UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~September~~June 30, ~~2020~~2021


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

For the transition period from to

Commission File Number: 1-34354

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

(Exact name of registrant as specified in its Charter)


Luxembourg			98-0554932
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

40, avenue Monterey

L-2163 Luxembourg

Grand Duchy of Luxembourg

(Address of principal executive offices)

(352) ~~24 69 79~~27 61 49 00

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $1.00 par value

ASPS

NASDAQ Global Select Market

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. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~October~~July 23, ~~2020,~~2021, there were ~~15,649,709~~15,896,932 outstanding shares of the registrant’s common stock (excluding ~~9,763,039~~9,515,816 shares held as treasury stock).

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

FORM 10-Q

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Interim Condensed Consolidated Financial Statements (Unaudited)

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020

ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	67,023	$	82,741	Cash and cash equivalents	$	35,329	$	58,263
Investment in equity securities		30,185		42,618

Accounts receivable, net	Accounts receivable, net	28,056		43,615		Accounts receivable, net	17,756		22,413

Prepaid expenses and other current assets	Prepaid expenses and other current assets	14,718		15,214		Prepaid expenses and other current assets	19,074		19,479
Total current assets	Total current assets	139,982		184,188		Total current assets	72,159		100,155

Premises and equipment, net	Premises and equipment, net	14,983		24,526		Premises and equipment, net	10,196		11,894
Right-of-use assets under operating leases, net		20,303		29,074
Right-of-use assets under operating leases						Right-of-use assets under operating leases	12,287		18,213
Goodwill	Goodwill	73,849		73,849		Goodwill	73,849		73,849
Intangible assets, net	Intangible assets, net	49,702		61,046		Intangible assets, net	40,816		46,326

Deferred tax assets, net						Deferred tax assets, net	5,284		5,398
Other assets	Other assets	11,284		12,436		Other assets	7,525		9,850

Total assets	Total assets	$	310,103	$	385,119	Total assets	$	222,116	$	265,685

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	56,362	$	67,671	Accounts payable and accrued expenses	$	59,693	$	56,779

Deferred revenue	Deferred revenue	4,349		5,183		Deferred revenue	5,727		5,461
Other current liabilities	Other current liabilities	10,749		14,724		Other current liabilities	6,828		9,305
Total current liabilities	Total current liabilities	71,460		87,578		Total current liabilities	72,248		71,545

Long-term debt	Long-term debt	288,930		287,882		Long-term debt	243,386		242,656
Deferred tax liabilities, net						Deferred tax liabilities, net	9,290		8,801
Convertible debt payable to related parties (Note 1)						Convertible debt payable to related parties (Note 1)	1,200		0
Other non-current liabilities	Other non-current liabilities	26,291		31,016		Other non-current liabilities	19,716		25,239

Commitments, contingencies and regulatory matters (Note 24)
Commitments, contingencies and regulatory matters (Note 23)						Commitments, contingencies and regulatory matters (Note 23)	0		0

Equity (deficit):	Equity (deficit):					Equity (deficit):
Common stock ($1.00 par value; 100,000 shares authorized, 25,413 issued and 15,646 outstanding as of September 30, 2020; 15,454 outstanding as of December 31, 2019)		25,413		25,413
Common stock ($1.00 par value; 100,000 shares authorized, 25,413 issued and 15,897 outstanding as of June 30, 2021; 15,664 outstanding as of December 31, 2020)						Common stock ($1.00 par value; 100,000 shares authorized, 25,413 issued and 15,897 outstanding as of June 30, 2021; 15,664 outstanding as of December 31, 2020)	25,413		25,413
Additional paid-in capital	Additional paid-in capital	140,225		133,669		Additional paid-in capital	143,552		141,473
Retained earnings	Retained earnings	198,756		272,026		Retained earnings	135,270		190,383
Treasury stock, at cost (9,767 shares as of September 30, 2020 and 9,959 shares as of December 31, 2019)		(442,107)		(453,934)
Treasury stock, at cost (9,516 shares as of June 30, 2021 and 9,749 shares as of December 31, 2020)						Treasury stock, at cost (9,516 shares as of June 30, 2021 and 9,749 shares as of December 31, 2020)	(427,325)		(441,034)
Altisource deficit	Altisource deficit	(77,713)		(22,826)		Altisource deficit	(123,090)		(83,765)

Non-controlling interests	Non-controlling interests	1,135		1,469		Non-controlling interests	(634)		1,209
Total deficit	Total deficit	(76,578)		(21,357)		Total deficit	(123,724)		(82,556)

Total liabilities and deficit	Total liabilities and deficit	$	310,103	$	385,119	Total liabilities and deficit	$	222,116	$	265,685

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(in thousands, except per share data)


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020

Revenue	Revenue	$	88,795	$	141,493	$	305,581	$	507,963	Revenue	$	46,041	$	95,342	$	96,506	$	216,786
Cost of revenue	Cost of revenue	72,570		110,722		249,779		387,651		Cost of revenue	44,037		82,628		94,195		177,209

Gross profit	Gross profit	16,225		30,771		55,802		120,312		Gross profit	2,004		12,714		2,311		39,577
Operating expenses (income):
Operating expenses:										Operating expenses:
Selling, general and administrative expenses	Selling, general and administrative expenses	20,812		25,833		73,606		104,275		Selling, general and administrative expenses	16,556		24,701		35,442		52,794
Gain on sale of business		0		(17,558)		0		(17,558)

Restructuring charges	Restructuring charges	2,227		2,761		10,921		9,080		Restructuring charges	0		5,769		0		8,694

(Loss) income from operations		(6,814)		19,735		(28,725)		24,515
Loss from operations										Loss from operations	(14,552)		(17,756)		(33,131)		(21,911)
Other income (expense), net	Other income (expense), net									Other income (expense), net
Interest expense	Interest expense	(4,103)		(4,892)		(13,265)		(16,656)		Interest expense	(3,475)		(4,446)		(6,917)		(9,162)
Unrealized gain (loss) on investment in equity securities		138		(2,294)		(12,433)		11,731
Other (expense) income, net		(361)		406		412		1,308
Unrealized loss on investment in equity securities										Unrealized loss on investment in equity securities	0		(11,224)		0		(12,571)
Other income (expense), net										Other income (expense), net	(43)		(321)		906		773
Total other income (expense), net	Total other income (expense), net	(4,326)		(6,780)		(25,286)		(3,617)		Total other income (expense), net	(3,518)		(15,991)		(6,011)		(20,960)

(Loss) income before income taxes and non-controlling interests		(11,140)		12,955		(54,011)		20,898
Loss before income taxes and non-controlling interests										Loss before income taxes and non-controlling interests	(18,070)		(33,747)		(39,142)		(42,871)
Income tax provision	Income tax provision	(1,757)		(5,379)		(5,295)		(20,670)		Income tax provision	(584)		(1,117)		(1,427)		(3,538)

Net (loss) income		(12,897)		7,576		(59,306)		228
Net income attributable to non-controlling interests		(340)		(411)		(642)		(2,091)
Net loss										Net loss	(18,654)		(34,864)		(40,569)		(46,409)
Net loss (income) attributable to non-controlling interests										Net loss (income) attributable to non-controlling interests	179		(197)		92		(302)

Net (loss) income attributable to Altisource		$	(13,237)	$	7,165	$	(59,948)	$	(1,863)
Net loss attributable to Altisource										Net loss attributable to Altisource	$	(18,475)	$	(35,061)	$	(40,477)	$	(46,711)

(Loss) earnings per share:
Loss per share:										Loss per share:
Basic	Basic	$	(0.85)	$	0.45	$	(3.85)	$	(0.12)	Basic	$	(1.17)	$	(2.25)	$	(2.57)	$	(3.00)
Diluted	Diluted	$	(0.85)	$	0.44	$	(3.85)	$	(0.12)	Diluted	$	(1.17)	$	(2.25)	$	(2.57)	$	(3.00)

Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	15,637		15,897		15,578		16,133		Basic	15,830		15,601		15,774		15,549
Diluted	Diluted	15,637		16,151		15,578		16,133		Diluted	15,830		15,601		15,774		15,549

Comprehensive (loss) income:
Comprehensive loss:										Comprehensive loss:

Comprehensive (loss) income, net of tax		$	(12,897)	$	7,576	$	(59,306)	$	228
Comprehensive income attributable to non-controlling interests		(340)		(411)		(642)		(2,091)
Comprehensive loss, net of tax										Comprehensive loss, net of tax	$	(18,654)	$	(34,864)	$	(40,569)	$	(46,409)
Comprehensive loss (income) attributable to non-controlling interests										Comprehensive loss (income) attributable to non-controlling interests	179		(197)		92		(302)

Comprehensive (loss) income attributable to Altisource		$	(13,237)	$	7,165	$	(59,948)	$	(1,863)
Comprehensive loss attributable to Altisource										Comprehensive loss attributable to Altisource	$	(18,475)	$	(35,061)	$	(40,477)	$	(46,711)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)


		Altisource Equity (Deficit)											Altisource Equity (Deficit)
		Common stock			Additional paid-in capital		Retained earnings		Treasury stock, at cost		Non-controlling interests			Total			Common stock			Additional paid-in capital		Retained earnings		Treasury stock, at cost		Non-controlling interests		Total
		Shares															Shares

Balance, December 31, 2018		25,413	$	25,413	$	122,667	$	590,655	$	(443,304)	$	1,237		$	296,668
Balance, December 31, 2019																Balance, December 31, 2019	25,413	$	25,413	$	133,669	$	272,026	$	(453,934)	$	1,469	$	(21,357)

Net loss																Net loss	—	—		—		(11,650)		—		105		(11,545)
Distributions to non-controlling interest holders																Distributions to non-controlling interest holders	—	—		—		—		—		(311)		(311)
Share-based compensation expense																Share-based compensation expense	—	—		2,894		—		—		—		2,894
Issuance of restricted share units and restricted shares																Issuance of restricted share units and restricted shares	—	—		—		(4,796)		4,796		—		0
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances																Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances	—	—		—		(3,114)		1,909		—		(1,205)

Balance, March 31, 2020																Balance, March 31, 2020	25,413	$	25,413	$	136,563	$	252,466	$	(447,229)	$	1,263	$	(31,524)

Net loss	Net loss	—	—		—		(3,184)		—		440			(2,744)		Net loss	—	—		—		(35,061)		—		197		(34,864)
Distributions to non-controlling interest holders	Distributions to non-controlling interest holders	—	—		—		—		—		(620)			(620)		Distributions to non-controlling interest holders	—	—		—		—		—		(180)		(180)
Share-based compensation expense	Share-based compensation expense	—	—		2,621		—		—		—			2,621		Share-based compensation expense	—	—		1,930		—		—		—		1,930

Exercise of stock options and issuance of restricted share units and restricted shares		—	—		—		(1,549)		1,577		—			28
Issuance of restricted share units and restricted shares																Issuance of restricted share units and restricted shares	—	—		—		(3,177)		3,177		—		0
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances	Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances	—	—		—		(1,163)		578		—			(585)		Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances	—	—		—		(1,205)		993		—		(212)

Balance, March 31, 2019		25,413	25,413		125,288		584,759		(441,149)		1,057			295,368
Balance, June 30, 2020																Balance, June 30, 2020	25,413	$	25,413	$	138,493	$	213,023	$	(443,059)	$	1,280	$	(64,850)

Balance, December 31, 2020																Balance, December 31, 2020	25,413	$	25,413	$	141,473	$	190,383	$	(441,034)	$	1,209	$	(82,556)

Net loss																Net loss	—	—		—		(22,002)		—		87		(21,915)
Distributions to non-controlling interest holders																Distributions to non-controlling interest holders	—	—		—		—		—		(1,395)		(1,395)
Share-based compensation expense																Share-based compensation expense	—	—		1,438		—		—		—		1,438

Issuance of restricted share units and restricted shares																Issuance of restricted share units and restricted shares	—	—		—		(5,905)		5,905		—		0
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances																Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances	—	—		—		(3,586)		2,756		—		(830)

Balance, March 31, 2021																Balance, March 31, 2021	25,413	$	25,413	$	142,911	$	158,890	$	(432,373)	$	(99)	$	(105,258)

Net loss	Net loss	—	—		—		(5,844)		—		1,240			(4,604)		Net loss	—	—		—		(18,475)		—		(179)		(18,654)

Distributions to non-controlling interest holders	Distributions to non-controlling interest holders	—	—		—		—		—		(518)			(518)		Distributions to non-controlling interest holders	—	—		—		—		—		(356)		(356)
Share-based compensation expense	Share-based compensation expense	—	—		2,832		—		—		—			2,832		Share-based compensation expense	—	—		641		—		—		—		641

Exercise of stock options and issuance of restricted share units and restricted shares		—	—		—		(3,473)		3,680		—			207

Issuance of restricted share units and restricted shares																Issuance of restricted share units and restricted shares	—	—		—		(4,574)		4,574		—		0
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances	Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances	—	—		—		(1,402)		689		—			(713)		Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances	—	—		—		(571)		474		—		(97)
Repurchase of shares		—	—		—		—		(6,700)		—			(6,700)

Balance, June 30, 2019		25,413	25,413		128,120		574,040		(443,480)		1,779			285,872

Net income		—	—		—		7,165		—		411			7,576
Balance, June 30, 2021																Balance, June 30, 2021	25,413	$	25,413	$	143,552	$	135,270	$	(427,325)	$	(634)	$	(123,724)

Distributions to non-controlling interest holders		—	—		—		—		—		(865)			(865)
Share-based compensation expense		—	—		2,831		—		—		—			2,831

Exercise of stock options and issuance of restricted share units and restricted shares		—	—		—		(1,214)		1,371		—			157
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances		—	—		—		(434)		216		—			(218)
Repurchase of shares		—	—		—		—		(6,697)		—			(6,697)

Balance, September 30, 2019		25,413	$	25,413	$	130,951	$	579,557	$	(448,590)	$	1,325		$	288,656

See accompanying notes to condensed consolidated financial statements.

~~Table of Contents~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY~~

~~(in thousands)~~

Altisource Equity (Deficit)
Common stock Additional paid-in capital Retained earnings Treasury stock, at cost Non-controlling interests Total
Shares
Balance, December 31, 2019 25,413 $ 25,413 $ 133,669 $ 272,026 $ (453,934) $ 1,469 $ (21,357)
Net loss — — — (11,650) — 105 (11,545)
Distributions to non-controlling interest holders — — — — — (311) (311)
Share-based compensation expense — — 2,894 — — — 2,894
Issuance of restricted share units and restricted shares — — — (4,796) 4,796 — 0
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances — — — (3,114) 1,909 — (1,205)
Balance, March 31, 2020 25,413 25,413 136,563 252,466 (447,229) 1,263 (31,524)
Net loss — — — (35,061) — 197 (34,864)
Distributions to non-controlling interest holders — — — — — (180) (180)
Share-based compensation expense — — 1,930 — — — 1,930
Issuance of restricted share units and restricted shares — — — (3,177) 3,177 — 0
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances — — — (1,205) 993 — (212)
Balance, June 30, 2020 25,413 25,413 138,493 213,023 (443,059) 1,280 (64,850)
Net loss — — — (13,237) — 340 (12,897)
Distributions to non-controlling interest holders — — — — — (485) (485)
Share-based compensation expense — — 1,732 — — — 1,732
Issuance of restricted share units and restricted shares — — — (747) 747 — 0
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances — — — (283) 205 — (78)
Balance, September 30, 2020 25,413 $ 25,413 $ 140,225 $ 198,756 $ (442,107) $ 1,135 $ (76,578)

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

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


		Nine months ended September 30,					Six months ended June 30,
		2020		2019			2021		2020

Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net (loss) income		$	(59,306)	$	228
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Net loss						Net loss	$	(40,569)	$	(46,409)
Adjustments to reconcile net loss to net cash used in operating activities:						Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	11,521		14,196		Depreciation and amortization	2,335		7,701
Amortization of right-of-use assets under operating leases	Amortization of right-of-use assets under operating leases	8,107		9,145		Amortization of right-of-use assets under operating leases	4,513		5,474
Amortization of intangible assets	Amortization of intangible assets	11,344		15,489		Amortization of intangible assets	5,510		7,049

Unrealized loss (gain) on investment in equity securities		12,433		(11,731)
Unrealized loss on investment in equity securities						Unrealized loss on investment in equity securities	0		12,571

Share-based compensation expense	Share-based compensation expense	6,556		8,284		Share-based compensation expense	2,079		4,824
Bad debt expense	Bad debt expense	1,423		114		Bad debt expense	615		1,066

Amortization of debt discount	Amortization of debt discount	500		499		Amortization of debt discount	334		333
Amortization of debt issuance costs	Amortization of debt issuance costs	548		552		Amortization of debt issuance costs	396		366
Deferred income taxes	Deferred income taxes	274		15,568		Deferred income taxes	65		261
Loss on disposal of fixed assets	Loss on disposal of fixed assets	459		330		Loss on disposal of fixed assets	8		99
Gain on sale of business		0		(17,558)

Changes in operating assets and liabilities (excludes effect of sale of business):

Changes in operating assets and liabilities:						Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	10,136		(31,580)		Accounts receivable	4,042		7,212
Short-term investments in real estate		0		39,873

Prepaid expenses and other current assets	Prepaid expenses and other current assets	621		12,588		Prepaid expenses and other current assets	405		1,057
Other assets	Other assets	853		(55)		Other assets	851		868
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(10,676)		(17,058)		Accounts payable and accrued expenses	2,962		(6,734)
Current and non-current operating lease liabilities	Current and non-current operating lease liabilities	(8,518)		(9,713)		Current and non-current operating lease liabilities	(4,855)		(6,024)
Other current and non-current liabilities	Other current and non-current liabilities	(352)		(6,977)		Other current and non-current liabilities	(1,466)		(930)
Net cash (used in) provided by operating activities		(14,077)		22,194
Net cash used in operating activities						Net cash used in operating activities	(22,775)		(11,216)

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Additions to premises and equipment	Additions to premises and equipment	(2,502)		(1,204)		Additions to premises and equipment	(693)		(1,466)
Proceeds from the sale of business						Proceeds from the sale of business	3,000		0

Proceeds received from sale of equity securities		0		7,819
Proceeds from the sale of business		3,307		38,027
Other		0		1,087
Net cash provided by investing activities		805		45,729
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	2,307		(1,466)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Repayments and repurchases of long-term debt		0		(44,820)

Proceeds from stock option exercises		0		392

Purchase of treasury shares		0		(13,397)
Proceeds from convertible debt payable to related parties (Note 1)						Proceeds from convertible debt payable to related parties (Note 1)	1,200		0
Distributions to non-controlling interests	Distributions to non-controlling interests	(976)		(2,003)		Distributions to non-controlling interests	(1,751)		(491)
Payments of tax withholding on issuance of restricted share units and restricted shares	Payments of tax withholding on issuance of restricted share units and restricted shares	(1,495)		(1,516)		Payments of tax withholding on issuance of restricted share units and restricted shares	(927)		(1,417)
Net cash used in financing activities	Net cash used in financing activities	(2,471)		(61,344)		Net cash used in financing activities	(1,478)		(1,908)

Net (decrease) increase in cash, cash equivalents and restricted cash		(15,743)		6,579
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	(21,946)		(14,590)
Cash, cash equivalents and restricted cash at the beginning of the period	Cash, cash equivalents and restricted cash at the beginning of the period	86,583		64,046		Cash, cash equivalents and restricted cash at the beginning of the period	62,096		86,583

Cash, cash equivalents and restricted cash at the end of the period	Cash, cash equivalents and restricted cash at the end of the period	$	70,840	$	70,625	Cash, cash equivalents and restricted cash at the end of the period	$	40,150	$	71,993

Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Interest paid	Interest paid	$	12,218	$	16,271	Interest paid	$	6,214	$	8,463
Income taxes paid, net		742		2,397
Income taxes paid (received), net						Income taxes paid (received), net	1,515		(944)
Acquisition of right-of-use assets with operating lease liabilities	Acquisition of right-of-use assets with operating lease liabilities	1,051		5,888		Acquisition of right-of-use assets with operating lease liabilities	2,327		958
Reduction of right-of-use assets from operating lease modifications or reassessments	Reduction of right-of-use assets from operating lease modifications or reassessments	(1,715)		(3,458)		Reduction of right-of-use assets from operating lease modifications or reassessments	(3,740)		(1,715)

Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:

Net increase in payables for purchases of premises and equipment		$	60	$	203
Net (decrease) increase in payables for purchases of premises and equipment						Net (decrease) increase in payables for purchases of premises and equipment	$	(48)	$	469

See accompanying notes to condensed consolidated financial statements.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements

NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION

Description of Business

Altisource Portfolio Solutions S.A., together with its subsidiaries (which may be referred to as “Altisource,” the “Company,” “we,” “us” or “our”), is an integrated service provider and marketplace for the real estate and mortgage industries. Combining operational excellence with a suite of innovative services and technologies, Altisource helps solve the demands of the ever-changing markets we serve.

We are publicly traded on the NASDAQ Global Select Market under the symbol “ASPS.” We are organized under the laws of the Grand Duchy of Luxembourg.

Basis of Accounting and Presentation

The unaudited interim condensed consolidated financial statements have been prepared 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 Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, the interim data includes all normal recurring adjustments considered necessary to fairly state the results for the interim periods presented. The preparation of interim 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 interim condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Intercompany transactions and accounts have been eliminated in consolidation. ~~Certain prior year amounts have been reclassified to conform to the current year presentation.~~

Altisource consolidates Best Partners Mortgage Cooperative, Inc., which is managed by The Mortgage Partnership of America, L.L.C. (“MPA”), a wholly-owned subsidiary of Altisource. Best Partners Mortgage Cooperative, Inc. is a mortgage cooperative doing business as Lenders One® (“Lenders One”). MPA provides services to Lenders One under a management agreement that ends on December 31, 2025 (with renewals for 3 successive five-year periods at MPA’s option).

The management agreement between MPA and Lenders One, pursuant to which MPA is the management company, represents a variable interest in a variable interest entity. MPA is the primary beneficiary of Lenders One as it has the power to direct the activities that most significantly impact the cooperative’s economic performance and the right to receive benefits from the cooperative. As a result, Lenders One is presented in the accompanying condensed consolidated financial statements on a consolidated basis and the interests of the members are reflected as non-controlling interests. As of ~~September~~June 30, 2021, Lenders One had total assets of $1.1 million and total liabilities of $0.9 million. As of December 31, 2020, Lenders One had total assets of ~~$2.4~~$2.3 million and total liabilities of ~~$0.5 million. As of December 31, 2019, Lenders One had total assets of $1.6 million and total liabilities of $0.3~~$0.1 million.

In 2019, Altisource created Pointillist, Inc. (“Pointillist”) and contributed the Pointillist® customer journey analytics business and $8.5 million to it. Pointillist is owned by Altisource and management of Pointillist. Management of Pointillist owns a non-controlling interest representing 12.1% of the outstanding equity of Pointillist. Additional equity shares of Pointillist are available for issuance to management and board members of Pointillist. On May 27, 2021, Pointillist issued $1.2 million in principal of convertible notes to related parties with a maturity date of January 1, 2023. The notes bear interest at a rate of 7% per annum. The principal and unpaid accrued interest then outstanding under the notes (1) automatically converts to Pointillist equity at the earlier of the time Pointillist receives proceeds of $5.0 million or more from the sale of its equity or January 1, 2023, or (2) are repaid in cash or Pointillist equity (at the Lenders’ option) in the event of a corporate transaction or initial public offering of Pointillist. Altisource has no ongoing obligation to provide future funding to Pointillist. Pointillist is presented in the accompanying condensed consolidated financial statements on a consolidated basis and the portion of Pointillist owned by Pointillist management is reported as non-controlling interests.

These interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, as filed with the SEC on March ~~5, 2020.~~11, 2021.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

Fair Value Measurements

Fair value is defined as an exit price, representing the amount that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:

Level 1 — Quoted prices in active markets for identical assets and liabilities

Level 2 — Observable inputs other than quoted prices included in Level 1

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities

Financial assets and financial liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

Recently Adopted Accounting Pronouncements

In ~~January 2017,~~December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~No. 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.~~ This standard simplified the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Prior guidance required that companies compute the implied fair value of goodwill under Step 2 by performing procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. This standard requires companies to perform annual or interim goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Company adopted this standard effective January 1, 2020 and is applied prospectively. Adoption of this new standard did not have any impact on the Company’s condensed consolidated financial statements.

~~In August 2018, the FASB issued ASU No. 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement~~. This standard modified certain disclosure requirements such as the valuation processes for Level 3 fair value measurements. This standard also requires new disclosures such as the disclosure of certain assumptions used to develop significant unobservable inputs for Level 3 fair value measurements. The Company adopted this standard effective January 1, 2020 and is applied prospectively. Adoption of this new standard did not have any impact on the Company’s condensed consolidated financial statements.

~~In August 2018, the FASB issued ASU No. 2018-15,~~ Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). This standard aligns the requirements for capitalizing implementation costs in a hosting arrangement service contract with the existing guidance for capitalizing implementation costs incurred for an internal-use software license. This standard also requires capitalizing or expensing implementation costs based on the nature of the costs and the project stage during which they are incurred and establishes additional disclosure requirements. The Company adopted this standard effective January 1, 2020 and is applied prospectively. Adoption of this new standard did not have any impact on the Company’s condensed consolidated financial statements.

~~Future Adoption of New Accounting Pronouncements~~

~~In December 2019, the FASB issued ASU~~ No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard is part of the FASB’s initiative to reduce complexity in accounting standards by instituting several simplifying provisions and removing several exceptions pertaining to income tax accounting. This standard ~~will be~~is effective for annual periods beginning after December 15, 2020, including interim periods within that reporting period. ~~Early adoption~~The Company adopted this standard effective January 1, 2021 and has applied it prospectively. Adoption of this new standard ~~is permitted. The Company is currently evaluating~~did not have any impact on the ~~impact this guidance may have on its~~Company’s condensed consolidated financial statements.

~~Table~~In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Topic 815). This standard simplifies the accounting for certain financial instruments with characteristics of ~~Contents~~liability and equity, particularly convertible debt instruments. This standard is effective for annual periods beginning after December 15, 2021, including interim periods within that reporting period. Early adoption is permitted for annual periods beginning after December 15, 2020. The Company early adopted this standard effective January 1, 2021 and has applied it prospectively. Adoption of this new standard did not have a material impact on the Company’s condensed consolidated financial statements.

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

Future Adoption of New Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reportingand in January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. This standard applies only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. This standard provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting, in response to concerns about structural risks of interbank offered rates, and, particularly, the risk of cessation of LIBOR. This standard is effective from the period from March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a topic or an industry subtopic, the standard must be applied prospectively for all eligible contract modifications for that topic or industry subtopic. The Company is currently evaluating the impact this guidance may have on its condensed consolidated financial statements.

NOTE 2 — CUSTOMER CONCENTRATION

Ocwen

Ocwen Financial Corporation (together with its subsidiaries, “Ocwen”) is a residential mortgage loan servicer of mortgage servicing rights (“MSRs”) it owns, including those MSRs in which others have an economic interest, and a subservicer of MSRs owned by others.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, Ocwen was our largest customer, accounting for ~~57%~~32% of our total revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2020 (48%~~2021 (31% of our revenue for the ~~third~~second quarter of ~~2020)~~2021). Ocwen purchases certain mortgage services from us under the terms of services agreements and amendments thereto (collectively, the “Ocwen Services

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

Agreements”) with terms extending through August ~~2025.~~2030. Certain of the Ocwen Services Agreements contain a “most favored nation” provision and also grant the parties the right to renegotiate pricing, among other things.

In February 2019, Altisource and Ocwen entered into agreements that, among other things, facilitated Ocwen’s transition from REALServicing and related technologies to another mortgage servicing software platform, establish a process for Ocwen to review and approve the assignment of one or more of our agreements to potential buyers of Altisource’s business lines, requiring Ocwen to use Altisource as service provider for certain service referrals totaling an amount equal to 100% of the applicable service referrals on certain portfolios plus an amount equal to not less than 90% of applicable service referrals from certain other portfolios (determined on a service by service basis), subject to certain additional restrictions and limitations, and affirm Altisource’s role as a strategic service provider to Ocwen through August 2025. In connection with these agreements, Altisource expressly preserved and did not waive any of its existing contractual rights relating to service referrals, other than with respect to Ocwen transitioning from the REALServicing and related technologies. If Altisource fails certain performance standards for specified periods of time, then Ocwen may terminate Altisource as a provider for the applicable service(s), subject to certain limitations and Altisource’s right to cure. Ocwen’s transition to another mortgage servicing platform was completed during 2019.

Revenue from Ocwen primarily consists of revenue earned from the loan portfolios serviced and subserviced by Ocwen when Ocwen engages us as the service provider, and revenue earned directly from Ocwen, pursuant to the Ocwen Services Agreements. For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we recognized revenue from Ocwen of ~~$174.1~~$31.2 million and ~~$275.1~~$131.6 million, respectively ($~~42.5~~14.2 million and ~~$89.8~~$57.4 million for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively). Revenue from Ocwen as a percentage of consolidated revenue was ~~57%~~32% and ~~54%~~61% for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, respectively (31% and ~~2019, respectively (48% and 63%~~60% for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively).

We earn additional revenue related to the portfolios serviced and subserviced by Ocwen when a party other than Ocwen or the MSR owner selects Altisource as the service provider. For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we recognized revenue of ~~$19.9~~$5.5 million and ~~$28.3~~$12.8 million, respectively ($~~7.2~~2.9 million and ~~$8.1~~$5.0 million for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively), related to the portfolios serviced by Ocwen when a party other than Ocwen or the ~~MSR~~MSRs owner selected Altisource as the service provider. These amounts are not included in deriving revenue from Ocwen and revenue from Ocwen as a percentage of revenue discussed above.

During the second quarter of 2020, Ocwen informed us that an MSR investor ~~had~~ instructed Ocwen to use a field services provider other than Altisource on properties associated with certain MSRs. ~~They indicated~~Based upon the impacted portfolios to date and the designated service provider, Altisource believes that ~~they were instructed to begin the transition in July 2020, and that the transition should be completed in a few months.~~Ocwen received these directions from New Residential Investment Corp. (individually, together with one or more of its subsidiaries or one or more of its subsidiaries individually, “NRZ”). We believe Ocwen commenced using another field services provider for these properties in July 2020 and continued to transition services during the third quarter of 2020. ~~Based upon~~We believe that the ~~impacted portfolios to date and the designated service provider, Altisource believes that Ocwen received~~

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

~~these directions from New Residential Investment Corp. (individually, together with one or more of its subsidiaries or one or more of its subsidiaries individually, “NRZ”). The~~ transition to the replacement field service provider ~~has~~was largely ~~been~~ completed as of September 30, 2020. We estimate that ~~$72.3~~$0.3 million and ~~$115.6~~$55.0 million of service revenue from Ocwen for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively ~~($14.1~~(less than $0.1 million and ~~$38.1~~$25.7 million for the ~~third~~second quarter of 2021 and 2020, ~~and 2019,~~ respectively), was derived from Field Services referrals from the NRZ portfolios. ~~Without providing the timing or specific services impacted,~~ Ocwen also communicated to Altisource in the fourth quarter of 2020 that the same investor ~~plans~~instructed Ocwen to ~~direct them to transition~~use a provider for default valuations and certain default title services other ~~default related service~~than Altisource on properties associated with such certain MSRs and commenced moving these referrals to other ~~providers.~~service providers in the fourth quarter of 2020. We anticipate that the transition of such default valuations and title services will continue during the course of 2021. We estimate that ~~revenue from these certain other default related services represented approximately $25.6~~$1.8 million and ~~$34.9~~$12.7 million of service revenue from Ocwen for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively ($~~6.4~~0.9 million and ~~$12.5~~$4.8 million for the ~~third~~second quarter of 2021 and 2020, respectively), was derived from default valuations and ~~2019, respectively). Altisource believes that any action taken by Ocwen to redirect these service~~title services referrals ~~breaches Altisource's agreement with Ocwen. We are currently in discussions with Ocwen to address this matter, and have reserved all of our rights with respect to this matter.~~

from the NRZ portfolios. To address the reduction in revenue, Altisource ~~has undertaken~~is undertaking several measures to further reduce its cost structure and strengthen its operations.

On May 5, 2021 we entered into an agreement with Ocwen (the “Agreement”) pursuant to which the terms of certain services agreements between us and Ocwen were extended from August 2025 through August 2030 and the scope of solutions we provide to Ocwen was expanded to include, among other things, the opportunity for the Company to provide first and second chance foreclosure auctions on Federal Housing Administration (“FHA”) loans and field services on Ocwen’s FHA, Veterans Affairs and United States Department of Agriculture loans (collectively, “Government Loans”), and title services on FHA and Veterans Affairs loans, subject to a process to confirm Altisource’s ability to meet reasonable performance requirements. The Agreement established a framework for us to expand the foreclosure trustee solutions we provide to Ocwen in additional states, and, as mutually agreed upon by the parties, to deliver reverse mortgage related solutions to Ocwen, subject to negotiation of appropriate statements of work or other agreements, a process to confirm Altisource’s ability to meet reasonable performance requirements, and technical integrations, as may be applicable. The Agreement further resolved the contractual dispute between the parties related to Ocwen’s transfer to NRZ the rights to designate service providers other than Altisource, including mutual releases with respect to such dispute. The Agreement also addressed Ocwen’s rights in the event of certain change of control or sale of a business transactions by us on or after September 1, 2028. During the second quarter of 2021, Ocwen transitioned over 1,900 of its FHA first chance auction inventory to us and increased our percentage of field services referrals on its Government Loans.

As of ~~September~~June 30, ~~2020,~~2021, accounts receivable from Ocwen totaled ~~$10.2~~$4.2 million, ~~$8.9~~$3.7 million of which was billed and ~~$1.3~~$0.5 million of which was unbilled. As of December 31, ~~2019,~~2020, accounts receivable from Ocwen totaled ~~$19.1~~$5.9 million, ~~$15.7~~$5.1 million of which was billed and ~~$3.4~~$0.8 million of which was unbilled.

NRZ

NRZ is a real estate investment trust that invests in and manages investments primarily related to residential real estate, including MSRs and excess MSRs.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

Ocwen has disclosed that NRZ is its largest client. As of ~~June 30, 2020, NRZ MSRs or rights to MSRs relating to~~March 31, 2021, approximately ~~53%~~36% of loans serviced and subserviced by Ocwen (measured in unpaid principal balance (“UPB”)). were related to NRZ MSRs or rights to MSRs. In July 2017 and January 2018, Ocwen and NRZ entered into a series of agreements pursuant to which the parties agreed, among other things, to undertake certain actions to facilitate the transfer from Ocwen to NRZ of Ocwen’s legal title to certain of its MSRs (the “Subject MSRs”) and under which Ocwen will subservice mortgage loans underlying the MSRs for an initial term of five years, subject to early termination rights.

On August 28, 2017, Altisource, through its licensed subsidiaries, entered into a Cooperative Brokerage Agreement, as amended, and related letter agreement (collectively, the “Brokerage Agreement”) with NRZ which extends through August 2025. Under this agreement and related amendments, Altisource remains the exclusive provider of brokerage services for real estate owned (“REO”) associated with the Subject MSRs, irrespective of the subservicer, subject to certain limitations. NRZ’s brokerage subsidiary receives a cooperative brokerage commission on the sale of REO properties from these portfolios subject to certain exceptions.

The Brokerage Agreement may be terminated by NRZ upon the occurrence of certain specified events. Termination events include, but are not limited to, a breach of the terms of the Brokerage Agreement (including, without limitation, the failure to meet performance standards and non-compliance with law in a material respect), the failure to maintain licenses which failure materially prevents performance of the contract, regulatory allegations of non-compliance resulting in an adversarial proceeding against NRZ, voluntary or involuntary bankruptcy, appointment of a receiver, disclosure in a Form 10-K or Form 10-Q that there is significant uncertainty about Altisource’s ability to continue as a going concern, failure to maintain a specified level of cash and an unapproved change of control.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we recognized revenue from NRZ of ~~$7.1~~$1.7 million and ~~$9.6~~$4.6 million, respectively ($~~2.5~~0.9 million and ~~$2.6~~$1.9 million for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively), under the Brokerage Agreement. For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we recognized additional revenue of ~~$29.3~~$7.6 million and ~~$45.5~~$19.1 million, respectively ($~~10.2~~4.1 million and ~~$11.4~~$7.1 million for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively), relating to the Subject MSRs when a party other than NRZ selects Altisource as the service provider.

NOTE 3 — SALE OF ~~THE FINANCIAL SERVICES~~A BUSINESS

~~On July 1, 2019,~~In August 2018, Altisource ~~sold~~entered into an amendment to its Financial Services business, consisting of its post-charge-off consumer debt and mortgage charge-off collection services and customer relationship management services (the “Financial Services Business”agreements with Front Yard Residential Corporation (“RESI”) to ~~Transworld Systems Inc. (“TSI”) for $44.0~~sell Altisource’s rental property management business to RESI and permit RESI to internalize certain services that had been provided by Altisource. The proceeds from the transaction totaled $18.0 million, ~~consisting~~payable in 2 installments. The first installment of ~~an up-front payment of $40.0~~$15.0 million ~~subject to a working capital adjustment (finalized during 2019) and transaction costs upon closing of the sale, and an additional~~ ~~$4.0 million payment~~was received on the ~~one year anniversary~~closing date of August 8, 2018. The second installment of $3.0 million was to be received on the ~~sale closing.~~earlier of a RESI change of control or on August 8, 2023. On ~~July 1,~~October 19, 2020, ~~the Company received net proceeds of $3.3 million~~

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

~~representing $4.0 million, net of certain amounts owed to TSI under the purchase and sale agreement.~~ ~~The parties also~~RESI announced that it had entered into a ~~transition services~~definitive merger agreement to ~~provide for~~sell RESI. The merger closed on January 11, 2021 and the management and orderly transition of certain services and technologies to TSI for periods ranging from 2 months to 13 months, subject to additional 3 month extensions. These services included support for information technology systems and infrastructure, facilities management, finance, compliance and human resources functions and were charged to TSI on a fixed fee or hourly basis. ~~As of October 1, 2020, all~~Company subsequently received the $3.0 million payment. The present value of the ~~transition services and technologies have been fully transitioned to TSI.~~second installment is included in other assets in the accompanying condensed consolidated balance sheets at a discounted value of $2.5 million as of December 31, 2020 (0 comparative amount as of June 30, 2021).

NOTE 4 — INVESTMENT IN EQUITY SECURITIES

During 2016, we purchased 4.1 million shares of ~~Front Yard Residential Corporation (“RESI”)~~RESI common stock. This investment is reflected in the accompanying condensed consolidated balance sheets at fair value and changes in fair value are included in other income (expense), net in the accompanying condensed consolidated statements of operations and comprehensive ~~income (loss).~~loss. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we held ~~3.5 million~~0 shares of RESI common stock. ~~As of September~~During the three and six months ended June 30, 2020, ~~and December 31, 2019, the fair value of our investment was $30.2 million and $42.6 million, respectively. During the nine months ended September 30, 2020 and 2019,~~ we recognized an unrealized ~~(loss) gain~~loss from the change in fair value of ~~$(12.4)~~$(11.2) million and $11.7 million, respectively ($0.1 million and $(2.3) million for the third quarter of 2020 and 2019, respectively). The unrealized (loss) gain for the three and nine months ended September 30, 2019 included less than $0.1 million net loss and a $1.9 million net gain, respectively, recognized on RESI shares sold during the periods. During the nine months ended September 30, 2020 and 2019, we earned dividends of $0.5 million and $1.7$(12.6) million, respectively (0 comparative amount for the ~~third quarter~~three and six months ended June 30, 2021). During the six months ended June 30, 2020, we earned dividends of ~~2020 and~~ $0.5 million ~~for the third quarter of 2019),~~ related to this ~~investment.~~

~~In May 2019, the Company began selling its~~ investment in RESI common stock. During the nine months ended September 30, 2019, the Company sold 0.7 million shares for net proceeds of $7.8 million (0.1 million shares for net proceeds of $1.3 million for the third quarter of 2019) (0 comparative ~~amounts~~amount for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020). Subsequent to~~2021 and for the end of the third quarter 2020, the Company sold 1.6 million shares for net proceeds of $21.1 million. The senior secured term loan agreement requires that the Company use the net proceeds to repay a portion of its senior secured term loan.

On October 19, 2020, RESI announced that it has entered into a definitive merger agreement whereby a partnership led by Pretium and including funds managed by the Real Estate Equity and Alternative Credit strategies of Ares Management Corporation will acquire RESI for $13.50 in cash per share. RESI also announced that the transaction is expected to close in the firstsecond quarter of ~~2021, subject~~2020).

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to ~~the approval of the holders of a majority of RESI’s outstanding shares and the satisfaction of customary closing conditions.~~Condensed Consolidated Financial Statements (Continued)

NOTE 5 — ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consists of the following:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	June 30, 2021		December 31, 2020

Billed	Billed	$	23,649	$	35,921	Billed	$	17,086	$	19,703
Unbilled	Unbilled	10,060		12,166		Unbilled	6,106		8,291
		33,709		48,087			23,192		27,994
Less: Allowance for credit losses	Less: Allowance for credit losses	(5,653)		(4,472)		Less: Allowance for credit losses	(5,436)		(5,581)

Total	Total	$	28,056	$	43,615	Total	$	17,756	$	22,413

Unbilled accounts receivable consist primarily of certain real estate asset management, REO sales, title and closing services for which we generally recognize revenue when the service is provided but collect upon closing of the sale, and foreclosure trustee services, for which we generally recognize revenues over the service delivery period but bill following completion of the service. We also include amounts in unbilled accounts receivable that are earned during a month and billed in the following month.

We are exposed to credit losses through our sales of products and services to our customers which are recorded as accounts receivable, net on the Company’s condensed consolidated financial statements. We monitor and estimate the allowance for credit losses based on our historical write-offs, historical collections, our analysis of past due accounts based on the contractual terms of the receivables, relevant market and industry reports and our assessment of the economic status of our customers, if known. Estimated credit losses are written off in the period in which the financial asset is determined to be no longer collectible. There can be no assurance that actual results will not differ from estimates or that consideration of these factors in the future will not result in an increase or decrease to our allowance for credit losses.

Changes in allowance for expected credit losses consist of the following:


			Additions
(in thousands)	Balance at Beginning of Period		Charged to Expenses		Deductions Note (1)		Balance at End of Period

Allowance for expected credit losses:

Six months ended June 30, 2021	$	5,581	$	615	$	760	$	5,436
Twelve months ended December 31, 2020	4,472		2,229		1,120		5,581

(1) Amounts written off as uncollectible or transferred to other accounts or utilized.

NOTE 6 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:


(in thousands)	June 30, 2021		December 31, 2020

Income taxes receivable	$	8,144	$	7,053
Maintenance agreements, current portion	1,826		2,513
Prepaid expenses	3,931		4,812
Other current assets	5,173		5,101

Total	$	19,074	$	19,479

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

NOTE ~~6 — PREPAID EXPENSES AND OTHER CURRENT ASSETS~~

~~Prepaid expenses and other current assets consist of the following:~~

(in thousands) September 30,
2020 December 31,
2019
Income taxes receivable $ 2,368 $ 5,098
Maintenance agreements, current portion 2,364 1,923
Prepaid expenses 4,502 3,924
Other current assets 5,484 4,269
Total $ 14,718 $ 15,214

~~NOTE~~ 7 ~~— DISCONTINUATION OF LINES OF BUSINESS~~

~~Owners.com~~

In October 2019, the Company announced its plans to wind down and close the Owners.com business, which was completed by December 31, 2019. Owners.com was a technology-enabled real estate brokerage and provider of related mortgage brokerage and title services. Owners.com was not material in relation to the Company’s results of operations or financial position. Wind down expenses were included in the Project Catalyst restructuring charges (see Note 23).

~~Buy-Renovate-Lease-Sell~~

On November 26, 2018, the Company announced its plans to sell its short-term investments in real estate (“BRS Inventory”) and discontinue the Company’s Buy-Renovate-Lease-Sell (“BRS”) business. Altisource’s BRS business focused on buying, renovating, leasing and selling single-family homes to real estate investors. The BRS business was not material in relation to the Company’s results of operations or financial position. The Company completed the sale of the BRS Inventory during the year ended December~~31, 2019.~~

~~NOTE 8~~ — PREMISES AND EQUIPMENT, NET

Premises and equipment, net consists of the following:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	June 30, 2021		December 31, 2020

Computer hardware and software	Computer hardware and software	$	68,242	$	144,608	Computer hardware and software	$	52,458	$	52,837
Leasehold improvements	Leasehold improvements	17,857		23,800		Leasehold improvements	10,760		14,792
Furniture and fixtures	Furniture and fixtures	6,553		8,775		Furniture and fixtures	5,251		5,882
Office equipment and other	Office equipment and other	2,812		4,004		Office equipment and other	1,193		1,817

		95,464		181,187			69,662		75,328
Less: Accumulated depreciation and amortization	Less: Accumulated depreciation and amortization	(80,481)		(156,661)		Less: Accumulated depreciation and amortization	(59,466)		(63,434)

Total	Total	$	14,983	$	24,526	Total	$	10,196	$	11,894

Depreciation and amortization expense amounted to ~~$11.5~~$2.3 million and ~~$14.2~~$7.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively ($~~3.8~~1.2 million and ~~$3.7~~$3.6 million for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively), and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets in the accompanying condensed consolidated statements of operations and comprehensive ~~income (loss).~~

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

loss.

Premises and equipment, net consist of the following, by country:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	June 30, 2021		December 31, 2020

United States	United States	$	7,332	$	13,426	United States	$	4,633	$	5,530
Luxembourg	Luxembourg	6,686		10,295		Luxembourg	4,658		5,451
India	India	824		671		India	792		822
Uruguay	Uruguay	105		39		Uruguay	113		91
Philippines		36		95

Total	Total	$	14,983	$	24,526	Total	$	10,196	$	11,894

NOTE 98 — RIGHT-OF-USE ASSETS UNDER OPERATING LEASES, NET

Right-of-use assets under operating leases, net consists of the following:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	June 30, 2021		December 31, 2020

Right-of-use assets under operating leases	Right-of-use assets under operating leases	$	35,013	$	39,729	Right-of-use assets under operating leases	$	25,793	$	31,932
Less: Accumulated amortization	Less: Accumulated amortization	(14,710)		(10,655)		Less: Accumulated amortization	(13,506)		(13,719)

Total	Total	$	20,303	$	29,074	Total	$	12,287	$	18,213

Amortization of operating leases was ~~$8.1~~$4.5 million and ~~$9.1~~$5.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively ($2.6 million and ~~$2.4~~$2.8 million for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively), and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets in the accompanying condensed consolidated statements of operations and comprehensive ~~income (loss).~~loss.

NOTE 109 — GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

Goodwill consists of the following:


(in thousands)	Total







Balance as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020	$	73,849

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Notes to Condensed Consolidated Financial Statements (Continued)

Intangible Assets, net

Intangible assets, net consist of the following:


		Weighted average estimated useful life (in years)		Gross carrying amount								Accumulated amortization								Net book value									Weighted average estimated useful life (in years)		Gross carrying amount								Accumulated amortization								Net book value
(in thousands)	(in thousands)		September 30, 2020			December 31, 2019				September 30, 2020				December 31, 2019				September 30, 2020				December 31, 2019		(in thousands)						June 30, 2021			December 31, 2020				June 30, 2021				December 31, 2020				June 30, 2021				December 31, 2020

Definite lived intangible assets:	Definite lived intangible assets:																									Definite lived intangible assets:
Customer related intangible assets	Customer related intangible assets		9			$	214,973			$	214,973			$	(185,089)			$	(176,043)			$	29,884			$	38,930	Customer related intangible assets		9			$	214,973			$	214,973			$	(192,352)			$	(187,923)			$	22,621			$	27,050
Operating agreement	Operating agreement	20		35,000				35,000				(18,689)				(17,376)				16,311				17,624		Operating agreement			20		35,000				35,000				(20,001)				(19,126)				14,999				15,874
Trademarks and trade names	Trademarks and trade names	16		9,709				9,709				(6,202)				(5,893)				3,507				3,816		Trademarks and trade names			16		9,709				9,709				(6,513)				(6,307)				3,196				3,402
Non-compete agreements	Non-compete agreements	4		1,230				1,230				(1,230)				(1,215)				0				15		Non-compete agreements			—		0				1,230				0				(1,230)				0				0
Intellectual property		—		0				300				0				(175)				0				125
Other intangible assets	Other intangible assets	5		1,800				3,745				(1,800)				(3,209)				0				536		Other intangible assets			—		0				1,800				0				(1,800)				0				0

Total	Total			$	262,712			$	264,957			$	(213,010)			$	(203,911)			$	49,702			$	61,046	Total					$	259,682			$	262,712			$	(218,866)			$	(216,386)			$	40,816			$	46,326

Amortization expense for definite lived intangible assets was ~~$11.3~~$5.5 million and ~~$15.5~~$7.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively ($~~4.3~~2.9 million and ~~$3.3~~$2.8 million for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively). Expected annual definite lived intangible asset amortization expense for ~~2020~~2021 through ~~2024~~2025 is ~~$14.9~~$9.5 million, ~~$9.3~~$5.1 million, $5.1 million, $5.1 million and $5.1 million, respectively.

NOTE 1110 — OTHER ASSETS

Other assets consist of the following:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	June 30, 2021		December 31, 2020

Restricted cash	Restricted cash	$	3,817	$	3,842	Restricted cash	$	4,821	$	3,833
Security deposits	Security deposits	2,628		3,473		Security deposits	1,645		2,416
Deferred tax assets, net		1,262		1,626

Other	Other	3,577		3,495		Other	1,059		3,601

Total	Total	$	11,284	$	12,436	Total	$	7,525	$	9,850

NOTE 1211 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accounts payable and accrued expenses consist of the following:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	June 30, 2021		December 31, 2020

Accounts payable	Accounts payable	$	17,861	$	22,431	Accounts payable	$	22,400	$	16,797
Accrued expenses - general	Accrued expenses - general	18,678		24,558		Accrued expenses - general	19,879		24,422
Accrued salaries and benefits	Accrued salaries and benefits	17,533		18,982		Accrued salaries and benefits	13,037		11,226
Income taxes payable	Income taxes payable	2,290		1,700		Income taxes payable	4,377		4,334

Total	Total	$	56,362	$	67,671	Total	$	59,693	$	56,779

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

Other current liabilities consist of the following:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	June 30, 2021		December 31, 2020

Operating lease liabilities	Operating lease liabilities	$	8,186	$	11,398	Operating lease liabilities	$	6,567	$	7,609
Other	Other	2,563		3,326		Other	261		1,696

Total	Total	$	10,749	$	14,724	Total	$	6,828	$	9,305

NOTE 1312 — LONG-TERM DEBT

Long-term debt consists of the following:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	June 30, 2021		December 31, 2020

Senior secured term loans	Senior secured term loans	$	293,826	$	293,826	Senior secured term loans	$	247,204	$	247,204
Less: Debt issuance costs, net	Less: Debt issuance costs, net	(2,571)		(3,119)		Less: Debt issuance costs, net	(1,993)		(2,389)
Less: Unamortized discount, net	Less: Unamortized discount, net	(2,325)		(2,825)		Less: Unamortized discount, net	(1,825)		(2,159)

Long-term debt	Long-term debt	$	288,930	$	287,882	Long-term debt	$	243,386	$	242,656

Credit Agreement

Altisource Portfolio Solutions S.A. and its wholly-owned subsidiary, Altisource S.à r.l. entered into a credit agreement (the “Credit Agreement”) in April 2018 with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and certain lenders. Under the Credit Agreement, Altisource borrowed $412.0 million in the form of Term B Loans and obtained a $15.0 million revolving credit facility. The Term B Loans mature in April 2024 and the revolving credit facility matures in April 2023. Altisource Portfolio Solutions S.A. and certain subsidiaries are guarantors of the term loan and the revolving credit facility (collectively, the “Guarantors”).

There are no mandatory repayments of the Term B Loans due until ~~March 2023,~~April 2024, when ~~$1.3 million~~the balance is due ~~to be repaid. Thereafter, the Term B Loans must be repaid in consecutive quarterly principal installments of $3.1 million, with the balance due~~ at ~~maturity.~~maturity, except as otherwise described herein. All amounts outstanding under the Term B Loans will become due on the earlier of (i) April 3, 2024, and (ii) the date on which the loans are declared to be due and owing by the administrative agent at the request (or with the consent) of the Required Lenders (as defined in the Credit Agreement; other capitalized terms, unless defined herein, are defined in the Credit Agreement) or as otherwise provided in the Credit Agreement upon the occurrence of any event of default.

In addition to the scheduled principal payments, subject to certain exceptions, the Term B Loans are subject to mandatory prepayment upon issuances of debt, certain casualty and condemnation events and sales of assets, as well as from a percentage of Consolidated Excess Cash Flow if our leverage ratio as of each year-end computation date is greater than 3.00 to 1.00, as calculated in accordance with the provisions of the Credit Agreement (the percentage increases if our leverage ratio exceeds 3.50 to 1.00). ~~Certain mandatory prepayments reduce future contractual amortization payments in direct order of maturity by an amount equal~~Our leverage ratio exceeded 3.50 to 1.00 for the ~~mandatory prepayment.~~

On July 1, 2019, Altisource closed the sale of the Financial Services Business to TSI and received a $40.0 million up-front payment less adjustments for working capital and transaction costs (see Note 3). On July 17, 2019, Altisource used $37.0 million to repay a portion of the senior secured term loan.

~~During the nine~~twelve months ended ~~September~~June 30, ~~2019,~~2021. The Company did not generate any Consolidated Excess Cash Flow in the ~~Company sold 0.7 million RESI shares for net proceeds of $7.8 million (0.1 million shares for net proceeds of $1.3 million for the third~~second quarter of ~~2019). Altisource used the net proceeds of $7.8 million to repay a portion of its senior secured term loan for the nine months ended September 30, 2019 ($2.0 million for the third quarter of 2019).~~2021.

Altisource may incur incremental indebtedness under the Credit Agreement from one or more incremental lenders, which may include existing lenders, in an aggregate incremental principal amount not to exceed $125.0 million, subject to certain conditions set forth in the Credit Agreement, including a sublimit of $80.0 million with respect to incremental revolving credit commitments and, after giving effect to the incremental borrowing, the Company’s leverage ratio does not exceed 3.00 to 1.00. Our leverage ratio exceeded 3.00 to 1.00 ~~during~~for the ~~third quarter of 2020.~~twelve months ended June 30, 2021. The lenders have no obligation to provide any incremental indebtedness.

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

The Term B Loans bear interest at rates based upon, at our option, the Adjusted Eurodollar Rate or the Base Rate. Adjusted Eurodollar Rate term loans bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Adjusted Eurodollar Rate for a three month interest period and (y) 1.00% plus (ii) 4.00%. Base Rate term loans bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Base Rate and (y) 2.00% plus (ii) 3.00%. The interest rate as of ~~September~~June 30, ~~2020~~2021 was 5.00%.

Loans under the revolving credit facility bear interest at rates based upon, at our option, the Adjusted Eurodollar Rate or the Base Rate. Adjusted Eurodollar Rate revolving loans bear interest at a rate per annum equal to the sum of (i) the Adjusted Eurodollar Rate for a three month interest period plus (ii) 4.00%. Base Rate revolving loans bear interest at a rate per annum

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

equal to the sum of (i) the Base Rate plus (ii) 3.00%. The unused commitment fee is 0.50%. Borrowings under the revolving credit facility are not permitted if our leverage ratio exceeds 3.50 to 1.00. Our leverage ratio exceeded 3.50 to 1.00 ~~during~~for the ~~third quarter of 2020.~~twelve months ended June 30, 2021. There were 0 borrowings outstanding under the revolving credit facility as of ~~September~~June 30, ~~2020.~~2021.

The payment of all amounts owing by Altisource under the Credit Agreement is guaranteed by the Guarantors and is secured by a pledge of all equity interests of certain subsidiaries of Altisource, as well as a lien on substantially all of the assets of Altisource S.à r.l. and the Guarantors, subject to certain exceptions.

The Credit Agreement includes covenants that restrict or limit, among other things, our ability, subject to certain exceptions and baskets, to incur indebtedness; incur liens on our assets; sell, transfer or dispose of assets; make Restricted Junior Payments including share repurchases, dividends and repayment of junior indebtedness; make investments; dispose of equity interests of any Material Subsidiaries; engage in a line of business substantially different than existing businesses and businesses reasonably related, complimentary or ancillary thereto; amend material debt agreements or other material contracts; engage in certain transactions with affiliates; enter into sale/leaseback transactions; grant negative pledges or agree to such other restrictions relating to subsidiary dividends and distributions; make changes to our fiscal year; and engage in mergers and consolidations; and to the extent any Revolving Credit Loans are outstanding on the last day of a fiscal quarter, permit the Total Leverage Ratio to be greater than 3.50:1.00 as of the last day of such fiscal quarter, subject to a customary cure provision (the “Revolving Financial Covenant”).

The Credit Agreement contains certain events of default including (i) failure to pay principal when due or interest or any other amount owing on any other obligation under the Credit Agreement within five days of becoming due, (ii) material incorrectness of representations and warranties when made, (iii) breach of certain other covenants, subject to cure periods described in the Credit Agreement, (iv) a breach of the Revolving Financial Covenant, subject to a customary cure provision and not an Event of Default with respect to the Term Loans unless and until the Required Revolving Lenders accelerate the Revolving Credit Loans, (v) failure to pay principal or interest on any other debt that equals or exceeds $40.0 million when due, (vi) default on any other debt that equals or exceeds $40.0 million that causes, or gives the holder or holders of such debt the ability to cause, an acceleration of such debt, (vii) occurrence of a Change of Control, (viii) bankruptcy and insolvency events, (ix) entry by a court of one or more judgments against us in an amount in excess of $40.0 million that remain unbonded, undischarged or unstayed for a certain number of days after the entry thereof, (x) the occurrence of certain ERISA events and (xi) the failure of certain Loan Documents to be in full force and effect. If any event of default occurs and is not cured within applicable grace periods set forth in the Credit Agreement or waived, all loans and other obligations could become due and immediately payable and the facility could be terminated.

As of ~~September~~June 30, ~~2020,~~2021, debt issuance costs were ~~$2.6~~$2.0 million, net of ~~$2.0~~$2.5 million of accumulated amortization. As of December 31, ~~2019,~~2020, debt issuance costs were ~~$3.1~~$2.4 million, net of ~~$1.4~~$2.2 million of accumulated amortization.

Credit Facility

~~NOTE 14 — OTHER NON-CURRENT LIABILITIES~~

~~Other non-current liabilities consist~~On June 22, 2021 Altisource S.à r.l, a subsidiary of Altisource Portfolio Solutions S.A., entered into a revolving credit facility with a related party, STS Master Fund, Ltd. (“STS”) (the “Credit Facility”). STS is an investment fund managed by Deer Park Road Management Company, LP. Deer Park Road Management, LP owns approximately 24% of Altisource’s common stock as of June 30, 2021 and its Chief Investment Officer and managing partner is a member of Altisource’s Board of Directors. Under the terms of the ~~following:~~Credit Facility, STS will make loans to Altisource from time to time, in amounts requested by Altisource and Altisource may voluntarily prepay all or any portion of the outstanding loans at any time. The Credit Facility provides Altisource the ability to borrow a maximum amount of $20 million through June 22, 2022, $15 million through June 22, 2023, and $10 million until the end of the term. Amounts that are repaid may be re-borrowed in accordance with the limitations set forth below.

(in thousands) September 30,
2020 December 31,
2019
Operating lease liabilities $ 13,737 $ 19,707
Income tax liabilities 12,026 10,935
Other non-current liabilities 528 374
Total $ 26,291 $ 31,016
Outstanding amounts borrowed pursuant to the Credit Facility will amortize over the three-year term as follows: on June 22, 2022, the difference between the then outstanding balance above $15 million and $15 million, on June 22, 2023, the difference between the then outstanding balance above $10 million and $10 million, and on June 22, 2024, the then outstanding balance of the loan will be due and payable by Altisource.

Borrowings under the Credit Facility bear interest at 9.00% per annum and are payable quarterly on the last business day of each March, June, September and December, commencing on September 30, 2021. In connection with the Credit Facility, Altisource is required to pay customary fees, including an upfront fee equal to $0.5 million at the initial extension of credit pursuant to the facility, an unused line fee of 0.5% and, an early termination fee in the event of a refinancing transaction.

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Notes to Condensed Consolidated Financial Statements (Continued)

Altisource’s obligations under the Credit Facility are secured by a lien on all equity in Altisource’s subsidiary incorporated in India, Altisource Business Solutions Private Limited, pursuant to a pledge agreement entered into by Altisource Asia Holdings Ltd I, a wholly owned subsidiary Altisource.

The Credit Facility contains additional representations, warranties, covenants, terms and conditions customary for transactions of this type, that restrict or limit, among other things, our ability to use the proceeds of credit only for general corporate purposes.

The Credit Facility contains certain events of default including (i) failure to pay principal when due or interest or any other amount owing on any other obligation under the Credit Facility within three business days of becoming due, (ii) failure to perform or observe any material provisions of the Credit Documents to be performed or complied with, (iii) material incorrectness of representations and warranties when made, (iv) default on any other debt that equals or exceeds $40.0 million that causes, or gives the holder or holders of such debt the ability to cause, an acceleration of such debt, (v) entry by a court of one or more judgments against us in an amount in excess of $40.0 million that remain unbonded, undischarged or unstayed for a certain number of days after the entry thereof, (vi) occurrence of a Change of Control, (vii) bankruptcy and insolvency events. If any event of default occurs and is not cured within applicable grace periods set forth in the Credit Facility or waived, all loans and other obligations could become due and immediately payable and the facility could be terminated.

As of June 30, 2021, there were no borrowing outstanding under the Credit Facility. On July 6, 2021, the Company borrowed $6 million under the Credit Facility.

NOTE 1513 — OTHER NON-CURRENT LIABILITIES

Other non-current liabilities consist of the following:


(in thousands)	June 30, 2021		December 31, 2020

Operating lease liabilities	$	7,055	$	12,281
Income tax liabilities	12,322		12,414
Deferred revenue	289		504
Other non-current liabilities	50		40

Total	$	19,716	$	25,239

NOTE 14 — FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

The following table presents the carrying amount and estimated fair value of financial instruments and certain liabilities measured at fair value as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. The following fair values are estimated using market information and what the Company believes to be appropriate valuation methodologies under GAAP:


		September 30, 2020								December 31, 2019									June 30, 2021								December 31, 2020
(in thousands)	(in thousands)	Carrying amount		Fair value						Carrying amount		Fair value						(in thousands)	Carrying amount		Fair value						Carrying amount		Fair value
				Level 1		Level 2		Level 3				Level 1		Level 2		Level 3					Level 1		Level 2		Level 3				Level 1		Level 2		Level 3
Assets:	Assets:																	Assets:
Cash and cash equivalents	Cash and cash equivalents	$	67,023	$	67,023	$	0	$	0	$	82,741	$	82,741	$	0	$	0	Cash and cash equivalents	$	35,329	$	35,329	$	0	$	0	$	58,263	$	58,263	$	0	$	0
Restricted cash	Restricted cash	3,817		3,817		0		0		3,842		3,842		0		0		Restricted cash	4,821		4,821		0		0		3,833		3,833		0		0
Investment in equity securities		30,185		30,185		0		0		42,618		42,618		0		0

Long-term receivable	Long-term receivable	2,490		0		0		2,490		2,371		0		0		2,371		Long-term receivable	0		—		0		0		2,531		0		0		2,531

Liabilities:	Liabilities:																	Liabilities:
Senior secured term loan	Senior secured term loan	293,826		0		205,678		0		293,826		0		277,666		0		Senior secured term loan	247,204		0		207,652		0		247,204		0		201,472		0

Fair Value Measurements on a Recurring Basis

Cash and cash equivalents and restricted cash are carried at amounts that approximate their fair values due to the highly liquid nature of these instruments and were measured using Level 1 inputs.

~~Investment in equity securities is carried at fair value and consists of 3.5 million~~shares of RESI common stock as of September 30, 2020 and December 31, 2019. The investment in equity securities is measured using Level 1 inputs as these securities have quoted prices in active markets.

The fair value of our senior secured term loan is based on quoted market prices. Based on the frequency of trading, we do not believe that there is an active market for our debt. Therefore, the quoted prices are considered Level 2 inputs.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

In connection with the sale of the rental property management business in August 2018, Altisource ~~will~~was to receive $3.0 million on the earlier of a RESI change of control or on August 8, 2023. On October 19, 2020, RESI announced that it had entered into a definitive merger agreement to sell RESI. The merger closed on January 11, 2021 and the Company subsequently received the $3.0 million payment (See Note 3 for additional information). We measure long-term receivables without a stated interest rate based on the present value of the future payments.

There were no transfers between different levels during the periods presented.

Concentrations of Credit Risk

Financial instruments that subject us to concentrations of credit risk primarily consist of cash and cash equivalents and accounts receivable. Our policy is to deposit our cash and cash equivalents with larger, highly rated financial institutions. The Company derived ~~57%~~31% and 32% of its revenue from Ocwen for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020 (48% of revenue for the third quarter of 2020)~~2021, respectively (see Note 2 for additional information on Ocwen revenues and accounts receivable balance). The Company strives to mitigate its concentrations of credit risk with respect to accounts receivable by actively monitoring past due accounts and the economic status of larger customers, if known.

NOTE 1615 — SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

Share Repurchase Program

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~~Notes to Condensed Consolidated Financial Statements (Continued~~)

to the balance of Altisource Portfolio Solutions S.A. (unconsolidated parent company) retained earnings, less the value of shares repurchased. As of ~~September~~June 30, ~~2020,~~2021, we can repurchase up to approximately ~~$93~~$82 million of our common stock under Luxembourg law. Our Credit Agreement also limits the amount we can spend on share repurchases, which limit was approximately ~~$448~~$395 million as of ~~September~~June 30, ~~2020,~~2021, and may prevent repurchases in certain circumstances, including if our leverage ratio exceeds 3.50 to 1.00. Our leverage ratio exceeded 3.50 to 1.00 ~~during~~for the ~~third quarter of 2020.~~twelve months ended June 30, 2021.

Share-Based Compensation

We issue share-based awards in the form of stock options, restricted shares and restricted share units for certain employees, officers and directors. We recognized share-based compensation expense of ~~$6.6~~$2.1 million and ~~$8.3~~$4.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively ($~~1.7~~0.6 million and ~~$2.8~~$1.9 million for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively). As of ~~September~~June 30, ~~2020,~~2021, estimated unrecognized compensation costs related to share-based awards amounted to ~~$6.6~~$4.2 million, which we expect to recognize over a weighted average remaining requisite service period of approximately ~~1.38~~1.36 years.

Stock Options

Stock option grants are composed of a combination of service-based, market-based and performance-based options.

Service-Based Options. These options generally vest over three or four years with equal annual vesting and generally expire on the earlier of ten years after the date of grant or following termination of service. A total of ~~271~~223 thousand service-based options were outstanding as of ~~September~~June 30, ~~2020.~~2021.

Market-Based Options. These option grants generally have 2 components, each of which vests only upon the achievement of certain criteria. The first component, which we refer to as “ordinary performance” grants, generally consists of two-thirds of the market-based grant and begins to vest if the stock price is at least double the exercise price, as long as the stock price realizes a compounded annual gain of at least 20% over the exercise price. The remaining third of the market-based options, which we refer to as “extraordinary performance” grants, generally begins to vest if the stock price is at least triple the exercise price, as long as the stock price realizes a compounded annual gain of at least 25% over the exercise price. Market-based options vest in three or four year installments with the first installment vesting upon the achievement of the criteria and the remaining installments vesting thereafter in equal annual installments. Market-based options generally expire on the earlier of ten years after the date of grant or following termination of service, unless the performance criteria is met prior to termination of service or in the final three years of the option term, in which case vesting will generally continue in accordance with the provisions of the award agreement. A total of ~~211~~187 thousand market-based options were outstanding as of ~~September~~June 30, ~~2020.~~2021.

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Notes to Condensed Consolidated Financial Statements (Continued)

Performance-Based Options. These option grants generally will vest if certain specific financial measures are achieved; one-fourth vests on each anniversary of the grant date. For certain other financial measures, options cliff-vest upon the achievement of the specific performance during ~~the period from 2019 through~~ 2021. The award of performance-based options is adjusted based on the level of achievement specified in the award agreements. If the performance criteria achieved is above threshold performance levels, participants have the opportunity to vest in 50% to 200% of the option grants, depending upon performance achieved. If the performance criteria achieved is below a certain threshold, the options are canceled. The options generally expire on the earlier of ten years after the date of grant or following termination of service. There were ~~460~~427 thousand performance-based options outstanding as of ~~September~~June 30, ~~2020.~~2021.

There were 0 stock options granted during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019. Outstanding stock options increased by 228 thousand in February 2019 in connection with the determination of the level of achievement for certain performance-based options granted in 2018.~~2020.

The fair values of the service-based options and performance-based options are determined using the Black-Scholes option pricing model and the fair values of the market-based options were determined using a lattice (binomial) model.

We determined the expected option life of all service-based stock option grants using the simplified method, determined based on the graded vesting term plus the contractual term of the options, divided by two. We use the simplified method because we believe that our historical data does not provide a reasonable basis upon which to estimate expected option life.

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~~Notes to Condensed Consolidated Financial Statements (Continued~~)

The following table summarizes ~~the total intrinsic value of stock options exercised and~~ the grant date fair value of stock options that vested during the periods presented:


		Nine months ended September 30,					Six months ended June 30,
(in thousands, except per share amounts)	(in thousands, except per share amounts)	2020		2019		(in thousands, except per share amounts)	2021	2020

Intrinsic value of options exercised		$	0	$	52

Grant date fair value of stock options that vested	Grant date fair value of stock options that vested	2,717		3,014		Grant date fair value of stock options that vested	1,203	2,602

The following table summarizes the activity related to our stock options:

Number of options Weighted average exercise price
Weighted average contractual term (in years)
Aggregate intrinsic value (in thousands)
Outstanding as of December 31, 2019 1,468,046 $ 29.19 4.60 $ 94
Forfeited/expired (526,454) 23.86
Outstanding as of September 30, 2020 941,592 32.17 5.85 0
Exercisable as of September 30, 2020 587,899 28.53 5.64 0


	Number of options	Weighted average exercise price		Weighted average contractual term (in years)	Aggregate intrinsic value (in thousands)

Outstanding as of December 31, 2020	899,914	$	32.47	5.63	$	0


Forfeited/expired	(63,324)	25.17

Outstanding as of June 30, 2021	836,590	33.02		5.14	0

Exercisable as of June 30, 2021	594,901	28.61		5.20	0

Other Share-Based Awards

The Company’s other share-based and similar types of awards are composed of restricted shares and restricted share units. The restricted shares and restricted share units are composed of a combination of service-based awards, performance-based awards and ~~performance-based~~market-based awards.

Service-Based Awards. These awards generally vest over two to four year periods with (a) vesting in equal annual installments, or (b) vesting of all of the restricted shares and restricted share units at the end of the vesting period. A total of ~~385~~278 thousand service-based awards were outstanding as of ~~September~~June 30, ~~2020.~~2021. Beginning in 2019, the Company granted service-based restricted share units ~~were awarded~~ as a component of most employees’ annual incentive compensation rather than cash.

Performance-Based Awards. These awards generally vest if certain specific financial measures are achieved; generally one-third vests on each anniversary of the grant date or cliff-vest on the third anniversary of the grant date. The number of performance-based restricted shares and restricted share units that may vest ~~will be~~is based on the level of achievement as specified in the award agreements. If the performance criteria achieved is above certain financial performance levels and Altisource’s share performance is above certain established criteria, participants have the opportunity to vest in up to ~~225%~~150% of the restricted share unit award for certain awards. If the performance criteria achieved is below certain thresholds, the award is canceled. A total of ~~265~~189 thousand performance-based awards were outstanding as of ~~September~~June 30, ~~2020.~~2021.

Market-Based Awards. 50% of these awards generally vest if certain specific market conditions are achieved over a 30-day period and the remaining 50% of these awards generally vest on the one year anniversary of the initial vesting. The

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Notes to Condensed Consolidated Financial Statements (Continued)

Company estimates the grant date fair value of these awards using a lattice (binomial) model. A total of 112 thousand market-based awards were outstanding as of June 30, 2021.

Performance-Based and Market-Based Awards. These awards generally vest if certain specific financial measures are achieved and if certain specific market conditions are achieved. If the performance criteria achieved is above certain financial performance levels and Altisource’s share performance is above certain established criteria, participants have the opportunity to vest in up to 300% of the restricted share unit award for certain awards. If the performance criteria or the market criteria is below certain thresholds, the award is canceled. The Company estimates the grant date fair value of these awards using a Monte Carlo simulation model. A total of 77 thousand performance-based and market-based awards were outstanding as of June 30, 2021.

The Company granted ~~349~~338 thousand restricted share units (at a weighted average grant date fair value of ~~$16.26~~$9.53 per share) during the ~~nine~~six months ended ~~September~~June 30, 2021. These grants include 29 thousand performance-based awards that include both a performance condition and a market condition. The Company granted 37 thousand performance-based awards that include both a performance condition and a market condition for the six months ended June 30, 2020. There were 0 market-based awards granted for the six months ended June 30, 2021 and 2020, respectively.

The following table summarizes the activity related to our restricted shares and restricted share units:


			Number of restricted shares and restricted share units

Outstanding as of December 31, ~~2019~~2020			~~636,146~~878,521
Granted			~~349,459~~338,445
Issued			~~(192,270)~~(232,900)
Forfeited/canceled			~~(143,118)~~(328,358)

Outstanding as of ~~September~~June 30, ~~2020~~2021			~~650,217~~655,708

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~~Notes to Condensed Consolidated Financial Statements (Continued~~)

NOTE 1716 — REVENUE

We classify revenue in three categories: service revenue, revenue from reimbursable expenses and non-controlling interests. Service revenue consists of amounts attributable to our fee-based services. ~~During the three and nine months ended September 30, 2019, service revenue included sales of short-term investments in real estate (see Note 7).~~ Reimbursable expenses and non-controlling ~~interests~~interest are pass-through items for which we earn no margin. Reimbursable expenses consist of amounts we incur on behalf of our customers in performing our fee-based services that we pass directly on to our customers without a markup. Non-controlling interests represent the earnings of Lenders One, a consolidated entity that is a mortgage cooperative managed, but not owned, by Altisource. The Lenders One members’ earnings are included in revenue and reduced from net income to arrive at net income attributable to Altisource (see Note 1). Our services are provided to customers located in the United States. The components of revenue were as follows:


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
(in thousands)	(in thousands)	2020		2019		2020		2019		(in thousands)	2021		2020		2021		2020

Service revenue	Service revenue	$	85,386	$	133,781	$	289,570	$	489,300	Service revenue	$	43,966	$	91,008	$	92,046	$	204,184
Reimbursable expenses	Reimbursable expenses	2,810		7,213		14,495		16,484		Reimbursable expenses	1,936		3,840		3,949		11,685
Non-controlling interests	Non-controlling interests	599		499		1,516		2,179		Non-controlling interests	139		494		511		917

Total	Total	$	88,795	$	141,493	$	305,581	$	507,963	Total	$	46,041	$	95,342	$	96,506	$	216,786

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Notes to Condensed Consolidated Financial Statements (Continued)

Disaggregation of Revenue

Disaggregation of total revenues by major source is as follows:

(in thousands) Revenue recognized when services are performed or assets are sold Revenue related to technology platforms and professional services Reimbursable expenses revenue Total revenue
Three months ended September 30, 2020 $ 82,067 $ 3,918 $ 2,810 $ 88,795
Three months ended September 30, 2019 125,939 8,341 7,213 141,493
Nine months ended September 30, 2020 277,522 13,564 14,495 305,581
Nine months ended September 30, 2019 452,643 38,836 16,484 507,963


(in thousands)	Revenue recognized when services are performed or assets are sold		Revenue related to technology platforms and professional services		Reimbursable expenses revenue		Total revenue

Three months ended June 30, 2021	$	40,712	$	3,393	$	1,936	$	46,041
Three months ended June 30, 2020	87,447		4,055		3,840		95,342

Six months ended June 30, 2021	85,963		6,594		3,949		96,506
Six months ended June 30, 2020	195,455		9,646		11,685		216,786

Contract Balances

Our contract assets consist of unbilled accounts receivable (see Note 5). Our contract liabilities consist of current deferred revenue and other non-current liabilities as reported on the accompanying condensed consolidated balance sheets. Revenue recognized that was included in the contract liability at the beginning of the period was ~~$4.5~~$3.8 million and ~~$9.4~~$3.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively ($~~0.7~~1.6 million and ~~$0.9~~$1.3 million for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively).

NOTE 17 — COST OF REVENUE

Cost of revenue principally includes payroll and employee benefits associated with personnel employed in customer service, operations and technology roles, fees paid to external providers related to the provision of services, reimbursable expenses, technology and telecommunications costs as well as depreciation and amortization of operating assets. The components of cost of revenue were as follows:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2021		2020		2021		2020

Compensation and benefits	$	18,449	$	24,913	$	40,484	$	50,829
Outside fees and services	16,859		41,761		35,582		89,901
Technology and telecommunications	5,994		9,074		12,581		18,306
Reimbursable expenses	1,936		3,840		3,949		11,685
Depreciation and amortization	799		3,040		1,599		6,488

Total	$	44,037	$	82,628	$	94,195	$	177,209

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Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 18 — ~~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 the provision of services, cost of real estate sold, reimbursable expenses, technology and telecommunications costs as well as depreciation and amortization of operating assets. The components of cost of revenue were as follows:

Three months ended September 30, Nine months ended
September 30,
(in thousands) 2020 2019 2020 2019
Compensation and benefits $ 23,947 $ 30,463 $ 74,776 $ 108,637
Outside fees and services 34,013 61,314 123,914 182,483
Technology and telecommunications 8,776 8,586 27,082 27,124
Reimbursable expenses 2,810 7,213 14,495 16,484
Depreciation and amortization 3,024 2,753 9,512 10,160
Cost of real estate sold 0 393 0 42,763
Total $ 72,570 $ 110,722 $ 249,779 $ 387,651

~~NOTE 19 —~~ SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include payroll and employee benefits associated with personnel employed in executive, sales and marketing, finance, technology, law, compliance, human resources, vendor management, facilities and risk management roles. This category also includes professional services fees, occupancy costs, marketing costs, depreciation and amortization of non-operating assets and other expenses. The components of selling, general and administrative expenses were as follows:


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
(in thousands)	(in thousands)	2020		2019		2020		2019		(in thousands)	2021		2020		2021		2020

Compensation and benefits	Compensation and benefits	$	9,077	$	10,395	$	30,396	$	36,986	Compensation and benefits	$	6,296	$	9,307	$	14,148	$	21,319
Professional services										Professional services	2,360		3,841		5,578		6,476
Occupancy related costs	Occupancy related costs	4,636		5,593		15,725		19,988		Occupancy related costs	2,290		5,668		5,470		11,089
Amortization of intangible assets	Amortization of intangible assets	4,295		3,298		11,344		15,489		Amortization of intangible assets	2,911		2,840		5,510		7,049
Professional services		2,129		2,588		8,605		11,384
Marketing costs	Marketing costs	422		3,481		2,810		9,402		Marketing costs	699		951		1,173		2,388
Depreciation and amortization	Depreciation and amortization	796		921		2,009		4,036		Depreciation and amortization	352		544		736		1,213
Other	Other	(543)		(443)		2,717		6,990		Other	1,648		1,550		2,827		3,260

Total	Total	$	20,812	$	25,833	$	73,606	$	104,275	Total	$	16,556	$	24,701	$	35,442	$	52,794

NOTE 2019 — OTHER INCOME (EXPENSE) ~~INCOME,~~, NET

Other income (expense) ~~income,~~, net consists of the following:


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
(in thousands)	(in thousands)	2020		2019		2020		2019		(in thousands)	2021		2020		2021		2020

Interest income		$	25	$	69	$	105	$	336
Interest (expense) income										Interest (expense) income	$	(7)	$	6	$	(28)	$	80
Other, net	Other, net	(386)		337		307		972		Other, net	(36)		(327)		934		693

Total	Total	$	(361)	$	406	$	412	$	1,308	Total	$	(43)	$	(321)	$	906	$	773

NOTE 2120 — INCOME TAXES

2221

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

income tax provision for the nine months ended September 30, 2020 was primarily from a $12.3 million reduction in Luxembourg deferred tax assets in connection with a decrease in the Luxembourg statutory income tax rate from 26.0% to 24.9% in the second quarter of 2019. The income tax provisions on losses before income taxes and non-controlling interests for the three and nine months ended September 30, 2020 were primarily driven by income in our US and other foreign operations from transfer pricing on services provided to our Luxembourg operating company and no tax benefit on the pretax losses from our Luxembourg operating company for the three and nine months ended September 30, 2020.

NOTE 2221 — ~~(LOSS) EARNINGS~~LOSS PER SHARE

Basic ~~(loss) earnings~~loss per share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net loss per share excludes all dilutive securities because their impact would be anti-dilutive, as described below.

Basic and diluted ~~(loss) earnings~~loss per share are calculated as follows:


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
(in thousands, except per share data)	(in thousands, except per share data)	2020		2019		2020		2019		(in thousands, except per share data)	2021		2020		2021		2020

Net (loss) income attributable to Altisource		$	(13,237)	$	7,165	$	(59,948)	$	(1,863)
Net loss attributable to Altisource										Net loss attributable to Altisource	$	(18,475)	$	(35,061)	$	(40,477)	$	(46,711)

Weighted average common shares outstanding, basic	Weighted average common shares outstanding, basic	15,637		15,897		15,578		16,133		Weighted average common shares outstanding, basic	15,830		15,601		15,774		15,549
Dilutive effect of stock options, restricted shares and restricted share units		0		254		0		0

Weighted average common shares outstanding, diluted	Weighted average common shares outstanding, diluted	15,637		16,151		15,578		16,133		Weighted average common shares outstanding, diluted	15,830		15,601		15,774		15,549

(Loss) earnings per share:
Loss per share:										Loss per share:
Basic	Basic	$	(0.85)	$	0.45	$	(3.85)	$	(0.12)	Basic	$	(1.17)	$	(2.25)	$	(2.57)	$	(3.00)
Diluted	Diluted	$	(0.85)	$	0.44	$	(3.85)	$	(0.12)	Diluted	$	(1.17)	$	(2.25)	$	(2.57)	$	(3.00)

For ~~both~~ the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, 1.6 million ~~(1.4~~and 1.8 million, respectively (1.5 million and 1.5 million for the ~~third~~second quarter of 2021 and 2020, ~~and 2019,~~ respectively), stock options, restricted shares and restricted share units, were excluded from the computation of ~~(loss) earnings~~loss per share, as a result of the following:

•~~As a result of~~For both the ~~net loss attributable to Altisource for the nine~~six months ended ~~September~~June 30, 2021 and 2020, 0.3 million and ~~2019,~~ 0.2 million, respectively (0.3 million and ~~0.3 million, respectively (0.2~~0.1 million for the ~~third~~second quarter of ~~2020)~~2021 and 2020, respectively) stock options, restricted shares and restricted share units ~~in each period~~ were anti-dilutive and have been excluded from the computation of diluted loss per share ~~as their impacts were anti-dilutive~~because the Company incurred a net loss

•For ~~both~~ the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019, 0.5 million (0.3~~0.2 million and ~~0.7~~0.6 million, respectively (0.2 million and 0.3 million for the ~~third~~second quarter of 2021 and 2020, ~~and 2019,~~ respectively), stock options were anti-dilutive and have been excluded from the computation of diluted ~~(loss) earnings~~loss per share because their exercise price was greater than the average market price of our common stock

•For the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019, 0.9~~1.1 million and ~~0.8~~1.0 million, respectively ~~(0.9~~(1.0 million and ~~0.8~~1.1 million for the ~~third~~second quarter of 2021 and 2020, ~~and 2019,~~ respectively), stock options, restricted shares and restricted share units, which begin to vest upon the achievement of certain market criteria related to our common stock price, performance criteria and ~~an annualized rate of~~a total shareholder return compared to ~~shareholders~~the market benchmark, that have not yet been met in each period have been excluded from the computation of diluted ~~(loss) earnings~~loss per share

NOTE 2322 — RESTRUCTURING CHARGES

In August 2018, Altisource initiated Project Catalyst, a project intended to optimize its operations and reduce costs to better align its cost structure with its anticipated revenues and improve its operating ~~margins.~~margins (finalized in 2020). During the ~~nine~~three and six months ended ~~September~~June 30, 2020, ~~and 2019,~~ Altisource incurred ~~$10.9~~$5.8 million and ~~$9.1~~$8.7 million, respectively, ~~($2.2 million and $2.8 million for the third quarter of 2020 and 2019, respectively),~~ of severance costs, professional services fees, facility consolidation costs, technology costs and business wind down costs related to the ~~reorganization plan. We expect to incur additional severance costs, professional services fees~~plan (0 comparative amount for the three and technology costs in connection with this internal reorganization, automation and other technology related activities and will expense those costs as incurred. Based on our analysis, we currently anticipate the future costs relating to Project Catalyst to be in the range of approximately $2 million to ~~$3 million~~six months ended June 30, 2021).

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

NOTE 2423 — COMMITMENTS, CONTINGENCIES AND REGULATORY MATTERS

We record a liability for contingencies if an unfavorable outcome is probable and the amount of loss can be reasonably estimated, including expected insurance coverage. For proceedings where the reasonable estimate of loss is a range, we record a best estimate of loss within the range.

Litigation

We are currently involved in legal actions in the course of our business, some of which seek monetary damages. We do not believe that the outcome of these proceedings, both individually and in the aggregate, will have a material impact on our financial condition, results of operations or cash flows.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

Regulatory Matters

Periodically, we are subject to audits, examinations and investigations by federal, state and local governmental authorities and receive subpoenas, civil investigative demands or other requests for information from such governmental authorities in connection with their regulatory or investigative authority. We are currently responding to such inquiries from governmental authorities relating to certain aspects of our business. We believe it is premature to predict the potential outcome or to estimate any potential financial impact in connection with these inquiries.

Sales Taxes

On June 21, 2018, the United States Supreme Court rendered a 5-4 majority decision in South Dakota v. Wayfair, Inc., holding that a state may require a remote seller with no physical presence in the state to collect and remit sales tax on goods and services provided to purchasers in the state, overturning existing court precedent. During the ~~nine months~~year ended ~~September 30,~~December 31, 2019, the Company completed the analysis of its services for potential exposure to sales tax in various jurisdictions in the United States. The Company recognized a $(0.6) million and $0.4 million net (loss reimbursement) loss for the nine months ended September 30, 2020 and 2019, respectively ($(0.6) million and $(1.7) million net loss reimbursement for the third quarter of 2020 and 2019, respectively) in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive income (loss). In October 2020, the Company received additional reimbursements of $(1.7) million of sales taxes previously accrued and paid. The Company began invoicing, collecting and remitting sales tax in applicable jurisdictions in 2019. The Company is also in the process of seeking additional reimbursements for sales tax payments from clients; however, there can be no assurance that the Company will be successful in collecting some or all of such additional reimbursements. Future changes in our estimated sales tax exposure could result in a material adjustment to our condensed consolidated financial statements, which would impact our financial condition and results of operations.

Ocwen Related Matters

As discussed in Note 2, during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, Ocwen was our largest customer, accounting for ~~57%~~32% of our total revenue ~~(48%~~(31% of our revenue for the ~~third~~second quarter of ~~2020)~~2021). Additionally, 7%6% of our revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2020 (8%~~2021 (6% of our revenue for the ~~third~~second quarter of ~~2020)~~2021) was earned on the loan portfolios serviced by Ocwen, when a party other than Ocwen or the ~~MSR~~MSRs owner selected Altisource as the service provider.

Ocwen has disclosed that it is subject to a number of ongoing federal and state regulatory examinations, consent orders, inquiries, subpoenas, civil investigative demands, requests for information and other actions and is subject to pending and threatened legal proceedings, some of which include claims against Ocwen for substantial monetary damages. In addition to monetary damages, various complaints have sought to obtain injunctive relief, consumer redress, refunds, restitution, disgorgement, civil penalties, costs and fees and other relief. Existing or future similar matters could result in, and in some cases, have resulted in, adverse regulatory or other actions against Ocwen. Previous regulatory actions against Ocwen have subjected Ocwen to independent oversight of its operations and placed certain restrictions on its ability to acquire servicing rights. In addition to the above, Ocwen may become subject to future adverse regulatory or other actions.

Ocwen has disclosed that NRZ is its largest client. As of ~~June 30, 2020, NRZ MSRs or rights to MSRs relating to~~March 31, 2021, approximately ~~53%~~36% of loans serviced and subserviced by Ocwen (measured in UPB). were related to NRZ MSRs or rights to MSRs. In July 2017 and January 2018, Ocwen and NRZ entered into a series of agreements pursuant to which the parties agreed, among other things, to undertake certain actions to facilitate the transfer from Ocwen to NRZ of Ocwen’s legal title to the Subject MSRs and under which Ocwen will subservice mortgage loans underlying the Subject MSRs for an initial term of five years. NRZ can terminate its sub-servicing agreement with Ocwen in exchange for the payment of a termination fee.

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

The existence or outcome of Ocwen regulatory matters or the termination of the NRZ sub-servicing agreement with Ocwen may have significant adverse effects on Ocwen’s business and/or our continuing relationship with Ocwen. For example, Ocwen may be required to alter the way it conducts business, including the parties it contracts with for services, it may be required to seek changes to its existing pricing structure with us, it may lose its non-government-sponsored enterprise (“GSE”) servicing rights or subservicing arrangements or may lose one or more of its state servicing or origination licenses. Additional regulatory actions or adverse financial developments may impose additional restrictions on or require changes in Ocwen’s business that could require it to sell assets or change its business operations. Any or all of these effects and others could result in our eventual loss of Ocwen as a customer or a reduction in the number and/or volume of services they purchase from us or the loss of other customers.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

other ~~providers.~~service providers in the fourth quarter of 2020. We anticipate that the transition of such default valuations and title services will continue during the course of 2021. We estimate that ~~revenue from these certain other default related services represented approximately $25.6~~$1.8 million and ~~$34.9~~$12.7 million of service revenue from Ocwen for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively ($~~6.4~~0.9 million and ~~$12.5~~$4.8 million for the ~~third~~second quarter of 2021 and 2020, respectively), was derived from default valuations and ~~2019, respectively). Altisource believes that any action taken by Ocwen to redirect these service~~title services referrals ~~breaches Altisource's agreement with Ocwen. We are currently in discussions with Ocwen to address this matter, and have reserved all of our rights with respect to this matter.~~

from the NRZ portfolios. To address the reduction in revenue, Altisource ~~has undertaken~~is undertaking several measures to further reduce its cost structure and strengthen its operations.

On May 5, 2021 we entered into an agreement with Ocwen pursuant to which the terms of certain services agreements between us and Ocwen were extended from August 2025 through August 2030 and the scope of solutions we provide to Ocwen was expanded to include, among other things, the opportunity for the Company to provide first and second chance foreclosure auctions on FHA loans and field services on Ocwen’s Government Loans, and title services on FHA and Veterans Affairs loans, subject to a process to confirm Altisource’s ability to meet reasonable performance requirements. The Agreement established a framework for us to expand the foreclosure trustee solutions we provide to Ocwen in additional states, and, as mutually agreed upon by the parties, to deliver reverse mortgage related solutions to Ocwen, subject to negotiation of appropriate statements of work or other agreements, a process to confirm Altisource’s ability to meet reasonable performance requirements, and technical integrations, as may be applicable. The Agreement further resolved the contractual dispute between the parties related to Ocwen’s transfer to NRZ the rights to designate service providers other than Altisource, including mutual releases with respect to such dispute. The Agreement also addressed Ocwen’s rights in the event of certain change of control or sale of a business transactions by us on or after September 1, 2028. During the second quarter of 2021, Ocwen transitioned over 1,900 of its FHA first chance auction inventory to us and increased our percentage of field services referrals on its Government Loans.

In addition to expected reductions in our revenue from the ~~Field Services~~transition of referrals ~~transition,~~for default related services previously identified, if any of the following events occurred, Altisource’s revenue could be further significantly reduced and our results of operations could be materially adversely affected, including from the possible impairment or write-off of goodwill, intangible assets, property and equipment, other assets and accounts receivable:

•Altisource loses Ocwen as a customer or there is an additional significant reduction in the volume of services they purchase from us

•Ocwen loses, sells or transfers a significant portion of its GSE ~~and Federal Housing Administration~~ servicing rights or subservicing arrangements or remaining non-GSE servicing rights or subservicing arrangements and Altisource fails to be retained as a service provider

•The contractual relationship between Ocwen and NRZ changes significantly and this change results in a change in our status as a provider of services related to the Subject MSRs

•Ocwen loses state servicing licenses in states with a significant number of loans in Ocwen’s servicing portfolio

•The contractual relationship between Ocwen and Altisource changes significantly or there are significant changes to our pricing to Ocwen for services from which we generate material revenue

•Altisource otherwise fails to be retained as a service provider

Management cannot predict whether any of these events will occur or the amount of any impact they may have on Altisource. However, we are focused on diversifying and growing our revenue and customer base and we have a sales and marketing strategy to support these efforts. Moreover, in the event one or more of these events materially negatively impact Altisource, we believe the variable nature of our cost structure would allow us to realign our cost structure ~~in line with remaining~~to address some of the impact to revenue and that current liquidity ~~and cash flows from operations~~ would be sufficient to meet our working capital, capital expenditures, debt service and other cash needs. There can be no assurance that our plans will be successful or our operations will be profitable.

Leases

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~ ~~and in July 2018, the FASB issued ASU No. 2018-10,~~ ~~Codification Improvements to Topic 842, Leases~~ ~~and ASU No. 2018-11,~~ ~~Leases (Topic 842): Targeted Improvements~~

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

(collectively “Topic 842”). Topic 842 introduced a new lessee model that brings substantially all leases on the balance sheet. The Company adopted Topic 842 effective January 1, 2019 using the modified retrospective transition approach. In addition, the Company elected the practical expedients permitted under the transition guidance within the new standard, including allowing the Company to carry forward its historical lease classification, using hindsight to determine the lease term for existing leases, combining fixed lease and non-lease components and excluding short-term leases. Adoption of this new standard resulted in the recognition of $42.1 million of right-of-use assets in right-of-use assets under operating leases, $45.5 million of operating lease liabilities ($16.7 million in other current liabilities and $28.8 million in other non-current liabilities) and reduced accrued rent and lease incentives of $3.4 million in accounts payable and accrued expenses and other non-current liabilities on the accompanying condensed consolidated balance sheets.

We lease certain premises and equipment, primarily consisting of office space and information technology equipment. Certain of our leases include options to renew at our discretion or terminate leases early, and these options are considered in our determination of the expected lease term. Certain of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. We sublease certain office space to third parties. Sublease income was ~~$1.0~~$0.4 million and ~~$1.3~~$0.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively ($~~0.3~~0.1 million and ~~$0.5~~$0.4 million for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively). The amortization periods of right-of-use assets are generally limited by the expected lease term. Our leases generally have expected lease terms at adoption of one to six years. As of ~~September~~June 30, ~~2020,~~2021, we entered into a five year lease for additional office space which has not yet commenced.

~~Information about our lease terms and our discount rate assumption is as follows:~~


	~~As of~~
	~~September 30, 2020~~

~~Weighted average remaining lease term (in years)~~	~~3.30~~
~~Weighted average discount rate~~	~~7.00~~	%

~~Our lease activity during the period is as follows:~~

Three months ended September 30, Nine months ended
September 30,
(in thousands) 2020 2019 2020 2019
Operating lease costs:
Selling, general and administrative expense $ 2,566 $ 1,752 $ 7,376 $ 8,368
Cost of revenue 479 567 1,748 2,279
Cash used in operating activities for amounts included in the measurement of lease liabilities $ 3,496 $ 3,771 $ 10,254 $ 12,228
Short-term (twelve months or less) lease costs 699 1,539 3,126 3,848

~~Maturities of our lease liabilities as of September 30, 2020 are as follows:~~

(in thousands) Operating lease obligations
2020 $ 2,552
2021 8,200
2022 5,718
2023 4,650
2024 2,892
Thereafter 599
Total lease payments 24,611
Less: interest (2,688)
Present value of lease liabilities $ 21,923

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

Information about our lease terms and our discount rate assumption is as follows for the six months ended June 30:



	2021		2020

Weighted average remaining lease term (in years)	2.72		3.37
Weighted average discount rate	6.43	%	6.99	%

Our lease activity during the period is as follows:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2021		2020		2021		2020

Operating lease costs:
Selling, general and administrative expense	$	1,118	$	2,529	$	3,210	$	4,810
Cost of revenue	1,327		635		1,498		1,269

Cash used in operating activities for amounts included in the measurement of lease liabilities	$	2,375	$	3,447	$	5,453	$	6,758
Short-term (twelve months or less) lease costs	(940)		1,222		(459)		2,427

Maturities of our lease liabilities as of June 30, 2021 are as follows:


(in thousands)	Operating lease obligations

2021	$	4,053
2022	4,661
2023	3,086
2024	2,225
2025	599
Total lease payments	14,624
Less: interest	(1,235)

Present value of lease liabilities	$	13,389

Escrow Balances

We hold customers’ assets in escrow accounts at various financial institutions pending completion of certain real estate activities. These amounts are held in escrow accounts for limited periods of time and are not included in the accompanying condensed consolidated balance sheets. Amounts held in escrow accounts were ~~$38.7~~$15.6 million and ~~$12.3~~$20.0 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

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

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is a supplement to the accompanying interim condensed consolidated financial statements and is intended to provide a reader of our financial statements with a narrative from the perspective of management on our businesses, current developments, financial condition, results of operations and liquidity. Our MD&A should be read in conjunction with our Form 10-K for the year ended December 31, ~~2019~~2020 filed with the Securities and Exchange Commission (“SEC”) on March ~~5, 2020.~~11, 2021.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may relate to, among other things, future events or our future performance or financial condition. Words such as “anticipate,” “intend,” “expect,” “may,” “could,” “should,” “would,” “plan,” “estimate,” “believe,” “predict,” “potential” or “continue” or the negative of these terms and ~~other~~ comparable terminology are intended to identify such forward-looking statements. Such statements are based on expectations as to the future and are not statements of historical fact. Furthermore, 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. The following are examples of such items and are not intended to be all inclusive:

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

•assumptions about our ability to grow our business, including executing on our strategic initiatives;

•assumptions about our ability to improve margins and affect anticipated expense reductions as a result of Project Catalyst and otherwise in response to lower revenues due to COVID-19, ~~the transfer of certain Field Services referrals to another service provider discussed below,~~ or other factors;

•assumptions about the variable nature of our cost structure that would allow us to realign our cost structure in line with revenue;

•assumptions regarding the impact of seasonality;

•assumptions regarding the impacts of the COVID-19 pandemic and the timeliness and effectiveness of actions taken in response thereto;

•estimates regarding our effective tax rate; and

•estimates regarding our reserves and valuations.

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 ~~in Part II, Item 1A of the Form 10-Q for the quarterly period ended March 31, 2020 and the~~ ~~Risk Factors~~ section of our Form 10-K for the year ended December 31, ~~2019~~2020 including:

•the timing of the anticipated increase in default related referrals following the expiration of foreclosure and eviction moratoriums, forbearance programs and temporary governmental loss mitigation requirements, the timing of the expiration of such moratoriums and programs, and any other delays occasioned by government, investor or servicer actions;

•our ability to retain Ocwen Financial Corporation (together with its subsidiaries, “Ocwen”) as a customer or our ability to receive the anticipated volume of referrals from Ocwen;

•our ability to retain New Residential Investment Corp. (individually, together with one or more of its subsidiaries, or one or more of its subsidiaries individually, “NRZ”) as a customer or our ability to receive the anticipated volume of referrals from NRZ;

•our ability to comply with material agreements if a change of control is deemed to have occurred including, among other things, through the formation of a shareholder group, which may cause a termination event or event of default under certain of our agreements;

•our ability to execute on our strategic plan;

•our ability to retain our existing customers, expand relationships and attract new customers;

•our ability to comply with governmental regulations and policies and any changes in such regulations and policies;

•our ability to develop, launch and gain market acceptance of new solutions or recoup our investments in developing such new solutions;

•the level of loan delinquencies and charge-offs;

•the level of origination volume;

•technology incidents, data breaches and cybersecurity risks;

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•significant changes in tax regulations and interpretations in the countries, states and local jurisdictions in which we operate; and

•the risks and uncertainties related to pandemics, epidemics or other force majeure events, including the COVID-19 pandemic, and associated impacts on the economy, supply chain, transportation, movement of people, availability of vendors and demand for our products or services as well as increased costs, recommendations or restrictions imposed

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by governmental entities, changes in relevant business practices undertaken or imposed by our clients, vendors or regulators, impacts on contracts and client relationships and potential litigation exposure.

We caution the reader not to place undue reliance on these forward-looking statements as they 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 any change in events, conditions or circumstances on which any such statement is based.

OVERVIEW

Our Business

When we refer to “Altisource,” the “Company,” “we,” “us” or “our” we mean Altisource Portfolio Solutions S.A., a Luxembourg société anonyme, or public limited liability company, and its subsidiaries.

We are an integrated service provider and marketplace for the real estate and mortgage industries. Combining operational excellence with a suite of innovative services and technologies, Altisource helps solve the demands of the ever-changing markets we serve.

We provide loan servicers and originators with marketplaces, services and technologies that span the residential mortgage lifecycle. We provide ~~real estate consumers~~buyers, sellers, servicers and investors with the technology enabled marketplaces and ~~services~~other solutions that span the residential real estate lifecycle.

The Company operates with one reportable segment (total Company). Our principal revenue generating activities are as follows:

Core Businesses

Field Services

•Property preservation and inspection services and ~~marketplace transaction management, payment management and~~ vendor management oversight software-as-a-service (“SaaS”) ~~technologies~~platform

Marketplace

•Hubzu® online real estate auction platform, real estate auction, real estate brokerage and asset management

•Equator®, a SaaS-based technology to manage real estate owned (“REO”), short sales, foreclosure, bankruptcy and eviction processes

Mortgage and Real Estate Solutions

•Mortgage loan fulfillment, certification and certification insurance services and technologies

•Title insurance (as an agent), and settlement ~~and~~services

•Real estate valuation services

•Residential and commercial construction inspection and risk mitigation services

•Management of the Best Partners Mortgage Cooperative, Inc., doing business as Lenders One® (“Lenders One”), mortgage banking cooperative

•Foreclosure trustee services

•Business services ~~to assist financial institutions with mortgage-related calls from homeowners~~

Other Businesses

Earlier Stage Business

•Pointillist® customer journey analytics platform

Other

•Commercial loan servicing technology

•~~Financial Services business including post-charge-off consumer debt, mortgage charge-off collection services and customer relationship management services (sold on July 1, 2019)~~

•~~Buy-Renovate-Lease-Sell (“BRS”) business (wound down in 2019)~~

•Residential loan servicing technologies, document management platform and information technology (“IT”) infrastructure management services (wound down in 2019 following Ocwen’s transition to another servicing platform)

•~~Owners.com~~® ~~technology-enabled real estate brokerage and provider of related mortgage brokerage and title services (discontinued in the fourth quarter of 2019)~~

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We classify revenue in three categories: service revenue, revenue from reimbursable expenses and non-controlling interests. In evaluating our performance, we focus on service revenue. Service revenue consists of amounts attributable to our fee-based services. ~~During the three and nine months ended September 30, 2019, service revenue included sales of short-term investments in real estate.~~ Reimbursable expenses and non-controlling interests are pass-through items for which we earn no margin. Reimbursable expenses consist of amounts we incur on behalf of our customers in performing our fee-based services that we pass directly on to our customers without a markup. Non-controlling interests represent the earnings of Lenders One. Lenders One is a mortgage cooperative managed, but not owned, by Altisource. The Lenders One members’ earnings are included in revenue and reduced from net income to arrive at net income attributable to Altisource.

Strategy and Core Businesses

We are focused on becoming the premier provider of mortgage and real estate marketplaces and related ~~services~~technology enabled solutions to a broad and diversified customer base of residential loan investors and servicers, and originators. The real estate and mortgage marketplaces represent very large markets, and we believe our scale and suite of offerings provide us with competitive advantages that could support our growth. As we navigate the COVID-19 pandemic and its impacts on our business, we continue to evaluate our strategy and core businesses and seek to position out businesses to provide long term value to our shareholders.

Through our offerings that support residential loan investors and servicers, we provide a suite of ~~services~~solutions and technologies intended to meet their growing and evolving needs. We are focused on growing referrals from our existing customer base and attracting new customers to our offerings. We have a customer base that includes government-sponsored enterprises (“GSEs”), asset managers, and several large bank and non-bank servicers including Ocwen and NRZ. We believe we are one of only a few providers with a broad suite of servicer solutions, nationwide coverage and scalability. Further, we believe we are well positioned to gain market share from existing and new customers in the event delinquency rates ~~rise,~~remain elevated following the expiration of the foreclosure moratoriums and forbearance plans, or customers and prospects consolidate to larger, full-service providers or outsource services that have historically been performed in-house.

We also provide services to mortgage loan originators (or other similar mortgage market participants) in originating, buying and selling residential mortgages. We provide a suite of ~~services~~solutions and technologies to meet the evolving and growing needs of lenders, mortgage purchasers and securitizers. We are focused on growing ~~referrals~~business from our existing customer base, ~~and~~ attracting new customers to our offerings and developing new offerings. We have a customer base that includes the Lenders One cooperative independent mortgage bankers, credit unions, and mid-size and larger bank and non-bank loan originators. We believe our suite of services, technologies and unique access to the members of the Lenders One mortgage cooperative position us to grow our relationships with our existing customer base by ~~providing additional products, services~~growing membership of Lenders One, increasing member adoption of existing solutions and ~~solutions to these customers.~~developing and cross-selling new offerings. Further, we believe we are well positioned to gain market share from existing and new customers ~~in the event origination volumes rise, or~~as customers and prospects consolidate to larger, full-service providers or outsource services that have historically been performed in-house. With our Origination business’s unique distribution engine, mission critical solutions and strong growth prospects, we believe this business will be a significant catalyst to create value for shareholders. Notably, there are several companies that we believe have similar business models which recently executed capital market transactions at attractive valuations. Given the attractive market comparables and the progress we are making with the Origination business, we are evaluating ways to enhance shareholder value. These options may include a potential divestiture, joint venture, third party investment in or other strategic transaction, as well as retaining and further investing in this business. There can be no assurance that this exploration will result in any transaction by us. We do not intend to provide updates regarding these matters unless and until we determine that further disclosure is appropriate or required.

Our earlier stage business consists of Pointillist, Inc. (“Pointillist”). The Pointillist business was developed by Altisource through our consumer analytics capabilities. We believe the Pointillist business is a potentially disruptive SaaS-based platform which provides unique customer journey analytics at scale and enables customers to engage through our intelligent platform. During 2019, we created Pointillist as a separate legal entity to position it for accelerated growth and outside investment and contributed the Pointillist business and $8.5 million to it. Pointillist is owned by Altisource and management of Pointillist. Management of Pointillist owns a non-controlling interest representing 12.1% of the outstanding equity of Pointillist. Additional equity shares of Pointillist are available for issuance to management and board members of Pointillist. On May 27, 2021, Pointillist issued $1.2 million in principal of convertible notes to related parties with a maturity date of January 1, 2023. The notes bear interest at a rate of 7% per annum. The principal and unpaid accrued interest then outstanding under the notes (1) automatically converts to Pointillist equity at the earlier of the time Pointillist receives proceeds of $5.0 million or more from the sale of its equity or January 1, 2023, or (2) are repaid in cash or Pointillist equity (at the Lenders’ option) in the event of a corporate transaction or initial public offering of Pointillist. Altisource has ~~an option, but~~ no ongoing obligation to ~~participate in~~provide future funding ofto Pointillist.

We previously reported the results of Owners.com as an earlier stage business. In October 2019, the Company announced its plans to wind down and close the Owners.com business, which was completed by December 31, 2019.

~~COVID-19 Pandemic Impacts~~

The COVID-19 pandemic continues to have an unprecedented impact on human life and the economy, including the real estate, mortgage and servicing industries in which we operate. Our financial performance in our default related services businesses during the nine months ended September 30, 2020 was negatively impacted by COVID-19 related governmental restrictions on services that could be performed and travel (i.e., only essential services and travel), restrictions on governmental services available (e.g., title offices closed), governmental and, in some instances, servicer measures to provide financial support to borrowers, including eviction moratoriums and forbearance programs, and changing vendor and consumer behavior. This impact was partially offset by stronger performance from our origination related businesses that benefited from lower interest rates throughout most of the nine months ended September 30, 2020 and the strengthening of the housing market during the third quarter 2020. We anticipate the COVID-19 circumstances will continue to have a negative impact on our default related services businesses. We further anticipate that the duration and quantum of this impact will be influenced by economic, regulatory and other factors that influence mortgage delinquency and foreclosure rates, evictions and the market for sales of one

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Credit Facility

On June 22, 2021, we entered into a revolving credit facility with STS Master Fund, Ltd. (“STS”), an investment fund managed by Deer Park Road Management Company, LP (the “Credit Facility”).

The Credit Facility provides us with the ability to ~~four family homes.~~borrow up to $20 million through June 22, 2022, up to $15 million through June 22, 2023, and up to $10 million until the end of the term. We may voluntarily prepay all or any portion of the outstanding loans at any time. Amounts available under the Credit Facility are for general corporate purposes. As ~~long as these factors persist, we anticipate continued negative~~of June 30, 2021, there were no borrowing outstanding under the Credit Facility. On July 6, 2021, the Company borrowed $6 million under the Credit Facility. The Credit Facility was filed in a Form 8-K filed on June 21, 2021.

COVID-19 Pandemic Impacts

In response to the COVID-19 pandemic, various governmental entities and servicers implemented unprecedented foreclosure and eviction moratoriums and forbearance programs to help mitigate the impact ~~on our default related services businesses.~~

to borrowers and renters. As a result of ~~COVID-19, during portions~~these measures and other related actions, foreclosure initiations were 81% lower for January through May 2021 compared to the same period in 2020 (with such foreclosure initiations representing 1% of seriously delinquent loans as of the ~~nine months ended September 30, 2020 at differing times, certain jurisdictions~~beginning of the year compared to 27% in the ~~United States have operated under certain social distancing restrictions,~~same period in 2020). The decline in foreclosure initiations resulted in significantly lower REO referrals and ~~restrictions~~negatively impacted virtually all of the default related services performed on ~~travel and commerce. The government and,~~delinquent loans, loans in ~~some instances, servicers have provided various forms of borrower assistance, including forbearance programs and~~ foreclosure and ~~eviction moratoriums. Despite government assistance programs, there has been~~REO.

At the same time, beginning in the first half of 2020 the Federal Reserve lowered the target for the federal funds rate to 0% to 0.25% and bought billions of dollars of mortgage backed securities on the secondary market to reduce interest rates. As a ~~significant negative impact on United States employment, with a September~~result of the lower interest rate environment, second quarter 2021 mortgage originations were 13% higher than second quarter 2020 ~~unemployment rate of 7.9% according~~(according to the ~~Bureau of Labor Statistics. These factors, together with~~Mortgage Bankers Association) driving higher demand for origination related services. For the ~~general economic impact of~~full year, the ~~pandemic, have led~~Mortgage Bankers Association forecasts that origination volume will decline by 7% compared to ~~a disruption in the real estate, mortgage and servicing markets. While we~~2020.

We cannot predict the duration of the pandemic and future governmental ~~measures that may continue to reduce foreclosure initiations and sales,~~measures. However, we ~~believe~~recently gained additional clarity on the ~~short- to medium-term revenue impact to Altisource will largely be driven by significantly reduced foreclosure sales, significantly reduced inflow~~timing of ~~REO, and~~ the ~~depletion~~recovery of ~~our REO inventory from REO sales. As a result of~~the default market. The Federal government extended its foreclosure and eviction moratoriums by one month through July 2021 and indicated this will be the last extension. The CFPB also finalized its rules on temporary loss mitigation measures, which essentially prohibits foreclosure initiations until January 1, 2022 other than a few exceptions, including for those loans that were 120 days or more delinquent prior to the pandemic. Based on this clarity, we believe the Default business will grow in 2022 and stabilize during 2023 when we anticipate foreclosures commenced after the expiration of the foreclosure moratoriums, forbearance plans and ~~other borrower relief actions, along with social distancing restrictions, we~~temporary loss mitigation rules become REO and are sold. We further anticipate that ~~foreclosure, eviction and REO referrals~~our originations business will be substantially lower. Data from a recent Black Knight report shows that foreclosure initiations were 83% lower for April 2020 through August 2020 compared to the same period in 2019 despite the 87% growth in the number of non-current mortgages in August 2020 compared to August 2019. As long as these factors persist, we anticipate a continued negative impact on our Equator, title, foreclosure trustee, valuation, field services and REO businesses.

In addition, governmental restrictions on movement and the provision of certain services, social distancing requirements, the closure of or reduced services provided by certain governmental offices, vendors’ refusals or inability to provide certain services in certain jurisdictions and limitations on the availability of supplies continued to negatively impact our Field Services business in the third quarter. Governmental restrictions and designations of essential services are subject to interpretation and continue to ~~evolve, negatively impacting~~grow from new customer wins, and cross selling existing and new offerings to customers.

To address the ~~ability and willingness of~~lower anticipated revenue, Altisource is working to (1) reduce our ~~vendors in applicable jurisdictions~~cost structure, (2) maintain the infrastructure to perform services and limiting services that we are able to provide to our customers, negatively impacting our Field Services businesses. Limited availability of supplies has also restricted the amount of services that we can provide, and in some cases, has increased the costs that we pay for these services. Some of our vendors have also refused to perform services that may involve contact with the public further limiting the services that we are capable of providing to customers. As long as these factors persist, we anticipate continued negative impact to our Field Services business.

At the same time, our originations businesses benefitted from the decline in mortgage interest rates and the growing refinance market. To the extent these factors continue, we anticipate stronger than planned growth in our origination related services. This potential growth could be limited, however, by the government’s and GSEs’ willingness, and purchase price, to acquire loans in forbearance, higher unemployment rates and economic deterioration.

~~We continue to experience declining~~deliver default related ~~referrals from foreclosure~~services for our customer base and ~~eviction~~support the anticipated increase in demand following the expiration of the moratoriums and forbearance plans. To address this challenging environment, we implemented cost reduction measures in the second quarter of 2020, and as a result, we have been able to reduce the anticipated cash burn and maintain a strong cash position ending the quarter with $97.2 million in cash, cash equivalents and marketable equity securities.

~~Altisource is attempting to adapt to the evolving situation, including by:~~

•~~Taking steps designed to maintain the health and safety of our employees~~

•~~Adjusting operations to mitigate the impact to our customers and business while complying with governmental orders~~

•~~Addressing our cost structure and preserving liquidity to prepare for what could be a period of lower revenue than planned~~

~~During March 2020, we began implementing our business continuity~~ plans, and ~~enabling remote work capabilities across~~(3) accelerate the organization. Altisource has transitioned the majority of its global workforce to work remotely. We have largely been able to maintain our productivity, despite this shift to remote work arrangements. We have implemented heightened hygiene protocols to help safeguard the health of the small number of employees who continue to perform critical functions from certain facilities that cannot be performed remotely.

We adjusted our operations in response to the current environment. In addition to the cost reduction measures described below, we sought to retain and deploy otherwise underutilized employees to increase the capacitygrowth of our originations businesses. Our customer relationship management, sales and operations teams are in regular contact with our customers concerning changing circumstances and impacts on services and performance levels. We are seeking to work with our customers to adjust services and operations to address the COVID-19 business related challenges and opportunities.

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We are also preparing Altisource for what could be an extended period of lower revenue than planned from the near-term economic effects of COVID-19 and the governmental response to it. The Company has $67.0 million in cash and equivalents as of September 30, 2020. Our liquidity position has been further enhanced by our debt reduction efforts over the last several years. The current outstanding balance on our senior secured term loan is $293.8 million.

We have and continue to seek to address our cost structure. In addition to undertaking cost reduction activities planned prior to the COVID-19 pandemic, we took several additional measures to further reduce our 2020 cash expenses as a result of COVID-19 and reductions in referrals from Ocwen (see Ocwen Related Matters below), including employee furloughs and terminations, the elimination of certain discretionary spending and temporary employee and Board compensation reductions (the temporary reductions were largely restored in October 2020). Altisource estimates that the cost reduction measures undertaken since April 2020 will reduce 2020 expenses by approximately $65 million - $75 million compared to the fourth quarter 2019 annual run rate expenses excluding (1) outside fees and services that generally decline proportionately with a decline in service referrals, (2) reimbursable expenses which are the costs associated with reimbursable revenue, (3) depreciation and amortization and (4) amortization of intangible assets. Based upon our revenue and working capital forecasts, and the successful implementation of our planned cash expense reductions, we anticipate that we can adequately support the cash needs of the business largely from the results of operations and cash on hand.

We are also positioning our businesses to be able to respond to what we believe will be strong medium- to longer-term demand for our default related services from anticipated growth in loan delinquencies. Increasing delinquencies have the potential to result in an increase in demand for our default related services businesses, including an increase in demand for inspection and preservation services, real estate auction and brokerage services, foreclosure trustee services, valuation services, and title and settlement services. We also anticipate that the current unprecedented level of foreclosure, eviction and other mortgage borrower relief will likely subside and, if unemployment rates remain elevated, delinquency levels are likely to be higher than they were before the COVID-19 pandemic began. Given the countercyclical nature of several of our businesses, we believe Altisource has the potential to benefit from such an environment.

Share Repurchase Program

On May 15, 2018, our shareholders approved the renewal and replacement of the share repurchase program previously approved by the shareholders on May 17, 2017. Under the program, we are authorized to purchase up to 4.3 million shares of our common stock, based on a limit of 25% of the outstanding shares of common stock on the date of approval, at a minimum price of $1.00 per share and a maximum price of $500.00 per share, for a period of five years from the date of approval. As of ~~September~~June 30, ~~2020,~~2021, approximately 2.4 million shares of common stock remain available for repurchase under the program. There were no purchases of shares of common stock during the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020. We purchased 0.6 million shares of common stock at an average price of $21.03 per share during the nine months ended September 30, 2019 (0.3 million shares at an average price of $20.24 per share for the third quarter of 2019). Luxembourg law limits share repurchases to the balance of Altisource Portfolio Solutions S.A. (unconsolidated parent company) retained earnings, less the value of shares repurchased. As of ~~September~~June 30, ~~2020,~~2021, we can repurchase up to approximately ~~$93~~$82 million of our common stock under Luxembourg law. Our Credit Agreement also limits the amount we can spend on share repurchases, which limit was approximately ~~$448~~$395 million as of ~~September~~June 30, ~~2020,~~2021, and may prevent repurchases in certain circumstances, including if our leverage ratio exceeds 3.50 to 1.00. Our leverage ratio exceeded 3.50 to 1.00 ~~during~~for the ~~third quarter of 2020.~~twelve months ended June 30, 2021.

Ocwen Related Matters

During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, Ocwen was our largest customer, accounting for ~~57%~~32% of our total revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2020 (48%~~2021 (31% of our revenue for the ~~third~~second quarter of ~~2020)~~2021). Additionally, 7%6% of our revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2020 (8%~~2021 (6% of our revenue for the ~~third~~second quarter of ~~2020)~~2021) was earned on the loan portfolios serviced by Ocwen, when a party other than Ocwen or the ~~mortgage servicing rights (“MSRs”)~~MSRs owner selected Altisource as the service provider.

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Ocwen has disclosed that NRZ is its largest client. As of ~~June 30, 2020, NRZ MSRs or rights to MSRs relating to~~March 31, 2021, approximately ~~53%~~36% of loans serviced and subserviced by Ocwen (measured in unpaid principal balance). were related to NRZ MSRs or rights to MSRs. In July 2017 and January 2018, Ocwen and NRZ entered into a series of agreements pursuant to which the parties agreed, among other things, to undertake certain actions to facilitate the transfer from Ocwen to NRZ of Ocwen’s legal title to certain of its MSRs (the “Subject MSRs”) and under which Ocwen will subservice mortgage loans underlying the MSRs for an initial term of five years. NRZ can terminate its sub-servicing agreement with Ocwen in exchange for the payment of a termination fee.

The existence or outcome of Ocwen regulatory matters or the termination of the NRZ sub-servicing agreement with Ocwen may have significant adverse effects on Ocwen’s business and/or our continuing relationship with Ocwen. For example, Ocwen may be required to alter the way it conducts business, including the parties it contracts with for services, it may be required to seek changes to its existing pricing structure with us, it may lose its non-GSE servicing rights or subservicing arrangements or may lose one or more of its state servicing or origination licenses. Additional regulatory actions or adverse financial developments may impose additional restrictions on or require changes in Ocwen’s business that could require it to sell assets or change its business operations. Any or all of these effects and others could result in our eventual loss of Ocwen as a customer or a reduction in the number and/or volume of services they purchase from us or the loss of other customers.

During the second quarter of 2020, Ocwen informed us that an MSR investor ~~had~~ instructed Ocwen to use a field services provider other than Altisource on properties associated with certain MSRs. They indicated that they were instructed to begin the transition in July 2020, and that the transition should be completed in a few months. We believe Ocwen commenced using another field services provider for these properties in July 2020 and continued to transition during the third quarter of 2020. Based upon the impacted portfolios to date and the designated service provider, Altisource believes that Ocwen received these directions from NRZ. ~~The~~We believe Ocwen commenced using another field services provider for these properties in July 2020 and continued to transition services during the third quarter of 2020. We believe that the transition to the replacement field service provider ~~has~~was largely ~~been~~ completed as of September 30, 2020. We estimate that ~~$72.3~~$0.3 million and ~~$115.6~~$55.0 million of service revenue from Ocwen for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively ~~($14.1~~(less than $0.1 million and ~~$38.1~~$25.7 million for the ~~third~~second quarter of 2021 and 2020, ~~and 2019,~~ respectively), was derived from Field Services referrals from the NRZ portfolios. ~~Without providing the timing or specific services impacted,~~ Ocwen also communicated to Altisource in the fourth quarter of 2020 that the same investor ~~plans~~instructed Ocwen to ~~direct them to transition~~use a provider for default valuations and certain default title services other ~~default related service~~than Altisource on properties associated with such certain MSRs and commenced moving these referrals to other ~~providers.~~service providers in the fourth quarter of 2020. We anticipate that the transition of such default valuations and title services will continue during the course of 2021. We estimate that ~~revenue from these certain other default related services represented approximately $25.6~~$1.8 million and ~~$34.9~~$12.7 million of service revenue from Ocwen for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively ($~~6.4~~0.9 million and ~~$12.5~~$4.8 million for the ~~third~~second quarter of 2021 and 2020, respectively), was derived from default valuations and ~~2019, respectively). Altisource believes that any action taken by Ocwen to redirect these service~~title services referrals ~~breaches Altisource's agreement with Ocwen. We are currently in discussions with Ocwen to address this matter, and have reserved all of our rights with respect to this matter.~~

from the NRZ portfolios. To address the reduction in revenue, Altisource ~~has undertaken~~is undertaking several measures to further reduce its cost structure and strengthen its operations.

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•Altisource loses Ocwen as a customer or there is an additional significant reduction in the volume of services they purchase from us

•The contractual relationship between Ocwen and NRZ changes significantly and this change results in a change in our status as a provider of services related to the Subject MSRs

•Ocwen loses state servicing licenses in states with a significant number of loans in Ocwen’s servicing portfolio

•The contractual relationship between Ocwen and Altisource changes significantly or there are significant changes to our pricing to Ocwen for services from which we generate material revenue

•Altisource otherwise fails to be retained as a service provider

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debt service and other cash needs. There can be no assurance that our plans will be successful or our operations will be profitable.

Factors Affecting Comparability

The following items impact the comparability of our results:

•The Company’s financial performance ~~for the three and nine months ended September 30, 2020~~ in its default ~~related services~~ businesses was negatively impacted by the COVID-19 pandemic for the three and six months ended June 30, 2021. Governmental, and in some instances, servicer measures to provide support to borrowers, including foreclosure and eviction moratoriums and forbearance programs, reduced referral volumes and inflows of REO. COVID-19 pandemic related governmental restrictions and changing vendor and consumer ~~behavior. This impact was~~behavior also impacted financial performance. These impacts were partially offset by stronger performance from the Company’s origination ~~related~~ businesses that benefited from lower interest rates, customer wins and new offerings for the three and ~~nine~~six months ended ~~September~~June 30, 2021 compared to the three and six months ended June 30, 2020. Across the Company’s three core businesses, service revenue from customers other than Ocwen, NRZ and ~~Front Yard Residential Corporation (“RESI”)~~RESI for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~2021 grew by ~~11%~~less than 1% and 6%, respectively, compared to the ~~nine~~three and six months ended ~~September~~June 30, ~~2019, despite the COVID-19 impacts the Company started facing late in the first quarter of~~ 2020. Compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, the increase is primarily from ~~the~~39% growth in our ~~customer base and market share expansion.~~origination businesses partially offset by a 68% decline in our default business. Service revenue from ~~the origination businesses such as loan fulfillment, loan certification, title, settlement~~our default and ~~valuation services in Mortgage~~other business was $58.9 million and ~~Real Estate Solutions grew by 38%~~$179.0 million for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~(30%~~respectively ($28.3 million and $77.7 million for the ~~third~~second quarter of ~~2020). In the Marketplace~~2021 and ~~Field Services businesses, revenue growth from customers other than Ocwen~~2020, respectively), and ~~NRZ was more than offset by lower~~service revenue from ~~Ocwen’s declining servicing portfolio~~our origination business was $31.3 million and $22.6 million for the ~~impact~~six months ended June 30, 2021 and 2020, respectively ($14.5 million and $12.5 million for the second quarter of ~~COVID-19.~~2021 and 2020, respectively).

•During the second quarter of 2020, Ocwen informed us that an MSR investor ~~had~~ instructed Ocwen to use a field services provider other than Altisource on properties associated with certain MSRs. ~~They indicated~~Based upon the impacted portfolios to date and the designated service provider, Altisource believes that ~~they were instructed to begin the transition in July 2020, and that the transition should be completed in a few months.~~Ocwen received these directions from NRZ. We believe Ocwen commenced using another field services provider for these properties in July 2020 and continued to transition services during the third quarter of 2020. ~~Based upon~~We believe that the ~~impacted portfolios to date and the designated service provider, Altisource believes that Ocwen received these directions from NRZ. The~~ transition to the replacement field service provider ~~has~~was largely ~~been~~ completed as of September 30, 2020. We estimate that ~~$72.3~~$0.3 million and ~~$115.6~~$55.0 million of service revenue from Ocwen for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively ~~($14.1~~(less than $0.1 million and ~~$38.1~~$25.7 million for the ~~third~~second quarter of 2021 and 2020, ~~and 2019,~~ respectively), was derived from Field Services referrals from the NRZ portfolios. ~~Without providing the timing or specific services impacted,~~ Ocwen also communicated to Altisource in the fourth quarter of 2020 that the same investor ~~plans~~instructed Ocwen to ~~direct them to transition~~use a provider for default valuations and certain default title services other ~~default related service~~than Altisource on properties associated with such certain MSRs and commenced moving these referrals to other ~~providers.~~service providers in the fourth quarter of 2020. We anticipate that the transition of such default valuations and title services will continue during the course of 2021. We estimate that ~~revenue from these certain other default related services represented approximately $25.6~~$1.8 million and ~~$34.9~~$12.7 million of service revenue from Ocwen for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively ($~~6.4~~0.9 million and ~~$12.5~~$4.8 million for the ~~third~~second quarter of 2021 and 2020, respectively), was

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derived from default valuations and ~~2019, respectively).~~title services referrals from the NRZ portfolios. To address the reduction in revenue, Altisource ~~has undertaken~~is undertaking several measures to further reduce its cost structure and strengthen its operations.

•During the ~~nine~~six months ended ~~September~~June 30, 2020, ~~and 2019,~~ we recognized an unrealized ~~(loss) gain~~loss of ~~$(12.4)~~$(12.6) million ~~and $11.7 million, respectively~~ ($~~0.1 million and $(2.3)~~(11.2) million for the ~~third~~second quarter of ~~2020 and 2019, respectively),~~2020) from the change in fair value on our investment in ~~RESI~~Front Yard Residential Corporation (“RESI”) in other income (expense), net in the condensed consolidated statements of operations and comprehensive ~~income (loss)~~loss from a change in the market value of RESI common ~~shares.~~shares (no comparative amount for the three and six months ended June 30, 2021).

•In August 2018, Altisource initiated Project Catalyst, a project intended to optimize its operations and reduce costs to better align its cost structure with its anticipated revenues and improve its operating ~~margins.~~margins (finalized in 2020). During the ~~nine~~three and six months ended ~~September~~June 30, 2020, ~~and 2019,~~ Altisource incurred ~~$10.9~~$5.8 million and ~~$9.1~~$8.7 million, respectively, ~~($2.2 million and $2.8 million for the third quarter of 2020 and 2019, respectively),~~ of severance costs, professional services fees, facility consolidation costs, technology costs and business wind down costs related to the reorganization plan. Altisource expects to incur additional severance costs, professional services fees and technology costs in connection with this internal reorganization, automation and other technology related activities and will expense those costs as incurred. Based on the Company’s analysis, it currently anticipates the future costs relating to Project Catalyst to be in the range of approximately $2 million to $3 million and does not include any anticipated costs associated with COVID-19 cost savings initiatives or planned cost reductions in connection with Ocwen’s decision to move certain field services referrals to another provider.

•On July 1, 2019, Altisource sold its Financial Services business, consisting of post-charge-off consumer debt and mortgage charge-off collection services and customer relationship management services (the “Financial Services Business”) to Transworld Systems Inc. (“TSI”) for $44.0 million consisting of an upfront payment of $40.0 million, subject to a working capital adjustment (finalized during 2019) and transaction costs upon closing of the sale, and an additional $4.0 million payment on the one year anniversary of the sale closing. On July 1, 2020, the Company received net proceeds of $3.3 million representing $4.0 million, net of certain amounts owed to TSI under the purchase and sale agreement. The parties also entered into a transition services agreement to provide for the management and

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orderly transition of certain services and technologies to TSI for periods ranging from 2 months to 13 months, subject to additional 3 month extensions. As of October 1, 2020, all of the transition services and technologies have been fully transitioned to TSI. On July 17, 2019, Altisource used $37.0 million of the net up-front payment to repay a portion of its senior secured term loan. For the nine months ended September 30, 2019, service revenue from the Financial Services Business was $33.4 millionplan (no comparative ~~amounts for the nine months ended September 30, 2020 and the third quarter of 2020 and 2019).~~

•In February 2019, Altisource and Ocwen entered into agreements that, among other things, facilitated Ocwen’s transition from REALServicing and related technologies to another mortgage servicing software platform. The transition was completed during 2019. For the nine months ended September 30, 2019, service revenue from REALServicing and related technologies was $13.8 million ($2.5 million for the third quarter of 2019).

•In November 2018, the Company announced its plans to sell its short-term investments in real estate and exit the Company’s BRS business. For the three and nine months ended September 30, 2019, service revenue from BRS was $0.4 million and $42.5 million, respectively (no comparative amountsamount for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020)~~2021).

•In May 2019, the Company began selling its investment in RESI common stock. During the nine months ended September 30, 2019, the Company sold 0.7 million shares for net proceeds of $7.8 million (0.1 million shares for net proceeds of $1.3 million for the third quarter of 2019) (no comparative amounts for the three and nine months ended September 30, 2020). As required by the senior secure term loan agreement, the Company used the net proceeds to repay a portion of its senior secured term loan.

•In October 2019, the Company announced its plans to wind down and close the Owners.com business, which was completed by December 31, 2019. For the three and nine months ended September 30, 2019, service revenue from Owners.com was $2.1 million and $5.9 million, respectively (no comparative amounts for the three and nine months ended September 30, 2020).

•On June 21, 2018, the United States Supreme Court rendered a 5-4 majority decision in South Dakota v. Wayfair, Inc., holding that a state may require a remote seller with no physical presence in the state to collect and remit sales tax on goods and services provided to purchasers in the state, overturning certain existing court precedent. During the nine months ended September 30, 2019, the Company completed the analysis of its services for potential exposure to sales tax in various jurisdictions in the United States. The Company recognized a $(0.6) million and $0.4 million net (loss reimbursement) loss for the nine months ended September 30, 2020 and 2019, respectively ($(0.6) million and $(1.7) million net loss reimbursement for the third quarter of 2020 and 2019, respectively) in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive income (loss). In October 2020, the Company received additional reimbursements of $(1.7) million of sales taxes previously accrued and paid. The Company began invoicing, collecting and remitting sales tax in applicable jurisdictions in 2019. The Company is also in the process of seeking additional reimbursements for sales tax payments from clients; however, there can be no assurance that the Company will be successful in collecting some or all of such additional reimbursements. Future changes in our estimated sales tax exposure could result in a material adjustment to our consolidated financial statements, which would impact our financial condition and results of operations.

•The Company recognized an income tax provision of ~~$5.3~~$1.4 million and ~~$20.7~~$3.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively ($~~1.8~~0.6 million and ~~$5.4~~$1.1 million for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively). The ~~decrease in the~~ income tax provision for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~2021 was primarily from a $12.3 million reduction in Luxembourg deferred tax assets in connection with a decrease in the Luxembourg statutory income tax rate from 26.0% to 24.9% in the second quarter of 2019. The income tax provisions on losses before income taxes and non-controlling interests for the three and nine months ended September 30, 2020 were primarily driven by income ~~in our US and other foreign operations from~~tax on transfer pricing ~~on services provided to our Luxembourg operating company and~~income from India, no tax benefit on the pretax ~~losses~~loss from our Luxembourg operating company ~~for the three~~ and ~~nine months ended September 30, 2020.~~

Pointillist, uncertain tax positions and tax on unrepatriated earnings in India.

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RESULTS OF OPERATIONS

Summary Results

The following is a discussion of our results of operations for the periods indicated.

The following table sets forth information on our consolidated results of operations:


		Three months ended September 30,							Nine months ended September 30,								Three months ended June 30,							Six months ended June 30,
(in thousands, except per share data)	(in thousands, except per share data)	2020			2019			% Increase (decrease)	2020			2019			% Increase (decrease)	(in thousands, except per share data)	2021			2020			% Increase (decrease)	2021			2020			% Increase (decrease)

Service revenue	Service revenue	$	85,386		$	133,781		(36)	$	289,570		$	489,300		(41)	Service revenue	$	43,966		$	91,008		(52)	$	92,046		$	204,184		(55)
Reimbursable expenses	Reimbursable expenses	2,810			7,213			(61)	14,495			16,484			(12)	Reimbursable expenses	1,936			3,840			(50)	3,949			11,685			(66)
Non-controlling interests	Non-controlling interests	599			499			20	1,516			2,179			(30)	Non-controlling interests	139			494			(72)	511			917			(44)
Total revenue	Total revenue	88,795			141,493			(37)	305,581			507,963			(40)	Total revenue	46,041			95,342			(52)	96,506			216,786			(55)
Cost of revenue	Cost of revenue	72,570			110,722			(34)	249,779			387,651			(36)	Cost of revenue	44,037			82,628			(47)	94,195			177,209			(47)
Gross profit	Gross profit	16,225			30,771			(47)	55,802			120,312			(54)	Gross profit	2,004			12,714			(84)	2,311			39,577			(94)
Operating expenses (income):
Operating expenses:																Operating expenses:
Selling, general and administrative expenses	Selling, general and administrative expenses	20,812			25,833			(19)	73,606			104,275			(29)	Selling, general and administrative expenses	16,556			24,701			(33)	35,442			52,794			(33)
Gain on sale of business		—			(17,558)			(100)	—			(17,558)			(100)
Restructuring charges	Restructuring charges	2,227			2,761			(19)	10,921			9,080			20	Restructuring charges	—			5,769			(100)	—			8,694			(100)
(Loss) income from operations		(6,814)			19,735			(135)	(28,725)			24,515			(217)
Loss from operations																Loss from operations	(14,552)			(17,756)			(18)	(33,131)			(21,911)			51
Other income (expense), net	Other income (expense), net															Other income (expense), net
Interest expense	Interest expense	(4,103)			(4,892)			(16)	(13,265)			(16,656)			(20)	Interest expense	(3,475)			(4,446)			(22)	(6,917)			(9,162)			(25)
Unrealized gain (loss) on investment in equity securities		138			(2,294)			106	(12,433)			11,731			(206)
Other (expense) income, net		(361)			406			(189)	412			1,308			(69)
Unrealized loss on investment in equity securities																Unrealized loss on investment in equity securities	—			(11,224)			(100)	—			(12,571)			(100)
Other income (expense), net																Other income (expense), net	(43)			(321)			(87)	906			773			17
Total other income (expense), net	Total other income (expense), net	(4,326)			(6,780)			(36)	(25,286)			(3,617)			N/M	Total other income (expense), net	(3,518)			(15,991)			(78)	(6,011)			(20,960)			(71)

(Loss) income before income taxes and non-controlling interests		(11,140)			12,955			(186)	(54,011)			20,898			N/M
Loss before income taxes and non-controlling interests																Loss before income taxes and non-controlling interests	(18,070)			(33,747)			(46)	(39,142)			(42,871)			(9)
Income tax provision	Income tax provision	(1,757)			(5,379)			(67)	(5,295)			(20,670)			(74)	Income tax provision	(584)			(1,117)			(48)	(1,427)			(3,538)			(60)

Net (loss) income		(12,897)			7,576			(270)	(59,306)			228			N/M
Net income attributable to non-controlling interests		(340)			(411)			(17)	(642)			(2,091)			(69)
Net loss																Net loss	(18,654)			(34,864)			(46)	(40,569)			(46,409)			(13)
Net loss (income) attributable to non-controlling interests																Net loss (income) attributable to non-controlling interests	179			(197)			191	92			(302)			130

Net (loss) income attributable to Altisource		$	(13,237)		$	7,165		(285)	$	(59,948)		$	(1,863)		N/M
Net loss attributable to Altisource																Net loss attributable to Altisource	$	(18,475)		$	(35,061)		(47)	$	(40,477)		$	(46,711)		(13)

Margins:	Margins:															Margins:
Gross profit/service revenue	Gross profit/service revenue	19		%	23		%		19		%	25		%		Gross profit/service revenue	5		%	14		%		3		%	19		%
(Loss) income from operations/service revenue		(8)		%	15		%		(10)		%	5		%
Loss from operations/service revenue																Loss from operations/service revenue	(33)		%	(20)		%		(36)		%	(11)		%

(Loss) earnings per share:
Loss per share:																Loss per share:
Basic	Basic	$	(0.85)		$	0.45		(289)	$	(3.85)		$	(0.12)		N/M	Basic	$	(1.17)		$	(2.25)		(48)	$	(2.57)		$	(3.00)		(14)
Diluted	Diluted	$	(0.85)		$	0.44		(293)	$	(3.85)		$	(0.12)		N/M	Diluted	$	(1.17)		$	(2.25)		(48)	$	(2.57)		$	(3.00)		(14)

Weighted average shares outstanding:	Weighted average shares outstanding:															Weighted average shares outstanding:
Basic	Basic	15,637			15,897			(2)	15,578			16,133			(3)	Basic	15,830			15,601			1	15,774			15,549			1
Diluted	Diluted	15,637			16,151			(3)	15,578			16,133			(3)	Diluted	15,830			15,601			1	15,774			15,549			1

~~N/M — not meaningful.~~

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Revenue

Revenue by line of business ~~was as follows:~~consists of the following:


		Three months ended September 30,					Nine months ended September 30,						Three months ended June 30,					Six months ended June 30,
(in thousands)	(in thousands)	2020		2019		% Increase (decrease)	2020		2019		% Increase (decrease)	(in thousands)	2021		2020		% Increase (decrease)	2021		2020		% Increase (decrease)

Service revenue:	Service revenue:											Service revenue:
Field Services	Field Services	$	34,570	$	69,873	(51)	$	137,050	$	204,355	(33)	Field Services	$	11,373	$	47,567	(76)	$	24,695	$	102,480	(76)
Marketplace	Marketplace	24,075		25,910		(7)	67,403		95,480		(29)	Marketplace	10,761		17,161		(37)	20,533		43,328		(53)
Mortgage and Real Estate Solutions	Mortgage and Real Estate Solutions	25,998		31,728		(18)	81,742		85,081		(4)	Mortgage and Real Estate Solutions	20,721		25,468		(19)	44,981		55,744		(19)
Earlier Stage Business	Earlier Stage Business	547		399		37	1,686		995		69	Earlier Stage Business	965		578		67	1,522		1,139		34
Other	Other	196		5,871		(97)	1,689		103,389		(98)	Other	146		234		(38)	315		1,493		(79)
Total service revenue	Total service revenue	85,386		133,781		(36)	289,570		489,300		(41)	Total service revenue	43,966		91,008		(52)	92,046		204,184		(55)

Reimbursable expenses:	Reimbursable expenses:											Reimbursable expenses:
Field Services	Field Services	693		2,008		(65)	3,861		7,082		(45)	Field Services	607		848		(28)	942		3,168		(70)
Marketplace	Marketplace	1,453		4,175		(65)	7,520		6,410		17	Marketplace	679		1,837		(63)	1,670		6,067		(72)
Mortgage and Real Estate Solutions	Mortgage and Real Estate Solutions	664		1,030		(36)	3,114		2,802		11	Mortgage and Real Estate Solutions	650		1,155		(44)	1,337		2,450		(45)
Other		—		—		—	—		190		(100)

Total reimbursable expenses	Total reimbursable expenses	2,810		7,213		(61)	14,495		16,484		(12)	Total reimbursable expenses	1,936		3,840		(50)	3,949		11,685		(66)

Non-controlling interests:	Non-controlling interests:											Non-controlling interests:
Mortgage and Real Estate Solutions	Mortgage and Real Estate Solutions	599		499		20	1,516		2,179		(30)	Mortgage and Real Estate Solutions	139		494		(72)	511		917		(44)

Total revenue	Total revenue	$	88,795	$	141,493	(37)	$	305,581	$	507,963	(40)	Total revenue	$	46,041	$	95,342	(52)	$	96,506	$	216,786	(55)

We recognized service revenue of ~~$289.6~~$92.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, a ~~41%~~55% decrease compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 ($~~85.4~~44.0 million for the ~~third~~second quarter of ~~2020,~~2021, a ~~36%~~52% decrease compared to the ~~third~~second quarter of ~~2019)~~2020), primarily from COVID-19 pandemic related ~~governmental restrictions, Ocwen’s~~foreclosure and eviction moratoriums and borrower forbearance plans, and an MSR investor’s 2020 instructions to Ocwen to transition of Field Services referrals associated with certain MSRs to another service provider (which began in July 2020), the reduction in the size of Ocwen’s portfolio, and NRZ’s higher percentage of home sales at the foreclosure auction (resulting in a lower percentage of foreclosures converting to REO, which in turn reduces our REO auction, brokerage, field services, title and ~~title service revenue). Service revenue also declined as a result of~~valuation referrals historically provided to Altisource to the ~~2019 sale, discontinuation and exit from certain businesses (resulting in a 4% and 20% decline in service revenue~~MSR investor’s captive vendors. The decreases for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, respectively). The decrease for the nine months ended September 30, 2020 was~~2021 were partially offset by an ~~11%~~ increase in revenue from ~~customers other than Ocwen, NRZ~~our origination business of 16% and ~~RESI in our Field Services, Marketplace and Mortgage and Real Estate Solutions businesses~~39%, respectively, from ~~new customer on-boardings, market share expansion with existing customers, and~~ higher origination related volumes driven by a lower interest rate ~~environment. Service revenue from the origination businesses in Mortgage~~environment, customer wins and Real Estate Solutions grew by 38% for the nine months ended September 30, 2020 (30% for the third quarter of 2020). Other service revenue declined for the three and nine months ended September 30, 2020 from lower REALServicing revenue from Ocwen’s migration to another servicing system and the wind down of Owners.com compared to the three and nine months ended September 30, 2019. Other service revenue declined for the nine months ended September 30, 2020 from the July 1, 2019 sale of the Financial Services Business and the discontinuation of the BRS business.new offerings.

We recognized reimbursable expense revenue of ~~$14.5~~$3.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, a ~~12%~~66% decrease compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 ($~~2.8~~1.9 million for the ~~third~~second quarter of ~~2020,~~2021, a ~~61%~~50% decrease compared to the ~~third~~second quarter of ~~2019)~~2020). ~~These decreases~~The decrease in reimbursable expenses for the ~~three and nine~~six months ended ~~September~~June 30, ~~2020 were~~2021 was consistent with the ~~declines~~decline in service revenue discussed above. The decrease in reimbursable expense revenue for the nine months ended September 30, 2020 was partially offset by an increase in certain title and foreclosure trustee volumes in Mortgage and Real Estate Solutions and a new early stage disposition service offering (cash for keys program and evictions) initiated in June 2019 in Marketplace.

Certain of our revenues can be impacted by seasonality. More specifically, revenues from property sales, loan originations and certain property preservation services in Field Services typically tend to be at their lowest level during the fall and winter months and at their highest level during the spring and summer months.

~~Table~~ However, as a result of ~~Contents~~

the pandemic and related measures, the seasonal impact to revenue may not follow historical patterns.

Cost of Revenue and Gross Profit

Cost of revenue principally includes payroll and employee benefits associated with personnel employed in customer service, operations and ~~operations~~technology roles, fees paid to external providers related to the provision of services, ~~cost of real estate sold,~~ reimbursable expenses, technology and telecommunications costs and depreciation and amortization of operating assets.

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Cost of revenue consists of the following:


		Three months ended September 30,					Nine months ended September 30,						Three months ended June 30,					Six months ended June 30,
(in thousands)	(in thousands)	2020		2019		% Increase (decrease)	2020		2019		% Increase (decrease)	(in thousands)	2021		2020		% Increase (decrease)	2021		2020		% Increase (decrease)

Compensation and benefits	Compensation and benefits	$	23,947	$	30,463	(21)	$	74,776	$	108,637	(31)	Compensation and benefits	$	18,449	$	24,913	(26)	$	40,484	$	50,829	(20)
Outside fees and services	Outside fees and services	34,013		61,314		(45)	123,914		182,483		(32)	Outside fees and services	16,859		41,761		(60)	35,582		89,901		(60)
Technology and telecommunications	Technology and telecommunications	8,776		8,586		2	27,082		27,124		—	Technology and telecommunications	5,994		9,074		(34)	12,581		18,306		(31)
Reimbursable expenses	Reimbursable expenses	2,810		7,213		(61)	14,495		16,484		(12)	Reimbursable expenses	1,936		3,840		(50)	3,949		11,685		(66)
Depreciation and amortization	Depreciation and amortization	3,024		2,753		10	9,512		10,160		(6)	Depreciation and amortization	799		3,040		(74)	1,599		6,488		(75)
Cost of real estate sold		—		393		(100)	—		42,763		(100)

Cost of revenue	Cost of revenue	$	72,570	$	110,722	(34)	$	249,779	$	387,651	(36)	Cost of revenue	$	44,037	$	82,628	(47)	$	94,195	$	177,209	(47)

We recognized cost of revenue of ~~$249.8~~$94.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, a ~~36%~~47% decrease compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 ($~~72.6~~44.0 million for the ~~third~~second quarter of ~~2020,~~2021, a ~~34%~~47% decrease compared to the ~~third~~second quarter of ~~2019)~~2020). The decreases in ~~compensation and benefits,~~ outside fees and services ~~and cost of real estate sold~~ were primarily driven by lower service revenue in Field Services and Marketplace businesses, ~~and the wind down of Owners.com, and for the nine months ended September 30, 2020, the July 1, 2019 sale of the Financial Services Business and the discontinuation of the BRS business,~~ discussed in the revenue section above. Compensation and benefits ~~also~~for the three and six months ended June 30, 2021 decreased primarily due to lower headcount ~~and temporary reductions in compensation~~ in connection with cash cost savings measures ~~initiated~~taken in ~~the second quarter of~~ 2020 in response to the COVID-19 related decreases in service revenue and reduction in revenue from Ocwen discussed in the revenue section ~~above~~above. The Company also continued to reduce employee costs in the three and six months ended June 30, 2021 as a result of the ~~Project Catalyst reorganization.~~extension of the expiration of foreclosure moratoriums and forbearance plans. The decreases in reimbursable expenses were consistent with the changes in reimbursable expense revenue discussed in the revenue section above.

Gross profit decreased to ~~$55.8~~$2.3 million, representing 3% of service revenue, for the six months ended June 30, 2021 compared to $39.6 million, representing 19% of service revenue, for the ~~nine~~six months ended ~~September~~June 30, 2020 ~~compared~~(decreased to ~~$120.3~~$2.0 million, representing ~~25%~~5% of service revenue, for the ~~nine months ended September 30, 2019 (decreased~~second quarter of 2021, compared to ~~$16.2~~$12.7 million, representing ~~19%~~14% of service revenue, for the ~~third~~second quarter of ~~2020 compared to $30.8 million, representing 23% of service revenue, for the third quarter of 2019)~~2020). Gross profit as a percentage of service revenue for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~2021 decreased compared to the ~~nine~~three and six months ended ~~September~~June 30, ~~2019~~2020 primarily due to revenue mix with lower revenue from the higher margin Marketplace businesses ~~the impact of the July 1, 2019 sale of the Financial Services Business~~ and higher revenue in the second quarter of 2019 from the sale of the short-term investments in real estate (“BRS Inventory”), which resulted in a $1.8 million loss. Gross profit as a percentage of service revenue for the third quarter of 2020 decreased compared to the third quarter of 2019 primarily due to a lower gross profit margin in the Field Services ~~business because decreases in compensation and benefits and technology and telecommunications costs were proportionately less than the decrease in service revenue.~~business. These decreases were partially offset by our COVID-19 cash cost savings ~~measures and Project Catalyst cost reduction initiatives.~~measures.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses include payroll for personnel employed in executive, sales and marketing, finance, technology, law, compliance, human resources, vendor management, facilities and risk management roles. This category also includes professional services fees, occupancy costs, marketing costs, depreciation and amortization of non-operating assets and other expenses.

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SG&A expenses consist of the following:


		Three months ended September 30,					Nine months ended September 30,						Three months ended June 30,					Six months ended June 30,
(in thousands)	(in thousands)	2020		2019		% Increase (decrease)	2020		2019		% Increase (decrease)	(in thousands)	2021		2020		% Increase (decrease)	2021		2020		% Increase (decrease)

Compensation and benefits	Compensation and benefits	$	9,077	$	10,395	(13)	$	30,396	$	36,986	(18)	Compensation and benefits	$	6,296	$	9,307	(32)	$	14,148	$	21,319	(34)
Occupancy related costs	Occupancy related costs	4,636		5,593		(17)	15,725		19,988		(21)	Occupancy related costs	2,290		5,668		(60)	5,470		11,089		(51)
Amortization of intangible assets	Amortization of intangible assets	4,295		3,298		30	11,344		15,489		(27)	Amortization of intangible assets	2,911		2,840		3	5,510		7,049		(22)
Professional services	Professional services	2,129		2,588		(18)	8,605		11,384		(24)	Professional services	2,360		3,841		(39)	5,578		6,476		(14)
Marketing costs	Marketing costs	422		3,481		(88)	2,810		9,402		(70)	Marketing costs	699		951		(26)	1,173		2,388		(51)
Depreciation and amortization	Depreciation and amortization	796		921		(14)	2,009		4,036		(50)	Depreciation and amortization	352		544		(35)	736		1,213		(39)
Other	Other	(543)		(443)		(23)	2,717		6,990		(61)	Other	1,648		1,550		6	2,827		3,260		(13)

Selling, general and administrative expenses	Selling, general and administrative expenses	$	20,812	$	25,833	(19)	$	73,606	$	104,275	(29)	Selling, general and administrative expenses	$	16,556	$	24,701	(33)	$	35,442	$	52,794	(33)

SG&A expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 of ~~$73.6~~$35.4 million decreased by ~~29%~~33% compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 ($~~20.8~~16.6 million for the ~~third~~second quarter of ~~2020,~~2021, a ~~19%~~33% decrease compared to the ~~third~~second quarter of ~~2019)~~2020). The decreases were primarily driven by lower compensation and benefits, occupancy related costs and marketing costs. Compensation and benefits for the three and six months ended June 30, 2021 decreased ~~as we reduced~~primarily due to lower headcount ~~and temporarily reduced compensation from COVID-19~~in connection with cash cost savings measures taken in 2020 in response to the COVID-19 related decreases in service revenue and ~~Project Catalyst cost~~ reduction ~~initiatives.~~in revenue from Ocwen discussed in the revenue section above. The Company also continued to reduce

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compensation and benefits costs in the three and six months ended June 30, 2021 as a result of the extension of the expiration of foreclosure moratoriums and forbearance plans. The decreases in occupancy related costs primarily resulted from ~~the July 1, 2019 sale of the Financial Services Business and~~ facility consolidation initiatives. The decreases in marketing costs were primarily driven by COVID-19 cost savings measures and the ~~wind down of Owners.com~~decline in ~~the fourth quarter of 2019.~~revenue. For the ~~nine~~six months ended ~~September~~June 30, 2020, Other expenses decreased primarily due to lower travel and entertainment costs driven by lower headcount and COVID-19 travel restrictions, billings to TSI for transition services and higher net sales tax loss reimbursements, partially offset by higher bad debt expense. In addition,2021, the decrease in amortization of intangible assets ~~for the nine months ended September 30, 2020~~ was driven by the completion of the amortization period of certain intangible assets during ~~2019, the July 1, 2019 sale of the Financial Services Business~~2020 and lower revenue generated from the Homeward Residential, Inc. and Residential Capital, LLC portfolios (revenue-based amortization) consistent with the reduction in the size of Ocwen’s portfolio, discussed in the revenue section above.

In addition, Other ~~Operating Expenses (Income)~~

Three months ended September 30, Nine months ended September 30,
(in thousands) 2020 2019 % Increase (decrease) 2020 2019 % Increase (decrease)
Gain on sale of business $ — $ (17,558) (100) $ — $ (17,558) (100)
Restructuring charges 2,227 2,761 (19) 10,921 9,080 20
Other operating expense (income), net $ 2,227 $ (14,797) (115) $ 10,921 $ (8,478) (229)

~~On March 28,~~expenses decreased for the six months ended June 30, 2021 primarily due to lower travel and entertainment costs driven by COVID-19 travel restrictions, lower billings to Transworld Systems Inc. for transition services in connection with the July 1, 2019 ~~Altisource entered into a definitive agreement to sell~~sale of the Financial Services Business ~~to TSI for $44.0 million consisting of an up-front payment of $40.0 million, subject to a working capital adjustment (finalized in 2019)~~ and transaction costs upon closing of the sale, and an additional $4.0 million payment on the one year anniversary of the sale closing. On July 1, 2020, the Company received net proceeds of $3.3 million representing $4.0 million, net of certain amounts owed to TSI under the purchase and sale agreement. The sale closed on July 1, 2019 and in connection with this sale, we recognized a $17.6 million pretax gain on sale for the three and nine months ended September 30, 2019.lower bad debt expense.

Other Operating Expenses

In August 2018, Altisource initiated Project Catalyst, a project intended to optimize its operations and reduce costs to better align its cost structure with its anticipated revenues and improve its operating ~~margins.~~margins (finalized in 2020). During the ~~nine~~three and six months ended ~~September~~June 30, 2020, ~~and 2019,~~ Altisource incurred ~~$10.9~~$5.8 million and ~~$9.1~~$8.7 million, respectively, ~~($2.2 million and $2.8 million for the third quarter of 2020 and 2019, respectively),~~ of severance costs, professional services fees, facility consolidation costs, technology costs and business wind down costs related to the reorganization ~~plan. Altisource expects to incur additional severance costs, professional services fees~~plan (no comparative amount for the three and technology costs in connection with this internal reorganization, automation and other technology related activities and will expense those costs as incurred. Based on the Company’s analysis, it currently anticipates the future costs relating to Project Catalyst to be in the range of approximately $2 million to $3 million.six months ended June 30, 2021).

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~~(Loss) Income~~Loss from Operations

~~Income~~Loss from operations ~~decreased to a loss of $(28.7)~~for the six months ended June 30, 2021 was $(33.1) million, representing ~~(10)~~(36)% of service revenue, compared to $(21.9) million, representing (11)% of service revenue, for the ~~nine~~six months ended ~~September~~June 30, 2020 ~~compared~~(decreased to ~~$24.5~~$(14.6) million, representing ~~5% of service revenue, for the nine months ended September 30, 2019 (decreased to a loss of $(6.8) million, representing (8)~~(33)% of service revenue, for the ~~third~~second quarter of ~~2020~~2021, compared to ~~$19.7~~$(17.8) million, representing ~~15%~~(20)% of service revenue, for the ~~third~~second quarter of ~~2019)~~2020). ~~Income~~Loss from operations as a percentage of service revenue ~~decreased~~increased for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, primarily as a result of lower gross profit ~~and a higher gain on the sale of business~~margins during the ~~three and nine~~six months ended ~~September~~June 30, ~~2019,~~2020, partially offset by lower SG&A expenses and restructuring charges, as discussed above.

Because Ocwen is our largest customer, 2021 declines in service revenue from Ocwen and the changes in mix of revenue from Ocwen have had a negative impact on our loss from operations.

Other Income (Expense), net

Other income (expense), net principally includes interest expense, unrealized ~~(loss) gain~~loss on our investment in RESI common shares and other non-operating gains and losses.

Other income (expense), net was ~~$(25.3)~~$(6.0) million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to ~~$(3.6)~~$(21.0) million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 ($~~(4.3)~~(3.5) million for the ~~third~~second quarter of ~~2020~~2021 and ~~$(6.8)~~$(16.0) million for the ~~third~~second quarter of ~~2019)~~2020). The ~~increase~~decrease in other expense for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~2021 was primarily driven by a ~~$(12.4)~~$(11.2) million and $(12.6) million unrealized loss on our investment in RESI common shares ~~compared to a $11.7 million unrealized gain in 2019. The increase in~~for the three and six months ended June 30, 2020, respectively (no comparative amount for the three and six months ended June 30, 2021). In addition, other expense ~~was partially offset by~~also decreased due to lower interest expense during the ~~nine~~three and six months ended ~~September~~June 30, ~~2020.~~2021. Interest expense decreased primarily due to the lower average outstanding balances of the senior secured term loan as a result of repayments during ~~2019~~2020 and lower interest rates. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the interest rate of the senior secured term loan was ~~5.46%~~5.00% compared to ~~6.44%~~5.70% for the ~~nine~~six months ended ~~September~~June 30, ~~2019. The decrease in other expense~~2020 (5.00% for the ~~third~~second quarter of ~~2020 was primarily driven by a $0.1 million unrealized gain on our investment in RESI common shares~~2021 compared to ~~a $(2.3) million unrealized loss in 2019, partially offset by lower interest expense in 2020 (interest rate of the senior secured term loan was 5.00%~~5.45% for the ~~third~~second quarter of ~~2020 compared to 6.33% for the third quarter of 2019)~~2020).

Income Tax Provision

We recognized an income tax provision of ~~$5.3~~$1.4 million and ~~$20.7~~$3.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively ($~~1.8~~0.6 million and ~~$5.4~~$1.1 million for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively). The ~~decrease in the~~ income tax provision for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~2021 was ~~primarily from a $12.3 million reduction in Luxembourg deferred tax assets in connection with a decrease in the Luxembourg statutory~~driven by income tax ~~rate from 26.0% to 24.9% in the second quarter of 2019. The income tax provisions~~ on ~~losses before income taxes and non-controlling interests for the three and nine months ended September 30, 2020 were primarily driven by the income in our US and other foreign operations from~~ transfer pricing ~~on services provided to our Luxembourg operating company and~~income from India, no tax benefit on the pretax ~~losses~~loss from our Luxembourg operating company ~~for the three~~ and ~~nine months ended September 30, 2020.~~Pointillist, uncertain tax positions and tax on unrepatriated earnings in India.

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our primary source of liquidity has historically been cash flow from operations, cash proceeds from sales of businesses and ~~equity securities, and~~ cash on hand. However, due to the COVID-19 pandemic and ~~Ocwen’s~~an MSR investor’s instructions to Ocwen to transition ~~of Field Services referrals~~field services, valuation and title services to ~~another~~the investor’s captive service ~~provider associated with certain MSRs have~~providers, revenue has declined significantly. The lower revenue, partially offset by cost savings initiatives, resulted in a ~~reduction in~~negative operating cash flow from operations for ~~the nine~~six months ended ~~September~~June 30, ~~2020, as lower service revenue has not been fully offset by~~2021. To address our current operating environment, we plan to continue our cost reduction initiatives to reduce cash ~~cost savings initiatives.~~burn. To increase our liquidity to provide a greater cushion, we entered into a Credit Facility during the second quarter of 2021. We also anticipate that we will continue to grow our origination businesses and that referral volumes from delinquent mortgages will increase following the expiration of the pandemic related foreclosure moratoriums, the CFPB's temporary loss mitigation measures and other pandemic related borrower relief measures. We seek to deploy cash generated in a disciplined manner. Principally, we intend to use cash to develop and grow complementary services and businesses that we believe will generate attractive margins in line with our core capabilities and strategy. We use cash for repayments of our long-term debt and capital ~~investments and we anticipate that we may use cash~~investments. In addition, from time to time, ~~to repurchase shares of our common stock. In addition,~~ we consider and evaluate business acquisitions, dispositions, closures or other similar actions ~~from time to time~~ that are aligned with our strategy.

Credit Agreement

In April 3, 2018, Altisource entered into the Credit Agreement pursuant to which Altisource borrowed $412.0 million in the form of Term B Loans and obtained a $15.0 million revolving credit facility. The Term B Loans mature in April 2024 and the revolving credit facility matures in April 2023. As of ~~September~~June 30, ~~2020, $293.8~~2021, $247.2 million of the Term B Loans were outstanding. Borrowings under the revolving credit facility are not permitted if our leverage ratio exceeds to 3.50 to 1.00. Our leverage ratio exceeded 3.50 to 1.00 ~~during~~for the ~~third quarter of 2020.~~twelve months ended June 30, 2021. There were no borrowings outstanding under the revolving credit facility as of ~~September~~June 30, ~~2020.~~2021.

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There are no mandatory repayments of the Term B Loans due until ~~March 2023, when~~ ~~$1.3 million~~ ~~is due to be repaid. Thereafter, the Term B Loans must be repaid~~maturity in ~~consecutive quarterly principal installments of $3.1 million, with the balance due at maturity.~~April 2024, except as otherwise described herein. All amounts outstanding under the Term B Loans will become due on the earlier of (i) April 3, 2024, and (ii) the date on which the loans are declared to be due and owing by the administrative agent at the request (or with the consent) of the Required Lenders (as defined in the Credit Agreement; other capitalized terms, unless defined herein, are defined in the Credit Agreement) or as otherwise provided in the Credit Agreement upon the occurrence of any event of default.

In addition to the scheduled principal payments, subject to certain exceptions, the Term B Loans are subject to mandatory prepayment upon issuances of debt, certain casualty and condemnation events and sales of assets, as well as from a percentage of Consolidated Excess Cash Flow if our leverage ratio as of each year-end computation date is greater than 3.00 to 1.00, as calculated in accordance with the provisions of the Credit Agreement (the percentage increases if our leverage ratio exceeds 3.50 to 1.00). ~~Certain mandatory prepayments reduce future contractual amortization payments by an amount equal~~Our leverage ratio exceeded 3.50 to 1.00 for the ~~mandatory prepayment.~~twelve months ended June 30, 2021. The Company did not generate any Consolidated Excess Cash Flow during the six months ended June 30, 2021.

The interest rate on the Term B Loans as of ~~September~~June 30, ~~2020~~2021 was 5.00%.

The Credit Agreement includes covenants that restrict or limit, among other things, our ability, subject to certain exceptions and baskets, to incur additional debt, pay dividends and repurchase shares of our common stock. In the event we require additional liquidity, our ability to obtain it may be limited by the Credit Agreement.

Credit Facility

On June 22, 2021 Altisource S.à r.l, a subsidiary of Altisource Portfolio Solutions S.A., entered into a revolving credit facility with a related party, STS. STS is an investment fund managed by Deer Park Road Management Company, LP. Deer Park Road Management Company, LP owns approximately 24% of Altisource’s common stock as of June 30, 2021 and its Chief Investment Officer and managing partner is a member of Altisource’s Board of Directors. Under the terms of the Credit Facility, STS will make loans to Altisource from time to time, in amounts requested by Altisource and Altisource may voluntarily prepay all or any portion of the outstanding loans at any time. The Credit Facility provides Altisource the ability to

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borrow a maximum amount of $20 million through June 22, 2022, $15 million through June 22, 2023, and $10 million until the end of the term. Amounts that are repaid may be re-borrowed in accordance with the limitations set forth below.

Outstanding amounts borrowed pursuant to the Credit Facility will amortize over the three-year term as follows: on June 22, 2022, the difference between the then outstanding balance above $15 million and $15 million, will be due and payable by Altisource; on June 22, 2023, the difference between the then outstanding balance above $10 million and $10 million, will be due and payable by Altisource; and on June 22, 2024, the then outstanding balance of the loan will be due and payable by Altisource.

Borrowings under the Credit Facility bear interest of 9.00% per annum and are payable quarterly on the last business day of each March, June, September and December, commencing on September 30, 2021. In connection with the Credit Facility, Altisource is required to pay customary fees, including an upfront fee equal to $0.5 million at the initial extension of credit pursuant to the facility, an unused line fee of 0.5% and, an early termination fee in the event of a refinancing transaction.

As of June 30, 2021, there were no borrowing outstanding under the Credit Facility. On July 6, 2021, the Company borrowed $6 million under the Credit Facility.

Cash Flows

The following table presents our cash flows for the ~~nine~~six months ended ~~September~~June 30:


(in thousands)	(in thousands)	2020		2019		% Increase (decrease)	(in thousands)	2021		2020		% Increase (decrease)

Net (loss) income adjusted for non-cash items		$	(6,141)	$	35,116	(117)
Net loss adjusted for non-cash items							Net loss adjusted for non-cash items	$	(24,714)	$	(6,665)	(271)
Changes in operating assets and liabilities	Changes in operating assets and liabilities	(7,936)		(12,922)		39	Changes in operating assets and liabilities	1,939		(4,551)		(143)
Net cash (used in) provided by operating activities		(14,077)		22,194		(163)
Net cash provided by investing activities		805		45,729		(98)
Net cash used in operating activities							Net cash used in operating activities	(22,775)		(11,216)		(103)
Net cash provided by (used in) investing activities							Net cash provided by (used in) investing activities	2,307		(1,466)		257
Net cash used in financing activities	Net cash used in financing activities	(2,471)		(61,344)		96	Net cash used in financing activities	(1,478)		(1,908)		(23)
Net (decrease) increase in cash, cash equivalents and restricted cash		(15,743)		6,579		(339)
Net decrease in cash, cash equivalents and restricted cash							Net decrease in cash, cash equivalents and restricted cash	(21,946)		(14,590)		50
Cash, cash equivalents and restricted cash at the beginning of the period	Cash, cash equivalents and restricted cash at the beginning of the period	86,583		64,046		35	Cash, cash equivalents and restricted cash at the beginning of the period	62,096		86,583		(28)

Cash, cash equivalents and restricted cash at the end of the period	Cash, cash equivalents and restricted cash at the end of the period	$	70,840	$	70,625	—	Cash, cash equivalents and restricted cash at the end of the period	$	40,150	$	71,993	(44)

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Cash Flows from Operating Activities

Cash flows from operating activities generally consist of the cash effects of transactions and events that enter into the determination of net ~~(loss) income.~~loss. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, cash flows used in operating activities were ~~$(14.1)~~$(22.8) million, or approximately $(0.25) for every dollar of service revenue ($(0.14) for every dollar of service revenue for the second quarter of 2021), compared to cash flows used in operating activities of $(11.2) million, or approximately $(0.05) for every dollar of service revenue for the six months ended June 30, 2020 ($~~(0.03)~~(0.11) for every dollar of service revenue for the ~~third~~second quarter of 2020), compared to cash flows provided by operating activities of $22.2 million, or approximately $0.05 for every dollar of service revenue for the nine months ended September 30, 2019 (cash used in operating activities of $(0.08) for every dollar of service revenue for the third quarter of 2019). During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the ~~decrease~~increase in cash ~~provided by~~used in operating activities was driven by ~~a $41.3~~an $18.0 million increase in net loss, adjusted for non-cash items, partially offset by lower cash used for changes in operating assets and liabilities of ~~$5.0~~$6.5 million. The increase in net loss, adjusted for non-cash items, was primarily due to lower gross profit during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 from lower service revenue driven by the COVID-19 pandemic ~~reduced customer volumes~~ and the ~~July 1, 2019 sale~~loss of ~~the Financial Services Business,~~certain services relating to one of Ocwen’s subservicing customers, partially offset by decreases in expenses as a result of COVID-19 cash cost savings measures, the Project Catalyst cost reduction initiatives and lower SG&A expenses. The decrease in cash used for changes in operating assets and liabilities was primarily driven by a decrease in accounts receivable of $10.1 million for the nine months ended September 30, 2020 compared to an increase in accounts receivable of $31.6 million during the nine months ended September 30, 2019, largely driven by the timing of collections, a decrease in cash used for changes in operating assets and liabilities driven by $6.9

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~~million of payments of sales tax accruals during the first quarter of 2019 and~~ lower cash payments for annual incentive compensation bonuses in the first quarter of ~~2020~~2021 by ~~$7.3 million. These decreases in cash used for changes in operating assets and liabilities were largely~~$7.2 million partially offset by ~~the~~a decrease in ~~short-term investments~~accounts receivable of $4.0 million for the six months ended June 30, 2021 compared to a decrease in ~~real estate~~accounts receivable of ~~$39.9~~$7.2 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019 related to~~2020, largely driven by the ~~sale~~timing of the majority of the remaining BRS Inventory. During 2019, accounts receivable increased in part as a result of delays in receiving payments from Ocwen in connection with Ocwen’s transition to another mortgage servicing software platform.collections. Operating cash flows can be negatively impacted because of the nature of some of our services and the mix of services provided. Certain services are performed immediately following or shortly after the referral, but the collection of the receivable does not occur until a specific event occurs (e.g., the foreclosure is complete, the REO asset is sold, etc.). Furthermore, lower margin services generate lower income and cash flows from operations. Consequently, our cash flows from operations may be negatively impacted when comparing one period to another.

Cash Flows from Investing Activities

Cash flows from investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 consisted of additions to premises and equipment and proceeds from the sale of a ~~business and, for the nine months ended September 30, 2019, proceeds from the sale of equity securities.~~business. Cash flows provided by (used in) investing activities were ~~$0.8~~$2.3 million and ~~$45.7~~$(1.5) million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The change in cash provided by investing activities was primarily driven by ~~$38.0 million in net proceeds received from the sale of the Financial Services Business and $7.8~~$3.0 million in proceeds received in connection with the second installment from the ~~sale of a portion of our investment in RESI common stock during the nine months ended September 30, 2019 and net proceeds of $3.3 million from the~~August 2018 sale of the ~~Financial Services Business received on~~rental property management business to RESI. In addition, we used $(0.7) million and $(1.5) million for the ~~one year anniversary of the sale closing received during the nine~~six months ended ~~September~~June 30, ~~2020.~~2021 and 2020, for additions to premises and equipment primarily related to investments in the development of certain software applications and facility improvements.

Cash Flows from Financing Activities

Cash flows from financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 primarily included payments of tax withholdings on issuance of restricted share units and restricted shares, ~~and~~ distributions to non-controlling interests and ~~for the nine months ended September 30, 2019, included repayments of long-term debt, the purchase of treasury shares and~~ proceeds from ~~stock option exercises.~~convertible notes payable to related parties. Cash flows used in financing activities were ~~$(2.5)~~$(1.5) million and ~~$(61.3)~~$(1.9) million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we made payments of ~~$(1.5)~~$(0.9) million ~~in each period~~and $(1.4) million, respectively, to satisfy employee tax withholding obligations on the issuance of restricted share units and restricted shares. These payments were made to tax authorities, at the employees’ direction, to satisfy the employees’ tax obligations rather than issuing a portion of vested restricted share units and restricted shares to employees. In addition, during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we distributed ~~$(1.0)~~$(1.8) million and ~~$(2.0)~~$(0.5) million, respectively, to non-controlling interests. During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2021, we ~~used $(44.8) million for repayments of long-term debt largely from~~also received proceeds ~~received~~ from the ~~sales~~Pointillist convertible notes payable to related parties of $1.2 million (no comparable amount for the ~~Financial Services Business and RESI shares and we used $(13.4) million to repurchase shares of our common stock.~~six months ended June 30, 2020).

Liquidity Requirements after ~~September~~June 30, ~~2020~~2021

Our significant future liquidity obligations primarily pertain to long-term debt repayments and interest expense under the Credit Agreement and Credit Facility (see Liquidity section above), lease payments and ~~lease payments.~~distributions to Lenders One members. During the next 12 months, we expect to pay ~~$14.7~~$12.4 million of interest expense (assuming no further principal repayments and the ~~September~~June 30, ~~2020~~2021 interest rate) under the Credit Agreement, $0.8 million of interest expense under the Credit Facility and make lease payments of ~~$8.8~~$6.9 million.

We believe that our existing cash and cash equivalents balances and available borrowings under the Credit Facility, net of our anticipated cash flows ~~from~~used in operations, will be sufficient to meet our liquidity needs, including to fund operating expenses, required interest ~~payments~~ and lease payments, for the next 12 months.

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Contractual Obligations, Commitments and Contingencies

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, there were no significant changes to our contractual obligations from those identified in our Form 10-K for the fiscal year ended December 31, ~~2019~~2020 and this Form 10-Q, other than those that occur in the normal course of business. See Note 2423 to the condensed consolidated financial statements.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND RECENT ACCOUNTING PRONOUNCEMENTS

We prepare our interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. In applying many of these accounting principles, we need to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, 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 judgments, however, are often subjective.

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Actual results may be negatively affected 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 of our Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on March ~~5, 2020.~~11, 2021. There have been no material changes to our critical accounting policies during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

Recently Adopted and Future Adoption of New Accounting Pronouncements

See Note 1 to the condensed consolidated financial statements for a discussion of recently issued accounting pronouncements, including pronouncements that were adopted in the current period.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market Risk

Our financial market risk consists primarily of interest rate and foreign currency exchange rate risk.

Interest Rate Risk

As of ~~September~~June 30, ~~2020,~~2021, the interest rate charged on the Term B Loan was 5.00%. The interest rate is calculated based on the Adjusted Eurodollar Rate (as defined in the senior secured term loan agreement) with a minimum floor of 1.00% plus 4.00%.

Based on the principal amount outstanding and the Adjusted Eurodollar Rate as of ~~September~~June 30, ~~2020,~~2021, a one percentage point increase in the Eurodollar rate would increase our annual interest expense by approximately ~~$2.9~~$2.5 million. There would be no decrease in our annual interest expense if there was a one percentage point decrease in the Eurodollar Rate, as a result of the 1.00% minimum floor.

Currency Exchange Risk

We are exposed to currency risk from potential changes in currency values of our non-United States dollar denominated expenses, assets, liabilities and cash flows. Our most significant currency exposure relates to the Indian rupee. Based on expenses incurred in Indian rupees for the ~~third~~first quarter of ~~2020,~~2021, a one percentage point increase or decrease in value of the Indian rupee in relation to the United States dollar would increase or decrease our annual expenses by approximately ~~$0.4~~$0.3 million.

Item 4. Controls and Procedures

a) Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including the Chairman and Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of ~~September~~June 30, ~~2020,~~2021, an evaluation was conducted under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls

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and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based on this evaluation, such officers have concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2020.~~2021.

b) Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the quarter ended ~~September~~June 30, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Litigation

Regulatory Matters

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, ~~2019~~2020 filed with the SEC on March ~~5, 2020,~~11, 2021, except as ~~discussed~~provided below.

Risks Related to Our Business and Operations

Our level of debt and provisions in our ~~Form 10-Q~~Credit Facility could limit our ability to react to changes in the economy or our industry. Our failure to comply with the covenants or terms contained in our Credit Facility, could result in an event of default.

We are subject to a credit agreement dated as of June 22, 2021 providing us with a revolving credit facility in an initial amount of $20 million. Our Credit Facility agreements require us to repay amounts in excess of specified thresholds as of certain dates as follows: repay outstanding amounts in excess of $15 million as of June 23, 2022; repay outstanding amounts in excess of $10 million as of June 23, 2023; and repay all outstanding amounts as of June 22, 2024. In addition, the Credit Facility agreements obligate us to comply with certain covenants or terms, the failure of which could give risk to an event of default.

If our cash from operations declines, there can be no assurance that our cash balances and other assets readily available for sale would be sufficient to fully repay borrowings as the same become due or that we will be able to refinance the remaining portion of the debt prior to the due date. If we were to default on our debt, our lenders could take action adverse to our interests under the terms of the Credit Facility agreements, including the lender seeking to take possession of the applicable collateral. Under such circumstances, if we are not able to agree upon a resolution with our lender, we might seek applicable legal protections including under bankruptcy law, which in turn could provide certain of our clients the ability to terminate our agreements. If we refinance the loan under less favorable terms, we may be more constrained in our ability to finance and operate our business. Furthermore, an event of default of the Credit Facility agreements could permit the lender to terminate its obligations to extend credit and to cause all outstanding amounts to become immediately due and payable, as well as permitting lender to avail itself to certain other remedies set forth in such agreements. Our assets or cash flows may not be sufficient to fully repay borrowings under the Credit Facility agreements if accelerated upon an event of default and we may not be able to refinance or restructure the payments on such debt.

An event of default under the Credit Facility could result in a going concern uncertainty, which in turn could result in a default to our Senior Secured Term Loan agreements.

Our Credit Facility required the pledge of a substantial portion of our available collateral and impacts our ability to incur additional debt under the terms of our senior secured term loan agreements which could make it difficult to obtain additional debt financing.

Our Senior Secured Term Loan agreements place certain limitations on incurring additional debt and on assets that may function as collateral on other debt. Amounts borrowed pursuant to the Credit Facility reduce the additional borrowing (outside of the revolver) permitted, without lender approval, under our Senior Secured Term Loan agreements. To the extent we exhaust permitted additional borrowing under the Senior Secured Term Loan agreements, we may be unable to secured future debt or

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secure such debt on favorable terms. In addition, the Credit Facility is secured by a lien on all equity in Altisource Business Solutions Private Limited (“ABSPL”), our main India subsidiary. The ABSPL equity was the remaining significant Altisource asset that was not subject to a security interest under the Senior Secured Term Loan agreements. Pledging the equity in ABSPL as collateral for the ~~quarterly period ended March 31, 2020.~~Credit Facility could leave us unable secure additional debt at reasonable rates if we are unable to provide collateral sufficient to satisfy potential lenders.

Our Senior Secured Term Loan agreements limit the additional borrowing permitted by the Company, amounts outstanding under the Credit Facility would apply to this capacity, impacting our ability to obtain additional debt financing.

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

There were no purchases of shares of common stock during the three months ended ~~September~~June 30, ~~2020.~~2021. On May 15, 2018, our shareholders approved the renewal and replacement of the share repurchase program previously approved by the shareholders on May 17, 2017. Under the program, we are authorized to purchase up to 4.3 million shares of our common stock in the open market, subject to certain parameters, for a period of five years from the date of approval. As of ~~September~~June 30, ~~2020,~~2021, the maximum number of shares that may be purchased under the repurchase program is 2.4 million shares of the Company’s common stock. In addition to the share repurchase program, during the three months ended ~~September~~June 30, ~~2020, 6,012~~2021, 12,652 common shares were withheld from employees to satisfy tax withholding obligations that arose from the vesting of restricted shares.

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Item 6. Exhibits


Exhibit Number						Exhibit Description

10.1

						Credit Agreement, dated June 22, 2021 among Altisource S.à r.l. and STS Master Fund, Ltd. (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on July 23, 2021)

31.1 *						Section 302 Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)

31.2 *						Section 302 Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)

32.1 *						Certification by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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 ~~September~~June 30, ~~2020~~2021 is formatted in Inline XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019;~~2020; (ii) Condensed Consolidated Statements of Operations and Comprehensive ~~Income (Loss)~~Loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019;~~2020; (iii) Condensed Consolidated Statements of Equity for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019;~~2020; (iv) Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019;~~2020; and (v) Notes to Condensed Consolidated Financial Statements.

104 *						Cover Page Interactive Data File formatted as Inline XBRL and contained in Exhibit 101

______________________________________
*						Filed herewith.

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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:

~~October~~July 29, ~~2020~~2021

By:

/s/ Michelle D. Esterman

Michelle D. Esterman

Chief Financial Officer

(On behalf of the Registrant and as its Principal Financial Officer and Principal Accounting Officer)

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			Page
PART I — Financial Information

	Item 1	Interim Condensed Consolidated Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Operations and Comprehensive ~~Income (~~Loss)	4
		Condensed Consolidated Statements of Equity	5
		Condensed Consolidated Statements of Cash Flows	76
		Notes to Condensed Consolidated Financial Statements	87

	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2826

	Item 3	Quantitative and Qualitative Disclosures about Market Risk	4340

	Item 4	Controls and Procedures	4340

PART II — Other Information

	Item 1	Legal Proceedings	4442

	Item 1A	Risk Factors	4442

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	4443

	Item 6	Exhibits	4544

SIGNATURES			4645