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 30, 2022~~March 31, 2023


☐			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.)

33, Boulevard Prince Henri

L-1724 Luxembourg

Grand Duchy of Luxembourg

(Address of principal executive offices)

(352) ~~27 61 49 00~~2060 2055

(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 28, 2022,~~April 21, 2023, there were ~~16,123,433~~20,814,813 outstanding shares of the registrant’s common stock (excluding ~~9,289,315~~9,147,935 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~~Condensed Consolidated Balance Sheets

(in thousands, except per share data)


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	63,812	$	98,132	Cash and cash equivalents	$	43,113	$	51,025

Accounts receivable, net	Accounts receivable, net	14,335		18,008		Accounts receivable, net	14,257		12,989
Prepaid expenses and other current assets	Prepaid expenses and other current assets	21,704		21,864		Prepaid expenses and other current assets	13,061		23,544
Total current assets	Total current assets	99,851		138,004		Total current assets	70,431		87,558

Premises and equipment, net	Premises and equipment, net	4,970		6,873		Premises and equipment, net	3,500		4,222
Right-of-use assets under operating leases	Right-of-use assets under operating leases	5,965		7,594		Right-of-use assets under operating leases	5,107		5,321
Goodwill	Goodwill	55,960		55,960		Goodwill	55,960		55,960
Intangible assets, net	Intangible assets, net	33,010		36,859		Intangible assets, net	30,450		31,730
Deferred tax assets, net	Deferred tax assets, net	6,023		6,386		Deferred tax assets, net	5,031		5,048
Other assets	Other assets	5,503		6,132		Other assets	7,104		5,166

Total assets	Total assets	$	211,282	$	257,808	Total assets	$	177,583	$	195,005

LIABILITIES AND DEFICIT	LIABILITIES AND DEFICIT					LIABILITIES AND DEFICIT
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	41,456	$	46,535	Accounts payable and accrued expenses	$	33,029	$	33,507

Warrant liability						Warrant liability	7,402		—
Deferred revenue	Deferred revenue	4,050		4,342		Deferred revenue	2,874		3,711
Other current liabilities	Other current liabilities	3,095		3,870		Other current liabilities	2,680		2,867
Total current liabilities	Total current liabilities	48,601		54,747		Total current liabilities	45,985		40,085

Long-term debt	Long-term debt	244,844		243,637		Long-term debt	213,879		245,230
Deferred tax liabilities, net	Deferred tax liabilities, net	8,849		9,028		Deferred tax liabilities, net	8,806		9,028

Other non-current liabilities	Other non-current liabilities	17,508		19,266		Other non-current liabilities	19,310		19,536

Commitments, contingencies and regulatory matters (Note 21)	Commitments, contingencies and regulatory matters (Note 21)					Commitments, contingencies and regulatory matters (Note 21)

Equity (deficit):	Equity (deficit):					Equity (deficit):
Common stock ($1.00 par value; 100,000 shares authorized, 25,413 issued and 16,117 outstanding as of September 30, 2022; 15,911 outstanding as of December 31, 2021)		25,413		25,413
Common stock ($1.00 par value; 100,000 shares authorized, 29,963 issued and 20,815 outstanding as of March 31, 2023; 16,129 outstanding as of December 31, 2022)						Common stock ($1.00 par value; 100,000 shares authorized, 29,963 issued and 20,815 outstanding as of March 31, 2023; 16,129 outstanding as of December 31, 2022)	29,963		25,413
Additional paid-in capital	Additional paid-in capital	148,197		144,298		Additional paid-in capital	166,704		149,348
Retained earnings	Retained earnings	131,124		186,592		Retained earnings	96,243		118,948
Treasury stock, at cost (9,296 shares as of September 30, 2022 and 9,502 shares as of December 31, 2021)		(414,102)		(426,445)
Treasury stock, at cost (9,148 shares as of March 31, 2023 and 9,284 shares as of December 31, 2022)						Treasury stock, at cost (9,148 shares as of March 31, 2023 and 9,284 shares as of December 31, 2022)	(404,060)		(413,358)
Altisource deficit	Altisource deficit	(109,368)		(70,142)		Altisource deficit	(111,150)		(119,649)

Non-controlling interests	Non-controlling interests	848		1,272		Non-controlling interests	753		775
Total deficit	Total deficit	(108,520)		(68,870)		Total deficit	(110,397)		(118,874)

Total liabilities and deficit	Total liabilities and deficit	$	211,282	$	257,808	Total liabilities and deficit	$	177,583	$	195,005

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS~~Condensed Statements of Operations and Comprehensive Loss

(in thousands, except per share data)


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2022		2021		2022		2021				2023		2022

Revenue	Revenue	$	38,380	$	43,243	$	118,317	$	139,749	Revenue		$	39,461	$	39,516
Cost of revenue	Cost of revenue	34,387		40,667		104,611		134,862		Cost of revenue		30,957		33,869

Gross profit	Gross profit	3,993		2,576		13,706		4,887		Gross profit		8,504		5,647

Selling, general and administrative expenses	Selling, general and administrative expenses	14,556		16,604		43,055		52,046		Selling, general and administrative expenses		12,094		13,974

Loss from operations	Loss from operations	(10,563)		(14,028)		(29,349)		(47,159)		Loss from operations		(3,590)		(8,327)
Other income (expense), net:	Other income (expense), net:									Other income (expense), net:
Interest expense	Interest expense	(4,349)		(3,755)		(11,439)		(10,672)		Interest expense		(6,760)		(3,556)

Change in fair value of warrant liability										Change in fair value of warrant liability		694		—
Debt amendment costs										Debt amendment costs		(3,242)		—
Other income (expense), net	Other income (expense), net	459		(115)		1,392		791		Other income (expense), net		1,560		740
Total other income (expense), net	Total other income (expense), net	(3,890)		(3,870)		(10,047)		(9,881)		Total other income (expense), net		(7,748)		(2,816)

Loss before income taxes and non-controlling interests	Loss before income taxes and non-controlling interests	(14,453)		(17,898)		(39,396)		(57,040)		Loss before income taxes and non-controlling interests		(11,338)		(11,143)
Income tax benefit (provision)		197		(430)		(2,210)		(1,857)
Income tax provision										Income tax provision		(1,529)		(886)

Net loss	Net loss	(14,256)		(18,328)		(41,606)		(58,897)		Net loss		(12,867)		(12,029)
Net (income) loss attributable to non-controlling interests		(133)		59		(468)		151
Net income attributable to non-controlling interests										Net income attributable to non-controlling interests		(80)		(161)

Net loss attributable to Altisource	Net loss attributable to Altisource	$	(14,389)	$	(18,269)	$	(42,074)	$	(58,746)	Net loss attributable to Altisource		$	(12,947)	$	(12,190)

Loss per share:	Loss per share:									Loss per share:
Basic	Basic	$	(0.89)	$	(1.15)	$	(2.62)	$	(3.71)	Basic		$	(0.70)	$	(0.76)
Diluted	Diluted	$	(0.89)	$	(1.15)	$	(2.62)	$	(3.71)	Diluted		$	(0.70)	$	(0.76)

Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	16,087		15,831		16,051		15,816		Basic		18,442		15,956
Diluted	Diluted	16,087		15,831		16,051		15,816		Diluted		18,442		15,956

Comprehensive loss:	Comprehensive loss:									Comprehensive loss:

Comprehensive loss, net of tax	Comprehensive loss, net of tax	$	(14,256)	$	(18,328)	$	(41,606)	$	(58,897)	Comprehensive loss, net of tax		$	(12,867)	$	(12,029)
Comprehensive (income) loss attributable to non-controlling interests		(133)		59		(468)		151
Comprehensive income attributable to non-controlling interests										Comprehensive income attributable to non-controlling interests		(80)		(161)

Comprehensive loss attributable to Altisource	Comprehensive loss attributable to Altisource	$	(14,389)	$	(18,269)	$	(42,074)	$	(58,746)	Comprehensive loss attributable to Altisource		$	(12,947)	$	(12,190)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY~~Condensed Consolidated Statements of Equity (Deficit)

(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, 2020 25,413 $ 25,413 $ 141,473 $ 190,383 $ (441,034) $ 1,209 $ (82,556)
Net loss — — — (22,002) — 87 (21,915)
Distributions to non-controlling interest holders — — — — — (1,395) (1,395)
Share-based compensation expense — — 1,438 — — — 1,438
Issuance of restricted share units and restricted shares — — — (5,905) 5,905 — —
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 25,413 $ 25,413 $ 142,911 $ 158,890 $ (432,373) $ (99) $ (105,258)
Net loss — — — (18,475) — (179) (18,654)
Distributions to non-controlling interest holders — — — — — (356) (356)
Share-based compensation expense — — 641 — — — 641
Issuance of restricted share units and restricted shares — — — (4,574) 4,574 — —
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances — — — (571) 474 — (97)
Balance, June 30, 2021 25,413 $ 25,413 $ 143,552 $ 135,270 $ (427,325) $ (634) $ (123,724)
Net loss — — — (18,269) — (59) (18,328)
Distributions to non-controlling interest holders — — — — — (53) (53)
Share-based compensation expense — — 431 — — — 431
Issuance of restricted share units and restricted shares — — — (84) 84 — —
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances — — — (36) 27 — (9)
Balance, September 30, 2021 25,413 $ 25,413 $ 143,983 $ 116,881 $ (427,214) $ (746) $ (141,683)
See accompanying notes to condensed consolidated financial statements.

~~Table of Contents~~


																	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, 2021	Balance, December 31, 2021	25,413	$	25,413	$	144,298	$	186,592	$	(426,445)	$	1,272		$	(68,870)	Balance, December 31, 2021	25,413	$	25,413	$	144,298	$	186,592		$	(426,445)	$	1,272	$	(68,870)

Net loss		—	—		—		(12,190)		—		161			(12,029)
Distributions to non-controlling interest holders		—	—		—		—		—		(264)			(264)
Share-based compensation expense		—	—		1,290		—		—		—			1,290

Issuance of restricted share units and restricted shares		—	—		—		(6,560)		6,560		—			—
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances		—	—		—		(4,046)		3,032		—			(1,014)

Balance, March 31, 2022		25,413	$	25,413	$	145,588	$	163,796	$	(416,853)	$	1,169		$	(80,887)

Net loss	Net loss	—	—		—		(15,495)		—		174			(15,321)		Net loss	—	—		—		(12,190)			—		161		(12,029)

Distributions to non-controlling interest holders	Distributions to non-controlling interest holders	—	—		—		—		—		(486)			(486)		Distributions to non-controlling interest holders	—	—		—		—			—		(264)		(264)
Share-based compensation expense	Share-based compensation expense	—	—		1,289		—		—		—			1,289		Share-based compensation expense	—	—		1,290		—			—		—		1,290

Issuance of restricted share units and restricted shares	Issuance of restricted share units and restricted shares	—	—		—		(2,384)		2,384		—			—		Issuance of restricted share units and restricted shares	—	—		—		(6,560)			6,560		—		—
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	—	—		—		(38)		29		—			(9)		Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances	—	—		—		(4,046)			3,032		—		(1,014)

Balance, June 30, 2022		25,413	$	25,413	$	146,877	$	145,879	$	(414,440)	$	857		$	(95,414)
Balance, March 31, 2022																Balance, March 31, 2022	25,413	$	25,413	$	145,588	$	163,796		$	(416,853)	$	1,169	$	(80,887)

Balance, December 31, 2022																Balance, December 31, 2022	25,413	$	25,413	$	149,348	$	118,948		$	(413,358)	$	775	$	(118,874)

Net loss	Net loss	—	—		—		(14,389)		—		133			(14,256)		Net loss	—	—		—		(12,947)			—		80		(12,867)

Distributions to non-controlling interest holders	Distributions to non-controlling interest holders	—	—		—		—		—		(142)			(142)		Distributions to non-controlling interest holders	—	—		—		—			—		(102)		(102)
Share-based compensation expense	Share-based compensation expense	—	—		1,320		—		—		—			1,320		Share-based compensation expense	—	—		1,445		—			—		—		1,445

Issuance of restricted share units and restricted shares	Issuance of restricted share units and restricted shares	—	—		—		(260)		260		—			—		Issuance of restricted share units and restricted shares	—	—		—		(6,058)			6,058		—		—
Issuance of common stock, net of issuance costs																Issuance of common stock, net of issuance costs	4,550	4,550		15,911		—			—		—		20,461
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	—	—		—		(106)		78		—			(28)		Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances	—	—		—		(3,700)			3,240		—		(460)

Balance, September 30, 2022		25,413	$	25,413	$	148,197	$	131,124	$	(414,102)	$	848		$	(108,520)

Balance, March 31, 2023																Balance, March 31, 2023	29,963	$	29,963	$	166,704	$	96,243		$	(404,060)	$	753	$	(110,397)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~Condensed Consolidated Statements of Cash Flows

(in thousands)


		Nine months ended September 30,					Three months ended March 31,
		2022		2021			2023		2022

Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(41,606)	$	(58,897)	Net loss	$	(12,867)	$	(12,029)
Adjustments to reconcile net loss to net cash used in operating activities:	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	2,700		3,479		Depreciation and amortization	699		958
Amortization of right-of-use assets under operating leases	Amortization of right-of-use assets under operating leases	2,254		6,340		Amortization of right-of-use assets under operating leases	472		1,144
Amortization of intangible assets	Amortization of intangible assets	3,849		8,183		Amortization of intangible assets	1,280		1,284

Share-based compensation expense	Share-based compensation expense	3,899		2,510		Share-based compensation expense	1,445		1,290
Bad debt expense	Bad debt expense	578		1,268		Bad debt expense	40		343

Amortization of debt discount	Amortization of debt discount	495		499		Amortization of debt discount	904		166
Amortization of debt issuance costs	Amortization of debt issuance costs	712		623		Amortization of debt issuance costs	627		276
Deferred income taxes	Deferred income taxes	(329)		8		Deferred income taxes	(155)		67
Loss on disposal of fixed assets	Loss on disposal of fixed assets	1		117		Loss on disposal of fixed assets	23		—
Other non-cash items		—		137

Change in fair value of warrant liability						Change in fair value of warrant liability	(694)		—

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	3,095		1,846		Accounts receivable	(1,308)		(653)

Prepaid expenses and other current assets	Prepaid expenses and other current assets	160		598		Prepaid expenses and other current assets	10,506		(3,558)
Other assets	Other assets	363		1,439		Other assets	(2,044)		143
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(5,014)		(2,738)		Accounts payable and accrued expenses	(478)		(4,515)
Current and non-current operating lease liabilities	Current and non-current operating lease liabilities	(2,444)		(6,958)		Current and non-current operating lease liabilities	(465)		(1,279)
Other current and non-current liabilities	Other current and non-current liabilities	(1,006)		413		Other current and non-current liabilities	(1,043)		(547)
Net cash used in operating activities	Net cash used in operating activities	(32,293)		(41,133)		Net cash used in operating activities	(3,058)		(16,910)

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	(863)		(1,125)		Additions to premises and equipment	—		(74)
Proceeds from the sale of business		346		3,000

Net cash (used in) provided by investing activities		(517)		1,875

Net cash used in investing activities						Net cash used in investing activities	—		(74)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from revolving credit facility		—		20,000
Debt issuance costs		—		(531)
Proceeds from convertible debt payable to related parties (Note 1)		—		1,200
Proceeds from issuance of common stock, net of issuance costs						Proceeds from issuance of common stock, net of issuance costs	20,461		—
Debt issuance and amendment costs						Debt issuance and amendment costs	(4,786)		—
Repayments of long-term debt						Repayments of long-term debt	(20,000)		—
Distributions to non-controlling interests	Distributions to non-controlling interests	(892)		(1,804)		Distributions to non-controlling interests	(102)		(264)
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	(1,051)		(936)		Payments of tax withholding on issuance of restricted share units and restricted shares	(460)		(1,014)
Net cash (used in) provided by financing activities		(1,943)		17,929
Net cash used in financing activities						Net cash used in financing activities	(4,887)		(1,278)

Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(34,753)		(21,329)		Net decrease in cash, cash equivalents and restricted cash	(7,945)		(18,262)
Cash, cash equivalents and restricted cash at the beginning of the period	Cash, cash equivalents and restricted cash at the beginning of the period	102,149		62,096		Cash, cash equivalents and restricted cash at the beginning of the period	54,273		102,149

Cash, cash equivalents and restricted cash at the end of the period	Cash, cash equivalents and restricted cash at the end of the period	$	67,396	$	40,767	Cash, cash equivalents and restricted cash at the end of the period	$	46,328	$	83,887

Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Interest paid	Interest paid	$	10,167	$	9,373	Interest paid	$	5,221	$	3,090
Income taxes paid, net		2,556		2,736
Income taxes (refunded) paid, net						Income taxes (refunded) paid, net	(4,663)		3,257
Acquisition of right-of-use assets with operating lease liabilities	Acquisition of right-of-use assets with operating lease liabilities	797		6,976		Acquisition of right-of-use assets with operating lease liabilities	258		29
Reduction of right-of-use assets from operating lease modifications or reassessments	Reduction of right-of-use assets from operating lease modifications or reassessments	(172)		(5,665)		Reduction of right-of-use assets from operating lease modifications or reassessments	—		(173)

Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Net decrease in payables for purchases of premises and equipment	Net decrease in payables for purchases of premises and equipment	$	(65)	$	(47)	Net decrease in payables for purchases of premises and equipment	$	—	$	(62)
Warrants issued in connection with Amended Credit Agreement						Warrants issued in connection with Amended Credit Agreement	8,096		—

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited consolidated balance sheets and the unaudited consolidated statements of cash flows:
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets and the unaudited condensed consolidated statements of cash flows:						The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets and the unaudited condensed consolidated statements of cash flows:
		September 30, 2022		September 30, 2021			March 31, 2023		March 31, 2022

Cash and cash equivalents	Cash and cash equivalents	$	63,812	$	36,492	Cash and cash equivalents	$	43,113	$	79,952
Restricted cash	Restricted cash	3,584		4,275		Restricted cash	3,215		3,935
Total cash, cash equivalents and restricted cash reported in the statements of cash flows	Total cash, cash equivalents and restricted cash reported in the statements of cash flows	$	67,396	$	40,767	Total cash, cash equivalents and restricted cash reported in the statements of cash flows	$	46,328	$	83,887

See accompanying notes to condensed consolidated financial statements.

Table of Contents

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.

We conduct our operations through two reportable segments: Servicer and Real Estate and Origination. In addition, we report Corporate and Others separately (See Note 22 for a description of our business segments).

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 periods. Actual results could differ from those estimates. Intercompany transactions and accounts have been eliminated in consolidation.

Effective January 1, 2022, our reportable segments changed as a result of a change in the way our Chief Executive Officer (our chief operating decision maker) manages our businesses, allocates resources and evaluates performance, and the related changes in our internal organization. We now report our operations through two reportable segments: ~~Servicer and Real Estate~~ ~~and~~ ~~Origination. In addition, we report~~ ~~Corporate and Others~~ separately. Prior to the January 1, 2022 change in reportable segments, the Company operated with one reportable segment (total Company). Prior year comparable period segment disclosures have been restated to conform to the current year presentation. See Note 22 for a description of our business segments.

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 three 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 30,~~March 31, 2023, Lenders One had total assets of $1.3 million and total liabilities of $1.2 million. As of December 31, 2022, Lenders One had total assets of ~~$1.1~~$1.2 million and total liabilities of ~~$0.8~~$1.1 million. ~~As of December 31, 2021, Lenders One had total assets of $2.2 million and total liabilities of $1.4 million.~~

~~In 2019, Altisource created Pointillist, Inc. (“Pointillist”) and contributed the Pointillist~~® customer journey analytics business and $8.5 million to it. On May 27, 2021, Pointillist issued $1.3 million in principal of convertible notes to related parties with a maturity date of January 1, 2023. The notes bore interest at a rate of 7% per annum. The principal and unpaid accrued interest then outstanding under the notes (1) would automatically convert 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 converted into Pointillist common stock equity based on a $13.1 million Pointillist valuation (at the Lenders’ option) in the event of a corporate transaction or initial public offering of Pointillist. On December 1, 2021, the notes were converted to Pointillist equity and Altisource and other shareholders of Pointillist sold all of the equity interests in Pointillist (See Note 3 for additional information). Prior to the sale, Pointillist was owned by Altisource and management of Pointillist, with management of Pointillist owning a non-controlling interest representing 12.1% of the outstanding equity of Pointillist. Through December 1, 2021, 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.

~~Table of Contents~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

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

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, ~~2021,~~2022, as filed with the SEC on March ~~3, 2022.~~30, 2023.

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.

~~Future Adoption~~

Table of ~~New Accounting Pronouncements~~Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

~~In March 2020, the~~Notes to Condensed Consolidated Financial ~~Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04,~~ Statements (~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ Continued~~and 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~~loans owned by others.

During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, Ocwen was our largest customer, accounting for ~~40%~~45% of our total ~~revenue for the nine months ended September 30, 2022 (45% of our revenue for the third quarter of 2022).~~revenue. Ocwen purchases certain mortgage services from us under the terms of services agreements and amendments thereto (collectively, the “Ocwen Services Agreements”) with terms extending through August 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.

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~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we recognized revenue from Ocwen of ~~$47.2~~$17.6 million and ~~$44.7~~$13.7 million, ~~respectively ($17.2 million and $13.6 million for the third quarter of 2022 and 2021, respectively).~~respectively. Revenue from Ocwen as a percentage of segment and consolidated revenue was as follows:

~~Table of Contents~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

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


		Three months ended September 30,				Nine months ended September 30,
		2022		2021		2022		2021			March 31, 2023		March 31, 2022

Servicer and Real Estate	Servicer and Real Estate	56	%	51	%	52	%	50	%	Servicer and Real Estate	55	%	48	%
Origination	Origination	—	%	—	%	—	%	—	%	Origination	—	%	—	%
Corporate and Others	Corporate and Others	—	%	—	%	—	%	1	%	Corporate and Others	—	%	—	%
Consolidated revenue	Consolidated revenue	45	%	31	%	40	%	32	%	Consolidated revenue	45	%	35	%

We earn additional revenue related to the portfolios serviced and subserviced by Ocwen when a party other than Ocwen or the ~~MSR~~MSRs owner selects Altisource as the service provider. For the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we recognized revenue of ~~$7.3~~$2.9 million and ~~$7.4~~$2.4 million, respectively, ~~($2.2 million and $1.9 million for the third quarter of 2022 and 2021, respectively),~~ of such revenue. These amounts are not included in deriving revenue from Ocwen and revenue from Ocwen as a percentage of revenue discussed above.

As of ~~September 30, 2022,~~March 31, 2023, accounts receivable from Ocwen totaled ~~$4.9~~$4.2 million, ~~$4.3~~$3.5 million of which was billed and ~~$0.6~~$0.7 million of which was unbilled. As of December 31, ~~2021,~~2022, accounts receivable from Ocwen totaled ~~$3.0~~$4.0 million, ~~$2.8~~$3.2 million of which was billed and ~~$0.2~~$0.8 million of which was unbilled.

~~RITM~~Rithm

Rithm Capital Corp. (individually, together with one or more of its subsidiaries or one or more of its subsidiaries individually, ~~“RITM”~~“Rithm”) (formerly New Residential Investment Corp., or “NRZ”) is a real estate investment trust that invests in and manages investments primarily related to residential real estate, including MSRs and excess MSRs.

Ocwen has disclosed that ~~RITM~~Rithm is ~~its largest client.~~a significant client of Ocwen’s. As of ~~June 30,~~December 31, 2022, approximately ~~18%~~17% of loans serviced and subserviced by Ocwen (measured in unpaid principal balance (“UPB”)) and approximately 68% of all delinquent loans that Ocwen services were related to ~~RITM~~Rithm MSRs or rights to MSRs (the “Subject MSRs”).

~~RITM~~Rithm purchases brokerage services for real estate owned (“REO”) exclusively from us, irrespective of the subservicer, subject to certain limitations, for certain MSRs set forth in and pursuant to the terms of a Cooperative Brokerage Agreement, as amended, and related letter agreement (collectively, the “Brokerage Agreement”) with terms extending through August 2025.

For the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we recognized revenue from ~~RITM~~Rithm of ~~$2.6~~$0.8 million and ~~$2.4~~$0.9 million, respectively, ~~($0.8 million and $0.7 million for the third quarter of 2022 and 2021, respectively),~~ under the Brokerage Agreement. For the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we recognized additional revenue of ~~$10.4~~$3.3 million and ~~$10.9~~$3.7 million, respectively, ~~($3.0 million and $3.4 million for the third quarter of 2022 and 2021, respectively),~~ relating to the Subject MSRs when a party other than ~~RITM~~Rithm selects Altisource as the service provider.

~~NOTE 3 — SALE OF BUSINESSES~~

~~Pointillist Business~~

On October 6, 2021, Altisource and other shareholders of Pointillist entered into a definitive Stock Purchase Agreement (as amended, the “SPA”) to sell all of the equity interests in Pointillist to Genesys Cloud Services, Inc. (“Genesys”) for $150.0 million (the “Purchase Price”) (the “Transaction”). The Purchase Price consisted of (1) an up-front payment of $144.5 million, subject to certain adjustments, (2) $0.5 million deposited into an escrow account to be used to satisfy potential deficits between estimated closing date working capital and actual closing date working capital (the “Working Capital Escrow”), with excess amounts remaining after satisfying such deficits (if any) being paid to the sellers, and (3) $5.0 million deposited into an escrow account to satisfy certain Genesys indemnification claims that may arise on or prior to the first anniversary of the sale closing and, at Genesys’ election, any working capital deficits that exceed the Working Capital Escrow (the “Indemnification Escrow”), with the balance to be paid to the sellers thereafter. The Transaction closed on December 1, 2021. On a fully diluted basis, Altisource owned approximately 69% of the equity of Pointillist. After working capital and other applicable adjustments, Altisource received approximately $106.0 million from the sale of its Pointillist equity and the collection of outstanding receivables, with $102.2 million received at closing, approximately $0.3 million deposited into the Working Capital Escrow and approximately $3.5 million deposited into the Indemnification Escrow. The Working Capital Escrow was received in May 2022. The present value of the amounts in escrow is included in other current assets in the accompanying condensed consolidated balance sheets at a discounted value of $3.4 million and $3.6 million as of September 30, 2022 and December 31, 2021, respectively.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

~~Rental Property Management Business~~

In August 2018, Altisource entered into an amendment to its agreements with Front Yard Residential Corporation (“RESI”) to 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, payable in two installments. The first installment of $15.0 million was received in August 2018 and the second installment of $3.0 million was received in January 2021.

NOTE 43 — ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consists of the following:


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022

Billed	Billed	$	13,384	$	17,907	Billed	$	11,702	$	11,993
Unbilled	Unbilled	5,432		5,398		Unbilled	6,760		5,359
		18,816		23,305			18,462		17,352
Less: Allowance for credit losses	Less: Allowance for credit losses	(4,481)		(5,297)		Less: Allowance for credit losses	(4,205)		(4,363)

Total	Total	$	14,335	$	18,008	Total	$	14,257	$	12,989

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 the allowance for expected credit losses consist of the following:


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

Allowance for expected credit losses:	Allowance for expected credit losses:									Allowance for expected credit losses:

Nine months ended September 30, 2022		$	5,297	$	578	$	1,394	$	4,481
Twelve months ended December 31, 2021		5,581		1,354		1,638		5,297
Three months ended March 31, 2023										Three months ended March 31, 2023	$	4,363	$	40	$	198	$	4,205
Three months ended March 31, 2022										Three months ended March 31, 2022	5,297		343		829		4,811

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

NOTE 4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:


(in thousands)	March 31, 2023		December 31, 2022

Prepaid expenses	$	4,455	$	5,165
Income taxes receivable	1,432		7,031
Maintenance agreements, current portion	1,304		1,498
Indemnity escrow receivable from Pointillist sale	3,223		3,223
Restricted cash	23		—
Surety bond collateral	—		4,000
Other current assets	2,624		2,627

Total	$	13,061	$	23,544

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 5 — ~~PREPAID EXPENSES AND OTHER CURRENT ASSETS~~

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

(in thousands) September 30,
2022 December 31,
2021
Income taxes receivable $ 6,214 $ 8,403
Maintenance agreements, current portion 1,794 1,717
Prepaid expenses 3,614 2,865
Surety bond collateral 4,000 2,000
Other current assets 6,082 6,879
Total $ 21,704 $ 21,864

~~NOTE 6 —~~ PREMISES AND EQUIPMENT, NET

Premises and equipment, net consists of the following:


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022

Computer hardware and software	Computer hardware and software	$	49,339	$	50,452	Computer hardware and software	$	46,859	$	49,339
Leasehold improvements	Leasehold improvements	5,848		5,927		Leasehold improvements	2,457		5,794
Furniture and fixtures	Furniture and fixtures	3,840		4,441		Furniture and fixtures	1,346		3,832
Office equipment and other	Office equipment and other	440		811		Office equipment and other	262		346

		59,467		61,631			50,924		59,311
Less: Accumulated depreciation and amortization	Less: Accumulated depreciation and amortization	(54,497)		(54,758)		Less: Accumulated depreciation and amortization	(47,424)		(55,089)

Total	Total	$	4,970	$	6,873	Total	$	3,500	$	4,222

Depreciation and amortization expense amounted to ~~$2.7~~$0.7 million and ~~$3.5~~$1.0 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, respectively, and ~~2021, respectively ($0.9~~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 loss.

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


(in thousands)	March 31, 2023		December 31, 2022

Luxembourg	$	2,117	$	2,455
India	960		1,129
United States	376		586
Uruguay	47		52


Total	$	3,500	$	4,222

NOTE 6 — RIGHT-OF-USE ASSETS UNDER OPERATING LEASES, NET

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


(in thousands)	March 31, 2023		December 31, 2022

Right-of-use assets under operating leases	$	12,063	$	11,808
Less: Accumulated amortization	(6,956)		(6,487)

Total	$	5,107	$	5,321

Amortization of operating leases was $0.5 million and $1.1 million for the ~~third quarter of~~three months ended March 31, 2023 and 2022, ~~and 2021, respectively),~~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 loss.

NOTE 7 — ~~RIGHT-OF-USE~~GOODWILL AND INTANGIBLE ASSETS, ~~UNDER OPERATING LEASES,~~ NET

~~Right-of-use~~Goodwill

The following is a summary of goodwill by segment:


(in thousands)	Servicer and Real Estate		Origination		Corporate and Others		Total







Balance as of March 31, 2023 and December 31, 2022	$	30,681	$	25,279	$	—	$	55,960

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

Intangible Assets, net

Intangible assets, ~~under operating leases,~~ net ~~consists~~consist of the following:


							Weighted average estimated useful life (in years)		Gross carrying amount								Accumulated amortization								Net book value
(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)		March 31, 2023			December 31, 2022				March 31, 2023				December 31, 2022				March 31, 2023				December 31, 2022

Right-of-use assets under operating leases		$	12,529	$	19,595
Less: Accumulated amortization		(6,564)		(12,001)
Definite lived intangible assets:						Definite lived intangible assets:
Customer related intangible assets						Customer related intangible assets		9			$	214,307			$	214,307			$	(198,343)			$	(197,594)			$	15,964			$	16,713
Operating agreement						Operating agreement	20		35,000				35,000				(23,042)				(22,604)				11,958				12,396
Trademarks and trade names						Trademarks and trade names	16		9,709				9,709				(7,181)				(7,088)				2,528				2,621

Total	Total	$	5,965	$	7,594	Total			$	259,016			$	259,016			$	(228,566)			$	(227,286)			$	30,450			$	31,730

Amortization ~~of operating leases~~expense for definite lived intangible assets was ~~$2.3~~$1.3 million and ~~$6.3~~$1.3 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively ($0.5~~respectively. Forecasted annual definite lived intangible asset amortization expense for 2023 through 2027 is $5.1 million, $5.1 million, $5.1 million, $4.9 million and ~~$1.8~~$4.7 million, respectively.

NOTE 8 — OTHER ASSETS

Other assets consist of the following:


(in thousands)	March 31, 2023		December 31, 2022

Restricted cash	$	3,192	$	3,248
Security deposits	600		596

Other	3,312		1,322

Total	$	7,104	$	5,166

NOTE 9 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accounts payable and accrued expenses consist of the following:


(in thousands)	March 31, 2023		December 31, 2022

Accounts payable	$	14,147	$	14,981
Accrued expenses - general	11,766		11,858
Accrued salaries and benefits	5,116		5,501
Income taxes payable	2,000		1,167

Total	$	33,029	$	33,507

Other current liabilities consist of the following:


(in thousands)	March 31, 2023		December 31, 2022

Operating lease liabilities	$	2,157	$	2,097
Other	523		770

Total	$	2,680	$	2,867

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 10 — WARRANT LIABILITY

On February 14, 2023, the lenders under the Amended Credit Agreement (See Note 11 for additional information) received warrants (the “Warrants”) to purchase 3,223,851 shares of Altisource common stock (the “Warrant Shares”). The number of Warrant Shares is subject to reduction based on the ~~third quarter~~amount of ~~2022 and 2021, respectively), and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets~~par paydowns on the senior secured term loans (“SSTL”) in the ~~accompanying condensed consolidated statements~~aggregate using proceeds from issuances of ~~operations~~equity interests or from junior indebtedness made prior to February 14, 2024 (“Aggregate Paydowns”) as set forth in the table below.


Aggregate Paydowns			Warrant Shares
Less than $20 million			3,223,851
$20 million+ but less than below			2,578,743
$30 million+			1,612,705

During the three months ended March 31, 2023, the Company made payments toward the determination of Aggregate Paydowns of $20 million. As a result, the number of Warrant Shares as of March 31, 2023 is 2,578,743.

The exercise price per share of common stock under each Warrant is equal to $0.01. The Warrants may be exercised at any time on and ~~comprehensive loss.~~after February 14, 2024 and prior to their expiration date. The Warrants are exercisable on a cashless basis and are subject to customary anti-dilution provisions. The Warrants, if not previously exercised or terminated, will be automatically exercised on May 22, 2027. The Warrants are subject to a lock-up agreement, subject to customary exceptions, ending two business days after the Paydown Measurement Date.

The Company determined that the Warrants are free standing financial instruments that are legally detachable and separately exercisable from term loans under the Amended Credit Agreement. The Company also determined that the Warrants are not considered to be indexed to the Company’s stock because the number of Warrant Shares varies based on Aggregate Paydowns and as such required classification as a liability pursuant to ASC 815-40, Derivatives and Hedging–Contracts in Entity’s Own Equity. The outstanding Warrants are recognized as a warrant liability on the balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income (expense) in the statement of operations.

The fair value of the warrant liability is based on the number of Warrant Shares that are expected to be exercisable on and after February 14, 2024 and the Altisource share price less $0.01 at the measurement date.

The fair value of the warrant liability at each of the respective valuation dates is summarized below:


Warrant Liability	Warrant Shares based on Aggregate Paydowns	Expected Warrant Shares that will be exercisable on February 14, 2024	Fair Value per Warrant Share	Fair Value (in thousands)

Fair value at initial measurement date of February 14, 2023	3,223,851	1,612,705	$5.02	$	8,096
Gain on change in fair value of warrant liability				(694)
Fair value at March 31, 2023	2,578,743	1,612,705	$4.59	$	7,402

During the three months ended March 31, 2023, the Company recorded a gain on changes in fair value of warrant liability of $0.7 million. During the three months ended March 31, 2022, there were no warrant liabilities outstanding.

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

NOTE ~~8 — GOODWILL AND INTANGIBLE ASSETS, NET~~

~~Goodwill~~

~~The following is a summary of goodwill by segment:~~

(in thousands) Servicer and Real Estate Origination Corporate and Others Total
Balance as of September 30, 2022 and December 31, 2021 $ 30,681 $ 25,279 $ — $ 55,960

~~We determined that each reportable segment represents a reporting unit. Goodwill was allocated to each reporting unit based on the relative fair value of each of our reporting units.~~

~~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
(in thousands) September 30,
2022 December 31,
2021 September 30,
2022 December 31,
2021 September 30,
2022 December 31,
2021
Definite lived intangible assets:
Customer related intangible assets 9 $ 214,307 $ 214,307 $ (196,844) $ (194,594) $ 17,463 $ 19,713
Operating agreement 20 35,000 35,000 (22,166) (20,854) 12,834 14,146
Trademarks and trade names 16 9,709 9,709 (6,996) (6,709) 2,713 3,000
Total $ 259,016 $ 259,016 $ (226,006) $ (222,157) $ 33,010 $ 36,859

Amortization expense for definite lived intangible assets was $3.8 million and $8.2 million for the nine months ended September 30, 2022 and 2021, respectively ($1.3 million and $2.7 million for the third quarter of 2022 and 2021, respectively). Forecasted annual definite lived intangible asset amortization expense for 2022 through 2026 is $5.1 million, $5.1 million, $5.1 million, $5.1 million and $4.9 million, respectively.

~~NOTE 9 — OTHER ASSETS~~

~~Other assets consist of the following:~~

(in thousands) September 30,
2022 December 31,
2021
Restricted cash $ 3,584 $ 4,017
Security deposits 825 1,043
Other 1,094 1,072
Total $ 5,503 $ 6,132

~~Table of Contents~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

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

~~NOTE 10 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES~~

~~Accounts payable and accrued expenses consist of the following:~~

(in thousands) September 30,
2022 December 31,
2021
Accounts payable $ 13,937 $ 15,978
Accrued expenses - general 14,920 13,653
Accrued salaries and benefits 10,711 12,254
Income taxes payable 1,888 4,650
Total $ 41,456 $ 46,535

~~Other current liabilities consist of the following:~~

(in thousands) September 30,
2022 December 31,
2021
Operating lease liabilities $ 2,303 $ 2,893
Other 792 977
Total $ 3,095 $ 3,870

~~NOTE~~ 11 — LONG-TERM DEBT

Long-term debt consists of the following:


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022

Senior secured term loans		$	247,204	$	247,204
Less: Debt issuance costs, net		(1,053)		(1,632)
Senior Secured Term Loans						Senior Secured Term Loans	$	227,204	$	247,204
Less: Debt issuance and amendment costs, net						Less: Debt issuance and amendment costs, net	(5,070)		(878)

Less: Unamortized discount, net	Less: Unamortized discount, net	(999)		(1,494)		Less: Unamortized discount, net	(8,025)		(833)

Total Senior secured term loans		245,152		244,078
Net Senior secured term loans						Net Senior secured term loans	214,109		245,493

Credit Facility		—		—
Revolver						Revolver	—		—
Less: Debt issuance costs, net	Less: Debt issuance costs, net	(308)		(441)		Less: Debt issuance costs, net	(230)		(263)
Net Credit Facility		(308)		(441)
Net Revolver						Net Revolver	(230)		(263)

Total Long-term debt	Total Long-term debt	$	244,844	$	243,637	Total Long-term debt	$	213,879	$	245,230

~~Credit Agreement~~Senior Secured Term Loans

In April 2018, 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.~~lenders (the “Credit Agreement”). Under the Credit Agreement, Altisource borrowed ~~$412.0~~$412 million in the form of ~~Term B Loans~~SSTL. Effective February 14, 2023, Altisource Portfolio Solutions S.A. and ~~obtained a $15.0 million revolving credit facility. The Term B Loans mature in April 2024.~~ Altisource ~~terminated~~S.à r.l. entered into Amendment No. 2 to the ~~revolving credit facility on December 1, 2021.~~Credit Agreement (as amended by Amendment No. 2, the “Amended Credit Agreement”). Altisource Portfolio Solutions S.A. and certain subsidiaries are guarantors of the ~~Term B Loans~~SSTL (collectively, the “Guarantors”).

~~There are no mandatory repayments~~The maturity date of the ~~Term B Loans except~~SSTL under the Amended Credit Agreement is April 30, 2025. If Aggregate Paydowns are equal to or greater than $30 million, then (subject to the representations and warranties being true and correct as ~~set forth below until~~of such date and there being no default or event of default being in existence as of such date) the maturity date of the SSTL may be extended at the Company’s option to April ~~2024 maturity when~~30, 2026. Such extension is conditioned upon the ~~balance is due.~~ Company’s payment of a 2% payment-in-kind extension fee.

In February 2023, the Company made payments of $20 million toward the determination of Aggregate Paydowns.

All amounts outstanding under the ~~Term B Loans~~SSTL will become due on the earlier of (i) ~~April 3, 2024,~~the maturity date, 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 Amended Credit Agreement; other capitalized terms, unless defined herein, are defined in the Amended Credit Agreement) or as otherwise provided in the Amended Credit Agreement upon the occurrence of any event of default.

~~Table~~ There are no mandatory repayments of ~~Contents~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

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

the SSTL except as set forth herein until the April 30, 2025 maturity when the balance is due.

In addition to the scheduled principal payments, subject to certain exceptions, the ~~Term B Loans are~~SSTL is subject to mandatory prepayment upon issuances of debt, certain casualty and condemnation events and sales of assets, as well as ~~from a percentage~~50% 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 Amended Credit ~~Agreement (the percentage increases if our leverage ratio exceeds 3.50 to 1.00).~~Agreement.

Altisource may incur incremental indebtedness under the Amended Credit Agreement from one or more incremental lenders, which may include existing lenders, in an aggregate incremental principal amount not to exceed ~~$125.0~~$50 million, subject to certain conditions set forth in the Amended 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.Agreement. The lenders have no obligation to provide any incremental indebtedness.

~~The Term B Loans bear~~Through March 29, 2023, the SSTL’s interest rate was the Adjusted Eurodollar Rate plus 4.00%. Beginning March 30, 2023, the SSTL bears interest at rates based upon, at our option, the ~~Adjusted Eurodollar~~Secured Ovnernight Financing Rate (“SOFR”) or the Base Rate. ~~Adjusted Eurodollar~~SOFR term loans initially bear interest at a rate per annum equal to SOFR plus 5.00% payable in cash plus 5.00% payable in kind (“PIK”). Base Rate ~~term~~ loans initially bear interest at a rate per annum equal to the ~~sum of (i) the greater of (x) the Adjusted Eurodollar~~Base Rate ~~for a three month interest period and (y) 1.00%~~ plus ~~(ii)~~ 4.00%. payable in cash plus 5.00% PIK. 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%~~4.00%. The interest rate as of ~~September 30, 2022~~March 31, 2023 was ~~6.25%~~14.49%. The PIK component of the interest rate is subject to adjustment based on the amount of Aggregate Paydowns as set forth in the table below. Based on Aggregate Paydowns of $20 million through March 31, 2023, the PIK component of the interest rate declined to 4.50%.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)


Aggregate Paydowns			PIK Component of Interest Rate
Less than $20 million			5.00%
$20 million+ but less than below			4.50%
$30 million+ but less than below			3.75%
$40 million+ but less than below			3.50%
$45 million+ but less than below			3.00%
$50 million+ but less than below			2.50%
$55 million+ but less than below			2.00%
$60 million+ but less than below			1.00%
$65 million+ but less than below			0.50%
$70 million+			0.00%

If, as of the end of any calendar quarter, (i) the amount of unencumbered cash and cash equivalents of Altisource S.à r.l. and its direct and indirect subsidiaries on a consolidated basis plus (ii) the undrawn commitment amount under the Revolver is, or is forecast as of the end of the immediately subsequent calendar quarter to be, less than $35 million, then up to 2.00% in interest otherwise payable in cash in the following quarter may be paid in kind at the Company’s election.

The payment of all amounts owing by Altisource under the Amended 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 Amended 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.

The Amended 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 Amended 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 Amended Credit Agreement, (iv) failure to pay principal or interest on any other debt that equals or exceeds ~~$40.0~~$5.0 million when due, (v) default on any other debt that equals or exceeds ~~$40.0~~$5.0 million that causes, or gives the holder or holders of such debt the ability to cause, an acceleration of such debt, (vi) occurrence of a Change of Control, (vii) bankruptcy and insolvency events, (viii) entry by a court of one or more judgments against us in an aggregate amount in excess of ~~$40.0~~$10.0 million that remain unbonded, undischarged or unstayed for a certain number of days after the entry thereof, (ix) the occurrence of certain ERISA events, ~~and~~ (x) the failure of certain Loan Documents to be in full force and ~~effect.~~effect and (xi) failure to comply in any material respects with the terms of the Warrants or the Warrant Purchase Agreement. 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.

AsThe lenders under the Amended Credit Agreement received Warrants to purchase 3,223,851 shares of ~~September 30, 2022,~~Altisource common stock. The number of Warrant Shares is subject to reduction based on the amount of Aggregate Paydowns (See Note 10 for additional information).

The fair value of the Warrants on February 14, 2023 was $8.1 million and was recorded as an increase in debt discount. In connection with Amendment No. 2, the Company paid $4.8 million to the lenders and to third parties on behalf of the lenders. The $4.8 million payment was recorded as an increase in debt issuance ~~costs were $1.1~~and amendment costs. In connection with Amendment No. 2, the Company paid $3.2 million ~~net~~to advisors and recorded these payments as other expense in the condensed consolidated statements of ~~$3.5 million of accumulated amortization. As of December 31, 2021, debt issuance costs were $1.6 million, net of $2.9 million of accumulated amortization.~~operations and comprehensive loss.

~~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 Master Fund, Ltd. (“STS”) (the “Credit Facility”). STS is an investment fund managed by Deer Park Road Management Company, LP. Deer Park Road Management Company, LP (“Deer Park”), a related party, owns approximately ~~24%~~20% of Altisource’s common stock and $44.7 million of Altisource debt under the Amended Credit Agreement as of ~~September 30, 2022.~~March 31, 2023. Deer Park’s Chief Investment Officer and managing partner was a member of Altisource’s Board of Directors until his resignation on March 1, 2022. The replacement director appointed by the Board of Directors is a current employee of Deer Park. In connection with

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

the Amended Credit Agreement, Deer Park received 583 thousand Warrants. During the three months ended March 31, 2023, Deer Park received interest of $0.9 million from the Altisource SSTL.

As of March 31, 2023, debt issuance and amendment costs were $5.1 million, net of $4.2 million of accumulated amortization. As of December 31, 2022, debt issuance costs were $0.9 million, net of $3.6 million of accumulated amortization.

Revolver

On June 22, 2021 Altisource S.à r.l, a subsidiary of Altisource Portfolio Solutions S.A., entered into a revolving credit facility with STS Master Fund, Ltd. (“STS”) (the “Revolver”). STS is an investment fund managed by Deer Park.

The Revolver was amended effective February 14, 2023 (the “Amended Revolver”). Under the terms of the ~~Credit Facility,~~Amended Revolver, 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~~Amended Revolver provides Altisource the ability to borrow a maximum amount of ~~$20.0 million through June 22, 2022,~~ $15.0 ~~million through June 22, 2023, and $10.0 million until the end of the term.~~million. Amounts that are repaid may be re-borrowed in accordance with the limitations set forth below.

~~Table~~The maturity date of ~~Contents~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

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

~~Outstanding amounts borrowed pursuant to~~ the Amended Revolver coincides with the maturity date of the SSTL under the Amended Credit ~~Facility will amortize over the three-year term~~Agreement, as ~~follows: on June 22, 2022, the difference between the then~~it may be extended. The outstanding balance ~~above $15.0 million and $15.0 million,~~ on ~~June 22, 2023,~~ the ~~difference between the then outstanding balance above $10.0 million and $10.0 million, and on June 22, 2024, the then outstanding balance of the loan will be~~Amended Revolver is due and payable ~~by Altisource.~~on such maturity date.

Borrowings under the ~~Credit Facility~~Amended Revolver bear interest ~~at 9.00%~~of 10.00% per annum in cash and 3.00% per annum PIK and are payable quarterly on the last business day of each March, June, September and December. In connection with the ~~Credit Facility,~~Amended Revolver, Altisource is required to pay ~~customary fees, including an upfront~~a usage fee equal to ~~$0.5~~$0.75 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.~~Amended Revolver.

Altisource’s obligations under the ~~Credit Facility~~Amended Revolver are secured by a first-priority lien on substantially 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 Altisource subsidiary.of the assets of the Company, which lien will be pari passu with liens securing the SSTL under the Amended Credit Agreement.

The ~~Credit Facility~~Amended Revolver 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~~Amended Revolver 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~~Amended Revolver within three business days of becoming due, (ii) failure to perform or observe any material provisions of the ~~Credit~~Amended Revolver Documents to be performed or complied with and such failure continues for a period of 30 days after written notice is given by the Lender to the Borrower, (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 aggregate 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~~Amended Revolver or waived, all loans and other obligations could become due and immediately payable and the facility could be terminated.

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, there was no outstanding debt under the ~~Credit Facility.~~Amended Revolver and Revolver, respectively. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, debt issuance costs were ~~$0.3~~$0.2 million, net of ~~$0.2~~$0.3 million of accumulated amortization, and ~~$0.4~~$0.3 million, net of ~~$0.1~~$0.3 million of accumulated amortization, respectively.

NOTE 12 — OTHER NON-CURRENT LIABILITIES

Other non-current liabilities consist of the following:


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022

Income tax liabilities						Income tax liabilities	$	16,145	$	16,079
Operating lease liabilities	Operating lease liabilities	$	3,800	$	5,029	Operating lease liabilities	3,104		3,371
Income tax liabilities		13,588		14,156
Deferred revenue	Deferred revenue	36		—		Deferred revenue	56		82
Other non-current liabilities	Other non-current liabilities	84		81		Other non-current liabilities	5		4

Total	Total	$	17,508	$	19,266	Total	$	19,310	$	19,536

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Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 13 — 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 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. The following fair values are estimated using market information and what the Company believes to be appropriate valuation methodologies under GAAP:


		September 30, 2022								December 31, 2021									March 31, 2023								December 31, 2022
(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	$	63,812	$	63,812	$	—	$	—	$	98,132	$	98,132	$	—	$	—	Cash and cash equivalents	$	43,113	$	43,113	$	—	$	—	$	51,025	$	51,025	$	—	$	—
Restricted cash	Restricted cash	3,584		3,584		—		—		4,017		4,017		—		—		Restricted cash	3,215		3,215		—		—		3,248		3,248		—		—

Short-term receivable	Short-term receivable	3,433		—		—		3,433		3,643		—		—		3,643		Short-term receivable	3,223		—		—		3,223		3,223		—		—		3,223

Liabilities:	Liabilities:																	Liabilities:
Senior secured term loan		247,204		—		200,235		—		247,204		—		224,956		—
Warrant liability																		Warrant liability	7,402		—		—		7,402		—		—		—		—
Senior secured term loans																		Senior secured term loans	227,204		—		179,775		—		247,204		—		200,235		—

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.

The fair value of our ~~senior secured term loan~~SSTL 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.

In connection with the sale of Pointillist on December 1, 2021, ~~Altisource is scheduled~~$3.5 million was deposited into an escrow account to ~~receive, assuming no~~satisfy certain indemnification claims ~~$3.5 million~~that may arise on or prior to the first anniversary of the sale ~~closing and received $0.3 million from the Working Capital Escrow in May 2022 (See Note 3 for additional information).~~closing. The deposit was recorded as a short-term receivable. We measure short-term receivables without a stated interest rate based on the present value of the future payments.

Warrant liability is carried at fair value. The fair value of the warrant liability is based on the number of Warrant Shares that are expected to be exercisable and the Altisource share price less $0.01 at the measurement date. The Warrant liability is measured using Level 3 inputs as the determination of fair value includes various assumptions of future Aggregate Paydowns (see Note 10 for additional information).

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 45% ~~and 40%~~ of its revenue from Ocwen for the three ~~and nine~~ months ended ~~September 30, 2022, respectively~~March 31, 2023 (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 14 — SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

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 30, 2022,~~March 31, 2023, 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~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. 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 30, 2022,~~March 31, 2023, we can repurchase up to approximately ~~$71~~$64 million of our common stock under Luxembourg law. ~~Our~~Under the Amended Credit Agreement, ~~also limits the amount~~ we ~~can spend on share repurchases, which limit was approximately $421 million as of September 30, 2022, and may prevent repurchases in certain circumstances, including if our leverage ratio exceeds 3.50~~are not permitted to ~~1.00.~~repurchase shares except for limited circumstances.

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Notes to Condensed Consolidated Financial Statements (Continued)

Public offering of Common Stock

On February 14, 2023, Altisource closed on an underwritten public offering to sell 4,550,000 shares of its common stock, at a price of $5.00 per share, generating net proceeds of $20.5 million, after deducting the underwriting discounts and commissions and other offering expenses.

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 ~~$3.9~~$1.4 million and ~~$2.5~~$1.3 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively ($1.3 million and $0.4 million for the third quarter of 2022 and 2021, respectively).~~respectively. As of ~~September 30, 2022,~~March 31, 2023, estimated unrecognized compensation costs related to share-based awards amounted to ~~$4.0~~$5.1 million, which we expect to recognize over a weighted average remaining requisite service period of approximately ~~1.43~~1.58 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 ~~185~~188 thousand service-based options were outstanding as of ~~September 30, 2022.~~March 31, 2023.

Market-Based Options. These option grants generally have two 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 96 thousand market-based options were outstanding as of ~~September 30, 2022.~~March 31, 2023.

Performance-Based Options. These option grants generally will vest if certain specific financial measures are achieved; typically with one-fourth vesting on each anniversary of the grant date. 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 generally 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, unless the performance criteria is met prior to termination of service in which case vesting will generally continue in accordance with the provisions of the award agreement. There were ~~450~~461 thousand performance-based options outstanding as of ~~September 30, 2022.~~March 31, 2023.

There were no stock option grants during the three months ended March 31, 2023. The Company granted 105 thousand stock options (at a weighted average exercise price of $11.86 per share) for the ~~nine~~three months ended ~~September 30, 2022 (no comparative amount for the nine months ended September 30, 2021).~~March 31, 2022.

The fair values of the performance-based options are determined using the Black-Scholes option pricing model. The following assumptions were used to determine the fair values as of the grant date:


	~~Nine~~Three months ended ~~September 30,~~March 31, 2022
	Black-Scholes

Risk-free interest rate (%)	1.62
Expected stock price volatility (%)	67.75		%
Expected dividend yield	—
Expected option life (in years)	~~6.00~~6
Fair value	$	7.27

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

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.

~~Table of Contents~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

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

The following table summarizes the grant date fair value of stock options that vested during the periods presented:


		Nine months ended September 30,					Three months ended March 31,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021		(in thousands, except per share data)	2023		2022

Weighted average grant date fair value of stock options granted per share	Weighted average grant date fair value of stock options granted per share	$	8.19	$	—	Weighted average grant date fair value of stock options granted per share	$	—	$	8.19
Intrinsic value of options exercised	Intrinsic value of options exercised	—		—		Intrinsic value of options exercised	—		—
Grant date fair value of stock options that vested	Grant date fair value of stock options that vested	1,031		1,203		Grant date fair value of stock options that vested	83		1,031

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, 2021 687,339 $ 27.99 4.57 $ —
Granted 105,000 11.86
Forfeited (61,800) 59.07
Outstanding as of September 30, 2022 730,539 27.34 4.98 131
Exercisable as of September 30, 2022 542,290 25.44 4.42 —


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

Outstanding as of December 31, 2022	745,277	$	27.03	4.83	$	—
Granted	—	—

Forfeited	(500)	32.64

Outstanding as of March 31, 2023	744,777	27.02		4.58	—

Exercisable as of March 31, 2023	549,289	25.26		3.99	—

Other Share-Based Awards

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

Service-Based Awards. These awards generally vest over one ~~to four year periods with vesting in equal annual installments.~~-to-four-year periods. A total of ~~402~~853 thousand service-based awards were outstanding as of ~~September 30, 2022.~~March 31, 2023.

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 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 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 ~~154~~148 thousand performance-based awards were outstanding as of ~~September 30, 2022.~~March 31, 2023.

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 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 ~~September 30, 2022.~~March 31, 2023.

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 98127 thousand performance-based and market-based awards were outstanding as of ~~September 30, 2022.~~March 31, 2023.

The Company granted ~~440~~744 thousand restricted share units (at a weighted average grant date fair value of ~~$10.69~~$4.94 per share) during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. These grants include 4657 thousand ~~performance-based~~ awards that include both a performance condition and a market condition and 4657 thousand performance-based ~~awards, for~~awards. During the ~~nine~~three months ended ~~September 30, 2022. The Company granted 29 thousand performance-based awards that include both a performance condition and a market condition and 89 thousand performance-based awards, for~~March 31, 2022 the ~~nine months ended September 30, 2021.~~

1918

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

Company granted 46 thousand awards that include both a performance condition and a market condition and 46 thousand performance-based awards.

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, ~~2021~~2022			~~677,175~~755,006
Granted			~~440,072~~743,856
Issued			~~(205,905)~~(136,293)
Forfeited/canceled			~~(145,377)~~(122,267)

Outstanding as of ~~September 30, 2022~~March 31, 2023			~~765,965~~1,240,302

NOTE 15 — 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. 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, 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:~~follows for the three months ended March 31:


		Three months ended September 30,				Nine months ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022

Service revenue	Service revenue	$	36,290	$	41,626	$	111,691	$	133,672	Service revenue	$	37,071	$	37,763
Reimbursable expenses	Reimbursable expenses	1,957		1,416		6,158		5,365		Reimbursable expenses	2,310		1,592
Non-controlling interests	Non-controlling interests	133		201		468		712		Non-controlling interests	80		161

Total	Total	$	38,380	$	43,243	$	118,317	$	139,749	Total	$	39,461	$	39,516

Disaggregation of Revenue

Disaggregation of total revenues by segment and major source was as follows:


		Three months ended September 30, 2022									Three months ended March 31, 2023
(in thousands)	(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		(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

Servicer and Real Estate	Servicer and Real Estate	$	26,387	$	2,633	$	1,846	$	30,866	Servicer and Real Estate	$	26,553	$	3,208	$	2,184	$	31,945
Origination	Origination	7,392		11		111		7,514		Origination	7,382		8		126		7,516

Total revenue	Total revenue	$	33,779	$	2,644	$	1,957	$	38,380	Total revenue	$	33,935	$	3,216	$	2,310	$	39,461


		Three months ended September 30, 2021									Three months ended March 31, 2022
(in thousands)	(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		(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

Servicer and Real Estate	Servicer and Real Estate	$	23,785	$	1,782	$	1,226	$	26,793	Servicer and Real Estate	$	24,659	$	2,498	$	1,379	$	28,536
Origination	Origination	14,362		11		190		14,563		Origination	10,759		8		213		10,980
Corporate and Others		—		1,887		—		1,887

Total revenue	Total revenue	$	38,147	$	3,680	$	1,416	$	43,243	Total revenue	$	35,418	$	2,506	$	1,592	$	39,516

2019

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

Nine months ended September 30, 2022
(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
Servicer and Real Estate $ 77,947 $ 7,654 $ 5,748 $ 91,349
Origination 26,533 25 410 26,968
Total revenue $ 104,480 $ 7,679 $ 6,158 $ 118,317

Nine months ended September 30, 2021
(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
Servicer and Real Estate $ 77,898 $ 6,832 $ 4,854 $ 89,584
Origination 46,213 32 511 46,756
Corporate and Others — 3,409 — 3,409
Total revenue $ 124,111 $ 10,273 $ 5,365 $ 139,749

Contract Balances

Our contract assets consist of unbilled accounts receivable (see Note 4)3). 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 ~~$3.7~~$1.9 million and ~~$4.7~~$1.8 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively ($0.8 million and $0.9 million for the third quarter of 2022 and 2021, respectively).~~respectively.

NOTE 16 — 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:~~follows for the three months ended March 31:


		Three months ended September 30,				Nine months ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022

Compensation and benefits	Compensation and benefits	$	11,885	$	15,171	$	39,231	$	55,655	Compensation and benefits	$	9,701	$	13,521
Outside fees and services	Outside fees and services	15,319		16,891		42,573		52,473		Outside fees and services	15,094		12,903
Technology and telecommunications	Technology and telecommunications	4,656		6,391		14,844		18,972		Technology and telecommunications	3,397		5,232
Reimbursable expenses	Reimbursable expenses	1,957		1,416		6,158		5,365		Reimbursable expenses	2,310		1,592
Depreciation and amortization	Depreciation and amortization	570		798		1,805		2,397		Depreciation and amortization	455		621

Total	Total	$	34,387	$	40,667	$	104,611	$	134,862	Total	$	30,957	$	33,869

Transactions with Related Parties

~~Table~~In May 2022, John G. Aldridge, Jr., the Managing Partner of ~~Contents~~Aldridge Pite LLP (“Aldridge Pite”), joined the Board of Directors of Altisource. Aldridge Pite provides eviction and other real estate related services to the Company. The Company recognized $0.2 million for the three months ended March 31, 2023 of reimbursable expenses relating to services provided to Aldridge Pite (no comparable amount for the three months ended March 31, 2022). As of March 31, 2023, the Company had no payable to Aldridge Pite.

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

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

NOTE 17 — 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,
(in thousands) 2022 2021 2022 2021
Compensation and benefits $ 7,388 $ 6,859 $ 19,093 $ 21,007
Amortization of intangible assets 1,281 2,673 3,849 8,183
Professional services 2,584 2,318 8,432 7,896
Occupancy related costs 1,008 2,182 4,049 7,652
Marketing costs 774 327 2,446 1,500
Depreciation and amortization 284 346 895 1,082
Other 1,237 1,899 4,291 4,726
Total $ 14,556 $ 16,604 $ 43,055 $ 52,046

~~NOTE 18 — OTHER INCOME (EXPENSE), NET~~

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

Three months ended
September 30,
Nine months ended
September 30,
(in thousands) 2022 2021 2022 2021
Interest income (expense) $ 212 $ — $ 318 $ (28)
Other, net 247 (115) 1,074 819
Total $ 459 $ (115) $ 1,392 $ 791

~~NOTE 19 — INCOME TAXES~~

We recognized an income tax (provision) benefit of $(2.2) million and $(1.9) million for the nine months ended September 30, 2022 and 2021, respectively ($0.2 million and $(0.4) million for the third quarter of 2022 and 2021, respectively). The income tax (provision) benefitfollows for the three ~~and nine~~ months ended September 30, 2022 was driven by income tax expense on transfer pricing income from India, income tax benefit from losses in the United States, no tax benefit on the pretax loss from our Luxembourg operating company and uncertain tax positions.March 31:



(in thousands)	2023		2022

Compensation and benefits	$	6,030	$	5,409
Amortization of intangible assets	1,280		1,284
Professional services	1,571		2,749
Occupancy related costs	1,442		1,624
Marketing costs	382		887
Depreciation and amortization	244		337
Other	1,145		1,684

Total	$	12,094	$	13,974

2220

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 18 — OTHER INCOME (EXPENSE), NET

Other income (expense), net consists of the following for the three months ended March 31:



(in thousands)	2023		2022

Interest income (expense)	$	434	$	45
Other, net	1,126		695

Total	$	1,560	$	740

NOTE 19 — INCOME TAXES

We recognized an income tax provision of $1.5 million and $0.9 million for the three months ended March 31, 2023 and 2022, respectively. The income tax provision for the three months ended March 31, 2023 was driven by income tax expense on transfer pricing income from India and the United States, reduction in deferred tax assets related to intangible assets, no tax benefit on the pretax loss from our Luxembourg operating company and uncertain tax positions.

NOTE 20 — LOSS PER SHARE

Basic 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 per share are calculated as ~~follows:~~follows for the three months ended March 31:


		Three months ended September 30,				Nine months ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021		2022		2021		(in thousands, except per share data)	2023		2022

Net loss attributable to Altisource	Net loss attributable to Altisource	$	(14,389)	$	(18,269)	$	(42,074)	$	(58,746)	Net loss attributable to Altisource	$	(12,947)	$	(12,190)

Weighted average common shares outstanding, basic	Weighted average common shares outstanding, basic	16,087		15,831		16,051		15,816		Weighted average common shares outstanding, basic	18,442		15,956

Weighted average common shares outstanding, diluted	Weighted average common shares outstanding, diluted	16,087		15,831		16,051		15,816		Weighted average common shares outstanding, diluted	18,442		15,956

Loss per share:	Loss per share:									Loss per share:
Basic	Basic	$	(0.89)	$	(1.15)	$	(2.62)	$	(3.71)	Basic	$	(0.70)	$	(0.76)
Diluted	Diluted	$	(0.89)	$	(1.15)	$	(2.62)	$	(3.71)	Diluted	$	(0.70)	$	(0.76)

For the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, 1.3~~2.9 million and 1.5 million, respectively, ~~(1.3 million and 1.3 million for the third quarter of 2022 and 2021, respectively),~~warrants, stock options, restricted shares and restricted share units, were excluded from the computation of loss per share, as a result of the following:

•For both the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, 1.7 million and ~~2021, 0.2~~0.3 million, ~~(0.2 million for both the third quarter of 2022 and 2021),~~respectively, warrants, stock options, restricted shares and restricted share units were anti-dilutive and have been excluded from the computation of diluted loss per share because the Company incurred a net loss

•For the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, 0.2~~0.3 million and 0.3 million, respectively, ~~(0.2 million and 0.3 million for the third quarter of 2022 and 2021, respectively),~~ stock options were anti-dilutive and have been excluded from the computation of diluted loss per share because their exercise price was greater than the average market price of our common stock

•For the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 0.9 million and ~~1.0~~0.9 million, respectively, ~~(0.9 million and 0.8 million for the third quarter of 2022 and 2021, 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 a total shareholder return compared to the market benchmark, that have not yet been met in each period have been excluded from the computation of diluted loss per share

NOTE 21 — 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.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

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.

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.

~~Table of Contents~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

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

Ocwen Related Matters

As discussed in Note 2, during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, Ocwen was our largest customer, accounting for ~~40%~~45% of our total ~~revenue (45% of our revenue for the third quarter of 2022).~~revenue. Additionally, 6%7% of our revenue for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 was earned on the loan portfolios serviced by Ocwen, when a party other than Ocwen or the 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. 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. Existing or future similar matters could result in adverse regulatory or other actions against Ocwen. In addition to the above, Ocwen may become subject to future adverse regulatory or other actions.

Ocwen has disclosed that ~~RITM~~Rithm is ~~its largest client.~~a significant client of Ocwen’s. As of ~~June 30,~~December 31, 2022, approximately ~~18%~~17% of loans serviced and subserviced by Ocwen (measured in UPB) and approximately 68% of all delinquent loans that Ocwen services were related to ~~RITM~~Rithm MSRs or rights to MSRs.

The existence or outcome of Ocwen regulatory matters or the termination of ~~the RITM~~Ocwen’s sub-servicing ~~agreement~~agreements with Rithm or other significant Ocwen clients may have significant adverse effects on Ocwen’s ~~business and/or our continuing relationship with Ocwen.~~business. 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.

If any of the following events occurred, Altisource’s revenue could be 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 a significant reduction in the volume of services they purchase from us

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

•The contractual relationship between Ocwen and ~~RITM~~Rithm changes significantly, including Ocwen’s sub-servicing arrangement with ~~RITM~~Rithm expiring without renewal, 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.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

Leases

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 ~~$0.4~~$0.1 million and ~~$0.6~~$0.3 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively (less than $0.1 million and $0.2 million for the third quarter of 2022 and 2021, respectively).~~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.

~~Table of Contents~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

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

Information about our lease terms and our discount rate assumption was as follows for the ~~nine~~three months ended ~~September 30:~~March 31:


		2022		2021			2023		2022

Weighted average remaining lease term (in years)	Weighted average remaining lease term (in years)	3.15		3.28		Weighted average remaining lease term (in years)	2.78		3.48
Weighted average discount rate	Weighted average discount rate	5.66	%	6.24	%	Weighted average discount rate	5.84	%	5.70	%

Our lease activity during the period was as ~~follows:~~follows for the three months ended March 31:


		Three months ended September 30,				Nine months ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022

Operating lease costs:	Operating lease costs:									Operating lease costs:
Selling, general and administrative expense	Selling, general and administrative expense	$	586	$	1,486	$	2,217	$	4,696	Selling, general and administrative expense	$	556	$	934
Cost of revenue	Cost of revenue	—		398		265		1,896		Cost of revenue	—		265

Cash used in operating activities for amounts included in the measurement of lease liabilities	Cash used in operating activities for amounts included in the measurement of lease liabilities	$	515	$	1,690	$	2,022	$	7,143	Cash used in operating activities for amounts included in the measurement of lease liabilities	$	1,135	$	1,182
Short-term (twelve months or less) lease costs	Short-term (twelve months or less) lease costs	402		(343)		827		(802)		Short-term (twelve months or less) lease costs	419		28

Maturities of our lease liabilities as of ~~September 30, 2022~~March 31, 2023 are as follows:


(in thousands)	(in thousands)	Operating lease obligations		(in thousands)	Operating lease obligations

2022		$	557
2023	2023	2,233		2023	$	2,092
2024	2024	1,715		2024	1,991
2025	2025	1,233		2025	1,320
2026	2026	636		2026	638
2027				2027	—

Total lease payments	Total lease payments	6,374		Total lease payments	6,041
Less: interest	Less: interest	(271)		Less: interest	(780)

Present value of lease liabilities	Present value of lease liabilities	$	6,103	Present value of lease liabilities	$	5,261

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 ~~$20.0~~$15.8 million and ~~$27.5~~$13.2 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

NOTE 22 — SEGMENT REPORTING

Our business segments are based upon our organizational structure, which focuses primarily on the services offered, and are consistent with the internal reporting used by our Chief Executive Officer (our chief operating decision maker) to evaluate operating performance and to assess the allocation of our resources.

Effective January 1, 2022, our reportable segments changed as a result of a change in the way our Chief Executive Officer (our chief operating decision maker) manages our businesses, allocates resources and evaluates performance, and the related changes in our internal organization. We ~~now report~~conduct our operations through two reportable segments: Servicer and Real Estate and Origination. In addition, we report Corporate and Others separately. Prior to the January 1, 2022 change in reportable segments, the Company operated with one reportable segment (total Company). Prior year comparable period segment disclosures have been restated to conform to the current year presentation.

2523

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

The Servicer and Real Estate segment provides loan servicers and real estate investors with solutions and technologies that span the mortgage and real estate lifecycle. The Origination segment provides originators with solutions and technologies that span the mortgage origination lifecycle. Corporate and Others includes ~~Pointillist (sold on December 1, 2021),~~ interest expense and costs related to corporate functions including executive, infrastructure and certain technology groups, finance, law, compliance, human resources, vendor management, facilities, risk management, as well as eliminations between reportable segments.

Financial information for our segments is as follows:


		Three months ended September 30, 2022									Three months ended March 31, 2023
(in thousands)	(in thousands)	Servicer and Real Estate		Origination		Corporate and Others		Consolidated Altisource		(in thousands)	Servicer and Real Estate		Origination		Corporate and Others		Consolidated Altisource

Revenue	Revenue	$	30,866	$	7,514	$	—	$	38,380	Revenue	$	31,945	$	7,516	$	—	$	39,461
Cost of revenue	Cost of revenue	22,082		7,654		4,651		34,387		Cost of revenue	19,725		7,454		3,778		30,957
Gross profit (loss)	Gross profit (loss)	8,784		(140)		(4,651)		3,993		Gross profit (loss)	12,220		62		(3,778)		8,504
Selling, general and administrative expenses	Selling, general and administrative expenses	2,931		2,399		9,226		14,556		Selling, general and administrative expenses	2,301		1,726		8,067		12,094
Income (loss) from operations	Income (loss) from operations	5,853		(2,539)		(13,877)		(10,563)		Income (loss) from operations	9,919		(1,664)		(11,845)		(3,590)
Total other income (expense), net	Total other income (expense), net	4		—		(3,894)		(3,890)		Total other income (expense), net	—		—		(7,748)		(7,748)

Income (loss) before income taxes and non-controlling interests	Income (loss) before income taxes and non-controlling interests	$	5,857	$	(2,539)	$	(17,771)	$	(14,453)	Income (loss) before income taxes and non-controlling interests	$	9,919	$	(1,664)	$	(19,593)	$	(11,338)


		Three months ended September 30, 2021									Three months ended March 31, 2022
(in thousands)	(in thousands)	Servicer and Real Estate		Origination		Corporate and Others		Consolidated Altisource		(in thousands)	Servicer and Real Estate		Origination		Corporate and Others		Consolidated Altisource

Revenue	Revenue	$	26,793	$	14,563	$	1,887	$	43,243	Revenue	$	28,536	$	10,980	$	—	$	39,516
Cost of revenue	Cost of revenue	21,088		11,555		8,024		40,667		Cost of revenue	19,740		9,307		4,822		33,869
Gross profit (loss)	Gross profit (loss)	5,705		3,008		(6,137)		2,576		Gross profit (loss)	8,796		1,673		(4,822)		5,647
Selling, general and administrative expenses	Selling, general and administrative expenses	3,289		1,586		11,729		16,604		Selling, general and administrative expenses	3,059		2,120		8,795		13,974
Income (loss) from operations	Income (loss) from operations	2,416		1,422		(17,866)		(14,028)		Income (loss) from operations	5,737		(447)		(13,617)		(8,327)
Total other income (expense), net	Total other income (expense), net	2		—		(3,872)		(3,870)		Total other income (expense), net	—		—		(2,816)		(2,816)

Income (loss) before income taxes and non-controlling interests	Income (loss) before income taxes and non-controlling interests	$	2,418	$	1,422	$	(21,738)	$	(17,898)	Income (loss) before income taxes and non-controlling interests	$	5,737	$	(447)	$	(16,433)	$	(11,143)

Nine months ended September 30, 2022
(in thousands) Servicer and Real Estate Origination Corporate and Others Consolidated Altisource
Revenue $ 91,349 $ 26,968 $ — $ 118,317
Cost of revenue 64,235 26,206 14,170 104,611
Gross profit (loss) 27,114 762 (14,170) 13,706
Selling, general and administrative expenses 9,227 6,739 27,089 43,055
Income (loss) from operations 17,887 (5,977) (41,259) (29,349)
Total other income (expense), net 4 — (10,051) (10,047)
Income (loss) before income taxes and
non-controlling interests
$ 17,891 $ (5,977) $ (51,310) $ (39,396)


(in thousands)	Servicer and Real Estate		Origination		Corporate and Others		Consolidated Altisource

Total assets:
March 31, 2023	$	61,898	$	54,681	$	61,004	$	177,583
December 31, 2022	63,696		53,984		77,325		195,005

~~Table of Contents~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

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

Nine months ended September 30, 2021
(in thousands) Servicer and Real Estate Origination Corporate and Others Consolidated Altisource
Revenue $ 89,584 $ 46,756 $ 3,409 $ 139,749
Cost of revenue 69,063 38,722 27,077 134,862
Gross profit (loss) 20,521 8,034 (23,668) 4,887
Selling, general and administrative expenses 10,709 4,468 36,869 52,046
Income (loss) from operations 9,812 3,566 (60,537) (47,159)
Total other income (expense), net 6 — (9,887) (9,881)
Income (loss) before income taxes and
non-controlling interests
$ 9,818 $ 3,566 $ (70,424) $ (57,040)

(in thousands) Servicer and Real Estate Origination Corporate and Others Consolidated Altisource
Total assets:
September 30, 2022 $ 64,885 $ 54,501 $ 91,896 $ 211,282
December 31, 2021 61,832 59,741 136,235 257,808

~~Our services are provided to customers primarily located in the United States. Premises and equipment, net consist of the following, by country:~~

(in thousands) September 30,
2022 December 31,
2021
Luxembourg $ 2,812 $ 3,883
United States 779 1,932
India 1,314 999
Uruguay 65 59
Total $ 4,970 $ 6,873

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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, ~~2021~~2022 filed with the Securities and Exchange Commission (“SEC”) on March ~~3, 2022.~~30, 2023.

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 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 in response to lower revenue due to COVID-19 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 section of our Form 10-K for the year ended December 31, ~~2021~~2022 including:

•the timing of the anticipated increase in default related referrals following the expiration of foreclosure and eviction moratoriums, forbearance programs and temporary governmental or servicer loss mitigation requirements, the timing of the expiration of such moratoriums, programs and requirements, 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 Rithm Capital Corp. (individually, together with one or more of its subsidiaries, or one or more of its subsidiaries individually, ~~“RITM”~~“Rithm”) (formerly New Residential Investment Corp., or “NRZ”) as a customer or our ability to receive the anticipated volume of referrals from ~~RITM;~~Rithm;

•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 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~~you not to place undue reliance on these forward-looking statements ~~as they~~which reflect our view only as of the date of this report. We are under no obligation (and expressly disclaim any obligation) to update or alter any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or ~~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.

Effective January 1, 2022, our reportable segments changed as a result of a change in the way our Chief Executive Officer (our chief operating decision maker) manages our businesses, allocates resources and evaluates performance, and the related changes in our internal organization. We ~~now report~~conduct our operations through two reportable segments: Servicer and Real Estate and Origination. ~~and~~ ~~Origination~~. In addition, we reportCorporate and Others separately. Prior to the January 1, 2022 change in reportable segments, the Company operated with one reportable segment (total Company). Prior year comparable period segment disclosures have been restated to conform to the current year presentation.

The Servicer and Real Estate segment provides loan servicers and real estate investors with solutions and technologies that span the mortgage and real estate lifecycle. Within the Servicer and Real Estate segment we provide:

Solutions

Our Solutions business includes property preservation and inspection services, title insurance (as an agent) and settlement services, real estate valuation services, foreclosure trustee services, and residential and commercial construction inspection and risk mitigation services.

Marketplace

Our Marketplace business includes the Hubzu® online real estate auction platform and real estate auction, real estate brokerage and asset management services.

Technology and software-as-a-service (“SaaS”) Products

Our Technology and SaaS Products business includes Equator® (a SaaS-based technology to manage real estate owned (“REO”), short sales, foreclosure, bankruptcy and eviction processes), Vendorly Invoice (a vendor invoicing and payment system), RentRange® (a single family rental data, analytics and rent-based valuation solution), REALSynergy® (a commercial loan servicing platform), and NestRangeTM (an automated valuation model and analytics solution).

The Origination segment provides originators with solutions and technologies that span the mortgage origination lifecycle. Within the Origination segment we provide:

Solutions

Our Solutions business includes title insurance (as an agent) and settlement services, real estate valuation services, and loan fulfillment, certification and certification insurance services.

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Lenders One

Our Lenders One business includes management services provided to the Best Partners Mortgage Cooperative, Inc., doing business as Lenders One® (“Lenders One”), and certain loan manufacturing and capital markets services provided to the members of the Lenders One cooperative.

Technology and SaaS Products

Our Technology and SaaS Products business includes Vendorly Monitor (a vendor management platform), Lenders One Loan Automation (“LOLA”) (a marketplace to order services and a tool to automate components of the loan manufacturing process), TrelixAITM (technology to manage the workflow and automate components of the loan fulfillment, pre and post-close quality control and service transfer processes), ADMS (a document management and data analytics delivery platform), and automated valuation technology.

Corporate and Others includes ~~Pointillist, Inc. (“Pointillist”) (sold on December 1, 2021),~~ interest expense and costs related to corporate functions including executive, infrastructure and certain technology groups, finance, law, compliance, human resources, vendor management, facilities, risk management and eliminations between reportable segments.

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. 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 technology enabled solutions to a broad and diversified customer base of residential real estate and loan investors, 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 our businesses to provide long term value to our customers and shareholders.

Each of our business segments provides Altisource the potential to grow and diversify our customer and revenue base. We believe these business segments address very large markets and directly leverage our core competencies and distinct competitive advantages. Our business segments and strategic initiatives follow:

Servicer and Real Estate:

Through our offerings that support residential real estate and loan investors and servicers, we provide a suite of 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 ~~RITM.~~Rithm. 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 as they consolidate to larger, full-service providers or outsource services that have historically been performed in-house.

Origination:

Through our offerings that support mortgage loan originators (or other similar mortgage market participants), we provide a suite of solutions and technologies to meet the evolving and growing needs of lenders, mortgage purchasers and securitizers. We are focused on growing business from our existing customer base, attracting new customers to our offerings and developing new offerings. We have a customer base that includes the Lenders One cooperative members, which includes independent mortgage bankers, credit unions, and banks, as well as 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 growing membership of Lenders One, increasing member adoption of existing solutions and developing and cross-selling new offerings. Further, we believe we are well positioned to gain market share from existing and new customers as customers and prospects look to Lenders One to help them improve their profitability and better compete.

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Corporate and Others includes ~~Pointillist (sold on December 1, 2021),~~ interest expense and costs related to corporate functions including executive, infrastructure and certain technology groups, finance, law, compliance, human resources, vendor management, facilities, risk management and eliminations between reportable segments. We developed the Pointillist business through our consumer analytics capabilities. On December 1, 2021, the shareholders of Pointillist sold all of the equity interests in Pointillist to Genesys Cloud Services, Inc. for $150.0 million. On a fully diluted basis, we owned approximately 69% of the equity of Pointillist. After working capital and other applicable adjustments, we received approximately $106.0 million from the sale of our Pointillist equity and the collection of outstanding receivables, with $102.2 million received at closing, approximately $0.3 million deposited into the Working Capital Escrow and approximately $3.5 million deposited into the Indemnification Escrow. The Working Capital Escrow was received on May 9, 2022.

COVID-19 Pandemic Impacts

In response to the COVID-19 pandemic, beginning in March 2020, various governmental entities and servicers implemented unprecedented foreclosure and eviction moratoriums, forbearance programs and loss mitigation measures to help mitigate the impact to borrowers and renters. As a result of these measures and other related actions, industrywide foreclosure initiations were 89% lower for the nine months ended September 2021 compared to the same pre-COVID-19 period in 2019 and foreclosure sales were 79% lower for the same periods. The Federal government’s foreclosure moratorium expired on July 1,31, 2021 and the Consumer Financial Protection Bureau’s (“CFPB’s”) temporary loss mitigation measures expired on December 31, 2021. Despite the expiration of such governmental measures, we believe servicers are proceeding slowly with foreclosure initiations for borrowers in default. Industrywide foreclosure initiations were ~~386% higher~~10% lower for the ~~nine~~three months ended ~~September 2022~~March 31, 2023 compared to the same period in ~~2021, although still 45%~~2022, and 28% lower than the same ~~pre-COVID-19~~ period in 2019. Industrywide foreclosure sales were 45% higher for the ~~nine~~three months ended ~~September 2022~~March 31, 2023 compared to the same period in ~~2021,~~2022, although still ~~69%~~44% lower than the same pre-COVID-19 period in 2019. The decline in foreclosure initiations and foreclosure sales throughout the pandemic, partially offset by the restart of the default market, significantly decreased default related referrals to Altisource and continues to negatively impact virtually all of Altisource’s default related services revenue.

At the same time, beginning in March 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 result of the lower interest rate environment, mortgage originations were 25% higher for the nine months ended September 30, 2021 compared to the same period in 2020 (according to the Mortgage Bankers Association) driving higher demand for origination related services. In November of 2021, the Federal Reserve began reducing the volume of mortgage backed securities it was purchasing and ended its monthly purchases in March 2022. Additionally, the Federal Reserve increased the target for the federal funds rate several times in 2022, most recently to 3.75% to 4.00% in November 2022. As a result of the higher interest rate environment, mortgage originations were 46% lower for the nine months ended September 30, 2022 compared to the same period in 2021 (according to the Mortgage Bankers Association).

We cannot predict the duration of the pandemic and future governmental and industry measures. Based on the expirations of the Federal government’s foreclosure and eviction moratoriums and the CFPB’s rules on temporary loss mitigation measures, we believe the demand for our Default business will grow. We estimate that in today’s environment it typically takes on average two years to convert foreclosure initiations to foreclosure sales and six months to market and sell the REO. Due to this timing, we anticipate that our later stage foreclosure auction and REO asset management services will not fully benefit from the early 2022 higher foreclosure initiations until late 2023 or early 2024. We further anticipate that despite the forecasted decline in origination volumes in 2022 compared to 2021 and increases in the target federal funds rate, our Lenders One business within our Origination segment may outperform the market for the full year compared to 2021 from new customer wins, and cross selling existing and new offerings to customers that are intended to help reduce their costs.

During ~~2021~~2022 and ~~2022,~~the three months ended March 2023, to address lower revenue, we worked to (1) reduce our cost structure, (2) maintain the infrastructure to deliver default related services for our customer base and support the anticipated increase in demand following the expiration of the moratoriums and forbearance plans and CFPB’s rules on temporary loss mitigation measures, and (3) grow Lenders One membership, launch new solutions and increase customer adoption of our solutions to accelerate the growth of our origination ~~business, and (4) generate cash from the 2021 sale of Pointillist.~~business.

Share Repurchase Program

~~Table of Contents~~

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 30, 2022,~~March 31, 2023, we can repurchase up to approximately ~~$71~~$64 million of our common stock under Luxembourg law. ~~Our senior secured term loan agreement also limits~~Under the ~~amount~~Amended Credit Agreement, we ~~can spend on share repurchases, which limit was approximately $421 million as of September 30, 2022, and may prevent repurchases in certain circumstances, including if our leverage ratio exceeds 3.50~~are not permitted to ~~1.00.~~repurchase shares except for limited circumstances.

Ocwen Related Matters

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, Ocwen was our largest customer, accounting for ~~40%~~45% of our total revenue for the ~~nine~~three months ended ~~September 30, 2022 (45% of our revenue for the third quarter of 2022).~~March 31, 2023. Additionally, 6%7% of our revenue for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 was earned on the loan portfolios serviced by Ocwen, when a party other than Ocwen or the mortgage servicing rights (“MSRs”) owner selected Altisource as the service provider.

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Ocwen has disclosed that ~~RITM~~Rithm is ~~its largest client.~~a significant client of Ocwen’s. As of ~~June 30,~~December 31, 2022, approximately ~~18%~~17% of loans serviced and subserviced by Ocwen (measured in unpaid principal balance) and approximately 68% of all delinquent loans that Ocwen services were related to ~~RITM~~Rithm MSRs or rights to MSRs.

The existence or outcome of Ocwen regulatory matters or the termination of ~~the RITM~~Ocwen’s sub-servicing ~~agreement~~agreements with Rithm or other significant Ocwen clients may have significant adverse effects on Ocwen’s ~~business and/or our continuing relationship with Ocwen.~~business. 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.

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

•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. We are seeking to diversify and grow 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 to address some of the impact to revenue and that current liquidity 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.

~~Table of Contents~~

Factors Affecting Comparability

The following items impact the comparability of our results:

•Industrywide foreclosure initiations were ~~386% higher~~10% lower for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to the same period in ~~2021 as~~2022 (and 28% lower than the foreclosure market begins to normalize following the Federal government’s foreclosure moratorium expiration on July 1, 2021 and the CFPB’s temporary loss mitigation measures expiration on December 31, 2021.pre-COVID-19 period in 2019)

•Industrywide foreclosure sales were 45% higher for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023 compared to the same period in ~~2021.~~2022 (although still 44% lower than the pre-COVID-19 period in 2019)

•~~Industrywide mortgage originations were 46% lower~~The interest rate on the Company’s senior secured term loans was 8.73% for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to 5.00% for the same period in ~~2021 resulting from a higher interest rate environment.~~2022

•On ~~December 1, 2021~~February 14, 2023, Altisource Portfolio Solutions S.A. and its wholly-owned subsidiary, Altisource S.à r.l., entered into Amendment No. 2 to the ~~shareholders~~Credit Agreement. In connection with Amendment No. 2, the Company paid $3.2 million to advisors and recorded these payments as other expense in the condensed consolidated statements of ~~Pointillist, a majority owned subsidiary of Altisource, sold all of the equity interests in Pointillist. For the three~~operations and ~~nine months ended 2021, service revenue from Pointillist was $1.9 million and $3.4 million, respectively, and~~comprehensive loss ~~before income taxes and non-controlling interest was $1.9 million and $6.3 million, respectively (no comparative amounts for the three and nine months ended September 30, 2022).~~

•The Company recognized an income tax ~~(provision) benefit~~provision of ~~$(2.2)~~$1.5 million and ~~$(1.9)~~$0.9 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively ($0.2 million and $(0.4) million for the third quarter of 2022 and 2021, respectively).~~respectively. The income tax ~~(provision) benefit~~provision for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 was driven by income tax expense on transfer pricing income from India ~~income tax benefit from losses in~~and the United States, reduction in deferred tax assets related to intangible assets, no tax benefit on the pretax loss from our Luxembourg operating company and uncertain tax ~~positions.~~positions

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CONSOLIDATED RESULTS OF OPERATIONS

Summary Results

The following is a discussion of our consolidated results of operations for the periods indicated. For a more detailed discussion of the factors that affected the results of our business segments in these periods, see “Segment Results of Operations” below.

The following table sets forth information on our consolidated results of ~~operations:~~operations for the three months ended March 31:


		Three months ended September 30,							Nine months ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)	2022			2021			% Increase (decrease)	2022			2021			% Increase (decrease)	(in thousands, except per share data)	2023			2022			% Increase (decrease)

Service revenue	Service revenue															Service revenue
Servicer and Real Estate	Servicer and Real Estate	$	29,020		$	25,567		14	$	85,601		$	84,730		1	Servicer and Real Estate	$	29,761		$	27,157		10
Origination	Origination	7,270			14,172			(49)	26,090			45,533			(43)	Origination	7,310			10,606			(31)
Corporate and Others		—			1,887			(100)	—			3,409			(100)

Total service revenue	Total service revenue	36,290			41,626			(13)	111,691			133,672			(16)	Total service revenue	37,071			37,763			(2)
Reimbursable expenses	Reimbursable expenses	1,957			1,416			38	6,158			5,365			15	Reimbursable expenses	2,310			1,592			45
Non-controlling interests	Non-controlling interests	133			201			(34)	468			712			(34)	Non-controlling interests	80			161			(50)
Total revenue	Total revenue	38,380			43,243			(11)	118,317			139,749			(15)	Total revenue	39,461			39,516			—
Cost of revenue	Cost of revenue	34,387			40,667			(15)	104,611			134,862			(22)	Cost of revenue	30,957			33,869			(9)
Gross profit	Gross profit	3,993			2,576			55	13,706			4,887			180	Gross profit	8,504			5,647			51

Selling, general and administrative expenses	Selling, general and administrative expenses	14,556			16,604			(12)	43,055			52,046			(17)	Selling, general and administrative expenses	12,094			13,974			(13)

Loss from operations	Loss from operations	(10,563)			(14,028)			25	(29,349)			(47,159)			38	Loss from operations	(3,590)			(8,327)			57
Other income (expense), net:	Other income (expense), net:															Other income (expense), net:
Interest expense	Interest expense	(4,349)			(3,755)			16	(11,439)			(10,672)			7	Interest expense	(6,760)			(3,556)			90

Change in fair value of warrant liability																Change in fair value of warrant liability	694			—			N/M
Debt amendment costs																Debt amendment costs	(3,242)			—			N/M
Other income (expense), net	Other income (expense), net	459			(115)			N/M	1,392			791			76	Other income (expense), net	1,560			740			111
Total other income (expense), net	Total other income (expense), net	(3,890)			(3,870)			1	(10,047)			(9,881)			2	Total other income (expense), net	(7,748)			(2,816)			175

Loss before income taxes and non-controlling interests	Loss before income taxes and non-controlling interests	(14,453)			(17,898)			19	(39,396)			(57,040)			31	Loss before income taxes and non-controlling interests	(11,338)			(11,143)			(2)
Income tax benefit (provision)		197			(430)			(146)	(2,210)			(1,857)			19
Income tax provision																Income tax provision	(1,529)			(886)			73

Net loss	Net loss	(14,256)			(18,328)			22	(41,606)			(58,897)			29	Net loss	(12,867)			(12,029)			(7)
Net (income) loss attributable to non-controlling interests		(133)			59			N/M	(468)			151			(410)
Net income attributable to non-controlling interests																Net income attributable to non-controlling interests	(80)			(161)			50

Net loss attributable to Altisource	Net loss attributable to Altisource	$	(14,389)		$	(18,269)		21	$	(42,074)		$	(58,746)		28	Net loss attributable to Altisource	$	(12,947)		$	(12,190)		(6)

Margins:	Margins:															Margins:
Gross profit/service revenue		11		%	6		%		12		%	4		%
Loss from operations/service revenue		(29)		%	(34)		%		(26)		%	(35)		%
Gross profit / service revenue																Gross profit / service revenue	23		%	15		%
Loss from operations / service revenue																Loss from operations / service revenue	(10)		%	(22)		%

Loss per share:	Loss per share:															Loss per share:
Basic	Basic	$	(0.89)		$	(1.15)		23	$	(2.62)		$	(3.71)		29	Basic	$	(0.70)		$	(0.76)		8
Diluted	Diluted	$	(0.89)		$	(1.15)		23	$	(2.62)		$	(3.71)		29	Diluted	$	(0.70)		$	(0.76)		8

Weighted average shares outstanding:	Weighted average shares outstanding:															Weighted average shares outstanding:
Basic	Basic	16,087			15,831			2	16,051			15,816			1	Basic	18,442			15,956			16
Diluted	Diluted	16,087			15,831			2	16,051			15,816			1	Diluted	18,442			15,956			16

N/M — not meaningful.

3430

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Revenue

We recognized service revenue of ~~$111.7~~$37.1 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, a ~~16%~~2% decrease compared to the ~~nine~~three months ended ~~September 30, 2021 ($36.3 million for~~March 31, 2022. The decline is primarily driven by lower revenue in the ~~third quarter of 2022, a 13% decrease compared to~~Origination segment from the ~~third quarter of 2021).~~

~~The increase~~overall market decline in ~~service revenue~~mortgage originations partially offset by growth in the Servicer and Real Estate segment ~~for~~from the nine months ended September 30, 2022 is primarily from higher revenue in our Marketplace and Technology and SaaS Products businesses, partially offset by lower revenue in our Solutions business. The increase in the Marketplace business is driven by a higher numbercontinuing recovery of homes sold, partially offset by lower average sales prices and lower commission rate from a higher percentage of foreclosure auctions. The increase in the Technology and SaaS Products business is from higher professional services revenue in the Equator business. The decline in our Solutions business is primarily driven by fewer preservation referrals per property in the Field Services business, largely offset by higher revenues from our other Solutions businesses. Revenue in the other Solutions businesses grew as the default market began to recover following the expiration of the pandemic related borrower relief measures. For the three months ended September 30, 2022, the increase in service revenue is driven by increases across all our Solutions, Marketplace and Technology and SaaS Products businesses as the default market continues to recover.

The decrease in service revenue in the Origination segment for the three and nine months ended September 30, 2022 is primarily driven by the overall market decline in mortgage originations. The decline in Lenders One revenue is lower than the overall market decline as we gained traction with our solutions that are designed to help our members save money. The decline in the Solutions business revenue was greater than the overall market decline as customers transitioned services in-house to retain their employees in some of our Solutions businesses and a greater percentage of revenue in some of these businesses was derived from refinance transactions which declined faster than the market.

~~The decrease in service revenue in Corporate and Other is from the December 2021 Pointillist sale.~~

We recognized reimbursable expense revenue of ~~$6.2~~$2.3 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, a ~~15%~~45% increase compared to the ~~nine~~three months ended ~~September 30, 2021 ($2.0 million for the third quarter of 2022, a 38% increase compared to the third quarter of 2021).~~March 31, 2022. The increase in reimbursable expenses for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 is ~~largely due to a higher volume of~~primarily driven by an increase in property preservation, asset resolution and asset management activities.

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. However, as a result of the pandemic and related measures and the rapid rise in mortgage interest rates the seasonal impact to revenue may not follow historical patterns.

Cost of Revenue and Gross Profit

Cost of revenue consists of the following:


		Three months ended September 30,					Nine months ended September 30,						Three months ended March 31,
(in thousands)	(in thousands)	2022		2021		% Increase (decrease)	2022		2021		% Increase (decrease)	(in thousands)		2023		2022		% Increase (decrease)

Outside fees and services												Outside fees and services		$	15,094	$	12,903	17
Compensation and benefits	Compensation and benefits	$	11,885	$	15,171	(22)	$	39,231	$	55,655	(30)	Compensation and benefits		9,701		13,521		(28)
Outside fees and services		15,319		16,891		(9)	42,573		52,473		(19)
Technology and telecommunications	Technology and telecommunications	4,656		6,391		(27)	14,844		18,972		(22)	Technology and telecommunications		3,397		5,232		(35)
Reimbursable expenses	Reimbursable expenses	1,957		1,416		38	6,158		5,365		15	Reimbursable expenses		2,310		1,592		45
Depreciation and amortization	Depreciation and amortization	570		798		(29)	1,805		2,397		(25)	Depreciation and amortization		455		621		(27)

Cost of revenue	Cost of revenue	$	34,387	$	40,667	(15)	$	104,611	$	134,862	(22)	Cost of revenue		$	30,957	$	33,869	(9)

We recognized cost of revenue of ~~$104.6~~$31.0 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, a ~~22%~~9% decrease compared to the ~~nine~~three months ended ~~September 30, 2021 ($34.4 million for the third quarter of 2022, a 15% decrease compared to the third quarter of 2021).~~March 31, 2022. Compensation and benefits for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 decreased primarily due to ~~cash~~ cost savings measures taken in ~~2021,~~2022 and early 2023 and the ~~December 2021 sale~~alignment of ~~Pointillist~~compensation and ~~from lower service revenue~~benefits in the Origination ~~segment.~~segment with lower revenue. Technology and telecommunications decreased primarily due to the renegotiation of certain contracts and lower overall headcount. Outside fees and services for the ~~nine~~three months ended ~~September 30, 2022 decreased~~March 31, 2023 increased primarily from ~~lower~~

~~Table of Contents~~

~~service revenue in the Origination segment, as discussed in the revenue section above, and from lower~~higher Field Services revenue in the Solutions business of the Servicer and Real Estate segment. In addition, the increases in reimbursable expenses are consistent with the changes in reimbursable expense revenue discussed in the revenue section above.

Gross profit increased to ~~$13.7~~$8.5 million, representing ~~12%~~23% of service revenue, for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$4.9~~$5.6 million, representing 4%15% of service revenue, for the ~~nine~~three months ended September 30, 2021 (increased to $4.0 million, representing 11% of service revenue, for the third quarter of 2022, compared to $2.6 million, representing 6% of service revenue, for the third quarter of 2021).March 31, 2022. Gross profit as a percentage of service revenue for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 increased compared to the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 primarily due to ~~revenue mix with higher revenue from~~margin expansion in the ~~higher margin businesses in~~ Servicer and Real Estate ~~the December 1, 2021 Pointillist sale~~segment from efficiency initiatives and ~~our COVID-19 cash~~ cost savings measures partially offset by revenue mix and lower gross profit margin in the Origination ~~business~~segment from product mix and lower revenue.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses includes 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.

Table of Contents

SG&A expenses consist of the following:


		Three months ended September 30,					Nine months ended September 30,						Three months ended March 31,
(in thousands)	(in thousands)	2022		2021		% Increase (decrease)	2022		2021		% Increase (decrease)	(in thousands)		2023		2022		% Increase (decrease)

Compensation and benefits	Compensation and benefits	$	7,388	$	6,859	8	$	19,093	$	21,007	(9)	Compensation and benefits		$	6,030	$	5,409	11
Professional services												Professional services		1,571		2,749		(43)
Occupancy related costs	Occupancy related costs	1,008		2,182		(54)	4,049		7,652		(47)	Occupancy related costs		1,442		1,624		(11)
Amortization of intangible assets	Amortization of intangible assets	1,281		2,673		(52)	3,849		8,183		(53)	Amortization of intangible assets		1,280		1,284		—
Professional services		2,584		2,318		11	8,432		7,896		7
Marketing costs	Marketing costs	774		327		137	2,446		1,500		63	Marketing costs		382		887		(57)
Depreciation and amortization	Depreciation and amortization	284		346		(18)	895		1,082		(17)	Depreciation and amortization		244		337		(28)
Other	Other	1,237		1,899		(35)	4,291		4,726		(9)	Other		1,145		1,684		(32)

Selling, general and administrative expenses	Selling, general and administrative expenses	$	14,556	$	16,604	(12)	$	43,055	$	52,046	(17)	Selling, general and administrative expenses		$	12,094	$	13,974	(13)

SG&A expenses for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 of ~~$43.1~~$12.1 million decreased by ~~17%~~13% compared to the ~~nine~~three months ended ~~September 30, 2021 ($14.6 million~~March 31, 2022. The decrease was primarily driven by lower professional services, marketing costs and Other expenses. Professional services for the ~~third quarter of 2022, a 12% decrease compared to the third quarter of 2021). Compensation and benefits for the nine~~three months ended ~~September 30, 2022~~March 31, 2023 decreased primarily due to ~~cash cost savings initiatives. Occupancy related~~lower legal and litigation fees. Marketing costs for the three ~~and nine~~ months ended ~~September 30, 2022 decreased primarily from facility consolidation initiatives. Amortization of intangible assets for the three and nine months ended September 30, 2022~~March 31, 2023 decreased from efficiency measures primarily in the ~~completion of the amortization period of certain intangible assets during 2021.~~Origination segment. The decreases for the ~~nine~~three months ended ~~September 30, 2022 are~~March 31, 2023 were partially offset by ~~increases~~an increase in ~~marketing costs from Lenders One convention activities that were cancelled~~compensation and benefits in the first quarter of ~~2021 due to the pandemic.~~2023.

Loss from Operations

Loss from operations for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was ~~$(29.3)~~$(3.6) million, representing ~~(26)~~(10)% of service revenue, compared to ~~$(47.2)~~$(8.3) million, representing ~~(35)~~(22)% of service revenue, for the ~~nine~~three months ended September 30, 2021 (increased to $(10.6) million, representing (29)% of service revenue, for the third quarter of 2022, compared to $(14.0) million, representing (34)% of service revenue for the third quarter of 2021).March 31, 2022. Loss from operations as a percentage of service revenue improved for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, primarily as a result of higher gross profit margins and ~~for the nine months ended September 30, 2022,~~ the percentage reduction in SG&A expenses in excess of the percentage change in revenue, discussed above.

Other Income (Expense), net

Other income (expense), net principally includes interest expense and other non-operating gains and losses.

~~Table of Contents~~

Other income (expense), net was ~~$(10.0)~~$(7.7) million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$(9.9)~~$(2.8) million for the ~~nine~~three months ended ~~September 30, 2021 ($(3.9) million for the third quarter of 2022 and $(3.9) million for the third quarter of 2021).~~March 31, 2022. The change for the ~~nine~~three months ended ~~September 30, 2022 is~~March 31, 2023 was primarily driven by an increase of ~~$0.8~~$3.2 million in interest expense driven by higher interest ~~rate~~rates on our ~~Credit Facility~~SSTL and higher amortization of debt discount and debt issuance and amendment costs, and $3.2 million of debt amendment costs in the three months ended March 31, 2023, partially offset by higher interest ~~income~~ and foreign currency exchange gains. For the three months ended September 30, 2022, higher interest expense from higher interest rates on our Credit Facility was largely offset by higher interest income and foreign currency exchange gains.other income.

Income Tax Provision

We recognized an income tax ~~(provision) benefit~~provision of ~~$(2.2)~~$1.5 million and ~~$(1.9)~~$0.9 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively ($0.2 million and $(0.4) million for the third quarter of 2022 and 2021, respectively).~~respectively. The income tax ~~(provision) benefit~~provision for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 was driven by income tax expense on transfer pricing income from India ~~income tax benefit from losses in~~and the United States, reduction in deferred tax assets related to intangible assets, no tax benefit on the pretax loss from our Luxembourg operating company and uncertain tax positions.

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SEGMENT RESULTS OF OPERATIONS

The following section provides a discussion of pretax results of operations of our business segments. Transactions between segments are accounted for as third party arrangements for purposes of presenting segment results of operations.

Financial information for our segments was as follows:


		Three months ended September 30, 2022												Three months ended March 31, 2023
(in thousands)	(in thousands)	Servicer and Real Estate			Origination			Corporate and Others		Consolidated Altisource			(in thousands)	Servicer and Real Estate			Origination			Corporate and Others		Consolidated Altisource

Revenue	Revenue												Revenue
Service revenue	Service revenue	$	29,020		$	7,270		$	—	$	36,290		Service revenue	$	29,761		$	7,310		$	—	$	37,071
Reimbursable expenses	Reimbursable expenses	1,846			111			—		1,957			Reimbursable expenses	2,184			126			—		2,310
Non-controlling interests	Non-controlling interests	—			133			—		133			Non-controlling interests	—			80			—		80
		30,866			7,514			—		38,380				31,945			7,516			—		39,461
Cost of revenue	Cost of revenue	22,082			7,654			4,651		34,387			Cost of revenue	19,725			7,454			3,778		30,957
Gross profit (loss)	Gross profit (loss)	8,784			(140)			(4,651)		3,993			Gross profit (loss)	12,220			62			(3,778)		8,504
Selling, general and administrative expenses	Selling, general and administrative expenses	2,931			2,399			9,226		14,556			Selling, general and administrative expenses	2,301			1,726			8,067		12,094
Income (loss) from operations	Income (loss) from operations	5,853			(2,539)			(13,877)		(10,563)			Income (loss) from operations	9,919			(1,664)			(11,845)		(3,590)
Total other income (expense), net	Total other income (expense), net	4			—			(3,894)		(3,890)			Total other income (expense), net	—			—			(7,748)		(7,748)

Income (loss) before income taxes and non-controlling interests	Income (loss) before income taxes and non-controlling interests	$	5,857		$	(2,539)		$	(17,771)	$	(14,453)		Income (loss) before income taxes and non-controlling interests	$	9,919		$	(1,664)		$	(19,593)	$	(11,338)

Margins:	Margins:												Margins:
Gross profit (loss) /service revenue		30		%	(2)		%	N/M		11		%
Income (loss) from operations/service revenue		20		%	(35)		%	N/M		(29)		%
Gross profit (loss) / service revenue													Gross profit (loss) / service revenue	41		%	1		%	N/M		23		%
Income (loss) from operations / service revenue													Income (loss) from operations / service revenue	33		%	(23)		%	N/M		(10)		%

_____________________________________

N/M — not meaningful.


		Three months ended September 30, 2021													Three months ended March 31, 2022
(in thousands)	(in thousands)	Servicer and Real Estate			Origination			Corporate and Others			Consolidated Altisource			(in thousands)	Servicer and Real Estate			Origination			Corporate and Others		Consolidated Altisource

Revenue	Revenue													Revenue
Service revenue	Service revenue	$	25,567		$	14,172		$	1,887		$	41,626		Service revenue	$	27,157		$	10,606		$	—	$	37,763
Reimbursable expenses	Reimbursable expenses	1,226			190			—			1,416			Reimbursable expenses	1,379			213			—		1,592
Non-controlling interests	Non-controlling interests	—			201			—			201			Non-controlling interests	—			161			—		161
		26,793			14,563			1,887			43,243				28,536			10,980			—		39,516
Cost of revenue	Cost of revenue	21,088			11,555			8,024			40,667			Cost of revenue	19,740			9,307			4,822		33,869
Gross profit (loss)	Gross profit (loss)	5,705			3,008			(6,137)			2,576			Gross profit (loss)	8,796			1,673			(4,822)		5,647
Selling, general and administrative expenses	Selling, general and administrative expenses	3,289			1,586			11,729			16,604			Selling, general and administrative expenses	3,059			2,120			8,795		13,974
Income (loss) from operations	Income (loss) from operations	2,416			1,422			(17,866)			(14,028)			Income (loss) from operations	5,737			(447)			(13,617)		(8,327)
Total other income (expense), net	Total other income (expense), net	2			—			(3,872)			(3,870)			Total other income (expense), net	—			—			(2,816)		(2,816)

Income (loss) before income taxes and non-controlling interests	Income (loss) before income taxes and non-controlling interests	$	2,418		$	1,422		$	(21,738)		$	(17,898)		Income (loss) before income taxes and non-controlling interests	$	5,737		$	(447)		$	(16,433)	$	(11,143)

Margins:	Margins:													Margins:
Gross profit (loss) /service revenue		22		%	21		%	(325)		%	6		%
Income (loss) from operations/service revenue		9		%	10		%	N/M			(34)		%
Gross profit (loss) / service revenue														Gross profit (loss) / service revenue	32		%	16		%	N/M		15		%
Income (loss) from operations / service revenue														Income (loss) from operations / service revenue	21		%	(4)		%	N/M		(22)		%

_____________________________________

N/M — not meaningful.

~~Table of Contents~~

Nine months ended September 30, 2022
(in thousands) Servicer and Real Estate Origination Corporate and Others Consolidated Altisource
Revenue
Service revenue $ 85,601 $ 26,090 $ — $ 111,691
Reimbursable expenses 5,748 410 — 6,158
Non-controlling interests — 468 — 468
91,349 26,968 — 118,317
Cost of revenue 64,235 26,206 14,170 104,611
Gross profit (loss) 27,114 762 (14,170) 13,706
Selling, general and administrative expenses 9,227 6,739 27,089 43,055
Income (loss) from operations 17,887 (5,977) (41,259) (29,349)
Total other income (expense), net 4 — (10,051) (10,047)
Income (loss) before income taxes and
non-controlling interests
$ 17,891 $ (5,977) $ (51,310) $ (39,396)
Margins:
Gross profit (loss) /service revenue 32 % 3 % N/M 12 %
Income (loss) from operations/service revenue 21 % (23) % N/M (26) %
~~_____________________________________~~

~~N/M — not meaningful.~~

Nine months ended September 30, 2021
(in thousands) Servicer and Real Estate Origination Corporate and Others Consolidated Altisource
Revenue
Service revenue $ 84,730 $ 45,533 $ 3,409 $ 133,672
Reimbursable expenses 4,854 511 — 5,365
Non-controlling interests — 712 — 712
89,584 46,756 3,409 139,749
Cost of revenue 69,063 38,722 27,077 134,862
Gross profit (loss) 20,521 8,034 (23,668) 4,887
Selling, general and administrative expenses 10,709 4,468 36,869 52,046
Income (loss) from operations 9,812 3,566 (60,537) (47,159)
Total other income (expense), net 6 — (9,887) (9,881)
Income (loss) before income taxes and
non-controlling interests
$ 9,818 $ 3,566 $ (70,424) $ (57,040)
Margins:
Gross profit (loss) /service revenue 24 % 18 % N/M 4 %
Income (loss) from operations/service revenue 12 % 8 % N/M (35) %
~~_____________________________________~~

~~N/M — not meaningful.~~

3933

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Servicer and Real Estate

Revenue

Revenue by line of business was as ~~follows:~~follows for the three months ended March 31:


		Three months ended September 30,					Nine months ended September 30,
(in thousands)	(in thousands)	2022		2021		% Increase (decrease)	2022		2021		% Increase (decrease)	(in thousands)	2023		2022		% Increase (decrease)

Service revenue:	Service revenue:											Service revenue:
Solutions	Solutions	$	19,418	$	17,432	11	$	54,178	$	54,841	(1)	Solutions	$	18,534	$	16,306	14
Marketplace	Marketplace	6,727		6,138		10	23,014		22,215		4	Marketplace	7,712		8,091		(5)
Technology and SaaS Products	Technology and SaaS Products	2,875		1,997		44	8,409		7,674		10	Technology and SaaS Products	3,515		2,760		27
Total service revenue	Total service revenue	29,020		25,567		14	85,601		84,730		1	Total service revenue	29,761		27,157		10

Reimbursable expenses:	Reimbursable expenses:											Reimbursable expenses:
Solutions	Solutions	915		781		17	2,416		2,739		(12)	Solutions	1,004		568		77
Marketplace	Marketplace	931		445		109	3,332		2,115		58	Marketplace	1,180		811		45

Total reimbursable expenses	Total reimbursable expenses	1,846		1,226		51	5,748		4,854		18	Total reimbursable expenses	2,184		1,379		58

Total revenue	Total revenue	$	30,866	$	26,793	15	$	91,349	$	89,584	2	Total revenue	$	31,945	$	28,536	12

We recognized service revenue of ~~$85.6~~$29.8 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, a 1%10% increase compared to the ~~nine~~three months ended ~~September 30, 2021 ($29.0 million for the third quarter of 2022, a 14% increase compared to the third quarter of 2021).~~March 31, 2022. We also recognized reimbursable expense revenue of ~~$5.7~~$2.2 million for the ~~nine~~three months ended ~~September 30, 2022, an 18%~~March 31, 2023, a 58% increase compared to the ~~nine~~three months ended ~~September 30, 2021 ($1.8 million for the third quarter of 2022, a 51% increase compared to the third quarter of 2021).~~March 31, 2022. The increase in service revenue in the Servicer and Real Estate segment for the ~~nine~~three months ended ~~September 30, 2022 is primarily from higher revenue in our Marketplace and Technology and SaaS Products businesses, partially offset~~March 31, 2023 was driven by ~~lower revenue~~the continuing recovery of the default market. The increase in our Solutions ~~business. The increase~~business is primarily driven by higher property preservation referrals in the ~~Marketplace business is driven by a higher number of homes sold, partially offset by lower average sales prices and lower commission rate from a higher percentage of foreclosure auctions.~~Field Services business. The increase in the Technology and SaaS Products business is from higher professional services revenue in the Equator business. The decline in our Solutions business is primarily driven by fewer preservation referrals per property in the Field Services business, largely offset by higher revenues from our other Solutions businesses. Revenue in the other Solutions businesses grew as the default market began to recover following the expiration of the pandemic related borrower relief measures. For the three months ended September 30, 2022 the increase in service revenue is driven by increases across all our Solutions, Marketplace and Technology and SaaS Products businesses as the default market continues to recover.

For the three months ended September 30, 2022, the increase in service revenue is driven by an increase in our Solutions business as the default market continues to recover, higher revenue in our Marketplace business driven by a higher number of homes sold, partially offset by lower average sales prices and lower commission rate from a higher percentage of foreclosure auction sales, and an increase in our Technology and SaaS Products businesswas from higher professional services revenue in the Equator business.

Certain of our Servicer and Real Estate businesses are impacted by seasonality. Revenues from property sales and certain property preservation services are generally lowest during the fall and winter months and highest during the spring and summer months. However, as a result of the pandemic and related measures and the rapid rise in mortgage interest rates the seasonal impact to revenue may not follow historical patterns.

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Cost of Revenue and Gross Profit

Cost of revenue consisted of the ~~following:~~following for the three months ended March 31:


		Three months ended September 30,					Nine months ended September 30,
(in thousands)	(in thousands)	2022		2021		% Increase (decrease)	2022		2021		% Increase (decrease)	(in thousands)	2023		2022		% Increase (decrease)

Outside fees and services												Outside fees and services	$	10,255	$	8,624	19
Compensation and benefits	Compensation and benefits	$	6,554	$	6,658	(2)	$	20,819	$	23,538	(12)	Compensation and benefits	5,719		7,098		(19)
Outside fees and services		11,382		10,729		6	30,216		33,097		(9)
Reimbursable expenses												Reimbursable expenses	2,184		1,379		58
Technology and telecommunications	Technology and telecommunications	2,059		2,204		(7)	6,723		6,751		—	Technology and telecommunications	1,351		2,391		(43)
Reimbursable expenses		1,846		1,227		50	5,748		4,855		18
Depreciation and amortization	Depreciation and amortization	241		270		(11)	729		822		(11)	Depreciation and amortization	216		248		(13)

Cost of revenue	Cost of revenue	$	22,082	$	21,088	5	$	64,235	$	69,063	(7)	Cost of revenue	$	19,725	$	19,740	—

Cost of revenue for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 of ~~$64.2~~$19.7 million ~~decrease by 7%~~was relatively flat compared to the ~~nine~~three months ended ~~September 30, 2021 ($22.1 million for the third quarter of 2022, a 5% increase compared to the third quarter of 2021).~~March 31, 2022. The decrease in cost of revenue for the nine months ended September 30, 2022 is primarily driven by lower outside fees and services from lower Field Services revenue in the Solutions business, as discussed above, and lower compensation and benefits primarily due to cash cost savings initiatives. These decreases are partially offset by an increase in reimbursable expenses from a higher volume of asset resolution and asset management activities.

~~The increase in~~stable cost of revenue for the three months ended ~~September 30, 2022~~March 31, 2023 is primarily driven by ~~an increase~~lower compensation and benefits primarily due to cost savings initiatives and lower technology and telecommunications due to a change in ~~reimbursable expenses from~~the terms of a ~~higher volume of asset resolution~~vendor agreement for property management technologies and ~~asset management activities and~~other cost savings initiatives. These decreases are largely offset by higher outside fees and services in the Field Services business in the Solutions business from revenue ~~growth. This~~growth and an increase ~~is partially offset by slightly lower compensation and benefits primarily~~in reimbursable expenses largely due to ~~cash costs savings initiatives.~~revenue growth and a higher volume of asset resolution and asset management activities.

Gross profit increased to ~~$27.1~~$12.2 million, representing 41% of service revenue, for the three months ended March 31, 2023 compared to $8.8 million, representing 32% of service revenue, for the ~~nine~~three months ended September 30, 2022 compared to $20.5 million, representing 24% of service revenue, for the nine months ended September 30, 2021 (increase to $8.8 million, representing 30% of service revenue, for the third quarter of 2022, compared to $5.7 million, representing 22% of service revenue, for the third quarter of 2021).March 31, 2022. Gross profit as a

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percentage of service revenue for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 increased primarily due to ~~our COVID-19 cash~~efficiency initiatives and cost savings ~~and efficiency measures.~~measures, partially offset by revenue mix with revenue growth in our lower margin Field Services business. Our margins can vary substantially depending upon the service revenue mix.

Selling, General and Administrative Expenses

SG&A expenses consisted of the ~~following:~~following for the three months ended March 31:

Three months ended September 30, Nine months ended September 30,
(in thousands) 2022 2021 % Increase (decrease) 2022 2021 % Increase (decrease)
Compensation and benefits $ 733 $ (16) N/M $ 2,130 $ 25 N/M
Occupancy related costs 228 195 17 756 564 34
Amortization of intangible assets 742 2,131 (65) 2,230 6,548 (66)
Professional services 558 510 9 2,040 2,016 1
Marketing costs 336 152 121 1,148 510 125
Depreciation and amortization 4 4 — 10 10 —
Other 330 313 5 913 1,036 (12)
Selling, general and administrative expenses $ 2,931 $ 3,289 (11) $ 9,227 $ 10,709 (14)
~~_____________________________________~~

~~N/M — not meaningful.~~

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(in thousands)	2023		2022		% Increase (decrease)

Amortization of intangible assets	$	740	$	744	(1)
Compensation and benefits	642		653		(2)
Professional services	281		559		(50)
Marketing costs	299		357		(16)
Occupancy related costs	174		311		(44)
Depreciation and amortization	1		3		(67)
Other	164		432		(62)

Selling, general and administrative expenses	$	2,301	$	3,059	(25)

SG&A for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 of ~~$9.2~~$2.3 million decreased by ~~14%~~25% compared to the ~~nine~~three months ended ~~September 30, 2021 ($2.9 million for the third quarter of 2022, a 11% decrease compared to the third quarter of 2021).~~March 31, 2022. The decrease in SG&A for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 is primarily due to lower ~~amortization of intangible assets~~professional services driven by certain non-recurring expenses incurred in the ~~completion~~first quarter of 2022, lower Other expenses, including reversal of bad debt expense from collection of aged receivables in the ~~amortization period~~first quarter of ~~certain intangible assets during 2021. These decreases are partially offset by higher compensation~~2023, and ~~benefits for the three and nine months ended September 30, 2022 from the assignment of sales and marketing employees~~lower occupancy related costs relating to the business segments beginning in January 1, 2022 and higher marketing costs from higher participation in convention activities for the Solutions businesses and related Technology and SaaS Products business.cost savings initiatives.

Income from Operations

Income from operations increased to ~~$17.9~~$9.9 million, representing 33% of service revenue, for the three months ended March 31, 2023 compared to $5.7 million, representing 21% of service revenue, for the ~~nine~~three months ended September 30, 2022 compared to $9.8 million, representing 12% of service revenue, for the nine months ended September 30, 2021 (increased to $5.9 million, representing 20% of service revenue, for the third quarter of 2022, compared to $2.4 million, representing 9% of service revenue for the third quarter of 2021).March 31, 2022. The increase in operating income as a percentage of service revenue for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 is primarily the result of higher gross profit margins and ~~for the nine months ended September 30, 2022, the percentage~~a reduction in SG&A expenses ~~in excess of the percentage change~~with growth in revenue, discussed above.

Origination

Revenue

Revenue by business unit was as ~~follows:~~follows for the three months ended March 31:


		Three months ended September 30,					Nine months ended September 30,
(in thousands)	(in thousands)	2022		2021		% Increase (decrease)	2022		2021		% Increase (decrease)	(in thousands)	2023		2022		% Increase (decrease)

Service revenue:	Service revenue:											Service revenue:
Lenders One	Lenders One	$	4,962	$	6,003	(17)	$	15,703	$	18,797	(16)	Lenders One	$	5,624	$	5,674	(1)
Solutions	Solutions	2,126		7,970		(73)	9,839		26,169		(62)	Solutions	1,510		4,746		(68)
Technology and SaaS Products	Technology and SaaS Products	182		199		(9)	548		567		(3)	Technology and SaaS Products	176		186		(5)

Total service revenue	Total service revenue	7,270		14,172		(49)	26,090		45,533		(43)	Total service revenue	7,310		10,606		(31)

Reimbursable expenses:	Reimbursable expenses:											Reimbursable expenses:
Solutions	Solutions	111		190		(42)	410		511		(20)	Solutions	126		213		(41)

Total reimbursable expenses	Total reimbursable expenses	111		190		(42)	410		511		(20)	Total reimbursable expenses	126		213		(41)

Non-controlling interests	Non-controlling interests	133		201		(34)	468		712		(34)	Non-controlling interests	80		161		(50)

Total revenue	Total revenue	$	7,514	$	14,563	(48)	$	26,968	$	46,756	(42)	Total revenue	$	7,516	$	10,980	(32)

We recognized service revenue of ~~$26.1~~$7.3 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, a ~~43%~~31% decrease compared to the ~~nine~~three months ended ~~September 30, 2021 ($7.3 million for the third quarter of 2022, a 49% decrease compared to the third quarter of 2021).~~March 31, 2022. We also recognized reimbursable expense revenue of ~~$0.4~~$0.1 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, a ~~20%~~41% decrease compared to the ~~nine~~three months ended ~~September 30, 2021 ($0.1 million for the third quarter of 2022, a 42% decrease compared to the third quarter of 2021).~~March 31, 2022. The decrease in service revenue

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in the Origination segment for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 is primarily driven by the overall market decline in mortgage originations. The 1% decline in Lenders One revenue ~~for the three and nine months ended September 30, 2022~~ is lower than the estimated 52% overall market decline as we ~~gained traction~~onboarded sales wins with our solutions ~~comprising existing and recent product launches,~~ that are designed to help our members save money. The decline in ~~our other~~the Solutions business revenue ~~for the three and nine months ended September 30, 2022 is~~was greater than the overall market decline as ~~customers transitioned services in-house to retain their employees in some of our Solutions businesses and~~ a greater percentage of revenue in some of ~~these~~our Solutions businesses was derived from refinance transactions which declined ~~faster~~at a greater rate than the overall market.

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Cost of Revenue and Gross Profit

Cost of revenue consisted of the ~~following:~~following for the three months ended March 31:


		Three months ended September 30,					Nine months ended September 30,
(in thousands)	(in thousands)	2022		2021		% Increase (decrease)	2022		2021		% Increase (decrease)	(in thousands)	2023		2022		% Increase (decrease)

Outside fees and services												Outside fees and services	$	4,839	$	4,279	13
Compensation and benefits	Compensation and benefits	$	3,121	$	4,752	(34)	$	11,947	$	17,414	(31)	Compensation and benefits	2,148		4,305		(50)
Outside fees and services		3,937		6,111		(36)	12,357		19,325		(36)
Technology and telecommunications	Technology and telecommunications	476		486		(2)	1,464		1,424		3	Technology and telecommunications	332		501		(34)
Reimbursable expenses	Reimbursable expenses	111		190		(42)	410		511		(20)	Reimbursable expenses	126		213		(41)
Depreciation and amortization	Depreciation and amortization	9		16		(44)	28		48		(42)	Depreciation and amortization	9		9		—

Cost of revenue	Cost of revenue	$	7,654	$	11,555	(34)	$	26,206	$	38,722	(32)	Cost of revenue	$	7,454	$	9,307	(20)

Cost of revenue for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 of ~~$26.2~~$7.5 million decreased by ~~32%~~20% compared to the ~~nine~~three months ended ~~September 30, 2021 ($7.7 million for the third quarter of 2022, a 34% decrease compared to the third quarter of 2021).~~March 31, 2022. The decrease in cost of revenue for the three ~~and nine~~ months ended ~~September 30, 2022 are~~March 31, 2023 was primarily driven by ~~lower~~the alignment of compensation and benefits ~~and~~with lower service revenue discussed above, partially offset by an increase in outside fees and services ~~driven by the decrease~~from growth in service revenue discussed above. In addition, the decrease in reimbursable expenses for the three and nine months ended September 30, 2022 is consistent with the changes in reimbursable expense revenue discussed in the revenue section above.sales of certain Lenders One reseller solutions.

Gross profit decreased to ~~$0.8~~$0.1 million, representing 3%1% of service revenue, for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$8.0~~$1.7 million, representing ~~18%~~16% of service revenue, for the ~~nine~~three months ended September 30, 2021 (decreased to $(0.1) million, representing (2)% of service revenue, for the third quarter of 2022, compared to $3.0 million, representing 21% of service revenue for the third quarter of 2021).March 31, 2022. Gross profit as a percentage of service revenue decreased primarily as costs did not decline at the same rate that revenue declined.

Selling, General and Administrative Expenses

SG&A expenses consisted of the ~~following:~~following for the three months ended March 31:

Three months ended September 30, Nine months ended September 30,
(in thousands) 2022 2021 % Increase (decrease) 2022 2021 % Increase (decrease)
Compensation and benefits $ 1,172 $ 107 N/M $ 2,119 $ 487 335
Occupancy related costs 133 68 96 483 214 126
Amortization of intangible assets 539 542 (1) 1,619 1,635 (1)
Professional services 149 249 (40) 625 748 (16)
Marketing costs 436 (41) N/M 1,286 322 299
Other (30) 661 (105) 607 1,062 (43)
Selling, general and administrative expenses $ 2,399 $ 1,586 51 $ 6,739 $ 4,468 51

~~N/M — not meaningful.~~



(in thousands)	2023		2022		% Increase (decrease)

Compensation and benefits	$	665	$	403	65
Amortization of intangible assets	540		540		—
Professional services	181		222		(18)
Marketing costs	94		530		(82)
Occupancy related costs	78		183		(57)

Other	168		242		(31)

Selling, general and administrative expenses	$	1,726	$	2,120	(19)

SG&A for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 of ~~$6.7~~$1.7 million ~~increased~~decreased by ~~51%~~19% compared to the ~~nine~~three months ended ~~September 30, 2021 ($2.4 million for the third quarter of 2022, increased by 51% compared to the third quarter of 2021).~~March 31, 2022. The ~~increase~~decrease in SG&A for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 is primarily due to ~~higher compensation~~lower marketing costs from efficiency measures and ~~benefits from~~lower occupancy related costs. The decrease for the ~~assignment~~three months ended March 31, 2023 was partially offset by an increase in the number of sales and marketing employees to the business segments beginning in January 1, 2022. In addition, the increase in marketing costs and other for the nine months ended September 30, 2022 is from Lenders One convention activities that were cancelled in first quarter of 2021 due to the pandemic.employees.

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~~(Loss) Income~~Loss from Operations

~~(Loss) income~~Loss from operations ~~decreased~~increased to ~~$(6.0)~~$(1.7) million, representing (23)% of service revenue, for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$3.6~~$(0.4) million, representing ~~8% of service revenue, for the nine months ended September 30, 2021 (decreased to $(2.5) million, representing (35)~~(4)% of service revenue, for the ~~third quarter of 2022, compared to $1.4 million, representing 10% of service revenue for the third quarter of 2021).~~three months ended March 31, 2022. The ~~decrease~~increase in operating ~~(loss) income~~loss as a percentage of service revenue for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 is primarily the result of lower gross profit margins, as discussed above, and ~~higher~~the percentage reduction in SG&A ~~costs, as discussed above.~~expenses was lower than the percentage change in revenue.

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Corporate and Others

~~Revenue~~

~~Revenue by business unit was as follows:~~

Three months ended September 30, Nine months ended September 30,
(in thousands) 2022 2021 % Increase (decrease) 2022 2021 % Increase (decrease)
Service revenue:
Pointillist $ — $ 1,887 (100) $ — $ 3,409 (100)
Total service revenue — 1,887 (100) — 3,409 (100)
Total revenue $ — $ 1,887 (100) $ — $ 3,409 (100)

We recognized service revenue of $1.9 million and $3.4 million for the three and nine months ended September 30, 2021, respectively (no comparative amount for the three and nine months ended September 30, 2022). The decrease in service revenue for the three and nine months ended September 30, 2022 is driven by the December 1, 2021, Pointillist sale.

Cost of Revenue

Cost of revenue consisted of the ~~following:~~following for the three months ended March 31:


		Three months ended September 30,					Nine months ended September 30,
(in thousands)	(in thousands)	2022		2021		% Increase (decrease)	2022		2021		% Increase (decrease)	(in thousands)	2023		2022		% Increase (decrease)

Compensation and benefits	Compensation and benefits	$	2,210	$	3,761	(41)	$	6,465	$	14,703	(56)	Compensation and benefits	$	1,834	$	2,118	(13)
Outside fees and services		—		50		(100)	—		50		(100)

Technology and telecommunications	Technology and telecommunications	2,121		3,701		(43)	6,657		10,797		(38)	Technology and telecommunications	1,714		2,340		(27)

Depreciation and amortization	Depreciation and amortization	320		512		(38)	1,048		1,527		(31)	Depreciation and amortization	230		364		(37)

Cost of revenue	Cost of revenue	$	4,651	$	8,024	(42)	$	14,170	$	27,077	(48)	Cost of revenue	$	3,778	$	4,822	(22)

Cost of revenue for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 of ~~$14.2~~$3.8 million decreased by ~~48%~~22% compared to the ~~nine~~three months ended ~~September 30, 2021 ($4.7 million for the third quarter of 2022, a 42% decrease compared to the third quarter of 2021).~~March 31, 2022. The decrease in cost of revenue for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 is primarily driven by lower compensation and benefits ~~due to cash cost savings initiatives, the December 1, 2021 Pointillist sale~~ and ~~the assignment of sales and marketing employees to the business segments beginning in January 1, 2022. In addition,~~ technology and telecommunications ~~decreased~~ due to ~~lower service contract costs as a result of the December 1, 2021, Pointillist sale and~~ cost savings initiatives.

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Selling, General and Administrative Expenses

SG&A in Corporate and Others include costs related to the corporate functions including executive, finance, technology, law, compliance, human resources, vendor management, facilities, risk management and eliminations between reportable segments.

SG&A expenses consisted of the ~~following:~~following for the three months ended March 31:


		Three months ended September 30,					Nine months ended September 30,
(in thousands)	(in thousands)	2022		2021		% Increase (decrease)	2022		2021		% Increase (decrease)	(in thousands)	2023		2022		% Increase (decrease)

Compensation and benefits	Compensation and benefits	$	5,483	$	6,768	(19)	$	14,844	$	20,495	(28)	Compensation and benefits	$	4,723	$	4,353	8
Occupancy related costs	Occupancy related costs	647		1,919		(66)	2,810		6,874		(59)	Occupancy related costs	1,190		1,130		5

Professional services	Professional services	1,877		1,559		20	5,767		5,132		12	Professional services	1,109		1,968		(44)
Marketing costs	Marketing costs	2		216		(99)	12		668		(98)	Marketing costs	(11)		—		N/M
Depreciation and amortization	Depreciation and amortization	280		342		(18)	885		1,072		(17)	Depreciation and amortization	243		334		(27)
Other	Other	937		925		1	2,771		2,628		5	Other	813		1,010		(20)

Selling, general and administrative expenses	Selling, general and administrative expenses	$	9,226	$	11,729	(21)	$	27,089	$	36,869	(27)	Selling, general and administrative expenses	$	8,067	$	8,795	(8)

N/M — not meaningful.

SG&A for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 of ~~$27.1~~$8.1 million decreased by ~~27%~~8% compared to the ~~nine~~three months ended ~~September 30, 2021 ($9.2 million for the third quarter of 2022, a 21%~~March 31, 2022. The decrease ~~compared to the third quarter of 2021). Compensation~~was primarily driven by lower professional services and ~~benefits~~Other expenses. Professional services for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 decreased ~~primarily~~ due to ~~cash cost savings initiatives,~~lower insurance, legal and ~~from the assignment of sales and marketing employees to the business segments beginning in January 1, 2022. In addition, the decrease in occupancy~~audit related ~~costs~~expenses. The decreases for the three ~~and nine~~ months ended ~~September 30, 2022 primarily resulted from facility elimination initiatives.~~March 31, 2023 were partially offset by an increase in compensation and benefits in the first quarter of 2023.

Other Income (Expense), net

Other income (expense), net principally includes interest expense and other non-operating gains and losses.

Other income (expense), net was ~~$(10.1)~~$(7.7) million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$(9.9)~~$(2.8) million for the ~~nine~~three months ended ~~September 30, 2021 ($(3.9) million for the third quarter of 2022 and $(3.9) million for the third quarter of 2021).~~March 31, 2022. The change for the ~~nine~~three months ended ~~September 30, 2022 is~~March 31, 2023 was primarily driven by an increase of ~~$0.8~~$3.2 million in interest expense driven by higher interest ~~rate~~rates on our SSTL and higher amortization of ~~our Credit Facility,~~debt discount and debt issuance and amendment costs, and $3.2 million of debt amendment costs in the three months ended March 31, 2023, partially offset by higher interest ~~income~~ and ~~foreign currency exchange gains.~~other income.

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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 cash on hand. However, due to governmental and market responses to the COVID-19 pandemic, revenue has declined significantly. The lower revenue, partially offset by cost savings initiatives, resulted in negative operating cash flow from operations for ~~nine~~the three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021. To increase~~2022. We believe our liquidity we entered into a $20 million revolving credit facility during the second quarter of 2021 ($15 million available as of September 30, 2022). In addition, Altisource’s December 1, 2021 sale of its equity interest in Pointillist increased our liquidity. The Pointillist sale generated approximately $106.0 million in cash, with $102.2 million received at closing, approximately $0.3 million deposited into the Working Capital Escrow and received in May 2022, and approximately $3.5 million deposited into the Indemnification Escrow. Finally, we believe the anticipated revenue growth asfrom the return of the default market, ~~returns~~on-boarding sales wins, and revenue mix ~~along~~together with our reduced cost structure, should help reduce negative operating cash flow. 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 and fund negative operating cash flow. We also use cash for repayments of our long-term debt and capital investments. In addition, from time to time we consider and evaluate business acquisitions, dispositions, closures or other similar actions that are aligned with our strategy.

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Senior Secured Term Loans

~~Credit Agreement~~

OnIn April 3, 2018, Altisource Portfolio Solutions S.A. and its wholly-owned subsidiary, Altisource S.à r.l., entered into a credit agreement with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and certain lenders (the “Credit Agreement”) ~~pursuant to which~~. Under the Credit Agreement, Altisource borrowed ~~$412.0~~$412 million in the form of ~~Term B Loans~~senior secured term loans (“SSTL”). Effective February 14, 2023, Altisource Portfolio Solutions S.A. and ~~obtained a $15.0 million revolving credit facility. The Term B Loans mature in April 2024. We terminated~~Altisource S.à r.l. entered into Amendment No. 2 to the ~~revolving credit facility on December 1, 2021. As of September 30, 2022,~~Credit Agreement (as amended by Amendment No. 2, the ~~principal balance~~“Amended Credit Agreement”). Altisource Portfolio Solutions S.A. and certain subsidiaries are guarantors of the ~~Term B Loans was $247.2 million.~~SSTL (collectively, the “Guarantors”).

~~There are no mandatory repayments~~The maturity date of the ~~Term B Loans due until~~SSTL under the Amended Credit Agreement is April 30, 2025. If Aggregate Paydowns are equal to or greater than $30 million, then (subject to the representations and warranties being true and correct as of such date and there being no default or event of default being in existence as of such date) the maturity indate of the SSTL may be extended at the Company’s option to April ~~2024, except as otherwise described herein and in~~30, 2026. Such extension is conditioned upon the ~~Credit Agreement.~~ Company’s payment of a 2% payment-in-kind extension fee.

In February 2023, the Company made payments of $20 million toward the determination of Aggregate Paydowns.

The interest rate on the Term B Loans as of September 30, 2022 was 6.25%, representing 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%.Agreement.

Through March 29, 2023, the SSTL’s interest rate was the Adjusted Eurodollar Rate plus 4.00%. Beginning March 30, 2023, the SSTL bears interest at rates based upon, at our option, the Secured Overnight Financing Rate (“SOFR”) or the Base Rate. SOFR term loans initially bear interest at a rate per annum equal to SOFR plus 5.00% payable in cash plus 5.00% payable in kind (“PIK”). Base Rate loans initially bear interest at a rate per annum equal to the Base Rate plus 4.00% payable in cash plus 5.00% PIK. 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) 4.00%. The interest rate as of March 31, 2023 was 14.49%. The PIK component of the interest rate is subject to adjustment based on the amount of Aggregate Paydowns as set forth in the table below. Based on Aggregate Paydowns of $20 million through March 31, 2023, the PIK component of the interest rate declined to 4.50%.

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Aggregate Paydowns			PIK Component of Interest Rate
Less than $20 million			5.00%
$20 million+ but less than below			4.50%
$30 million+ but less than below			3.75%
$40 million+ but less than below			3.50%
$45 million+ but less than below			3.00%
$50 million+ but less than below			2.50%
$55 million+ but less than below			2.00%
$60 million+ but less than below			1.00%
$65 million+ but less than below			0.50%
$70 million+			0.00%

The Amended 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. Under the Amended Credit Agreement, we are not permitted to repurchase shares except for limited circumstances. In the event we require additional liquidity, our ability to obtain it may be limited by the Credit Agreement.

~~Credit Facility~~As of March 31, 2023, the outstanding principal balance of the SSTL was $227.2 million.

Revolver

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”~~“Revolver”). STS is an investment fund managed by Deer ~~Park Road Management Company, LP.~~Park. Deer Park ~~Road Management Company, LP~~ owns approximately ~~24%~~20% of Altisource’s common stock as of ~~September 30, 2022.~~March 31, 2023 and owns Altisource debt as a lender under the Amended Credit Agreement. Deer Park’s Chief Investment Officer and managing partner was a member of Altisource’s Board of Directors until his resignation on March 1, 2022. The replacement director appointed by the Board of Directors is a current employee of Deer Park.

~~Outstanding amounts borrowed pursuant to~~The maturity date of the Amended Revolver coincides with the maturity date of the SSTL under the Amended Credit ~~Facility will amortize over the three-year term~~Agreement, as ~~follows: on June 22, 2022, the difference between the then~~it may be extended. The outstanding balance ~~above $15.0 million and $15.0 million, will be~~on the Amended Revolver is due and payable ~~by Altisource;~~ on June 22, 2023, the difference between the then outstanding balance above $10.0 million and $10.0 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.such maturity date.

Borrowings under the ~~Credit Facility~~Amended Revolver bear interest of ~~9.00%~~10.00% per annum in cash and 3.00% per annum PIK and are payable quarterly on the last business day of each March, June, September and ~~December, commencing on September 30, 2021.~~December. In connection with the ~~Credit Facility,~~Amended Revolver, Altisource is required to pay ~~customary fees, including an upfront~~a usage fee equal to ~~$0.5~~$0.75 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.~~Amended Revolver.

~~Table~~ of ~~Contents~~

the assets of the Company, which lien will be pari passu with liens securing the SSTL under the Amended Credit Agreement.

~~The Credit Facility contains certain events~~

Table 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.Contents

As of ~~September 30, 2022,~~March 31, 2023, there was no outstanding debt under the ~~Credit Facility.~~Amended Revolver.

Cash Flows

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


(in thousands)	(in thousands)	2022		2021		% Increase (decrease)	(in thousands)	2023		2022		% Increase (decrease)

Net cash used in operating activities	Net cash used in operating activities	$	(32,293)	$	(41,133)	21	Net cash used in operating activities	$	(3,058)	$	(16,910)	82
Net cash (used in) provided by investing activities		(517)		1,875		(128)
Net cash (used in) provided by financing activities		(1,943)		17,929		(111)
Net cash used in investing activities							Net cash used in investing activities	—		(74)		100
Net cash used in financing activities							Net cash used in financing activities	(4,887)		(1,278)		(282)
Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(34,753)		(21,329)		63	Net decrease in cash, cash equivalents and restricted cash	(7,945)		(18,262)		(56)
Cash, cash equivalents and restricted cash at the beginning of the period	Cash, cash equivalents and restricted cash at the beginning of the period	102,149		62,096		65	Cash, cash equivalents and restricted cash at the beginning of the period	54,273		102,149		(47)

Cash, cash equivalents and restricted cash at the end of the period	Cash, cash equivalents and restricted cash at the end of the period	$	67,396	$	40,767	65	Cash, cash equivalents and restricted cash at the end of the period	$	46,328	$	83,887	(45)

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. For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net cash used in operating activities was ~~$(32.3)~~$(3.1) million compared to net cash used in operating activities of ~~$(41.1)~~$(16.9) million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the decrease in cash used in operating activities was driven by a ~~$17.3~~$14.8 million decrease in ~~net loss~~cash used for working capital and a $1.1 million increase in non-cash interest expense (amortization of debt discount and amortization of debt issuance and amendment costs), partially offset by a ~~$4.1~~$0.8 million increase in net loss and a $0.3 million decrease in non-cash depreciation, amortization of intangibles, ~~and~~ stock based compensation expenses and ~~a $4.0 million~~deferred income tax expenses. The increase ~~in cash used for working capital. The decrease~~ in net loss was primarily due to higher ~~gross profit during the nine months ended September 30, 2022 from revenue mix with~~interest expense driven by higher ~~revenue from the higher margin businesses in Servicer~~interest rates on our SSTL, debt amendment costs and ~~Real Estate, our cash cost savings measures, the sale of Pointillist and lower SG&A expenses, partially offset by~~ lower gross profit in the Origination ~~business~~segment from lower ~~revenue.~~revenue, partially offset by higher gross profit in the Servicer and Real Estate segment from revenue growth, our cash cost savings measures, and lower SG&A expenses. The ~~increase~~decrease in cash used for changes in working capital was primarily driven by ~~higher cash payments for annual incentive compensation bonuses~~the $4.7 million net collection of taxes receivable in the first quarter of 2023 compared to a net payment of taxes of $3.3 million in the first quarter of 2022, ~~by $3.7~~a $2.0 million ~~partially offset by $1.3 million more~~return of surety bonds, and no cash ~~generated from~~bonuses paid in the ~~change in accounts receivable for the nine~~three months ended ~~September 30, 2022 compared to~~March 31, 2023. Non-cash interest expense increased as a result of the ~~nine months ended September 30, 2021, largely driven by the timing of collections.~~February 2023 Amended Credit Agreement. 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~~three months ended ~~September 30,~~March 31, 2022 ~~and 2021~~ consisted of additions to premises and equipment and proceeds from the sale of a business. Net cash ~~(used in) provided by~~used in investing activities was ~~$(0.5) million and $1.9~~$(0.1) million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 ~~and 2021, respectively. The change in cash provided by investing activities was driven by $3.0 million in proceeds received in 2021 in connection with~~(no comparable amount for the ~~second installment from the August 2018 sale of the rental property management business to Front Yard Residential Corporation (“RESI”)~~three months ended March 31, 2023). In addition, we used ~~$(0.9)~~$(0.1) million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 ~~compared to $(1.1) million in 2021,~~ for additions to premises and equipment primarily related to investments in the development of certain software applications and facility ~~improvements.~~

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improvements (no comparable amount for the three months ended March 31, 2023).

Cash Flows from Financing Activities

Net cash used in financing activities were ~~$(1.9)~~$(4.9) million and ~~$17.9~~$(1.3) million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023, we received proceeds from the issuance of common stock, net of issuance costs of $20.5 million and used $(20.0) million of the proceeds for repayment of debt. Also during the three months ended March 31, 2023, we paid $(4.8) million to lenders or others on behalf of the lenders related to the debt amendment. During the three months ended March 31, 2023 and 2022, ~~and 2021,~~ we made payments of ~~$(1.1)~~$(0.5) million and ~~$(0.9)~~$(1.0) million, respectively, to satisfy employee tax withholding obligations on the issuance of restricted share units and restricted shares. These payments were made to tax authorities, at the employees’ direction, to satisfy the employees’ tax obligations rather than issuing a portion of vested restricted share units and restricted shares to employees. In addition, during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we distributed ~~$(0.9)~~$(0.1) million and ~~$(1.8)~~$(0.3) million, respectively, to non-controlling interests. ~~During the nine months ended September 30, 2021, we received proceeds from the issuance~~

Table of long-term debt of $20.0 million and paid $0.5 million in debt issuance costs in connection with borrowings under the Credit Facility (no comparable amount for the nine months ended September 30, 2022). During the nine months ended September 30, 2021, we also received proceeds from the Pointillist convertible notes payable to related parties of $1.2 million (no comparable amount for the nine months ended September 30, 2022).Contents

Future Uses of Cash

Our significant future liquidity obligations primarily pertain to the maturity of the Amended Credit Agreement, interest expense under the Amended Credit Agreement (see Liquidity section above), distributions to Lenders One members and operating lease payments on certain of our premises and equipment.

Significant future uses of cash include the following:


				Payments Due by Period									Payments Due by Period
(in thousands)	(in thousands)	Total		2022		2023-2024		2025-2026		(in thousands)	Total		2023		2024-2025		2026-2027

Credit Agreement outstanding balance (1)		$	247,204	$	—	$	247,204	$	—
Senior secured term loans (1)										Senior secured term loans (1)	$	249,409	$	—	$	249,409	$	—
Interest expense payments (2)	Interest expense payments (2)	28,562		4,743		23,819		—		Interest expense payments (2)	50,017		17,537		32,480		—
Lease payments	Lease payments	6,919		1,102		3,948		1,869		Lease payments	6,041		2,092		3,311		638

Total	Total	$	282,685	$	5,845	$	274,971	$	1,869	Total	$	305,467	$	19,629	$	285,200	$	638

(1) The outstanding balance of our ~~Credit Agreement~~SSTL as of ~~$247.2~~March 31, 2023 is $227.2 million and is due on April ~~1, 2024.~~30, 2025. The maturity date of the SSTL may be extended to April 30, 2026 at the Company’s option if Aggregate Paydowns made prior to February 14, 2024 total $30 million or more. In the first quarter of 2023, the Company made $20 million of payments toward the determination of Aggregate Paydowns. The table herein reflects a maturity of April 2025 as the Company has not made Aggregate Paydowns of $30 million or more at the time of this filing. The increase in outstanding balance is from the PIK component of our interest expense and is assumed to be paid in kind.

(2) ~~Assuming no further principal repayments, estimated~~Estimated future interest payments based on the SOFR interest rate as of ~~September 30, 2022~~March 31, 2023 and the April ~~1, 2024~~30, 2025 maturity date. Based on the April ~~1, 2024~~30, 2025 maturity date, no interest expense has been included beyond April ~~1, 2024.~~30, 2025.

We anticipate to fund future liquidity requirements with a combination of existing cash balances, cash anticipated to be generated by operating activities and, ~~anticipated~~as needed, proceeds from ~~a refinancing of our Credit Agreement.~~the Amended Revolver. For further information, see Note 11 and Note 21 to the condensed consolidated financial statements.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements consist of escrow arrangements.

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 condensed consolidated balance sheets. Amounts held in escrow accounts were ~~$20.0~~$15.8 million and ~~$27.5~~$13.2 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Contractual Obligations, Commitments and Contingencies

For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, there were no significant changes to our contractual obligations from those identified in our Form 10-K for the fiscal year ended December 31, ~~2021~~2022 and this Form 10-Q, other than those that occur in the normal course of business. See Note 21 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,

~~Table of Contents~~

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. 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, ~~2021~~2022 filed with the SEC on March ~~3, 2022.~~30, 2023. There have been no material changes to our critical accounting policies during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

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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

AsUnder the terms of ~~September 30, 2022,~~the Amended Credit Agreement, the interest rate charged on the ~~Term B Loan was 6.25%. The interest rate~~SSTL is ~~calculated based on the Adjusted Eurodollar Rate for a three month interest period~~SOFR (as defined in the ~~senior secured term loan agreement)~~Amended Credit Agreement) with a minimum floor of 1.00% plus ~~4.00%.~~5.00% paid in cash plus 5.00% PIK. Based on the first quarter 2023 par paydown of $20 million, the PIK component was reduced to 4.50% and may be further reduced on a prospective basis based on the Aggregate Paydowns made prior to February 14, 2024.

Based on the principal amount outstanding and ~~the Adjusted Eurodollar Rate~~SOFR as of ~~September 30, 2022,~~March 31, 2023, a one percentage point increase in ~~the Eurodollar rate~~SOFR above the minimum floor would increase our annual interest expense by approximately ~~$2.5~~$2.3 million. There would be a ~~$2.5~~$2.3 million decrease in our annual interest expense if there was a one percentage point decrease in ~~the Eurodollar Rate.~~SOFR.

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 ~~2022,~~2023, 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 ~~$0.3~~$0.1 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 30, 2022,~~March 31, 2023, 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 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 30, 2022.~~March 31, 2023.

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 30, 2022,~~March 31, 2023, 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, ~~2021~~2022 filed with the SEC on March ~~3, 2022.~~30, 2023.

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 30, 2022.~~March 31, 2023. 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 30, 2022,~~March 31, 2023, 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 30, 2022, 93,628~~March 31, 2023, 83,250 common shares were withheld from employees to satisfy tax withholding obligations that arose from the vesting of restricted shares.

On February 14, 2023, the lenders under the Amended Credit Agreement received warrants to purchase 3,223,851 shares of Altisource common stock (the “Warrant Shares”). The exercise price per share of common stock under each Warrant is equal to $0.01. The number of Warrant Shares is subject to reduction based on the amount of par paydowns on the SSTL in the aggregate using proceeds from issuances of equity interests or from junior indebtedness made prior to February 14, 2024 (“Aggregate Paydowns”) as set forth in the table below.


Aggregate Paydowns			Warrant Shares
Less than $20 million			3,223,851
$20 million+ but less than below			2,578,743
$30 million+			1,612,705

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Item 6. Exhibits


Exhibit Number						Exhibit Description

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 30, 2022~~March 31, 2023 is formatted in Inline XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021;~~2022; (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021;~~2022; (iii) Condensed Consolidated Statements of Equity for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021;~~2022; (iv) Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021;~~2022; 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:

~~November 3, 2022~~April 27, 2023

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 Loss	4
		Condensed Consolidated Statements of Equity (Deficit)	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	2825

	Item 3	Quantitative and Qualitative Disclosures about Market Risk	4942

	Item 4	Controls and Procedures	4942

PART II — Other Information

	Item 1	Legal Proceedings	5043

	Item 1A	Risk Factors	5043

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	5043

	Item 6	Exhibits	5144

SIGNATURES			5245


	Nine months ended September 30, 2021
(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

Servicer and Real Estate	$	77,898	$	6,832	$	4,854	$	89,584
Origination	46,213		32		511		46,756
Corporate and Others	—		3,409		—		3,409
Total revenue	$	124,111	$	10,273	$	5,365	$	139,749