.54		$	0.65		$	1.14		$	0.91

Diluted	$	0.57		$	0.25		$	0.52		$	0.62		$	1.09		$	0.87


Weighted Average Shares Outstanding:
Basic		24,845			24,690			24,625			25,226			24,734			24,960

Diluted		25,928			25,663			25,773			26,247			25,851			25,965


Transactions with Related Parties included above:
Transactions with Related Parties Included Above:
Revenue	$	48,790		$	29,251		$	53,694		$	35,784		$	102,484		$	65,035
Selling, General and Administrative Expenses	$	391		$	324		$	455		$	264		$	846		$	588

See accompanying notes to condensed consolidated financial ~~statements.~~statements.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)


	Altisource Equity												Non-								Altisource Equity												Non-
					Retained			Additional		Treasury			controlling						Comprehensive						Retained			Additional		Treasury			controlling						Comprehensive
	Common Stock				Earnings			Paid-in Capital		Stock, at Cost			Interests			Total			Income		Common Stock				Earnings			Paid-in Capital		Stock, at Cost			Interests			Total			Income

Balance, December 31, 2009		24,145	$	24,145	$	11,665		$	50,538	$	—		$	—		$	86,348		$	—		24,145	$	24,145	$	11,665		$	50,538	$	—		$	—		$	86,348

Net Income		—		—		6,307			—		—			787			7,094			6,307		—		—		22,653			—		—			2,084			24,737		$	24,737
Acquisition of MPA		959		959		—			22,941		—			3,268			27,168			—		959		959		—			22,941		—			3,268			27,168			—
Contributions from Non-controlling Interest Holders		—		—		—			—		—			2			2			—		—		—		—			—		—			18			18			—
Distributions to Non-controlling Interest Holders		—		—		—			—		—			(2,420	)		(2,420	)		—		—		—		—			—		—			(3,896	)		(3,896	)		—
Share-based compensation		—		—		—			271		—			—			271			—
Exercise of stock options		101		101		—			1,014		—			—			1,115			—
Share-based Compensation Expense																						—		—		—			973		—			—			973			—
Exercise of Stock Options																						127		127		—			1,150		—			—			1,277			—

Balance, March 31, 2010		25,025		25,025		17,972			74,764		—			1,637			119,578			6,307

Balance, June 30, 2010																						25,231	$	25,231	$	34,318		$	75,602	$	—		$	1,474		$	136,625		$	24,737


Balance, December 31, 2010		25,413		25,413		58,546			79,297		(14,418	)		3,060			151,898			—		25,413	$	25,413	$	58,546		$	79,297	$	(14,418	)	$	3,060		$	151,898
Net Income		—		—		14,825			—		—			1,299			16,124			14,825		—		—		28,210			—		—			2,604			30,814		$	30,814
Contributions from Non-controlling Interest Holders		—		—		—			—		—			6			6			—		—		—		—			—		—			14			14			—
Distributions to Non-controlling Interest Holders		—		—		—			—		—			(2,824	)		(2,824	)		—		—		—		—			—		—			(4,193	)		(4,193	)		—
Share-based Compensation Expense		—		—		—			788		—			—			788			—		—		—		—			1,379		—			—			1,379			—
Exercise of Stock Options		—		—		(1,417	)		—		1,858			—			441			—		—		—		(2,012	)		—		2,522			—			510			—
Repurchase of Shares		—		—		—			—		(7,238	)		—			(7,238	)		—		—		—		—			—		(12,546	)		—			(12,546	)		—

Balance, March 31, 2011		25,413	$	25,413	$	71,954		$	80,085	$	(19,798	)	$	1,541		$	159,195		$	14,825
Balance, June 30, 2011																						25,413	$	25,413	$	84,744		$	80,676	$	(24,442	)	$	1,485		$	167,876		$	30,814

See accompanying notes to condensed consolidated financial ~~statements.~~statements.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


	Three Months Ended						Six Months Ended
	March 31,						June 30,
	2011			2010			2011			2010
Cash Flows from Operating Activities:

Cash flows from Operating Activities:
Net Income	$	16,124		$	7,094		$	30,814		$	24,737
Reconciling Items:
Depreciation and Amortization		1,938			1,523			4,114			3,211
Amortization of Intangible Assets		1,273			1,189			2,613			2,639
Share-based Compensation Expense		788			271			1,379			973
Bad Debt Expense		1,280			241			684			706
Deferred Income Taxes		224			551			634			1,065
Changes in Operating Assets and Liabilities, net of Acquisition:
Changes in Operating Assets and Liabilities, net of Acquisitions:
Accounts Receivable		(793	)		4,886			424			(4,514	)
Prepaid Expenses and Other Current Assets		687			(405	)		6,590			(211	)
Other Assets		(172	)		(990	)		(2,288	)		(2,643	)
Accounts Payable and Accrued Expenses		(4,971	)		4,863			(4,172	)		(3,488	)
Other Current and Non-current Liabilities		221			462			(2,630	)		1,867


Net Cash Flow from Operating Activities		16,599			19,685			38,162			24,342


Cash Flows from Investing Activities:
Additions to Premises and Equipment, net		(1,355	)		(3,613	)
Acquisition of Business, net of cash acquired		—			(25,462	)
Cash flows from Investing Activities:
Additions to Premises and Equipment								(3,419	)		(5,234	)
Acquisition of Business, net of Cash Acquired								(1,785	)		(25,462	)
Investment in Equity Affiliate		(1,113	)		—			(3,328	)		—
Change in Restricted Cash		(177	)		—			(177	)		(355	)


Net Cash Flow from Investing Activities		(2,645	)		(29,075	)		(8,709	)		(31,051	)


Cash Flows from Financing Activities:
Cash flows from Financing Activities:
Principal Payments on Capital Lease Obligations		(149	)		(143	)		(340	)		(306	)
Proceeds from Stock Option Exercises		441			1,115			510			1,277
Purchase of Treasury Stock		(7,238	)		—			(12,546	)		—
Contributions from Non-controlling Interests		6			2			14			18
Distributions to Non-controlling Interests		(2,824	)		(2,420	)		(4,193	)		(3,896	)


Net Cash Flow from Financing Activities		(9,764	)		(1,446	)		(16,555	)		(2,907	)


Net Increase (Decrease) in Cash and Cash Equivalents		4,190			(10,836	)		12,898			(9,616	)
Cash and Cash Equivalents at the Beginning of the Period		22,134			30,456
Cash and Cash Equivalents at the Beginning of the Year								22,134			30,456


Cash and Cash Equivalents at the End of the Period	$	26,324		$	19,620		$	35,032		$	20,840


Supplemental Cash Flow Information:
Supplemental Cash Flow Information
Interest Paid	$	21		$	—		$	46		$	—
Income Taxes Paid	$	563		$	25
Income Taxes (Received) Paid, net							$	(3,342	)	$	31

Non-cash Investing and Financing Activities:
Shares issued in connection with acquisition	$	—		$	23,900
Non-Cash Investing and Financing Activities
Shares issued in Connection with Acquisition							$	—		$	23,900
Reduction in Income Tax Payable from Tax Amortizable Goodwill	$	863		$	—		$	1,076		$	—

See accompanying notes to condensed consolidated financial statements.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements

NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION

Altisource Portfolio Solutions S.A. (which may be referred to as Altisource, the Company, we, us or our), together with its subsidiaries is a provider of services focused on ~~high value,~~high-value, technology-enabled, knowledge-based ~~functions~~solutions principally related to real estate and mortgage portfolio management, asset recovery and customer relationship management. ~~Utilizing integrated technology that includes decision models and behavioral based scripting engines, the Company provides solutions that improve clients’ performance and maximizes their returns.~~

We are publicly traded on the NASDAQ Global Select market under the symbol ASPS. We were incorporated under the laws of Luxembourg on November 4, 1999 as Ocwen Luxembourg S.à~~.r.l.~~ r.l., renamed Altisource Portfolio Solutions S.à~~.r.l.~~ r.l. on May 12, 2009 and converted into Altisource Portfolio Solutions S.A. on June 5, 2009. We became a publicly traded company as of August 10, 2009 (the “Separation”). Prior to the Separation, our businesses were wholly-owned subsidiaries of Ocwen Financial Corporation (“Ocwen”).

We conduct our operations through three reporting segments: Mortgage Services, Financial Services and Technology Services. In addition, we report our corporate related expenditures as a separate segment (see Note 14 for a description of our business segments).

Basis of Presentation

Our condensed consolidated financial statements include the assets and liabilities, revenues and expenses directly attributable to our operations. All significant inter-company and inter-segment transactions and accounts have been eliminated upon consolidation. Certain amounts disclosed in prior period statements have been reclassified to conform to the current period presentation.

In February 2010, we acquired the Mortgage Partnership ~~Association~~of American, L.L.C. (“MPA”), the manager of a national alliance of community mortgage bankers, correspondent lenders and suppliers of mortgage products and services that does business as Lenders One Mortgage Cooperative (“Lenders One”). The Management Agreement between MPA and Lenders One, pursuant to which MPA is the management company of Lenders One, represents a variable interest in a variable interest entity. MPA determined ~~that they are~~it is the primary beneficiary of Lenders One as ~~they have~~it has the power to direct the activities that most significantly impact Lenders One’s economic performance and the obligation to absorb losses or the right to receive benefits from Lenders One. As a result, Lenders One is presented in the accompanying condensed consolidated financial statements on a consolidated basis with the interests of the members reflected as Non-controlling ~~Interests~~Interest on the Condensed Consolidated Balance Sheets. At ~~March 31,~~June 30, 2011, Lenders One had total assets of ~~$3.7~~$5.4 million and liabilities of ~~$0.2~~$0.1 million.

We have prepared our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of SEC Regulation S-X. Accordingly, ~~they~~these financial statements do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, all normal recurring adjustments considered necessary to fairly state the results for the interim periods presented have been included. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our Form 10-K for the year ended December 31, 2010, filed with the SEC on February 18, 2011, which contains a summary of our significant accounting policies. Certain footnote detail is also omitted from the condensed consolidated financial statements unless there is a material change from the information included in the Form 10-K.

Investment in Equity Affiliate

We utilize the equity method to account for investments in equity securities where we have the ability to exercise significant influence over operating and financial policies of the investee. We include a proportionate share of earnings and/or losses of equity method investees in equity income (loss), net in the condensed consolidated statements of operations.

As of ~~March 31,~~June 30, 2011 our only significant equity investment was a 50% stake in Correspondent One S.A. (“Correspondent One”) which iswas still in the formation ~~process~~process. Correspondent One facilitates the purchase of conforming and ~~therefore had no~~government guaranteed residential mortgages from approved mortgage originators. In July, we fulfilled our committed funding obligations and have provided a total of $15.0 million to Correspondent One. Our ownership was reduced below 50% due to investments by certain Lenders One members. For the six months ended June 30, 2011, Correspondent One has minimal impact to our ~~consolidated operations.~~Condensed Consolidated Statements of Operations. Beginning in the third quarter of 2011, Correspondent One will partner with Ocwen and members of Lenders One to provide additional avenues for members to sell loans beyond Lenders One’s preferred investor arrangements and the members own network of loan buyers.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
(continued)

Acquisitions

In April 2011, we acquired Springhouse, LLC (“Springhouse”) an appraisal management company that utilizes a nationwide panel of appraisers to provide real estate appraisals principally to mortgage originators, including the members of Lenders One, and real estate asset managers. See Note 6 for additional information.

Foreign Currency Translation

Our reporting currency is the U.S. dollar. Other foreign currency assets and liabilities that are considered monetary items are translated at exchange rates in effect at the balance sheet date. Foreign currency revenues and expenses are translated at transaction date exchange rates. These exchange gains and losses are included in the determination of net income.

Fair Value of Financial Instruments

The fair value of financial instruments, which primarily include Cash and Cash Equivalents, Accounts Receivable, net, Restricted Cash and Accounts Payable and Accrued Expenses at ~~March 31,~~June 30, 2011 and December 31, 2010, are carried at amounts that approximate their fair value due to the short-term nature of these amounts.

Additionally, a put option arrangement was issued to the predecessor owners of MPA. The arrangement, which expires in February 2014, allows the holders to put a portion of the Altisource shares issued as consideration to Altisource at a predetermined price. The fair value calculation is deemed to be a Level 3 calculation. The fair value of the put ~~as of March 31,~~option at June 30, 2011 of ~~$0.4~~$0.2 million was valued using the following assumptions:


	Assumptions

Risk-free Interest Rate		~~0.3%~~0.19% – ~~1.29~~0.810	%
Expected Stock Price Volatility		~~29%~~23% – 4944	%
Expected Dividend Yield		—
Expected Option Life (in years)		10.75 – 32.75
Contractual Life (in years)		—
Fair Value	$	~~0.05~~$0.0 – ~~$2.32~~$1.14

The put option agreement is a written derivative valued similar to stock options and is included within Other Non-current Liabilities on the Condensed Consolidated Balance Sheet. The fair value of the put option agreements will be determined each quarter until such puts are either exercised or ~~forfeited with any~~forfeited. Any changes in value are included as a component of Other Income (Expense), net in the Condensed Consolidated Statements of Operations.

NOTE 2 — TRANSACTIONS WITH RELATED PARTIES

Ocwen remains our largest customer. Following the date of Separation, Ocwen is contractually obligated to purchase certain Mortgage Services and Technology Services from us under service agreements. These agreements extend for eight years from the Separation, ~~Date,~~ subject to termination under certain provisions. Ocwen is not restricted from redeveloping these services. We settle amounts with Ocwen on a daily, weekly or monthly basis based upon the nature of the services and when the service is completed.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements
(continued)

Ocwen, or services derived from Ocwen’s loan servicing portfolio, as a percentage of each of our segment revenues and as a percentage of consolidated revenues was as follows for the three and six months ended ~~March 31:~~June 30:


							Three Months Ended						Six Months Ended
	Three Months Ended						June 30,						June 30,
	March 31,						2011			2010			2011			2010
	2011			2010
Mortgage Services		73	%		77	%		74	%		73	%		74	%		75	%
Technology Services		39			37
Technology Products								38	%		36	%		38	%		37	%
Financial Services		< 1			< 1			1	%		<1	%		<1	%		<1	%
Consolidated Revenues		55	%		48	%
Consolidated Revenue								58	%		50	%		56	%		49	%

We record revenues we earn from Ocwen under the various long-term servicing contracts at rates we believe to be market rates as they are consistent with one or more of the following: the fees we charge to other customers for comparable services; the rates Ocwen pays to other service providers; fees commensurate with market surveys prepared by unaffiliated firms; and prices charged by our competitors. As of January 1, 2011, we modified our pricing for IT Infrastructure Services within our Technology Services segment from a rate card model primarily based on headcount to a fully loaded costs plus mark-up methodology. This new model applies to the amounts charged to Ocwen as well as internal allocations of infrastructure costs. This resulted in reduced revenues for the Technology Services segment and on a consolidated basis.

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~

Transition Services

In connection with the Separation, Altisource and Ocwen entered into a Transition Services ~~Agreement~~agreement under which services in such areas as human resources, vendor management, corporate services, six sigma, quality assurance, quantitative analytics, treasury, accounting, risk management, legal, strategic planning, compliance and other areas are provided to the counterparty for up to two years from the date of Separation. For the ~~quarters~~six months ended ~~March 31,~~June 30, 2011 and ~~March 31,~~ 2010, Altisource billed Ocwen ~~$0.4~~$0.9 million and $0.8 million respectively ($0.5 million and $0.4 million ~~respectively,~~for the second quarter of 2011 and 2010, respectively), and Ocwen billed Altisource ~~$0.4~~$0.8 million and $0.6 respectively ($0.5 million and $0.3 million ~~respectively,~~for the second quarter of 2011 and 2010, respectively) for services provided under this agreement. These amounts are reflected as a component of Selling, General and Administrative ~~expenses~~Expenses in the Condensed Consolidated Statements of Operations.

NOTE 3 — ACCOUNTS RECEIVABLE, NET

Accounts Receivable, net consists of the following:


	March 31,			December 31,			June 30,			December 31,
(in thousands)	2011			2010			2011			2010

Third-party Accounts Receivable	$	17,432		$	19,039		$	15,371		$	19,039
Unbilled Fees		34,562			32,055			35,791			32,055
Receivable from Ocwen		2,850			3,950			2,941			3,950
Other Receivables		1,478			583			919			583

		56,322			55,627			55,022			55,627
Allowance for Doubtful Accounts		(3,314	)		(2,132	)		(2,527	)		(2,132	)


Total	$	53,008		$	53,495		$	52,495		$	53,495

Unbilled Fees consist primarily of Asset Management and Default Management Services for which we recognize revenues over the service delivery period but bill atfollowing completion of the service.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements
(continued)

NOTE 4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid Expenses and Other Current Assets ~~consists~~consist of the following:

March 31, December 31,
(in thousands) 2011 2010

Prepaid Expenses $ 4,401 $ 5,134
Income Tax Receivable 3,505 7,327
Other Current Assets 1,539 615

Total $ 9,445 $ 13,076

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~


	June 30,		December 31,
(in thousands)	2011		2010

Prepaid Expenses	$	3,463	$	5,134
Income Tax Receivable		—		7,327
Other Current Assets		942		615


Total	$	4,405	$	13,076

NOTE 5 — PREMISES AND EQUIPMENT, NET

Premises and Equipment, net which ~~include~~includes amounts recorded under capital leases, consists of the following:


	March 31,			December 31,			June 30,			December 31,
(in thousands)	2011			2010			2011			2010

Computer Hardware and Software	$	33,164		$	32,931		$	34,492		$	32,931
Office Equipment and Other		9,960			9,717			10,477			9,717
Furniture and Fixtures		2,258			2,226			2,346			2,226
Leasehold Improvements		5,348			4,501			5,495			4,501

		50,730			49,375		$	52,810		$	49,375
Less: Accumulated Depreciation and Amortization		(33,820	)		(31,882	)		(35,996	)		(31,882	)


Total	$	16,910		$	17,493		$	16,814		$	17,493

Depreciation and amortization expense, inclusive of capital lease obligations, amounted to ~~$1.9~~$4.1 million and ~~$1.5~~$3.2 million for the ~~three~~six months ended ~~March 31,~~June 30, 2011 and 2010, respectively ($2.2 million and $1.7 million for the second quarter of 2011 and 2010, respectively), and is included in Cost of Revenue for operating assets and in Selling, General and Administrative ~~expense~~Expenses for non-operating assets in the accompanying Condensed Consolidated Statements of Operations.

NOTE 6 — GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

~~There were no changes in Goodwill during the three months ended March 31, 2011.~~ The following is a summary showing the balance of ~~Goodwill~~goodwill by segment:


	Mortgage		Technology				Mortgage		Technology
(in thousands)	Services		Services		Total		Services		Services		Total

Balance, March 31, 2011	$	10,218	$	1,618	$	11,836
Balance, December 31, 2010							$	10,218	$	1,618	$	11,836
Acquisition of Springhouse								701		—		701


Balance, June 30, 2011							$	10,919	$	1,618	$	12,537

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements
(continued)

Springhouse Acquisition

In April 2011, we acquired Springhouse an appraisal management company that utilizes a nationwide panel of appraisers to provide real estate appraisals principally to mortgage originators, including the members of Lenders One, and real estate asset managers.

Consideration for the transaction consisted of the amounts provided in the table below. The working capital amount is subject to additional revision in the third quarter which is not expected to be material:


(in thousands)	Consideration

Cash	$	1,900
Non-compete agreement		100
Working Capital Adjustment		(215	)

Total Consideration	$	1,785

A summary of the preliminary allocation of the purchase consideration based on estimates of fair value of the assets acquired and the liabilities assumed is follows:


(in thousands)

Accounts Receivable	$	108
Premises and Equipment		16
Identifiable Intangible Assets		1,180
Goodwill		701

		2,005
Accounts Payable and Accrued Expenses		(220	)

Total Purchase Price	$	1,785

Management has assigned the following lives to identified assets acquired as a result of the acquisition:


	Estimated Life
	(in Years)

Premises and Equipment		2 – 5
Trademarks⁽¹⁾		4
Customer Lists⁽¹⁾		6
Non-compete⁽¹⁾		2
Goodwill	Indefinite


⁽¹⁾		The identifiable assets are subject to amortization on a straight-line basis as this best approximates the benefit period related to these assets.

The goodwill arising from the Springhouse acquisition assigned to our Mortgage Services segment relates principally to in-place workforce and our ability to go to market more quickly with a retail origination appraisal business. All goodwill and intangible assets related to the acquisition are expected to be amortizable and deductible for income tax purposes.

The results of operations of Springhouse has been included in our consolidated results from the acquisition date. The acquisition did not have a material effect on our financial position, results of operations or cash flows.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements
(continued)

Acquisition-related transaction costs are included in Selling, General and Administrative Expenses in the Consolidated Statements of Operations.

Intangible Assets, Net

Intangible Assets, net consists of the following:


	Weighted															Weighted
	Average		Gross													Average
	Estimated		Carrying Amount				Accumulated Amortization					Net Book Value				Estimated		Gross Carrying Amount				Accumulated Amortization					Net Book Value
	Useful Life		March 31,		December 31,		March 31,			December 31,		March 31,		December 31,		Useful Life		June 30,		December 31,		June 30,			December 31,		June 30,		December 31,
(dollars in thousands)	(Years)		2011		2010		2011			2010		2011		2010		(Years)		2011		2010		2011			2010		2011		2010

Definite-lived Intangible Assets
Trademarks		16	$	10,200	$	10,200	$	2,578		$	2,346	$	7,622	$	7,854		16	$	10,614	$	10,200	$	2,836		$	2,346	$	7,778	$	7,854
Customer Lists		19		37,700		37,700		8,838	(a)		7,447		28,862		30,253		19		38,366		37,700		10,202	(a)		7,447		28,164		30,253
Operating Agreement		20		35,000		35,000		2,042			1,604		32,958		33,396		20		35,000		35,000		2,535			1,604		32,465		33,396
Non-compete Agreement		4		1,200		1,200		350			275		850		925		4		1,300		1,200		438			275		862		925


Total Intangible Assets			$	84,100	$	84,100	$	13,808		$	11,672	$	70,292	$	72,428			$	85,280	$	84,100	$	16,011		$	11,672	$	69,269	$	72,428


(a)		Prior to our acquisition of ~~NCI~~Nationwide Credit, Inc. (“NCI”) in 2007, NCI completed an acquisition which created tax-deductible goodwill that amortizes for tax purposes over time. When we acquired NCI in 2007, we recorded a lesser amount of goodwill for financial reporting purposes than what had previously been recorded at NCI for tax purposes. This difference between the amount of goodwill recorded for financial reporting purposes and the amount recorded for taxes is referred to as “Component 2” goodwill and it resulted in our recording periodic reductions ~~firstly~~first to our book goodwill balance in our consolidated financial statements. As our book goodwill balance was fully written off at December 31, ~~2010. We~~2010, we continue to amortize the remaining Component 2 goodwill for U.S. tax purposes by reducing certain intangible assets by the remaining tax benefits of the Component 2 ~~goodwill.~~goodwill as they are realized in our tax returns. The amount amortized was ~~$0.9~~$1.7 million for the ~~three~~six months ended ~~March 31,~~June 30, 2011. The balance of Component 2 goodwill remaining was ~~$9.9~~$8.5 million as of ~~March 31,~~June 30, 2011 which should generate ~~$6.0~~$5.1 million of reductions of intangible ~~assets.~~assets when the benefit can be realized for U.S. tax purposes.

Amortization expense for definite lived intangible assets was ~~$1.3~~$2.6 million and ~~$1.2~~$2.6 million for the ~~three~~six months ended ~~March 31,~~June 30, 2011 and 2010, ~~respectively.~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~respectively ($1.3 million and $1.5 million for the second quarter of 2011 and 2010, respectively). Amortization expense is estimated to be $5.3 million for 2011, $5.0 million for 2012, $4.8 million for 2013, $4.5 million for 2014 and $4.4 million for 2015.

NOTE 7 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accounts Payable and Accrued Expenses consists of the following:


	March 31,		December 31,		June 30,		December 31,
(in thousands)	2011		2010		2011		2010

Accounts Payable	$	6,729	$	5,960	$	2,840	$	5,960
Accrued Expenses — General		10,041		11,189		10,206		11,189
Accrued Salaries and Benefits		9,423		12,010		11,267		12,010
Income Tax Payable		—		3,807
Income Taxes Payable						733		3,807
Payable to Ocwen		413		2,418		2,579		2,418


Total	$	26,606	$	35,384	$	27,625	$	35,384

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements
(continued)

Other Current Liabilities consists of the following:


	March 31,		December 31,		June 30,		December 31,
(in thousands)	2011		2010		2011		2010

Mortgage Charge-Off and Deficiency Collections	$	12	$	8
Deferred Revenue		2,421		2,542	$	1,637	$	2,542
Facility Closure Cost Accrual, current portion		125		253
Facility Closure Cost Accrual, Current Portion						127		253
Other		3,622		2,813		1,810		2,821


Total	$	6,180	$	5,616	$	3,574	$	5,616

Facility Closure Costs

During 2009, we accrued facility closure costs (included in Other Current and Other Non-Current ~~Liabilities~~liabilities in the Condensed Consolidated Balance Sheet) primarily consisting of lease exit costs (expected to be paid through 2014) and severance for the closure of two facilities. The following table summarizes the activity, all recorded in our Financial Services segment, for the ~~three~~six months ended ~~March 31,~~June 30, 2011:


(in thousands)	Lease costs			Lease Costs

Balance, December 31, 2010	$	672		$	672
Payments		(127	)		(138	)

Balance, March 31, 2011		545
Balance, June 30, 2011					534
Less: Long-Term Portion		(420	)		407


Facility Closure Cost Accrual, current portion	$	125
Facility Closure Cost Accrual, Current Portion				$	127

We do not expect additional significant costs related to the closure of these facilities.

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~

NOTE 8 — EQUITY BASED COMPENSATION

We provide stock-based awards as a form of compensation for certain employees and officers. We have issued stock-based awards in the form of stock ~~options and restricted stock units.~~options. We recorded total stock compensation expense of ~~$0.8~~$1.4 million and $1.0 million for the ~~three~~six months ended ~~March 31, 2011.~~June 30, 2011 and 2010, respectively ($0.6 million and $0.7 million for the second quarter of 2011 and 2010, respectively). The compensation expense is principally included in Selling, General and Administrative Expenses in the accompany Condensed Consolidated Statements of Operations.

Below is a summary of the different types of stock-based awards issued under our stock plans:

Stock Options

Service-based Options.These options are granted at fair market value on the date of grant. The options generally vest over four years with equal annual cliff-vesting and expire on the earlier of 10 years after the date of grant or ~~3 months after~~following termination of service. A total of 1.1 million service-based awards were outstanding at ~~March 31,~~June 30, 2011.

Market-based ~~Options.~~Options. These option grants have two components each of which vest only upon the achievement of certain criteria. The first component, which we refer to internally as “ordinary performance” grants, consists of two-thirds of the market-based grant and begins to vest if the stock price realizes a compounded annual gain of at least 20% over the exercise price, so long as the stock price is at least double the exercise price. The remaining third of the market-based options, which we refer to internally as “extraordinary performance” grants, ~~would~~begins to vest ~~over three years~~ if the stock price realizes a compounded annual gain of at least 25% over the exercise price, so long as it is at least triple the exercise price. The vesting schedule for all market-based awards is 25% upon achievement of the ~~criterion~~criteria and the remaining 75% in three equal annual installments. A total of 2.2 million market-based awards were outstanding at ~~March 31,~~June 30, 2011.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements
(continued)

During the ~~three~~six months ended ~~March 31,~~June 30, 2011, the Company granted 0.1 million stock options. The options have an average exercise price of ~~$29.14~~$29.99 per share.

The fair value of the service-based options was determined using the Black-Scholes options pricing model while a lattice (binomial) model was used to determine the fair value of the market-based options using the following assumptions as of the grant date:


	March 31, 2011						March 31, 2010						June 30, 2011						June 30, 2010
	Black-						Black-						Black-Scholes			Binominal			Black-Scholes			Binominal
(in thousands)	Scholes			Binomial			Scholes			Binomial

Risk-free Interest Rate		2.38	%		0.06 – 3.36	%		1.90	%		0.02 – 3.66	%		2.20	%		0.03%–3.18	%		2.82	%		0.17%–3.36	%
Expected Stock Price Volatility		48	%		56	%		36	%		24 – 41	%		48	%		55.9	%		48	%		51.5	%
Expected Dividend Yield		—			—			—			—			—			—			—			—
Expected Option Life (in years)		6.25			—			5			—			6.25			—			7			—
Contractual Life (in years)		—			14			—			10			—			14			—			14
Fair Value	$14.18 and $14.82			$	15.41 – $16.76		$	6.80		$7.35 and $8.48			$	16.55		$18.09 and $18.76			$	13.00		$10.50 and $12.35

The following table summarizes the weighted-average fair value of stock options granted, and the total intrinsic value of stock options exercised:


	March 31				June 30
(in thousands, except per share amounts)	2011		2010
(in thousands, except per share amounts)					2011		2010

Weighted-Average Fair Value at Date of Grant Per Share	$	15.60	$	11.03	$	16.03	$	11.58
Intrinsic Value of Options Exercised	$	1,804	$	1,818	$	2,855	$	1,827
Fair Value of Options Vested	$	304	$	15	$	788	$	131

Stock-based compensation expense is recorded net of estimated forfeiture rates ranging from 1% to 3%.

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~

As of ~~March 31,~~June 30, 2011, estimated unrecognized compensation costs related to share-based payments amounted to ~~$8.2~~$7.0 million which we expect to recognize over a weighted-average remaining requisite service period of approximately ~~3.3~~3.1 years.

The following table summarizes activity of our stock options:


						Weighted									Weighted
				Weighted		Average		Aggregate					Weighted		Average
				Average		Contractual		Intrinsic					Average		Contractual		Aggregate
	Number of			Exercise		Term		Value		Number of			Exercise		Term		Intrinsic Value
	Options			Price		(in years)		(in thousands)		Options			Price		(in years)		(in thousands)

Outstanding at December 31, 2010		3,451,613		$	13.46		7.3		52,641		3,451,613		$	13.46		7.3	$	52,641

Granted		70,000			29.14						85,000			29.99
Exercised		(114,136	)		14.36						(157,256	)		12.76
Forfeited		(31,250	)		22.01						(138,750	)		24.92

Outstanding at March 31, 2011		3,376,227		$	13.67		7.3	$	57,415
Outstanding at June 30, 2011											3,240,607		$	13.44		7.1	$	75,715


Exercisable at March 31, 2011		1,242,586		$	9.83		6.1	$	25,912
Exercisable at June 30, 2011											1,373,219		$	10.21		6.0	$	36,509

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements
(continued)

Stock Repurchase Authorization

On May 19, 2010, our shareholders authorized us to purchase up to 3.8 million shares of our common stock in the open market. From authorization through ~~March 31,~~June 30, 2011, we have purchased ~~0.9~~1.0 million shares of our common stock on the open market at an average price of ~~$27.85,~~$28.51, leaving ~~2.9~~2.8 million shares still available for purchase.

NOTE 9 — COST OF REVENUE

Cost of Revenue principally includes payroll and employee benefits associated with personnel employed in customer service and operations roles; fees paid to external providers related to provision of services, reimbursable expenses, ~~and~~ technology and telephony expenses as well as depreciation and amortization of operating assets. The components of Cost of Revenue were as follows for the periods ended ~~March 31,~~June 30, 2011 and 2010:

Three Months Ended
March 31,
(in thousands) 2011 2010

Compensation and Benefits $ 16,840 $ 13,999
Outside Fees and Services 18,161 12,460
Expense Reimbursements 15,641 8,530
Technology and Communications 4,307 4,365

Total $ 54,949 $ 39,354

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2011		2010		2011		2010

Compensation and Benefits	$	19,959	$	15,691	$	36,799	$	29,690
Outside Fees and Services		17,532		13,321		35,693		25,781
Expense Reimbursements		19,459		11,141		35,100		19,671
Technology and Communications		4,557		2,692		7,535		5,647
Depreciation and Amortization		1,590		1,530		2,919		2,940


Total	$	63,097	$	44,375	$	118,046	$	83,729

NOTE 10 — SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, General and Administrative ~~expenses~~Expenses include payroll ~~employee benefits, occupancy and other costs associated with~~for personnel employed in executive, sales, marketing, human resources and finance roles. This category also includes occupancy costs, professional fees, depreciation and amortization on non-operating assets. The components of Selling, General and Administrative ~~expenses~~Expenses were as follows for the periods ended ~~March 31,~~June 30, 2011 and 2010:


	Three Months Ended				Three Months Ended				Six Months Ended
	March 31,				June 30,				June 30,
(in thousands)	2011		2010		2011		2010		2011		2010

Compensation and Benefits	$	5,920	$	4,040	$	5,825	$	3,965	$	11,745	$	8,005
Professional Services		2,102		2,296		1,055		1,761		3,157		4,057
Occupancy Related Costs		3,333		2,353		4,062		3,600		7,559		5,841
Amortization of Intangible Assets		1,273		1,189		1,340		1,450		2,613		2,639
Depreciation and Amortization						586		159		1,196		271
Other		3,626		2,191		1,036		1,541		3,888		3,732


Total	$	16,254	$	12,069	$	13,904	$	12,476	$	30,158	$	24,545

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements
(continued)

NOTE 11 — OTHER INCOME (EXPENSE), NET

Other Income (Expense), net consists of the following:

Three Months Ended
March 31,
(in thousands) 2011 2010

Interest Income $ 5 $ 9
Interest Expense (23 ) (28 )
Change in Fair Value of Put Option 357 —
Other, net 5 (53 )

Total $ 344 $ (72 )

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2011			2010			2011			2010

Interest Income	$	17		$	3		$	22		$	12
Interest Expense		(24	)		(23	)		(47	)		(51	)
Change in Fair Value of Put Option		225			—			582			—
Other, net		52			60			57			7


Total	$	270		$	40		$	614		$	(32	)

NOTE 12 — EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the assumed conversion of all dilutive securities.

Basic and diluted earnings per share for the three and six months ended ~~March 31,~~June 30, 2011 and 2010 are calculated as follows:


	For Three Months Ended				Three Months Ended				Six Months Ended
	March 31,				June 30,				June 30,
(in thousands, except per share amounts)	2011		2010
(in thousands)					2011		2010		2011		2010

Net Income	$	14,825	$	6,307
Net Income Attributable to Altisource					$	13,385	$	16,347	$	28,210	$	22,653


Weighted-Average Common Shares Outstanding, Basic		24,845		24,690		24,625		25,226		24,734		24,960
Dilutive Effect of Stock Options		1,083		970		1,148		1,018		1,117		1,002
Dilutive Effect of Restricted Shares		—		3		—		3		—		3

Weighted-Average Common Shares Outstanding, Diluted		25,928		25,663		25,773		26,247		25,851		25,965


Earnings Per Share
Basic	$	0.60	$	0.26	$	0.54	$	0.65	$	1.14	$	0.91

Diluted	$	0.57	$	0.25	$	0.52	$	0.62	$	1.09	$	0.87

For the three and six months ended ~~March 31,~~June 30, 2011, an immaterial amount of options that were anti-dilutive have been excluded from the computation of diluted EPS ~~(0.7~~(0.2 million for the three ~~months~~and six month ended ~~March 31,~~June 30, 2010). These options were anti-dilutive because their exercise price was greater than the average market price of our stock. Also excluded from the computation of diluted EPS for each of the three and six months ended ~~March 31,~~June 30, 2011 and 2010 are 0.6 and 0.7 million options granted for shares that are issuable upon the achievement of certain market and performance criteria related to our stock price and an annualized rate of return to investors that have not been met at this point.

NOTE 13 — COMMITMENTS AND CONTINGENCIES

~~Correspondent One S.A.~~

Correspondent One is formed to facilitate the purchase of conforming and government guaranteed residential mortgages from approved mortgage originators. During the first quarter of 2011, we provided initial funding to facilitate the establishment of the entity. We have committed to provide an additional $14.0 million which expect to fund in the second quarter.

Litigation

The Company is from time to time involved in legal ~~actions~~proceedings arising in the ordinary course of business. We record a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated, including expected insurance coverage. For proceedings where a range of loss is determined, we record a best estimate of loss within the range. When legal proceedings are material we disclose the nature of the litigation and to the extent possible the estimate of loss or range of loss. In the opinion of management, after consultation with legal counsel and considering insurance coverage where applicable, the outcome of ~~any such~~ current ~~matters~~legal proceedings both individually and in the aggregate will not have a material impact on the Company’s financial condition, results of operations or cash flows.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements
(continued)

NOTE 14 — SEGMENT REPORTING

Our business segments are based upon our organizational structure which focuses primarily on the services offered and are consistent with the internal reporting that we use to evaluate operating performance and to assess the allocation of our resources by our Chief Executive Officer.

We classify our businesses into three reportable segments.Mortgage Servicesconsists of mortgage portfolio management services that span the mortgage lifecycle.Financial Servicesprincipally consists of unsecured asset recovery and customer relationship management.Technology Services consists of modular, comprehensive integrated technological solutions for loan servicing, vendor management and invoice presentment and payment as well as providing infrastructure support. In addition, ourCorporate Items and Eliminationssegment includes eliminations of transactions between the reporting segments and this segment also includes costs recognized by us related to corporate support functions such as finance, legal, human resources, six sigma and quality assurances.

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~

In 2011, we reorganized our reporting structure in that certain services that were originally part of the Mortgage Services Segment are now classified as part of Financial Services. Prior periods have been recast to conform with the current year presentation.

Financial information for our segments is as follows:

Three Months Ended March 31, 2011
Corporate
Mortgage Financial Technology Items & Consolidated
(in thousands) Services Services Services Eliminations Altisource

Revenue $ 59,707 $ 19,493 $ 12,716 $ (3,246 ) $ 88,670
Cost of Revenue 37,020 13,488 7,445 (3,004 ) 54,949

Gross Profit 22,687 6,005 5,271 (242 ) 33,721
Selling, General and Administrative 4,583 4,460 1,196 6,015 16,254

Income (Loss) from Operations 18,104 1,545 4,075 (6,257 ) 17,467
Other Income (Expense), net 365 (11 ) (15 ) 5 344

Income (Loss) Before Income Taxes $ 18,469 $ 1,534 $ 4,060 $ (6,252 ) $ 17,811

Transactions with Related Parties:
Revenue $ 43,810 $ 29 $ 4,951 $ — $ 48,790

Selling, General and Administrative Expenses $ — $ — $ — $ 391 $ 391


	Three Months Ended March 31, 2010														Three Months Ended June 30, 2011
									Corporate														Corporate
	Mortgage		Financial			Technology			Items &			Consolidated			Mortgage		Financial			Technology			Items and			Consolidated
(in thousands)	Services		Services			Services			Eliminations			Altisource			Services		Services			Services			Eliminations			Altisource

Revenue	$	32,383	$	20,045		$	11,974		$	(3,428	)	$	60,974		$	65,507	$	17,983		$	13,572		$	(3,794	)	$	93,268
Cost of Revenue		21,293		14,526			6,647			(3,112	)		39,354			43,544		13,574			9,334			(3,355	)		63,097

Gross Profit		11,090		5,519			5,327			(316	)		21,620			21,963		4,409			4,238			(439	)		30,171
Selling, General and Administrative		2,443		4,100			1,106			4,420			12,069
Selling, General and Administrative Expenses																2,853		3,502			1,537			6,012			13,904

Income (Loss) from Operations		8,647		1,419			4,221			(4,736	)		9,551			19,110		907			2,701			(6,451	)		16,267
Other Expense, net		3		(16	)		(12	)		(47	)		(72	)
Other Income (Expense), net																258		(7	)		(12	)		31			270

Income (Loss) Before Income Taxes	$	8,650	$	1,403		$	4,209		$	(4,783	)	$	9,479		$	19,368	$	900		$	2,689		$	(6,420	)	$	16,537


Transactions with Related Parties:
Revenue	$	24,762	$	51		$	4,438		$	—		$	29,251		$	48,473	$	118		$	5,103		$	—		$	53,694

Selling, General and Administrative Expenses	$	—	$	—		$	—		$	324		$	324		$	—	$	—		$	—		$	455		$	455

1617

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements
(continued)


	Six Months Ended June 30, 2011
									Corporate
	Mortgage		Financial			Technology			Items and			Consolidated
(in thousands)	Services		Services			Services			Eliminations			Altisource

Revenue	$	125,214	$	37,476		$	26,288		$	(7,040	)	$	181,938
Cost of Revenue		80,564		27,062			16,779			(6,359	)		118,046

Gross Profit		44,650		10,414			9,509			(681	)		63,892
Selling, General and Administrative Expenses		7,436		7,962			2,733			12,027			30,158

Income (Loss) from Operations		37,214		2,452			6,776			(12,708	)		33,734
Other Expense, net		623		(18	)		(27	)		36			614

Income (Loss) Before Income Taxes	$	37,837	$	2,434		$	6,749		$	(12,672	)	$	34,348


Transactions with Related Parties:
Revenue	$	92,283	$	147		$	10,054		$	—		$	102,484

Selling, General and Administrative Expenses	$	—	$	—		$	—		$	846		$	846


	Three Months Ended June 30, 2010
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(in thousands)	Services			Services			Services			Eliminations			Altisource

Revenue	$	42,665		$	19,891		$	12,485		$	(3,693	)	$	71,348
Cost of Revenue		26,912			14,176			6,669			(3,382	)		44,375

Gross Profit		15,753			5,715			5,816			(311	)		26,973
Selling, General and Administrative Expenses		3,484			4,062			1,324			3,606			12,476

Income (Loss) from Operations		12,269			1,653			4,492			(3,917	)		14,497
Other Income (Expense), net		(41	)		(13	)		(9	)		103			40

Income (Loss) Before Income Taxes	$	12,228		$	1,640		$	4,483		$	(3,814	)	$	14,537


Transactions with Related Parties:
Revenue	$	31,222		$	25		$	4,537		$	—		$	35,784

Selling, General and Administrative Expenses	$	—		$	—		$	—		$	264		$	264

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements
(continued)


	Six Months Ended June 30, 2010
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(in thousands)	Services			Services			Services			Eliminations			Altisource

Revenue	$	75,047		$	39,936		$	24,459		$	(7,121	)	$	132,321
Cost of Revenue		48,205			28,702			13,316			(6,494	)		83,729

Gross Profit		26,842			11,234			11,143			(627	)		48,592
Selling, General and Administrative Expenses		5,927			8,162			2,430			8,026			24,545

Income (Loss) from Operations		20,915			3,072			8,713			(8,653	)		24,047
Other Expense, net		(38	)		(29	)		(21	)		56			(32	)

Income (Loss) Before Income Taxes	$	20,877		$	3,043		$	8,692		$	(8,597	)	$	24,015


Transactions with Related Parties:
Revenue	$	55,984		$	76		$	8,975		$	—		$	65,035

Selling, General and Administrative Expenses	$	—		$	—		$	—		$	588		$	588

Item 22.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of results of operations ~~and financial condition~~ (“MD&A”) is a supplement to the accompanying consolidated financial statements and provides additional information on our businesses, current developments, financial condition, cash flows and results of operations. Significant sections of the MD&A are as follows:

~~Overview.~~~~This section, beginning on page 18,~~Overview.This section, beginning on page 21, provides a description of recent developments we believe are important in understanding the results of operations and financial condition or in understanding anticipated future trends.

~~Consolidated Results of Operations~~~~. This section, beginning on page 19, provides an analysis of our consolidated results of operations for the three months ended March 31,~~Consolidated Results of Operations.This section, beginning on page 22, provides an analysis of our consolidated results of operations for the three and six months ended June 30, 2011 and 2010. In addition, a brief description is provided of significant transactions and events that affect the comparability of results being analyzed.

~~Segment Results of Operations~~~~. This section, beginning on page 23, provides an analysis of each business segment for the three months ended March 31,~~Segment Results of Operations.This section, beginning on page 26, provides an analysis of each business segment for the three and six months ended June 30, 2011 and 2010 as well as our Corporate segment. In addition, we discuss significant transactions, events and trends that may affect the comparability of the results being analyzed.

~~Liquidity and Capital Resources~~~~. This section, beginning on page 31, provides an analysis of our cash flows for three months ended March 31,~~Liquidity and Capital Resources. This section, beginning on page 36, provides an analysis of our cash flows for the six months ended June 30, 2011 and 2010. We also discuss restrictions on cash movements, future commitments and capital resources.

FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements that relate to, among other things, our future financial and operating results. In many cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms and other comparable terminology including, but not limited to, the following:

~~assumptions related to the sources of liquidity and the adequacy of financial resources;~~

~~assumptions about our ability to grow our business;~~

~~assumptions about our ability to reduce our cost structure;~~

~~expectations regarding collection rates and placements in our Financial Services segment;~~

~~estimates regarding the calculation of our effective tax rate; and~~

~~estimates regarding our reserves and valuations.~~

	•		assumptions related to the sources of liquidity and the adequacy of financial resources;

	•		assumptions about our ability to grow our business;

	•		assumptions about our ability to reduce our cost structure;

	•		expectations regarding collection rates and placements in our Financial Services segment;

	•		assumptions regarding the impact of seasonality;

	•		estimates regarding the calculation of our effective tax rate; and

	•		estimates regarding our reserves and valuations.

Forward-looking statements are not guarantees of future performance and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the risks discussed in the “Risk Factors” insection of our Form 10-K for the year ended December 31, 2010 and include the following:

our ability to retain and expand our existing ~~client relationships~~customers and attract new customers; and

governmental regulations, taxes and policies.

We caution you not to place undue reliance on these forward-looking statements which reflect our view only as of the date of this report. We are under no obligation (and expressly disclaim any obligation) to update or alter any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any such statement is based.

1720

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~

OVERVIEW

Our Business

We are a provider of services focused on ~~high value,~~high-value, technology-enabled, knowledge-based ~~functions~~solutions principally related to mortgage and real estate ~~and mortgage~~ portfolio management, asset recovery and customer relationship management. ~~Utilizing integrated technology that includes decision models and behavioral based scripting engines, we provide solutions that improve clients’ performance and maximize their returns.~~

We classify our ~~businesses~~business into three reportable segments:

~~Mortgage Services:~~Consists of portfolio management services that span the mortgage lifecycle. In 2011, we reorganized our reporting structure in that certain services originally part of Component Services and Other in this segment are now classified as part of Customer Relationship Management in our Financial Services segment. Following this change, Component Services has beenMortgage Services:Consists of services that span the mortgage lifecycle and are typically outsourced by loan servicers and originators. In 2011, we reorganized our reporting structure in that certain services originally part of Component Services and Other in this segment are now classified as part of Customer Relationship Management in our Financial Services segment. Following this change, Component Service and Other was renamed Origination Management Services. Origination Management Services includes MPA, our legacy contract underwriting business and our origination fulfillment operations currently under development. Prior periods have been recast to conform to the current year presentation.

Financial Services:Consists primarily of unsecured asset recovery and customer relationship management. As discussed above, Customer Relationship Management now includes certain services that were originally recorded as part of Mortgage Services.

Technology Services:Consists of modular, comprehensive integrated technological solutions for loan servicing, vendor management, ~~and~~ invoice presentment and payment as well as providing infrastructure support.

Stock Repurchase Plan

~~We intend to limit dilution caused by option exercises, including anticipated exercises, and acquisitions by repurchasing shares on the open market. On~~In May ~~19,~~ 2010, our shareholders authorized us to purchase 15% of our outstanding share capital, or 3.8 million shares of ~~our~~ common stock, in the open market. ~~Since the start of the stock repurchase program,~~From authorization through June 30, 2011, we have purchased ~~0.9~~1.0 million shares of ~~our~~ common stock on the open market at an average price of ~~$27.85,~~$28.51, leaving ~~2.9~~2.8 million shares available for purchase under the program.

Springhouse, LLC

OnIn April ~~11,~~ 2011, we acquired Springhouse, ~~LLC (“Springhouse”)~~ an appraisal management company that utilizes a nationwide panel of appraisers to provide real estate appraisals principally to mortgage originators, including the members of Lenders One, and real estate asset managers.

Factors Affecting Comparability

The following additional items may impact the comparability of our results:

In February 2010, we acquired all of the outstanding membership ~~interests~~interest of MPA which was formed with the purpose of managing Lenders One (see Note 1 to the condensed consolidated financial statements). The results of operations of Lenders One have been consolidated under the variable interest model since the acquisition date; and

Effective January 1, 2011, we modified our pricing for IT Infrastructure Services within our Technology Services segment from a rate card model primarily based on headcount to a fully loaded cost plus mark-up methodology. This new model applies to the infrastructure amounts charged to Ocwen as well as internal allocations of infrastructure ~~costs.~~cost. The impact of this change is discussed further in the Technology Services segment.

1821

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~

CONSOLIDATED RESULTS OF OPERATIONS

Summary Consolidated Results

Following is a discussion of our consolidated results of operations for the periods indicated. In evaluating performance, we neutralize the impact of pass-through items for which we earn no margin by excluding reimbursable expenses and non-controlling interests where appropriate and calculating all margins based upon Service Revenue.

The following table sets forth information regarding our results of operations for the periods ended ~~March 31,~~June 30, 2011 and 2010:


	Three Months Ended March 31,									Three Months Ended June 30,									Six Months Ended June 30,
							%									%									%
(in thousands)	2011			2010			Better/(worse)
(in thousands, except per share amounts)										2011			2010			Better/(worse)			2011			2010			Better/(worse)

Service Revenue	$	71,730		$	51,657			39		$	72,504		$	58,910			23		$	144,234		$	110,566			30
Reimbursable Expenses		15,641			8,530			83			19,459			11,141			75			35,100			19,671			78
Cooperative Non-controlling Interest		1,299			787			(65	)		1,305			1,297			1			2,604			2,084			25


Total Revenue		88,670			60,974			45			93,268			71,348			31			181,938			132,321			37

Cost of Revenue		54,949			39,354			(40	)		63,097			44,375			(42	)		118,046			83,729			(41	)


Gross Profit		33,721			21,620			56			30,171			26,973			12			63,892			48,592			31

Gross Profit / Service Revenue		47	%		41	%
Gross Profit/Service Revenue											42	%		46	%					44	%		44	%

Selling, General and Administrative Expenses		16,254			12,069			(35	)		13,904			12,476			(11	)		30,158			24,545			(23	)


Income from Operations		17,467			9,551			83			16,267			14,497			12			33,734			24,047			40
Income from Operations / Service Revenue		24	%		18	%

Income from Operations/Service Revenue											22	%		25	%					23	%		22	%

Other Expense, net		344			(72	)		N/M			270			40			N/M			614			(32	)		N/M

Income Before Income Taxes and Non-controlling Interests		17,811			9,479			88			16,537			14,537			14			34,348			24,015			43
Income Tax Provision		(1,687	)		(2,385	)		29
Income Tax (Provision) Benefit											(1,847	)		3,107			(159	)		(3,534	)		722			N/M


Net Income		16,124			7,094			127			14,690			17,644			(17	)		30,814			24,737			25

Net Income Attributable to Non-controlling Interests		(1,299	)		(787	)		(65	)		(1,305	)		(1,297	)		(1	)		(2,604	)		(2,084	)		(25	)

Net Income Attributable to Altisource	$	14,825		$	6,307			135		$	13,385		$	16,347			(18	)	$	28,210		$	22,653			25


Earnings Per Share
Basic	$	0.60		$	0.26					$	0.54		$	0.65			(17	)	$	1.14		$	0.91			25

Diluted	$	0.57		$	0.25					$	0.52		$	0.62			(16	)	$	1.09		$	0.87			25


Transactions with Related Parties:
Revenue	$	48,790		$	29,251			67		$	53,694		$	35,784			50		$	102,484		$	65,035			58

Selling, General and Administrative Expenses		391			324			(21	)	$	455		$	264			72		$	846		$	588			44

N/M — ~~Not~~not meaningful.

We recognized $144.2 million of Service Revenue for the six months ended June 30, 2011, a 30% increase over the same period in 2010. We sequentially grew Service Revenue in the second quarter through higher sales of real estate owned (REO) properties, due to seasonality and expansion of the title insurance business. Sequential growth in Service Revenue was constrained by Financial Services due to seasonality as well as completion of temporary assignment in the first quarter, and by Mortgage Services due to decreased foreclosure referrals which resulted in reduced title search and default management services revenues.

For the third quarter, we expect modest growth in Service Revenue facilitated by seasonally strong REO sales and continued growth of the title insurance operations. For the fourth quarter, we expect substantially greater growth in Service Revenue assuming Ocwen concludes its acquisition of the Litton platform and the Company’s continued roll-out of our title insurance services.

1922

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion~~Income before income tax attributable to Altisource grew in both periods over the comparable periods in 2010 principally as a result of the development of mortgage and ~~Analysis~~real estate portfolio management services and the growth of Ocwen’s servicing portfolio. Sequentially, income before income tax attributable to Altisource declined $1.3 million due to increased investments in personnel and technology to support our growth initiatives, initial investments in infrastructure to support the acquisition by Ocwen of the Litton portfolio and the seasonal decline in Financial ~~Condition~~Services revenue.

For the third quarter, we expect initiatives to support the Litton portfolio and ~~Results~~investment in technology will limit margin expansion. We continuously undertake process improvement initiatives focused on margin enhancement of ~~Operations~~
~~(continued)~~fully deployed services and we believe implementation of business process management software, deployment of next generation REALSuite software and leveraging of fixed costs on higher referral volume will facilitate continued growth in margins over the longer term.

Revenue

The following table presents our ~~revenues~~Revenue for the periods ended ~~March 31,~~June 30, 2011 and 2010:


	Three Months Ended March 31,									Three Months Ended June 30,									Six Months Ended June 30,
							%									%									%
(in thousands)	2011			2010			Better/(worse)
(in thousands, except per share amounts)										2011			2010			Better/(worse)			2011			2010			Better/(worse)

Mortgage Services:
Service Revenue:	$	43,340		$	23,714			83
Service Revenue										$	45,513		$	31,001			47		$	88,853		$	54,714			62
Reimbursable Expenses		15,068			7,882			91			18,689			10,367			80			33,757			18,249			85

Cooperative Non-controlling Interest		1,299			787			65			1,305			1,297			1			2,604			2,084			25


Mortgage Services — Total Revenue		59,707			32,383			84			65,507			42,665			54			125,214			75,047			67

Financial Services
Service Revenue:		18,920			19,397			(2	)
Financial Services:
Service Revenue											17,213			19,117			(10	)		36,133			38,514			(6	)
Reimbursable Expenses		573			648			(12	)		770			774			(1	)		1,343			1,422			(6	)

Financial Services — Total Revenue		19,493			20,045			(3	)		17,983			19,891			(10	)		37,476			39,936			(6	)

Technology Services		12,716			11,974			6			13,572			12,485			9			26,288			24,459			8

Eliminations		(3,246	)		(3,428	)		(5	)		(3,794	)		(3,693	)		3			(7,040	)		(7,121	)		1

Total Revenues	$	88,670		$	60,974			45
Total Revenue										$	93,268		$	71,348			31		$	181,938		$	132,321			37


Transactions with Related Parties:
Mortgage Services	$	43,810		$	24,762			77			48,473			31,222			55			92,283			55,984			65
Financial Services		29			51			(43	)		118			25			N/M			147			76			93
Technology Services		4,951			4,438			12			5,103			4,537			13			10,054			8,975			12

N/M — not meaningful.

In evaluating our performance, we utilize Service Revenue which consists of amounts attributable to our fee based services. Reimbursable Expenses and Cooperative Non-controlling Interests are pass-through items for which we earn no margin. Reimbursable Expenses consists of amounts that we incur on behalf of our customers in performing our fee based services, but we pass such costs directly on to our customers without any additional markup. Cooperative Non-controlling Interests is attributable to the members of Lenders One.

~~We recognized $71.7 million of~~Growth in Service Revenue for the ~~quarter ended March 31, 2011, a 39% increase over~~period presented was due to the ~~same quarter in 2010. Revenues for the first quarter were consistent with~~development of mortgage and real estate portfolio management services across our ~~internal expectations.~~national platform. Our Mortgage Services ~~revenue grew as a result of (i) the national rollout of services during 2010, including property preservation~~ and ~~inspection services, default management services and sale of real estate owned (REO), and (ii)~~Technology Services segments also benefited from the growth in ~~Ocwen’s loan portfolio.~~loans serviced by Ocwen during this period. Financial Services revenue declined in both periods compared ~~to prior year~~ due to a decline in revenues from one of the segment’s largest ~~customer.~~customers. The decline was in part as a result of the client shifting work to our global delivery platform. This resulted in lower revenue although higher margins.

Sequentially, Service Revenue increased $0.8 million compared to the first quarter 2011 led by the Mortgage Services and Technology Services ~~revenue~~segment. Increases in the Mortgage Services segment were driven principally by the increased assales of REO properties and the ~~impact~~growth of ~~lowering infrastructure~~insured title services ~~pricing (which occurred on January 1, 2011) was more than~~partially offset by ~~the growth~~decline in ~~REALSuite revenues, principally REALServicing~~^®~~, given~~services dependent upon foreclosure referrals. The Technology Services segment continued to benefit from the growth in Ocwen’s ~~servicing portfolio during 2010.~~

~~Sequentially,~~loan portfolio. The Service Revenue ~~declined $2.6 million compared to the fourth quarter of 2010. The decline is principally attributable to the Mortgage~~for Financial Services segment which saw sequential decreases in Residential Property Valuation, Default Management Services and Closing and Title Services, all of which received elevated benefit in the fourth quarter from the boarding of additional loans by Ocwen in September 2010. In addition, MPA declineddecreased principally due to higher seasonal collections in the first quarter ~~compared~~2011 and the continued transfer of work to fourth quarter consistent with the overall market decline in loan originations. Service Revenue for the Financial Services segment increased slightly, driven by stabilized performance in unsecured asset recovery and improved performance in our ~~customer relationship management business. Technology Services revenue declined sequentially as expected due to the previously mentioned billing methodology change.~~global delivery platform.

Our revenues are seasonal. More specifically, Financial Services revenue tends to be ~~highest~~higher in the first quarter and generally declines throughout the year. Mortgage Services revenue is impacted by REO sales which tend to be at their lowest level during fall and winter months and highest during spring and summer months.

2023

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~

Cost of Revenue

Cost of Revenue principally includes payroll and employee benefits associated with personnel employed in customer service roles, fees paid to external providers related to the provision of services, reimbursable expenses, ~~and~~ technology and telephony expenses as well as depreciation and amortization of operating assets. The components of Cost of Revenue were as follows for the periods ended ~~March 31,~~June 30, 2011 and 2010:


	Three Months Ended March 31,									Three Months Ended June 30,									Six Months Ended June 30,
							%									%									%
(in thousands)	2011			2010			Better/(worse)			2011			2010			Better/(worse)			2011			2010			Better/(worse)

Compensation and Benefits	$	16,840		$	13,999			(20	)	$	19,959		$	15,691			(27	)	$	36,799		$	29,690			(24	)
Outside Fees and Services		18,161			12,460			(46	)		17,532			13,321			(32	)		35,693			25,781			(38	)
Reimbursable Expenses		15,641			8,530			(83	)		19,459			11,141			(75	)		35,100			19,671			(78	)
Technology and Communications		4,307			4,365			1			4,577			2,692			(69	)		7,535			5,647			(33	)
Depreciation and Amortization											1,590			1,530			(4	)		2,919			2,940			1

Cost of Revenue	$	54,949		$	39,354			(40	)	$	63,097		$	44,375			(42	)	$	118,046		$	83,729			(41	)


Gross Profit Percentage
Gross Profit Percentage:
Gross Profit/Service Revenue		47	%		41	%					42	%		46	%					44	%		44	%

~~Our~~For the six months ended June 30, 2011, our gross margin percentage was flat. Our margins have remained fairly stable although we have and continue to make significant investments in personnel and technology to support our growth plans. Sequentially, our margins declined as we increased our investments in personnel to ~~47% for~~support the ~~three months ended March 31, 2011 from 41% for~~development of our insured title services and origination services as well as increases in technology costs due to the ~~same period in 2010. The~~initial implementation of our business process software and higher software license costs given our continued growth.

When compared to the prior year periods, the substantial increase in ~~gross margin results from~~Cost of Revenue is consistent with the ~~composition of revenue being more weighted towards~~growth in our Mortgage Services ~~which has higher margins. Sequentially, gross margins remained flat~~segment as we expanded our mortgage and real estate portfolio management services. In addition, increased volumes attributable to ~~fourth quarter as~~the growth in Ocwen’s portfolio caused increases at both our Mortgage Services and Technology Services segment. This was partially offset by a decline in ~~Mortgage~~Cost of Revenue for our Financial Services segment ~~margins,~~as we continue to manage costs.

Compensation and Benefits costs for the quarter ended June 30, 2011 increased sequentially as a result of the ~~mix~~addition of personnel principally to support the development of our title agency and ~~timing~~origination services related to mortgage portfolio management, the expected growth in referrals from Ocwen and personnel to develop our next generation of ~~services, was offset by improved margins~~REALSuite technologies. We expect compensation and benefit costs to continue to increase in ~~Financial Services.~~

~~Compensation and Benefits costs was impacted by investments in~~the third quarter as we ramp up our personnel to support ~~our suite~~the expected boarding of ~~default oriented services and Ocwen’s residential loan~~the Litton portfolio growth. In addition, during the first quarter 2011, we principally invested in personnel for new services including title insurance and fulfillment services. We expect these modest investments to continue in the second quarter.by Ocwen.

Outside Fees and Services ~~primarily increased in our Mortgage Services segment consistent with greater revenues including those related to our new services~~for the quarter ended June 30, 2011 were essentially flat when compared to ~~the same period in 2010. Sequentially, outsides fees and services declined principally driven by the reduction in valuation reports delivered in the~~ first quarter ~~2011 versus fourth quarter 2010.~~2011.

Technology and Communication costs ~~were relatively flat from~~increased sequentially for the ~~same period~~quarter ended June 30, 2011 due to continued investment in ~~2010~~personnel and licenses as ~~increases related~~a result of the growth in personnel to ~~the~~support existing and new ~~data center were generally offset by other cost reduction initiatives. Sequentially, technology and communication costs declined due principally to lower telephony expenses.~~services.

Selling, General and Administrative Expenses

Selling, General and Administrative Expenses include payroll, employee benefits, occupancy and other costs associated with personnel employed in executive, sales, marketing, human resources and finance roles. This category also includes professional fees, depreciation and amortization on non-operating assets. The components of Selling, General and Administrative Expenses were as follows for the periods ended ~~March 31,~~June 30, 2011 and 2010:


	Three Months Ended March 31,									Three Months Ended June 30,									Six Months Ended June 30,
							%									%									%
(in thousands)	2011			2010			Better/(worse)			2011			2010			Better/(worse)			2011			2010			Better/(worse)

Compensation and Benefits	$	5,920		$	4,040			(47	)	$	5,825		$	3,965			(47	)	$	11,745		$	8,005			(47	)
Professional Services		2,102			2,296			8			1,055			1,761			40			3,157			4,057			22
Occupancy Related Costs		3,333			2,353			(42	)		4,062			3,600			(13	)		7,559			5,841			(29	)
Amortization of Intangible Assets		1,273			1,189			(7	)		1,340			1,450			8			2,613			2,639			1
Depreciation and Amortization											586			159			N/M			1,196			271			N/M
Other		3,626			2,191			(65	)		1,036			1,541			33			3,888			3,732			(4	)

Total Selling, General and Administrative Expenses	$	16,254		$	12,069			(35	)	$	13,904		$	12,476			(11	)	$	30,158		$	24,545			(23	)


Operating Margin Percentage
Income from Operations/Service Revenue		24	%		18	%
Operating Percentage:
Income from Operation/Service Revenue											22	%		25	%					23	%		22	%

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~N/M — not meaningful.

Our operating margin percentage ~~increased to 24%~~was 23% for the ~~three~~six months ended ~~March 31,~~June 30, 2011 ~~primarily as a result of~~and compares favorably to the composition of our revenues being more weighted towards our higher margin Mortgage Services segment. Sequentially, operating margins were relatively flat as declines in Mortgage Services attributable to revenue declines previously discussed were offset by improvements at Financial Services, which included a goodwill impairment chargesame period in the ~~fourth~~prior year but reflects a sequential decline in margins in the second quarter ~~of 2010.~~2011 when compared to the first quarter.

Compensation and Benefits increased in both periods compared to the ~~prior year primarily~~same periods in 2010 as we built out our support functions such as accounting, legal and human resources ~~throughout 2010.~~as well as added to the executive ranks of our segments to support the continued growth.

Professional Services ~~were relatively flat compared~~fees have generally been declining as we have worked to reduce our external legal costs through increased compliance and by reducing costs paid to external advisors with respect to legal advice. In addition, consulting costs related to accounting and tax support decreased as we have hired additional staff in these functions. Lastly, the ~~prior year.~~first half of 2010 included professional costs associated with the acquisition of MPA.

Occupancy Related Costs increased in both periods as compared to the same periods in 2010 due to the growth in our ~~business which resulted in the addition~~business. As of June 30, 2011, we had over 5,800 employees worldwide compared to approximately ~~1,000 people worldwide.~~3,900 at year end.

~~Amortization of Intangible Assets increased slightly as a result of the intangibles acquired in connection with the acquisition of MPA in February 2010.~~

Income Before Income Tax

The following table presents income before income tax including the amount attributable to Altisource by segment:


	Three Months Ended						Three Months Ended						Six Months Ended
	March 31,						June 30,						June 30,
(in thousands)	2011			2010			2011			2010			2011				2010

Mortgage Services:
Income Before Income Taxes	$	18,469		$	8,650		$	19,368		$	12,228		$	37,837			$	20,877
Non-controlling Interests		(1,299	)		(787	)		(1,305	)		(1,297	)		(2,604	)			(2,084	)

Income Before Income Taxes Attributable to Altisource	$	17,170		$	7,863		$	18,063		$	10,931		$	35,233			$	18,793
As percent of Service Revenue		40	%		33	%
As Percent of Service Revenue								40	%		35	%		40	%			34	%

Financial Services:
Income Before Income Taxes	$	1,534		$	1,403		$	900		$	1,640		$	2,434			$	3,043
As percent of Service Revenue		8	%		7	%
As Percent of Service Revenue								5	%		9	%		7	%			8	%

Technology Services:
Income Before Income Taxes	$	4,060		$	4,209		$	2,689		$	4,483		$	6,749		��	$	8,692
As percent of Revenue		32	%		35	%		20	%		36	%		26	%			36	%

Corporate:
Income Before Income Taxes								(6,420	)		(3,814	)		(12,672	)			(8,597	)

Consolidated:
Income Before Income Taxes	$	17,811		$	9,479		$	16,537		$	14,537		$	34,348			$	24,015
Non-controlling Interests		(1,299	)		(787	)		(1,305	)		(1,297	)		(2,604	)			(2,084	)

Income Before Income Taxes Attributable to Altisource	$	16,512		$	8,692		$	15,232		$	13,240		$	31,744			$	21,931
As percent of Service Revenue		23	%		17	%		21	%		22	%		22	%			20	%

On a consolidated basis, income before income tax attributable to Altisource grew in both periods over the comparable periods in 2010 principally as a result of the ~~national rollout~~development of mortgage and real estate portfolio management services and the growth of Ocwen’s servicing ~~portfolio during 2010 as previously discussed.~~portfolio. Sequentially, income before income taxes attributable to Altisource ~~grew $2.2 million; however, the fourth quarter included a $2.8~~declined $1.3 million charge for goodwill impairment in the Financial Services segment. Adjusting for the impairment charge, income before income taxes attributable to Altisource as a percent of Service Revenue remained constant at 23% for both quarters.

For the Mortgage Services segment, income before income taxes attributable to Altisource declined sequentially by $0.8 million attributable to the decline in Service Revenue as previously discussed. Income before income taxes attributable to Altisource as a percent of Service Revenue improved to 40% from 39% sequentially primarily as a result of the mix of services and a reduction in intersegment technology charges.

~~For the Financial Services segment, income before income taxes improved $4.7 million sequentially primarily~~ due to ~~the $2.8 million goodwill impairment recognized~~our increased investments in ~~the fourth quarter~~personnel and the benefit of a seasonally strong first quarter. In addition, the Financial Services segment also started to see the initial benefits of disciplined floor management and improved performance for our customers. Technology costs for the Financial Services segment increased sequentially; however, this is expected to improve in the second half of 2011 as we implement certain cost containment measures.

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~

For the Technology Services segment, income before income taxes declined $1.2 million sequentially, principally as a result of the reduced pricing for IT infrastructure services as previously discussed.

~~Corporate costs increased $0.6 million principally due to increased costs associated with compliance and quality assurance, including related hiring costs,~~technology to support our ~~growing business.~~growth initiatives including our next generation of REALSuite technologies, initial investments in infrastructure to support the acquisition by Ocwen of the Litton portfolio and the seasonal decline in Financial Services revenue.

Income Tax Provision

The Company recognized an income tax provision of ~~$1.7~~$3.5 million for the ~~three~~six months ended ~~March 31,~~June 30, 2011 representing an effective tax rate of 9%10.3%. The income tax provision computed by applying the Luxembourg statutory tax rate of ~~28.9%~~28.8% differs from the effective tax rate primarily because of the effect of the favorable tax ruling as well as the mix of income and losses in multiple taxing jurisdictions. The Company received a favorable ruling in June 2010 regarding the treatment of certain intangibles that exist for purposes of determining the Company’s taxable income. The ruling was retroactive to the date of Separation. As a result of the ruling, the Company recognized a $3.4 million credit attributable to 2009 as well as adjusted the year to date tax provision to the new effective tax rate of 12.5% in the second quarter 2010 which resulted in a credit of $0.7 million for the six months ended June 30, 2010.

SEGMENT RESULTS OF OPERATIONS

The following section provides a discussion of ~~pre-tax~~pretax results of operations of our business segments for the three and six months ended ~~March 31,~~June 30, 2011 and 2010. Transactions between segments are accounted for as third-party arrangements for purposes of presenting Segment Results of Operations. Intercompany transactions primarily consist of information technology infrastructure services and charges for the use of certain ~~REAL products~~REALSuite applications from our Technology ~~Services~~Service segment to our other two segments. Generally, we reflect these charges within technology and communication in the segment receiving the services, except for consulting services, which we reflect in professional services.

Financial information for our segments is as follows:


	Three Months Ended March 31, 2010														Three Months Ended June 30, 2011
									Corporate														Corporate
	Mortgage		Financial			Technology			Items &			Consolidated			Mortgage		Financial			Technology			Items and			Consolidated
(in thousands)	Services		Services			Services			Eliminations			Altisource			Services		Services			Services			Eliminations			Altisource
										��
Revenue	$	32,383	$	20,045		$	11,974		$	(3,428	)	$	60,974		$	65,507	$	17,983		$	13,572		$	(3,794	)	$	93,268
Cost of Revenue		21,293		14,526			6,647			(3,112	)		39,354			43,544		13,574			9,334			(3,355	)		63,097

Gross Profit		11,090		5,519			5,327			(316	)		21,620			21,963		4,409			4,238			(439	)		30,171
Selling, General and Administrative		2,443		4,100			1,106			4,420			12,069
Selling, General and Administrative Expenses																2,853		3,502			1,537			6,012			13,904

Income (Loss) from Operations		8,647		1,419			4,221			(4,736	)		9,551			19,110		907			2,701			(6,451	)		16,267
Other Expense, net		3		(16	)		(12	)		(47	)		(72	)
Other Income (Expense), net																258		(7	)		(12	)		31			270

Income (Loss) Before Income Taxes	$	8,650	$	1,403		$	4,209		$	(4,783	)	$	9,479		$	19,368	$	900		$	2,689		$	(6,420	)	$	16,537


Transactions with Related Parties:
Revenue	$	24,762	$	51		$	4,438		$	—		$	29,251		$	48,473	$	118		$	5,103		$	—		$	53,694

Selling, General and Administrative Expenses	$	—	$	—		$	—		$	324		$	324		$	—	$	—		$	—		$	455		$	455

2326

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~


	Three Months Ended June 30, 2010
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(in thousands)	Services			Services			Services			Eliminations			Altisource

Revenue	$	42,665		$	19,891		$	12,485		$	(3,693	)	$	71,348
Cost of Revenue		26,912			14,176			6,669			(3,382	)		44,375

Gross Profit		15,753			5,715			5,816			(311	)		26,973
Selling, General and Administrative Expenses		3,484			4,062			1,324			3,606			12,476

Income (Loss) from Operations		12,269			1,653			4,492			(3,917	)		14,497
Other Income (Expense), net		(41	)		(13	)		(9	)		103			40

Income (Loss) Before Income Taxes	$	12,228		$	1,640		$	4,483		$	(3,814	)	$	14,537


Transactions with Related Parties:
Revenue	$	31,222		$	25		$	4,537		$	—		$	35,784

Selling, General and Administrative Expenses	$	—		$	—		$	—		$	264		$	264


	Six Months Ended June 30, 2011
									Corporate
	Mortgage		Financial			Technology			Items and			Consolidated
(in thousands)	Services		Services			Services			Eliminations			Altisource

Revenue	$	125,214	$	37,476		$	26,288		$	(7,040	)	$	181,938
Cost of Revenue		80,564		27,062			16,779			(6,359	)		118,046

Gross Profit		44,650		10,414			9,509			(681	)		63,892
Selling, General and Administrative Expenses		7,436		7,962			2,733			12,027			30,158

Income (Loss) from Operations		37,214		2,452			6,776			(12,708	)		33,734
Other Income (Expense), net		623		(18	)		(27	)		36			614

Income (Loss) Before Income Taxes	$	37,837	$	2,434		$	6,749		$	(12,672	)	$	34,348


Transactions with Related Parties:
Revenue	$	92,283	$	147		$	10,054		$	—		$	102,484

Selling, General and Administrative Expenses	$	—	$	—		$	—		$	846		$	846


	Six Months Ended June 30, 2010
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(in thousands)	Services			Services			Services			Eliminations			Altisource

Revenue	$	75,047		$	39,936		$	24,459		$	(7,121	)	$	132,321
Cost of Revenue		48,205			28,702			13,316			(6,494	)		83,729

Gross Profit		26,842			11,234			11,143			(627	)		48,592
Selling, General and Administrative Expenses		5,927			8,162			2,430			8,026			24,545

Income (Loss) from Operations		20,915			3,072			8,713			(8,653	)		24,047
Other Income (Expense), net		(38	)		(29	)		(21	)		56			(32	)

Income (Loss) Before Income Taxes	$	20,877		$	3,043		$	8,692		$	(8,597	)	$	24,015


Transactions with Related Parties:
Revenue	$	55,984		$	76		$	8,975		$	—		$	65,035

Selling, General and Administrative Expenses	$	—		$	—		$	—		$	588		$	588

Mortgage Services

The following table presents our results of operations for our Mortgage Services segment for the three and six months ending ~~March 31:~~June 30:


	Three Months Ended March 31,									Three Months Ended June 30,									Six Months Ended June 30,
							%									%									%
(in thousands)	2011			2010			Better/(worse)			2011			2010			Better/(worse)			2011			2010			Better/(worse)

Service Revenue	$	43,340		$	23,714			83		$	45,513		$	31,001			47		$	88,853		$	54,714			62
Reimbursable Expenses		15,068			7,882			91			18,689			10,367			80			33,757			18,249			85
Cooperative Non-controlling Interest		1,299			787			65			1,305			1,297			1			2,604			2,084			25

Total Revenue		59,707			32,383			84			65,507			42,665			54			125,214			75,047			67
Cost of Revenue		37,020			21,293			(74	)		43,544			26,912			(62	)		80,564			48,205			(67	)

Gross Profit		22,687			11,090			105			21,963			15,753			39			44,650			26,842			66

Gross Profit/Service Revenue		52	%		47	%					48	%		51	%					50	%		49	%

Selling, General and Administrative Expenses		4,583			2,443			(88	)		2,853			3,484			18			7,436			5,927			(26	)

Income from Operations	$	18,104		$	8,647			109		$	19,110		$	12,269			56		$	37,214		$	20,915			80


Income from Operations/Service Revenue		42	%		36	%					42	%		40	%					42	%		38	%

Transactions with Related Parties Included Above:
Revenue	$	43,810		$	24,762			77		$	48,473		$	31,222			55		$	92,283		$	55,984			65

N/M — not meaningful.

Our Mortgage Services segment continues to be the primary driver of ~~growth.~~growth for both year to date and second quarter results. As previously discussed, in 2011 we reorganized our reporting structure in that certain services that were originally part of Component Services and Other are now classified as part of Customer Relationship Management in our Financial Services segment.

~~We expect~~Through July 2011, we fulfilled our funding requirements and have provided $15.0 million in total to ~~fund our remaining investment in~~ Correspondent ~~One during the second quarter.~~One. Correspondent One is expected to partner with Ocwen and members of Lenders One to provide additional avenues for members to sell loans beyond Lenders One’s preferred investor arrangements and the members own network of loan buyers. We anticipate this will result in improved capital markets execution for the members and facilitate the sale of our services to the members.

~~Sequentially,~~The growth in Mortgage Services ~~revenues declined principally due to two factors. First, fourth quarter revenues were positively impacted~~was due to the ~~boarding~~development of mortgage and real estate portfolio services and growth in the loan portfolio serviced by Ocwen. On average, Ocwen serviced 466,353 loans for the six months ended June 30, 2011 compared to 359,146 for the six months ended June 30, 2010. The growth in loans was principally driven by Ocwen’s acquisition of the HomEq portfolio which boarded in September 2010. Assuming Ocwen ~~in September. This triggered an elevated level~~completes the acquisition of ~~valuation reports utilized by~~the Litton portfolio, we expect Ocwen to ~~determine the appropriate course of action for the~~board at least an additional 200,000 loans and an elevated level of foreclosure title searches and initiated foreclosure actions. Although the boarding of these loans did ultimately lead to an increase in referrals for various Mortgage Services businesses, we recognize revenue for these referrals over an extended period of time or when the homes sell. Given the seasonal nature of home sales, we would expect Asset Management Services revenues to significantly increaseprincipally impacting our results beginning in the ~~second~~fourth quarter.

Sequentially, Service Revenue increased $2.2 million or 5%. This growth was driven by our new insured title agency operations and ~~third quarters. Second, MPA was impacted~~seasonally improving REO brokerage commissions. These increases were partially offset by ~~the overall market~~a decline in loan origination activity experienced in the first quarter. Partially offsetting these declines was growth in our insured title business following the receipt of title agent licenses in California and the continued development of our title ~~agent~~search and default management services ~~in other states.~~operations which are dependent upon foreclosure referrals. We expect to continue to ramp up the title insurance agency ~~business~~and, to a lesser extent, our origination services through the balance of the year.

Although we believe the development of origination services is important to balancing our service offerings, it will require a significant investment in personnel, technology and management to ensure we can perform these services in-line with customer expectations. When appropriate, we will consider small complementary acquisitions similar in nature to the recent acquisition of Springhouse to facilitate the growth of origination services. Although we will continue to leverage our global delivery model and our experience with technological based solutions, econometrics and behavioral science, these investments could limit our ability to significantly expand Mortgage Services margins, calculated based upon Service Revenue, during 2011.

2428

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~

Revenue


	Three Months Ended March 31,						Three Months Ended June 30,							Six Months Ended June 30,
					%						%							%
(in thousands)	2011		2010		Better/(worse)		2011		2010		Better/(worse)			2011		2010		Better/(worse)

Service Revenue:
Asset Management Services	$	12,306	$	5,967		106	$	14,535	$	8,754		66		$	26,841	$	14,721		82
Origination Management Services		3,958		2,490		59		4,027		3,397		19			8,313		5,886		41
Residential Property Valuation		9,884		6,580		50		10,185		7,576		34			20,069		14,156		42
Closing and Title Services		9,381		5,253		79		10,111		6,091		66			19,492		11,344		72
Default Management Services		7,483		3,424		119		6,655		5,183		28			14,138		8,607		64
Others		328		—		N/M

Total Service Revenue		43,340		23,714		83		45,513		31,001		47			88,853		54,714		62

Reimbursable Expenses:
Asset Management Services		13,881		7,369		88		17,764		9,759		82			31,645		17,128		85
Default Management Services		1,187		513		131		925		535		73			2,112		1,048		102
Closing and Title Services								—		73		(100	)		—		73		(100	)

Total Reimbursable Expenses		15,068		7,882		91		18,689		10,367		80			33,757		18,249		85

Non-controlling Interests:		1,299		787		65		1,305		1,297		1			2,604		2,084		25

Total Revenue	$	59,707	$	32,383		84	$	65,507	$	42,665		54		$	125,214	$	75,047		67


Transactions with Related Parties:
Asset Management Services	$	26,226	$	13,380		96	$	32,260	$	18,470		75		$	58,486	$	31,849		84
Residential Property Valuation		9,657		6,015		61		9,543		7,438		28			19,200		13,453		43
Closing and Title Services		4,751		3,828		24		3,832		3,562		8			8,583		7,390		16
Default Management Services		3,176		1,539		106		2,838		1,752		62			6,014		3,292		83

Total	$	43,810	$	24,762		77	$	48,473	$	31,222		55		$	92,283	$	55,984		65

N/M — not meaningful.

In our Mortgage Services segment, we generate the majority of our ~~revenue~~Revenue by providing outsourced services that span the lifecycle of a mortgage loan primarily for Ocwen or with respect to the loan portfolio serviced by Ocwen. In addition to our relationship with Ocwen, we have longstanding relationships with some of the leading capital markets firms, commercial banks, hedge funds, insurance companies, credit unions and lending institutions.

~~Asset Management Services.~~Asset Management Services principally include property preservation, property inspection, REO asset management and REO brokerage. In the first quarter of 2010, we completed our national network for property preservation services and, including our real estate broker referral network, have coverage nationally for REO dispositions. The completion of the national network and increases in Ocwen’s loan portfolio are the reasons for the significant growth compared to the prior year period. Sequentially, Service Revenue for this segment increased as a result of the growth in Ocwen’s loan portfolio and an increase in REO properties disposed when compared to the prior period.

Asset Management Services.Asset Management Services principally include property preservation, property inspection, REO asset management and REO brokerage. In the first quarter of 2010, we completed our national network for property preservation services and, including our real estate broker referral network, have coverage nationally for REO dispositions. The completion of the national network of our services, coupled with the increase in Ocwen’s loan portfolio, are the reasons for the significant growth compared to the prior year period. Sequentially, Service Revenue for this segment increased primarily as a result of the increase in REO properties sold due to the seasonal nature of home sales when compared to first quarter 2011.

Origination Management Services. Origination Management Services includes MPA and our developing fulfillment business. The increase year over year is principally due to the inclusion of MPA’s results for an entire period in 2011 as compared to a partial period in 2010 from the date of acquisition. Sequentially, Revenue declined as a result of a reduction in the volume of loans sold through preferred investor agreements as well as a general decline in the loan origination market which, although expected, impacted MPA’s results. For the six months ended June 30, 2011, MPA added 18 members (12 members in the second quarter) and as of June 30, 2011 had 190 members.

Residential Property Valuation. The increase in both year to date and second quarter as compared to the same periods in the prior year was as a result of Ocwen’s residential loan portfolio growth. Sequentially, Revenue increased slightly principally due to our acquisition of Springhouse.

Closing and Title Services.During 2010, we began to roll out our title agency business in key markets. In December 2010, we obtained agency status in California. During 2011, we are focused on increasing our referral capture rate in our operational states and rolling out insured title services nationwide, similar to what we accomplished with our title search and asset management businesses in 2010. The continued focus on completing the rollout drove the year over year increase. Sequentially, Revenue increased as we continue to expand our insured title agency offerings sufficient enough to offset declines in default title search.

Default Management Services.We provide non-legal back-office support for foreclosure, bankruptcy and eviction attorneys as well as foreclosure trustee services. The increase in both periods as compared to the same periods in 2010 was a result of our continued rollout of a national platform as well as Ocwen’s servicing portfolio growth. Sequentially, we saw a decrease in Revenue primarily due to a decrease in foreclosure referrals to the attorneys we provide services to and our trustee business. The increase year over year is principally due to the inclusion of MPA’s results for an entire quarter in 2011 as compared to a partial period in 2010 from the date of acquisition. Sequentially, revenue declined as a result of the general decline in the loan origination market which impacted MPA’s results. For the quarter, MPA added six members.

~~Residential Property Valuation~~. The first quarter of 2011 was higher than first quarter 2010 as a result of Ocwen’s residential loan portfolio growth. As previously discussed, sequentially we saw a decline in revenues due to the elevated fourth quarter 2010 impact of loans boarded by Ocwen in September 2010.

~~Closing and Title Services.~~During 2011, we are focused on rolling out insured title services nationwide, similar to what we accomplished with our REO closing business in 2010 which explains increase year over year. Sequentially, revenues slightly declined as the growth in insured title agency products was insufficient to offset the elevated title search revenues in the fourth quarter caused by the boarding of loans by Ocwen in September 2010. We expect closing and title services to significantly grow throughout the year as we expand our insured title agency offerings.

2529

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~

~~Default Management Services.~~This group includes support services whereby we provide non-legal back-office support for foreclosure, bankruptcy and eviction attorneys as well as foreclosure trustee services. The first quarter of 2011 was higher than the first quarter of 2010 as a result of our continued rollout of a national platform as well as Ocwen’s servicing portfolio growth. Sequentially, we saw a decrease in revenues during the first quarter primarily due to elevated foreclosure referrals in the fourth quarter following Ocwen’s boarding of additional loans in September.

Cost of Revenue


	Three Months Ended March 31,									Three Months Ended June 30,									Six Months Ended June 30,
							%									%									%
(in thousands)	2011			2010			Better/(worse)			2011			2010			Better/(worse)			2011			2010			Better/(worse)

Expenditures	$	21,952		$	13,411			(64	)	$	11,005		$	7,183			(53	)	$	19,282		$	12,056			(60	)
Outside Fees and Services											13,850			9,362			(48	)		27,525			17,900			(54	)
Reimbursable Expenses		15,068			7,882			(91	)		18,689			10,367			(80	)		33,757			18,249			(85	)


Cost of Revenue	$	37,020		$	21,293			(74	)	$	43,544		$	26,912			(62	)	$	80,564		$	48,205			(67	)


Gross Margin Percentage:
Gross Profit/Service Revenue		52	%		47	%

Gross Profit / Service Revenue											48	%		51	%					50	%		49	%

~~Our gross margin was 52%~~Expenditures, which consists primarily of compensation and technology costs, increased in both periods as compared to the same periods in 2010 due to the growth in default oriented mortgage services. Sequentially, expenditures increased principally as a result of employee costs to support the roll-out of our title agency operations, development of origination services and hiring of employees to support expected growth. We would expect expenditures to continue to increase in the third quarter as we prepare for the ~~first~~anticipated referrals from the boarding of the Litton portfolio by Ocwen.

Outside fees and services increased over the prior year period due to the increase in default oriented services for the periods presented. Sequentially, outside fees and services was essentially flat. We anticipate outside fees and services to increase in the third quarter ~~of 2011.~~ as we expand our retail valuation and title agency offerings.

Several factors impact our gross margins from period to period including seasonality, the mix of services delivered, timing of investments in new services and the timing of when loans are boarded by our customers. Sequentially, our gross margin decreased principally as a result of increased compensation and technology costs, particularly related to our title agency and origination services under development.

Selling, General and Administrative Expenses


	Three Months Ended March 31,									Three Months Ended June 30,								Six Months Ended June 30,
							%									%								%
(in thousands)	2011			2010			Better/(worse)			2011			2010			Better/(worse)		2011			2010			Better/(worse)

Total Selling, General and Administrative Expenses	$	4,583		$	2,443			(88	)	$	2,853		$	3,484			18	$	7,436		$	5,927			(26	)


Operating Percentage:
Income from Operations/Service Revenue		42	%		36	%					42	%		40	%				42	%		38	%

Selling, General and Administrative Expenses increased ~~year~~ over ~~year~~both periods principally due to the exponential growth in the segment which required investments in facilities, technology and other general and administrative costs. Sequentially, Selling, General and Administrative Expenses declined as a result of reduced reserves for bad debt, reversal of stock compensation expense due to the departure of certain executives and lower expenses for professional services. As this segment continues to grow, we should see continued leverage resulting in increased ~~margin.~~margins.

2630

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~

Financial Services

The following table presents our results of operations for our Financial Services segment for the three and six months ending ~~March 31:~~June 30:


	Three Months Ended March 31,									Three Months Ended June 30,									Six Months Ended June 30,
							%									%									%
(in thousands)	2011			2010			Better/(worse)			2011			2010			Better/(worse)			2011			2010			Better/(worse)

Service Revenue	$	18,920		$	19,397			(2	)	$	17,213		$	19,117			(10	)	$	36,133		$	38,514		$	(6	)
Reimbursable Expenses		573			648			(12	)		770			774			(1	)		1,343			1,422			(6	)

Total Revenue		19,493			20,045			(3	)		17,983			19,891			(10	)		37,476			39,936			(6	)

Cost of Revenue		13,488			14,526			7			13,574			14,176			4			27,062			28,702			6

Gross Profit		6,005			5,519			9			4,409			5,715			(23	)		10,414			11,234			(7	)

Gross Profit/Service Revenue		32	%		28	%					26	%		30	%					29	%		29	%

Selling, General and Administrative Expenses		4,460			4,100			(9	)		3,502			4,062			14			7,962			8,162			3

Income / (Loss) from Operations	$	1,545		$	1,419			9
Income from Operations										$	907		$	1,653			(45	)	$	2,452		$	3,072			(20	)


Income from Operations/Service Revenue		8	%		7	%					5	%		9	%					7	%		8	%

Transactions with Related Parties:
Transactions with Related Parties Above:
Revenue	$	29		$	51			(43	)	$	118		$	25			N/M		$	147		$	76			93

N/M — not meaningful.

As discussed above, Customer Relationship Management now includes certain services that were originally recorded as part of Mortgage Services.

Financial Services revenue declined in both periods as compared to the ~~prior year~~same periods in 2010 due to a decline in ~~revenue~~Revenue from one of the segment’s largest ~~customer.~~customers. The decline was in part as a result of the client shifting work to the Company’s global delivery platform which resulted in lower revenue although at higher margins. This decline was partially offset by growth in new asset recovery management accounts and growth in customer relationship management revenues. Sequentially, ~~revenue grew $0.8~~Revenue declined $1.5 million, or 5%8%, primarily due to the seasonality of ~~collections.~~collections which are usually higher in the first quarter and a short-term customer relationship management assignment that was completed in the first quarter.

Our new leadership team is focused on disciplined floor management and cost containment as well as improving the analytics to determine which accounts to contact, what offer to make and what to say. In addition, we are focused on delivering more services over our global delivery platform, expanding our quality initiatives and investing in new technology. We expect limited revenue growth in this segment and instead will be focused on the performance of our collectors, which should facilitate future ~~year growth as well as~~ margin improvement.

In July 2011, we purchased the assembled workforce of a sub-contractor in India for $2.4 million that performed asset recovery services. For the periods presented, the costs paid to the sub-contractor were included as a component of Outside Fees and Services. In future periods, the costs will be recorded as employee costs, technology or occupancy which will result in some movement between Cost of Revenue

Three Months Ended March 31,
%
(in thousands) 2011 2010 Better/(worse)

Service Revenue:
Asset Recovery Management $ 10,904 $ 12,172 (10 )
Customer Relationship Management 8,016 7,225 11

Total Service Revenue 18,920 19,397 2

Reimbursable Expenses:
Asset Recovery Management 573 648 (12 )

Total Reimbursable Expenses 573 648 (12 )

Total Revenue 19,493 20,045 3

Transactions with Related Parties:
Asset Recovery Management $ 29 $ 51 (43 )

and Selling, General and Administrative Expense categories.

2731

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~Revenue


	Three Months Ended June 30,							Six Months Ended June 30,
					%							%
(in thousands)	2011		2010		Better/(worse)			2011		2010		Better/(worse)

Service Revenue:
Asset Recovery Management	$	9,538	$	11,801		(19	)	$	20,442	$	23,973		(15	)
Customer Relationship Management		7,675		7,316		5			15,691		14,541		8

Total Service Revenue		17,213		19,117		(10	)		36,133		38,514		6


Reimbursable Expenses:
Asset Recovery Management		770		774		(1	)		1,343		1,422		(6	)

Total Reimbursable Expenses		770		774		(1	)		1,343		1,422		(6	)


Total Revenue	$	17,983	$	19,891		(10	)	$	37,476	$	39,936		(6	)


Transactions with Related Parties:
Asset Recovery Management	$	118	$	25		N/M		$	147	$	76		93

N/M — not meaningful.

In our Financial Services segment, we generate the majority of our revenue from asset recovery management fees we earn for collecting amounts due to our customers and from fees we earn for performing customer relationship management for our customers.

~~Asset Recovery Management.~~Our revenues associated with contingency collections declined when compared to the first quarter of 2010 due to a decline in revenues from our largest customer. The decline was in part a result of the client shifting work to the Company’s global delivery platform which resulted in lower revenue although generally at higher margins and as a result of collector performance.Asset Recovery Management.Our revenue associated with contingency collections declined in both periods when compared to the same periods in 2010 due to a decline in revenue from one of the segment’s largest customers. The decline was in part a result of the client shifting work to the Company’s global delivery platform which resulted in lower revenue although generally at higher margins. In general, we have seen improved performance of our collectors which we believe will translate into better placements in the future should such performance continue.

~~Customer Relationship Management~~~~. Our revenues with customer relationship management increased year over year~~Customer Relationship Management. Our revenue associated with customer relationship management increased in both periods as compared to the same periods in 2010 as a result of increased services to two key customers. Sequentially, Revenue decreased due to a temporary increase in staffing during the first quarter for one of our customers. ~~We expect revenues to be flat or decrease in the second quarter due to customer requirements offset in part by seasonality.~~

Cost of Revenue


	Three Months Ended March 31,								Three Months Ended June 30,									Six Months Ended June 30,
							%								%									%
(in thousands)	2011			2010			Better/(worse)		2011			2010			Better/(worse)			2011			2010			Better/(worse)

Expenditures	$	12,915			13,878			7	$	8,788		$	9,431			7		$	17,806		$	19,398			8
Outside Fees and Services										4,016			3,971			(1	)		7,913			7,882			N/M
Reimbursable Expenses										770			774			1			1,343			1,422			6

Reimbursable Expenses		573			648			12

Cost of Revenue	$	13,488		$	14,526			7	$	13,574		$	14,176			4		$	27,062		$	28,702			6


Gross Margin Percentage:
Gross Profit/Service Revenue		32	%		28	%				26	%		30	%					29	%		29	%

N/M — not meaningful.

Our gross margin declined sequentially to 26% as a result of the decrease in revenue as Cost of Revenue was ~~32%~~essentially flat for the first and second quarter of 2011. ~~The primary component of Cost of Revenue is compensation and benefits for our collectors. Personnel costs declined when~~When compared to the prior year, expenditures declined principally as a result of ~~expanding~~lower employee costs as we expanded the use of our global delivery ~~footprint while rationalizing higher cost locations. This was partially offset by higher technology costs.~~footprint.

Selling, General and Administrative Expenses


	Three Months Ended March 31,									Three Months Ended June 30,								Six Months Ended June 30,
							%									%								%
(in thousands)	2011			2010			Better/(worse)			2011			2010			Better/(worse)		2011			2010			Better/(worse)

Total Selling, General and Administrative Expenses	$	4,460		$	4,100			(9	)	$	3,502		$	4,062			14	$	7,962		$	8,162			3


Operating Percentage:
Income / (Loss) from Operations/Service Revenue		8	%		7	%
Income from Operations/Service Revenue											5	%		9	%				7	%		8	%

Selling, General and Administrative Expenses ~~increased,~~decreased compared to the prior year ~~primarily~~principally as a result of ~~additional costs incurred~~reduced legal costs. Sequentially, Selling, General and Administrative Expenses declined when compared to ~~support increased placements~~the first quarter as a result of decreased legal expenses and ~~the expansion~~a release of ~~our Goa facility.~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~reserves associated with a vendor matter satisfactorily resolved.

Technology Services

The following table presents our results of operations for our Technology Services segment for the three and six months ending ~~March 31:~~June 30:


	Three Months Ended March 31,									Three Months Ended June 30,									Six Months Ended June 30,
							%									%									%
(in thousands)	2011			2010			Better/(worse)			2011			2010			Better/(worse)			2011			2010			Better/(worse)

Revenue	$	12,716		$	11,974			6		$	13,572		$	12,485			9		$	26,288		$	24,459			8
Cost of Revenue		7,445			6,647			(12	)		9,334			6,669			(40	)		16,779			13,316			(26	)

Gross Profit		5,271			5,327			(1	)		4,238			5,816			(27	)		9,509			11,143			(15	)

Gross Profit/Service Revenue		41	%		44	%					31	%		47	%					36	%		46	%

Selling, General and Administrative Expenses		1,196			1,106			(8	)		1,537			1,324			(16	)		2,733			2,430			(13	)

Income from Operations	$	4,075		$	4,221			(3	)	$	2,701		$	4,492			(40	)	$	6,776		$	8,713			(22	)


Income from Operations/Service Revenue		32	%		35	%					20	%		36	%					26	%		36	%

Transactions with Related Parties:
Transactions with Related Parties Above:
Revenue	$	4,951		$	4,438			12		$	5,103		$	4,537			13		$	10,054		$	8,975			12

The primary focus of the Technology Services segment today is to support the growth of Mortgage Services and Ocwen. In addition, Technology Services is assisting in the cost reduction and quality initiatives on-going within the Financial Services segment. In 2011, we intend to expend significant resources, principally personnel costs and external consulting costs to accomplish three key objectives:

The re-architecture and enhancement of our REALSuite of services;

The deployment of business process management and business intelligence reporting systems to more effectively manage our operations; and

The development and early stage incubation of technology solutions principally based on patented technologies.

Effective January 1, 2011, we modified our pricing for IT Infrastructure Services within our Technology Services segment from a ~~rate card~~ model based principally on headcount to a fully loaded costs plus mark-up methodology. This new model applies to the infrastructure amounts charged to Ocwen as well as internal allocations of infrastructure costs.

~~Revenue~~

Three Months Ended March 31,
%
(in thousands) 2011 2010 Better/(worse)

Service Revenue:
REAL Suite $ 8,156 $ 6,986 17
IT Infrastructure Services 4,560 4,988 (9 )

Total Revenue $ 12,716 $ 11,974 6

Transactions with Related Parties:
REALSuite $ 1,946 $ 2,555 (24 )
IT Infrastructure Services 3,005 1,883 60

Revenue $ 4,951 $ 4,438 12

~~REALSuite~~~~. Our REALSuite revenue is primarily driven by our REALServicing~~^® ~~product which is our comprehensive residential loan servicing platform. The primary driver for the growth in revenue is the increase in Ocwen’s residential loan portfolio.~~

2933

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~Revenue

~~IT Infrastructure Services.~~~~Our IT infrastructure services revenues~~


	Three Months Ended June 30,						Six Months Ended June 30,
					%						%
(in thousands)	2011		2010		Better/(worse)		2011		2010		Better/(worse)

Service Revenue:
REALSuite	$	8,275	$	7,565		9	$	16,431	$	14,551		13
IT Infrastructure Services		5,297		4,920		8		9,857		9,908		(1	)

Total Revenue	$	13,572	$	12,485		9	$	26,288	$	24,459		8


Transactions with Related Parties:
REALSuite	$	3,008	$	2,653		13	$	6,013	$	5,208		16
IT Infrastructure Services		2,095		1,884		11		4,041		3,767		7

Revenue	$	5,103	$	4,537		13	$	10,054	$	8,975		12

REALSuite. Our REALSuite revenue is primarily driven by our REALServicing^® product which is our comprehensive residential loan servicing platform. The primary driver for the growth in revenue is the increase in Ocwen’s residential loan portfolio.

IT Infrastructure Services.Our IT infrastructure services revenue declined when compared to the comparable period in 2010 almost entirely due to our change in pricing for infrastructure services. Sequentially, revenue increased given the increased headcount both internally and at Ocwen. The mark-ups are based upon economic studies performed generally consistent with our transfer pricing methodology. ~~We expect revenues to be consistent or down in future periods as we focus on reducing costs both internally and for Ocwen.~~

Cost of Revenue


	Three Months Ended March 31,									Three Months Ended June 30,									Six Months Ended June 30,
							%									%									%
(in thousands)	2011			2010			Better/(worse)			2011			2010			Better/(worse)			2011			2010			Better/(worse)

Cost of Revenue	$	7,445		$	6,647			(12	)	$	9,334		$	6,669			(40	)	$	16,779		$	13,316			(26	)


Gross Margin Percentage:
Cost of Revenue / Total Revenue		41	%		44	%

Gross Profit / Total Revenue											31	%		47	%					36	%		46	%

Our gross margin declined to ~~41% when compared to~~36% for the ~~first quarter of~~six months ended June 30, 2011 ~~primarily as a result of compensation and benefits~~ as we ~~added~~now report our Consumer Analytics group within Technology Services during 2011. Our Consumer Analytics group seeks to expand our use of behavioral sciences by building proprietary algorithms and psychologically-optimized communications through a customized technology platform. In addition, we have seen an increase in licensing fees given the increase in personnel ~~to enhance our service capabilities as well as the previously mentioned change in billing methodology.~~both at Ocwen and Altisource.

Selling, General and Administrative Expenses


	Three Months Ended March 31,									Three Months Ended June 30,									Six Months Ended June 30,
							%									%									%
(in thousands)	2011			2010			Better/(worse)			2011			2010			Better/(worse)			2011			2010			Better/(worse)

Total Selling, General and Administrative Expenses	$	1,196		$	1,106			(8	)	$	1,537		$	1,324			(16	)	$	2,733		$	2,430			(13	)


Operating Percentage:
Operating Income / Total Revenue		32	%		35	%					20	%		36	%					26	%		36	%

Selling, General and Administrative Expenses increased slightly primarily due to higher occupancy charges. Margins principally decreased as a result of the increase in Cost of Revenue as previously ~~mentioned change in billing methodology.~~described.

Corporate

Our Corporate Segment includes costs recognized by us related to corporate support functions such as finance, legal, human resources, compliance and quality assurance.


	Three Months Ended March 31,							Three Months Ended June 30,							Six Months Ended June 30,
					%							%							%
(in thousands)	2011		2010		Better/(worse)			2011		2010		Better/(worse)			2011		2010		Better/(worse)

Total Selling, General and Administrative Expenses	$	6,015	$	4,420		(36	)	$	6,012	$	3,606		(67	)	$	12,027	$	8,026		(50	)

Corporate costs rose throughout 2010 as we invested in staff to support our growing operations. ~~In the first quarter,~~

During 2011, we hired additional ~~resource~~resources principally focused on legal, compliance and quality assurance. In addition, lease costs increased related to the build out of new facilities to support the growth we expect from Ocwen’s acquisition of the Litton portfolio. Typically we include new leases costs within Corporate until the facility is put into use at which time the prospective lease cost is included within the appropriate segment. Lastly, we continue to invest in an enterprise resource planning system that we expect will increase the quality of our support functions and over time reduce costs. When compared to the first quarter, corporate costs were flat.

3035

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

We seek to deploy excess cash generated in a disciplined manner. Principally, we will continue to invest in compelling services that we believe will generate high margins. In addition, we may seek to acquire a limited number of complementary companies that fit our strategic objectives. Finally, given the tax inefficiency of dividends, the low returns earned on cash held and our current belief to pursue a limited number of acquisitions, we believe one of the best ways to return value to shareholders is a stock repurchase program.

OnIn May, ~~19,~~ 2010, our shareholders authorized us to purchase up to 3.8 million shares of our common stock in the open market. Through ~~March 31,~~June 30, 2011, we purchased ~~0.9~~1.0 million shares of our common stock on the open market at an average price of ~~$27.85,~~$28.51, leaving ~~2.9~~2.8 million shares still available for purchase.

Cash Flows

The following table presents our cash flows for the ~~three~~six months ended ~~March 31:~~June 30:


	Three Months Ended March 31,									Six Months Ended June 30,
							%									%
(dollars in thousands)	2011			2010			Better/(worse)			2011			2010			Better/(worse)

Net Income Adjusted for Non-Cash Items	$	21,627		$	10,869			99		$	40,238		$	33,331			21
Working Capital		(5,028	)		8,816			(157	)		(2,076	)		(8,989	)		77

Cash Flow from Operating Activities		16,599			19,685			(16	)		38,162			24,342			57
Cash Flow from Investing Activities		(2,645	)		(29,075	)		91			(8,709	)		(31,051	)		72
Cash Flow from Financing Activities		(9,764	)		(1,446	)		N/M			(16,555	)		(2,907	)		N/M

Net Change in Cash		4,190			(10,836	)		139			12,898			(9,616	)		234
Cash at Beginning of Period		22,134			30,456			(27	)		22,134			30,456			(27	)

Cash at End of Period	$	26,324		$	19,620			34		$	35,032		$	20,840			68

N/M — Not meaningful.

Cash Flow from Operating Activities

Cash flow from operating activities consists of two ~~components including~~components: (i) net income adjusted for depreciation, amortization and certain other non-cash items and (ii) working capital. In ~~the first quarter of~~ 2011, we generated ~~$16.6~~$38.2 million in positive cash flow from ~~operations.~~operations or approximately $0.26 per every dollar of Service Revenue. This primarily reflects our profitability adjusted for non-cash items in the period as a result of our year-over-year growth in mortgage related services partially offset by ~~a decline in working capital. The decline~~an increase in working capital ~~was due to the timing of services incurred at year-end and the associated payments to vendors as well as the payment of incentive compensation.~~requirements.

Cash Flow from Investing Activities

~~The most significant use~~During the six months ended June 30, 2011, we invested approximately $3.3 million in Correspondent One to facilitate the establishment of ~~cash flow for investing activities~~this business. In addition, in the ~~first~~second quarter 2011, we acquired Springhouse for $1.8 million. We currently expect capital expenditures in 2011 to be higher than 2010 levels as we ramp up our development costs related to REALSuite. Our current estimate of ~~2011 was~~capital expenditures for the ~~purchase of equipment and technology as well as external consulting costs associated with our Technology Services initiatives.~~full year is $16 to $18 million. Our cash flow from investing activities in 2010 includes the acquisition of MPA for which the purchase consideration included $29.0 million in cash. In addition, in first quarter 2011 we invested approximately $1.1 million in Correspondent One to facilitate the establishment of this business. We currently expect capital expenditures in 2011 to be consistent with 2010 levels as we expect to ramp up our development costs related to REALSuite.

Cash Flow from Financing Activities

Cash flow from financing activities in 2011 primarily includes activity associated with stock option exercises, share repurchases and payments to non-controlling interests as a result of the acquisition of MPA. We utilized significantly more cash in 2011 from financing activities as a result of our stock repurchase program.

Liquidity Requirements after ~~March 31,~~June 30, 2011

~~During the second quarter of~~In July 2011, we ~~expect to distribute $1.3 million to non-controlling interests; $1.7 million for the Springhouse acquisition and $14.0~~paid $12.0 million to fund our remaining commitment to Correspondent ~~One.~~One and a net amount of $0.7 million to a sub-contractor to terminate the existing arrangement and acquire an in-place workforce of approximately 600 persons. During the third quarter, we expect to distribute $1.3 million to the Lenders One members representing non-controlling interests.

3136

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~(continued)~~

Management is not aware of any other trends or events, commitments or uncertainties which have not otherwise been disclosed that will or are likely to impact liquidity in a material way.

Capital Resources

Given our ability to generate cash flow which is sufficient to fund current operations as well as expansion ~~of our operations,~~activities, we require very limited capital. Were we to need additional capital, we believe we have adequate access to both debt and equity capital markets.

Contractual Obligation, Commitments and Contingencies

For ~~details~~the six months ended June 30, 2011, there were no significant changes to our contractual obligations from those identified in our Form 10-K for the fiscal year ended December 31, 2010, other than those which occur in the normal course of ~~these transactions, see~~business (primarily the addition of operating leases due to our growth). See also Note 13 to the condensed consolidated financial ~~statements.~~statements for additional information on commitments and contingencies.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States. In applying many of these accounting principles, we need to make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, ~~revenues~~revenue and expenses in our condensed consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and/or judgments, however, are often subjective. Actual results may be affected negatively based on changing circumstances. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known.

Our critical accounting policies are described in the MD&A section in our Form 10-K for the year ended December 31, 2010. Such policies have not changed during the ~~first~~ quarter ofended June 30, 2011.

OTHER MATTERS

Related Party — Ocwen

For the ~~three~~six months ended ~~March 31,~~June 30, 2011, approximately ~~$44~~$92.3 million of the Mortgage Services ~~$0.03~~($48.5 million for the second quarter), $0.1 million ($0.1 million for the second quarter) of the Financial Services and ~~$5.0~~$10.1 million ($5.1 million for the second quarter) of the Technology ~~Services~~Service segment ~~revenues~~revenue were from services provided to Ocwen or sales derived from Ocwen’s loan servicing portfolio. Services provided to Ocwen included residential property valuation, real estate asset management and sales, trustee management services, property inspection and preservation, closing and title services, charge-off second mortgage collections, core technology back office support and multiple business technologies including our REALSuite of products. We provided all services at rates we believe to be comparable to market rates.

In connection with the Separation, Altisource and Ocwen entered into a Transition Services agreement under which services in such areas as human resources, vendor management, corporate services, six sigma, quality assurance, quantitative analytics, treasury, accounting, risk management, legal, strategic planning, compliance and other areas are provided to the counterparty for up to two years from the date of Separation. For the ~~three~~six months ended ~~March 31,~~June 30, 2011 and 2010, Altisource billed Ocwen $0.9 million and $0.8 million respectively ($0.5 million and $0.4 million for the second quarter of 2011 and 2010, respectively), and Ocwen billed Altisource $0.8 million and $0.6 respectively ($0.5 million and $0.3 million for the second quarter of 2011 and 2010, respectively) for services provided under ~~the Transition Services Agreement.~~this agreement. These amounts are reflected as a component of Selling, General and Administrative Expenses in the ~~accompanying~~Condensed Consolidated Statements of Operations.

3237


Item 3.		Quantitative and Qualitative Disclosures about Market Risk.

Our financial market risk consists primarily of foreign currency exchange risk. We are exposed to foreign currency exchange rate risk in connection with our investment in non-U.S. dollar functional currency operations, which are very limited, to the extent that our foreign exchange positions remain un-hedged.


Item 4.		Controls and ~~Procedures~~Procedures..

a)		Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report. Based on such evaluation, such officers have concluded that our disclosure controls and procedures as of the end of the period covered by this quarterly report were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and to ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

b)		Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ending ~~March 31,~~June 30, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3338

PART II — OTHER INFORMATION


Item 1.		Legal Proceedings.

We are subject to routine litigation and administrative proceedings arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel and considering insurance coverage where applicable, the outcome of current legal proceedings both individually and in the aggregate will not have a material impact on the Company’s financial condition, results of operations or cash flows.


Item 1A.		Risk Factors.

As of the date of this filing, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of our Form 10-K for the year ended December 31, 2010.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds.

Equity Securities purchased by us

The following table presents information related to our repurchases of our equity securities during the three months ended ~~March 31,~~June 30, 2011:

Total number

Maximum

Total number

Maximum

of shares

number

of shares

number

purchased as

of shares that

purchased as

of shares that

part of

may

part of

may

publicly

yet be

publicly

yet be

Total

Weighted

announced

purchased

Total

Weighted

announced

purchased

number of

average

plans

under the

number of

average

plans

under the

price paid

plans or

price paid

plans or

Period

purchased

per share

programs⁽¹⁾

programs

purchased

per share

programs⁽¹⁾

programs

Common shares^(1):

January 1 – 31, 2011

—

3,128,503

February 1 – 28, 2011

26,000

30.09

26,000

3,102,503

March 1 – 31, 2011

205,795

30.00

205,795

2,896,708

April 1 — 30, 2011

32,334

30.68

32,334

2,864,374

May 1 — 31, 2011

119,841

32.83

119,841

2,744,533

June 1 — 30, 2011

—

2,744,533

Total common shares

231,795

30.01

231,795

2,896,708

152,175

32.37

152,175

2,744,533


⁽¹⁾		In the second quarter of 2010, our shareholders authorized us to purchase up to 3.8 million shares of our common stock in the open market.


Item 3.		Defaults upon Senior Securities.None


Item 4.		(Removed and Reserved)


Item 5.		Other Information.None


Item 6.		Exhibits.


	31.1			Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

	31.2			Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

	32.1			Certification by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of theSarbanes-Oxley Act of 2002 (filed herewith)

	101			Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2011, is formatted in XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010; (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010; (iii) Condensed Consolidated Statements of Equity for the six months ended June 30, 2011 and 2010; (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010; and (iv) Notes to Condensed Consolidated Financial Statements (As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Act of 1934)

3440

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ALTISOURCE PORTFOLIO SOLUTIONS S.A. (Registrant)
Date: ~~April~~July 28, 2011	By:	/s/ Robert D. Stiles
		Robert D. Stiles
		Chief Financial Officer (On behalf of the Registrant and as its principal financial officer)


	Three Months Ended March 31, 2011
									Corporate
	Mortgage		Financial			Technology			Items &			Consolidated
(in thousands)	Services		Services			Services			Eliminations			Altisource

Revenue	$	59,707	$	19,493		$	12,716		$	(3,246	)	$	88,670
Cost of Revenue		37,020		13,488			7,445			(3,004	)		54,949

Gross Profit		22,687		6,005			5,271			(242	)		33,721
Selling, General and Administrative		4,583		4,460			1,196			6,015			16,254

Income (Loss) from Operations		18,104		1,545			4,075			(6,257	)		17,467
Other Income (Expense), net		365		(11	)		(15	)		5			344

Income (Loss) Before Income Taxes	$	18,469	$	1,534		$	4,060		$	(6,252	)	$	17,811


Transactions with Related Parties:
Revenue	$	43,810	$	29		$	4,951		$	—		$	48,790

Selling, General and Administrative Expenses	$	—	$	—		$	—		$	391		$	391