SEC Filing | Altisource Portfolio Solutions

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2013

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

Commission File Number 1-34354

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

(Exact name of Registrant as specified in its Charter)

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

291, Route d’Arlon

L-1150 Luxembourg

Grand Duchy of Luxembourg

(Address of principal executive offices) (Zip Code)

+352 2469 7900

Registrant’s telephone number

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer x		Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

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

As of October 19, 2013, there were 22,857,130 outstanding shares of the registrant’s shares of beneficial interest (excluding 2,555,618 shares held as treasury stock).

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

FORM 10-Q

			Page
PART I — Financial Information

	Item 1	Interim Condensed Consolidated Financial Statements
		Condensed Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Operations	4
		Condensed Consolidated Statements of Equity	5
		Condensed Consolidated Statements of Cash Flows	6
		Notes to Condensed Consolidated Financial Statements	7

	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

	Item 3	Quantitative and Qualitative Disclosures about Market Risk	40

	Item 4	Controls and Procedures	41


PART II — Other Information

	Item 1	Legal Proceedings	42

	Item 1A	Risk Factors	42

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	42

	Item 6	Exhibits	43

SIGNATURES			44

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PART I. FINANCIAL INFORMATION

Item 1. Interim Condensed Consolidated Financial Statements (Unaudited)

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	September 30,			December 31,
	2013			2012

ASSETS
Current assets:
Cash and cash equivalents	$	212,585		$	105,502
Accounts receivable, net	83,851			88,955
Prepaid expenses and other current assets	13,760			7,618
Deferred tax assets, net	1,775			1,775
Total current assets	311,971			203,850

Premises and equipment, net	59,464			50,399
Deferred tax assets, net	4,073			4,073
Intangible assets, net	242,088			56,586
Goodwill	14,915			14,915
Investment in Correspondent One	—			12,729
Loan to Ocwen	—			75,000
Other assets	15,243			11,674

Total assets	$	647,754		$	429,226

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	66,848		$	58,976
Current portion of long-term debt	4,000			2,000
Current portion of capital lease obligations	—			233
Other current liabilities	9,371			10,423
Total current liabilities	80,219			71,632

Long-term debt, less current portion	392,708			196,027
Other non-current liabilities	1,296			1,738

Commitments and contingencies (Note 17)

Equity:
Common stock ($1.00 par value; 100,000 shares authorized; 25,413 issued and 22,866 outstanding as of September 30, 2013; 25,413 issued and 23,427 outstanding as of December 31, 2012)	25,413			25,413
Additional paid-in-capital	88,949			86,873
Retained earnings	209,783			124,127
Treasury stock, at cost (2,547 shares as of September 30, 2013 and 1,986 shares as of December 31, 2012)	(151,861		)	(77,954		)
Altisource equity	172,284			158,459

Non-controlling interests	1,247			1,370
Total equity	173,531			159,829

Total liabilities and equity	$	647,754		$	429,226

See accompanying notes to condensed consolidated financial statements.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Three months ended						Nine months ended
	September 30,						September 30,
	2013			2012			2013			2012

Revenue	$	210,835		$	143,988		$	545,772		$	427,259
Cost of revenue	134,261			94,287			348,195			278,785

Gross profit	76,574			49,701			197,577			148,474
Selling, general and administrative expenses	31,519			18,452			80,027			54,485

Income from operations	45,055			31,249			117,550			93,989
Other income (expense), net:
Interest expense	(6,188		)	(10		)	(14,302		)	(39		)
Other income (expense), net	(253		)	(257		)	529			(900		)
Total other income (expense), net	(6,441		)	(267		)	(13,773		)	(939		)

Income before income taxes and non-controlling interests	38,614			30,982			103,777			93,050
Income tax provision	(1,659		)	(2,898		)	(6,227		)	(8,493		)

Net income	36,955			28,084			97,550			84,557
Net income attributable to non-controlling interests	(947		)	(1,060		)	(3,093		)	(4,223		)

Net income attributable to Altisource	$	36,008		$	27,024		$	94,457		$	80,334

Earnings per share:
Basic	$	1.56		$	1.16		$	4.07		$	3.44
Diluted	$	1.42		$	1.08		$	3.77		$	3.23

Weighted average shares outstanding
Basic	23,025			23,338			23,185			23,347
Diluted	25,333			25,016			25,070			24,895

Transactions with related parties included above
Revenue	$	143,557		$	86,558		$	354,889		$	257,491
Selling, general and administrative expenses	720			621			2,133			1,801
Other income	—			—			773			—

See accompanying notes to condensed consolidated financial statements.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)

	Altisource Equity
	Common stock			Additional paid-in capital		Retained earnings			Treasury stock, at cost			Non- controlling interests			Total
Balance, December 31, 2011	25,413	$	25,413	$	83,229	$	126,161		$	(72,048	)	$	3,188		$	165,943
Net income	—	—		—		80,334			—			4,223			84,557
Contributions from non-controlling interest holders	—	—		—		—			—			27			27
Distributions to non-controlling interest holders	—	—		—		—			—			(6,008		)	(6,008		)
Share-based compensation expense	—	—		2,038		—			—			—			2,038
Exercise of stock options	—	—		—		(5,759		)	8,378			—			2,619
Repurchase of shares	—	—		—		—			(16,781		)	—			(16,781		)
Balance, September 30, 2012	25,413	$	25,413	$	85,267	$	200,736		$	(80,451	)	$	1,430		$	232,395

Balance, December 31, 2012	25,413	$	25,413	$	86,873	$	124,127		$	(77,954	)	$	1,370		$	159,829
Net income	—	—		—		94,457			—			3,093			97,550
Contributions from non-controlling interest holders	—	—		—		—			—			18			18
Distributions to non-controlling interest holders	—	—		—		—			—			(3,234		)	(3,234		)
Share-based compensation expense	—	—		2,076		—			—			—			2,076
Exercise of stock options	—	—		—		(8,801		)	13,511			—			4,710
Repurchase of shares	—	—		—		—			(87,418		)	—			(87,418		)
Balance, September 30, 2013	25,413	$	25,413	$	88,949	$	209,783		$	(151,861	)	$	1,247		$	173,531

See accompanying notes to condensed consolidated financial statements.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine months ended
	September 30,
	2013			2012
Cash flows from operating activities:
Net income	$	97,550		$	84,557
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	13,791			9,038
Amortization of intangible assets	18,857			3,833
Share-based compensation expense	2,076			2,038
Equity in losses of affiliates	176			872
Bad debt expense	1,338			1,170
Amortization of debt discount	184			—
Amortization of debt issuance costs	702			—
Loss on sale or disposal of fixed assets	1,178			401
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	3,762			(11,662		)
Prepaid expenses and other current assets	(6,142		)	(4,058		)
Other assets	(1,871		)	809
Accounts payable and accrued expenses	4,574			10,405
Other current and non-current liabilities	(1,535		)	(266		)
Net cash provided by operating activities	134,640			97,137

Cash flows from investing activities:
Additions to premises and equipment	(20,528		)	(24,199		)
Acquisition of businesses, net of cash acquired	(204,567		)	—
Investment in equity affiliate	(50		)	—
Proceeds from sale of equity affiliate	12,648			—
Proceeds from loan to Ocwen	75,000			—
Net cash used in investing activities	(137,497		)	(24,199		)

Cash flows from financing activities:
Proceeds from issuance of long-term debt	201,000			—
Repayment of long-term debt	(2,503		)	—
Debt issuance costs	(2,400		)	—
Principal payments on capital lease obligations	(233		)	(491		)
Proceeds from stock option exercises	4,710			2,619
Purchase of treasury stock	(87,418		)	(16,781		)
Contributions from non-controlling interests	18			27
Distributions to non-controlling interests	(3,234		)	(6,008		)
Net cash provided by (used in) financing activities	109,940			(20,634		)

Increase in cash and cash equivalents	107,083			52,304
Cash and cash equivalents at the beginning of the period	105,502			32,125
Cash and cash equivalents at the end of the period	$	212,585		$	84,429

Supplemental cash flow information
Interest paid	$	13,592		$	39
Income taxes paid, net	2,360			2,252

Non-cash investing and financing activities
Amortization of tax-deductible goodwill	$	—		$	2,524
Premises and equipment purchased on account	1,947			5,992

See accompanying notes to condensed consolidated financial statements.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements

NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION

Description of Business

Altisource Portfolio Solutions S.A., together with its subsidiaries (which may be referred to as “Altisource,” the “Company,” “we,” “us” or “our”), is a premier marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries offering both distribution and content. We leverage proprietary business process, vendor and electronic payment management software and behavioral science based analytics to improve outcomes for marketplace participants.

We are incorporated under the laws of Luxembourg and are publicly traded on the NASDAQ Global Select market under the symbol “ASPS.”

We conduct our operations through three reporting segments: Mortgage Services, Financial Services and Technology Services. In addition, we report our corporate related expenditures and eliminations as a separate segment (see Note 18 for a description of our business segments).

Basis of 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 notes required by GAAP for complete consolidated financial statements. In the opinion of management, the interim data includes all normal recurring adjustments considered necessary to fairly state the results for the interim periods presented. The preparation of interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our interim condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All significant intercompany and inter-segment transactions and accounts have been eliminated in consolidation.

The Mortgage Partnership of America, L.L.C. (“MPA”), a wholly-owned subsidiary of Altisource®, is the manager of a national alliance of community mortgage bankers, correspondent lenders and suppliers of mortgage products and services that is referred to as the Lenders One® Mortgage Cooperative (“Lenders One”). The management agreement between MPA and Lenders One, pursuant to which MPA is the management company of Lenders One, represents a variable interest in a variable interest entity. MPA is the primary beneficiary of Lenders One as it has the power to direct the activities that most significantly impact Lenders One’s economic performance and the obligation to absorb losses or the right to receive benefits from Lenders One. As a result, Lenders One is presented in the accompanying interim condensed consolidated financial statements on a consolidated basis with the interests of the members reflected as non-controlling interests. As of September 30, 2013, Lenders One had total assets of $3.8 million and liabilities of $2.5 million. As of December 31, 2012, Lenders One had total assets of $2.3 million and liabilities of $1.0 million.

These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our Form 10-K for the year ended December 31, 2012, filed with the SEC on February 13, 2013, which contains a summary of our significant accounting policies. Certain footnote detail in the Form 10-K is omitted from the information included herein.

Fair Value of Financial Instruments

Our financial instruments primarily include cash and cash equivalents, restricted cash and long-term debt. Cash and cash equivalents and restricted cash are carried at amounts that approximate their fair value due to the short-term nature of these instruments. The fair value was determined by level 1 of the three level hierarchy established by the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement, using quoted prices in active markets for identical assets. The carrying amount of the long-term debt approximates fair value due to the variable interest rate. The fair value was determined by level 2 of the three level hierarchy in ASC Topic 820 using inputs other than quoted prices that are observable, either directly or indirectly.

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NOTE 2 — TRANSACTIONS WITH RELATED PARTIES

Ocwen®

Ocwen Financial Corporation, together with its subsidiaries (“Ocwen”), is our largest customer. Our Chairman is also the Chairman of Ocwen. Ocwen is contractually obligated to purchase certain mortgage services and technology services from us through August 2025 under the terms of a master services agreement and amendments to the master services agreement (collectively, the “Service Agreements”). In connection with our acquisition from Ocwen of the fee-based businesses of Homeward Residential, Inc. (“Homeward”) that closed on March 29, 2013 and the acquisition from Ocwen related to the fee-based businesses of Residential Capital, LLC (“ResCap”) that closed on April 12, 2013 (see Note 3), our Service Agreements with Ocwen were amended to extend the term from 2020 to 2025. Further, as part of the amendments, we are the exclusive provider of services to Ocwen with respect to the Homeward and ResCap servicing portfolios, and Ocwen agreed not to establish similar fee-based businesses that would directly or indirectly compete with Altisource’s services with respect to the Homeward and ResCap businesses. We settle amounts with Ocwen on a daily, weekly or monthly basis depending upon the nature of the service and when the service is provided.

Related party revenue consists of revenue earned directly from Ocwen and revenue earned from the loans serviced by Ocwen when Ocwen designates us as the service provider. We earn additional revenue on the portfolios serviced by Ocwen that are not considered related party revenue when a party other than Ocwen selects the service provider. Related party revenue as a percentage of segment and consolidated revenue was as follows:

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012

Mortgage Services	73	%	68	%	71	%	69	%
Financial Services	37	%	<1	%	25	%	<1	%
Technology Services	53	%	39	%	53	%	40	%
Consolidated revenue	68	%	60	%	65	%	60	%

We record revenue we earn from Ocwen under various long-term servicing contracts at rates we believe to be market rates as they are consistent with one or more of the following: the fees we charge to other customers for comparable services, the fees Ocwen pays to other service providers and fees charged by our competitors.

Support Services

We have support services agreements with Ocwen. These services provided and received pursuant to the above agreements include such areas as human resources, vendor management, corporate services, operational effectiveness, quality assurance, quantitative analytics and treasury. Payment for the services provided or received is on the fully-allocated cost of providing the service based on an estimate of the time and expense of providing the service. For the nine months ended September 30, 2013 and 2012, we billed Ocwen $1.8 million and $2.0 million, respectively ($0.6 million for the third quarter of 2013 and 2012), and Ocwen billed us $2.1 million and $1.8 million, respectively ($0.7 million and $0.6 million for the third quarter of 2013 and 2012, respectively), for services provided under these agreements. These amounts are reflected as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.

Unsecured Term Loan

On December 27, 2012, we entered into a senior unsecured term loan agreement with Ocwen under which we loaned $75.0 million to Ocwen. Payments of interest were due quarterly at a rate per annum equal to the Eurodollar Rate (as defined in the agreement) plus 6.75%, provided that the Eurodollar Rate shall at no time be less than 1.50%. On February 15, 2013, Ocwen repaid the outstanding principal amount of $75.0 million, plus all accrued and unpaid interest and the term loan was terminated. Interest income related to this loan was $0.8 million for the nine months ended September 30, 2013 (no comparative amounts for 2012).

Transactions Related to Fee-Based Businesses

On January 31, 2013, we entered into non-binding letters of intent with Ocwen to acquire certain fee-based businesses associated with Ocwen’s acquisitions of the Homeward and the ResCap servicing portfolios. Ocwen acquired the Homeward servicing portfolio on December 27, 2012 and the ResCap servicing portfolio on February 15, 2013. Altisource acquired the Homeward

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fee-based businesses from Ocwen on March 29, 2013 (see Note 3). Altisource entered into an agreement with Ocwen on April 12, 2013 to establish additional terms related to our services in connection with the ResCap fee-based businesses (see Note 3).

Correspondent One® and HLSS™

In July 2011, we acquired an equity interest in Correspondent One S.A. (“Correspondent One”) (see Note 8). Correspondent One purchased closed conforming and government guaranteed residential mortgages from approved mortgage bankers. On March 31, 2013, we sold our 49% interest in Correspondent One to Ocwen for $12.6 million. Under a support services agreement, we provided Correspondent One certain finance, human resources, legal support, facilities, technology, vendor management and risk management services. For the nine months ended September 30, 2013 and 2012, we billed Correspondent One less than $0.1 million and $0.2 million, respectively (none for the third quarter of 2013 and $0.1 million for the third quarter of 2012). We also provided certain origination related services to Correspondent One. We earned revenue of $0.1 million and $0.2 million for the nine months ended September 30, 2013 and 2012, respectively, for these services (none for the third quarter of 2013 and $0.2 million for the third quarter of 2012).

Home Loan Servicing Solutions, Ltd. (“HLSS”) is a publicly traded company whose primary objective is the acquisition of mortgage servicing rights and advances. In connection with the February 2012 HLSS initial public offering and subsequent thereto, HLSS acquired mortgage servicing related assets from Ocwen. Our Chairman is also the Chairman of HLSS. Under a support services agreement, we provide HLSS certain finance, human resources and legal support services. For the nine months ended September 30, 2013 and 2012, we billed HLSS $0.5 million and $0.4 million, respectively ($0.2 million for the third quarter of 2013 and 2012).

These amounts are reflected as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.

Residential and AAMC

Altisource Residential Corporation (“Residential”) and Altisource Asset Management Corporation (“AAMC”) were established, capitalized and their equity was distributed to our shareholders on December 21, 2012 and are each separate publicly traded companies (the “Separation of the Residential Asset Businesses”). Residential is focused on acquiring and managing single family rental properties by acquiring portfolios of sub-performing and non-performing residential mortgage loans throughout the United States. AAMC is an asset management company providing portfolio management and corporate governance services to Residential. Our Chairman is also the Chairman of each of Residential and AAMC.

For purposes of governing certain ongoing relationships between Altisource, Residential and AAMC after the Separation of the Residential Asset Businesses, and to provide for an orderly transition, we entered into certain agreements with Residential and AAMC. We have agreements to provide Residential with renovation management, lease management and property management services. In addition, we have agreements with Residential and AAMC to provide support services such as finance, human resources, legal support, facilities, technology, vendor management and risk management. Further, we have separate agreements for certain services related to income tax matters, trademark licenses and technology products and services. For the nine months ended September 30, 2013, we billed Residential $0.4 million, and we billed AAMC $0.9 million ($0.2 million for Residential and $0.7 million for AAMC for the third quarter of 2013 and no comparative amounts in 2012), under these agreements.

NOTE 3 — ACQUISITIONS

Homeward Fee-Based Businesses

On March 29, 2013, we acquired certain fee-based businesses associated with Ocwen’s acquisition of Homeward. As part of the acquisition, Ocwen agreed not to develop similar fee-based businesses that would directly or indirectly compete with services provided by Altisource relative to the Homeward servicing portfolio. Additionally, the terms of the Service Agreements were amended to extend the term from 2020 to 2025 (see Note 2). We paid $75.8 million, after a working capital and net income adjustment of $11.1 million, for the Homeward fee-based businesses. From the acquisition date through September 30, 2013, we recorded service revenue of $74.3 million and we estimate pre-tax income is $14.2 million related to these businesses.

Since the acquisition date, management adjusted the preliminary purchase price allocation and assigned associated asset lives based upon information that has become available. In addition to the working capital adjustment, we also reduced premises and equipment by $1.2 million based on a post-acquisition detailed analysis of software licenses received. The purchase price allocation and assessment of asset lives will continue to be revised as additional information about the fair value of assets and liabilities becomes available. Such assessment must be completed within 12 months from the acquisition date.

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The preliminary adjusted allocation of the purchase price is estimated as follows:

(in thousands)

Premises and equipment	$	1,559
Customer relationship	75,609
	77,168
Accounts payable and accrued expenses	(1,351		)
Purchase price	$	75,817

		Estimated life (in years)

Premises and equipment		3 - 5
Customer relationship		7

ResCap Fee-Based Businesses

On April 12, 2013, we entered into an agreement with Ocwen to establish additional terms related to the existing servicing arrangements between Altisource and Ocwen in connection with certain mortgage servicing platform assets of ResCap (the “ResCap Business”). The Service Agreements provide that (i) Altisource will be the exclusive provider, except as prohibited by applicable law, to Ocwen of certain services related to the ResCap Business, (ii) Ocwen will not establish similar fee-based businesses that would directly or indirectly compete with Altisource’s services as they relate to the ResCap Business and (iii) Ocwen will market and promote the utilization of Altisource’s services to their various third party relationships. Additionally, the parties agreed to use commercially reasonable best efforts to ensure that the loans associated with the ResCap Business are boarded onto Altisource’s mortgage servicing platform. We paid $128.8 million ($80.0 million on April 12, 2013 and $48.8 million on May 10, 2013) for the ResCap fee-based businesses. From the acquisition date through September 30, 2013, we recorded service revenue of $28.6 million and we estimate pre-tax income is $10.9 million related to these businesses.

We acquired no tangible assets and assumed no liabilities in connection with the acquisition. However, certain employees as well as practices and processes developed to support the ResCap servicing portfolio were components of the transaction. We accounted for this transaction as a business combination in accordance with ASC Topic 805, Business Combinations.

Management prepared a preliminary purchase price allocation and assigned associated asset lives based upon available information at the time of the agreement and through the date of filing. This preliminary allocation and assessment of asset lives will be revised as additional information about the fair value of assets and liabilities becomes available. Such assessment must be completed within 12 months from the acquisition date. The agreement consideration of $128.8 million was fully allocated to the customer relationship intangible asset with an estimated average useful life of 7 years.

The following tables present the unaudited pro forma condensed consolidated results of operations as if the Homeward and ResCap Business transactions had occurred at the beginning of the earliest period presented.

	Nine months ended September 30, 2013
(in thousands, except per share amounts)	As reported		Pro forma
Revenue	$	545,772	$	579,263
Net income attributable to Altisource	94,457		101,413
Earnings per share — diluted	3.77		4.05

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	Nine months ended September 30, 2012
(in thousands, except per share amounts)	As reported		Pro forma
Revenue	$	427,259	$	536,647
Net income attributable to Altisource	80,334		103,313
Earnings per share — diluted	3.23		4.15

	Three months ended September 30, 2012
(in thousands, except per share amounts)	As reported		Pro forma
Revenue	$	143,988	$	180,451
Net income attributable to Altisource	27,024		34,665
Earnings per share — diluted	1.08		1.39

The unaudited pro forma information presents the combined operating results of Altisource and the Homeward and ResCap Business transactions. The Homeward and ResCap Business operating results were derived from their historical financial statements for the most comparable periods available. The results prior to the acquisition dates have been adjusted to include the pro forma impact of the adjustment of amortization of the acquired intangible assets based on the preliminary purchase price allocations, the adjustment of interest expense reflecting the portion of our $200 million senior secured term loan, increased to $400 million on May 7, 2013, used in the Homeward and ResCap Business transactions and to reflect the impact of income taxes on the pro forma adjustments utilizing Altisource’s effective income tax rate in each period presented.

The unaudited pro forma results are presented for illustrative purposes only and do not reflect additional revenue opportunities, the realization of any potential cost savings and any related integration costs. Certain revenue opportunities and cost savings may result from the transactions and the conversion to the Altisource model; however, there can be no assurance that these revenue opportunities and cost savings will be achieved. These pro forma results do not purport to be indicative of the results that would have actually been obtained if the transactions occurred as of the beginning of each of the periods presented, nor is the pro forma data intended to be a projection of results that may be obtained in the future.

Equator Acquisition

On August 19, 2013, we entered into a Purchase and Sale Agreement (the “Purchase Agreement”) pursuant to which we agreed to purchase all of the outstanding limited liability company interests of Equator, LLC, a California limited-liability company (“Equator”). The aggregate consideration payable under the Purchase Agreement is up to $150.0 million comprised of (i) $70.0 million in initial consideration and (ii) up to an additional $80.0 million in potential additional consideration, the payment of which is dependent upon the Equator business meeting targeted levels of profitability (as described in the Purchase Agreement) for three consecutive 12-month periods following closing. Each 12-month period has targeted levels of profitability and potential additional consideration will be paid based on each 12-month period. We may, at our discretion, pay up to 20% of the initial consideration and up to 20% of each payment of any additional consideration in shares of our restricted stock, with the balance to be paid in cash. The closing is subject to the satisfaction of customary closing terms and conditions, including, without limitation, clearance under the Hart-Scott-Rodino (“HSR”) Act. The purchase price is subject to certain adjustments based on targeted amounts of current assets and current liabilities of Equator at closing, to be settled within 90 days of the closing date.

We initially filed the HSR application with the Federal Trade Commission (the “FTC”) in the third quarter and initially expected to receive approval and close the acquisition in the third quarter of 2013. With the recent disruption of the United States government and shutdown of nonessential services, approval from the FTC has been delayed. To ensure that the HSR waiting period did not expire during the United States government disruption, and following discussions with the staff of the FTC, we voluntarily withdrew our initial application and re-filed it early in the fourth quarter of 2013. We believe, although there can be no assurance, the transaction will close in the fourth quarter of 2013.

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NOTE 4 — ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consists of the following:

	September 30,			December 31,
(in thousands)	2013			2012

Billed
Non-related parties	$	27,392		$	25,950
Ocwen	11,146			19,817
Correspondent One	—			27
HLSS	71			163
AAMC	595			14
Residential	71			—
Other receivables	234			353
	39,509			46,324
Unbilled
Non-related parties	40,010			39,496
Ocwen	8,940			6,377
Correspondent One	—			32
	88,459			92,229
Allowance for doubtful accounts	(4,608		)	(3,274		)

Total	$	83,851		$	88,955

Unbilled fees consist primarily of asset management and default management services for which we recognize revenues over the service delivery period but bill following completion of the service.

NOTE 5 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

	September 30,		December 31,
(in thousands)	2013		2012

Maintenance agreements, current portion	$	4,350	$	3,636
Income taxes receivable	4,256		1,814
Prepaid expenses	4,646		1,640
Other current assets	508		528

Total	$	13,760	$	7,618

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NOTE 6 — PREMISES AND EQUIPMENT, NET

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

	September 30,			December 31,
(in thousands)	2013			2012

Computer hardware and software	$	81,897		$	68,329
Office equipment and other	21,849			15,592
Furniture and fixtures	6,414			5,344
Leasehold improvements	14,863			12,982
	125,023			102,247
Less: Accumulated depreciation and amortization	(65,559		)	(51,848		)

Total	$	59,464		$	50,399

Depreciation and amortization expense, inclusive of capital leases, amounted to $13.8 million and $9.0 million for the nine months ended September 30, 2013 and 2012, respectively ($4.5 million and $3.8 million for the third quarter of 2013 and 2012, 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.

NOTE 7 — GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

There were no changes in goodwill during the nine months ended September 30, 2013. The following is a summary of goodwill by segment:

	Mortgage		Financial		Technology
(in thousands)	Services		Services		Services		Total

Balance, September 30, 2013 and December 31, 2012	$	10,919	$	2,378	$	1,618	$	14,915

Intangible Assets, Net

Intangible assets, net consist of the following:

	Weighted average estimated	Gross carrying amount				Accumulated amortization						Net book value
(dollars in thousands)	useful life (years)	September 30, 2013		December 31, 2012		September 30, 2013			December 31, 2012			September 30, 2013		December 31, 2012

Definite lived intangible assets
Trademarks	16	$	10,614	$	10,614	$	(4,414	)	$	(4,060	)	$	6,200	$	6,554
Customer-related intangible assets	9	242,725		38,366		(35,520		)	(18,567		)	207,205		19,799
Operating agreement	20	35,000		35,000		(6,417		)	(5,104		)	28,583		29,896
Non-compete agreement	4	1,300		1,300		(1,200		)	(963		)	100		337

Total		$	289,639	$	85,280	$	(47,551	)	$	(28,694	)	$	242,088	$	56,586

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Amortization expense for definite lived intangible assets was $18.9 million and $3.8 million for the nine months ended September 30, 2013 and 2012, respectively ($8.6 million and $1.2 million for the third quarter of 2013 and 2012, respectively). Expected annual definite lived intangible asset amortization for 2013 through 2017 is $27.6 million, $46.9 million, $40.4 million, $32.5 million and $26.0 million, respectively, for assets recorded as of September 30, 2013, including preliminary amounts associated with the Homeward and ResCap fee-based business transactions (see Note 3).

NOTE 8 — INVESTMENT IN EQUITY AFFILIATES

Correspondent One purchased closed conforming and government guaranteed residential mortgages from approved mortgage bankers. Prior to the sale of our interest in Correspondent One to Ocwen on March 31, 2013 (see Note 2), we had significant influence over the general operations of Correspondent One consistent with our 49% ownership level, and therefore, accounted for our investment under the equity method. On March 31, 2013, we sold our 49% interest in Correspondent One to Ocwen for $12.6 million.

Our net loss on this investment was $0.1 million and $0.9 million for the nine months ended September 30, 2013 and 2012, respectively (none for the third quarter of 2013 and $0.3 million net loss for the third quarter of 2012).

NOTE 9 — OTHER ASSETS

Other assets consist of the following:

	September 30,		December 31,
(in thousands)	2013		2012

Security deposits, net	$	7,105	$	5,019
Debt issuance costs, net	6,143		4,260
Maintenance agreements, non-current portion	1,743		1,614
Restricted cash	158		158
Other	94		623

Total	$	15,243	$	11,674

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

Accounts payable and accrued expenses consist of the following:

	September 30,		December 31,
(in thousands)	2013		2012

Accounts payable	$	7,818	$	5,079
Accrued expenses - general	16,903		16,528
Accrued salaries and benefits	23,222		19,613
Income taxes payable	14,774		8,750
Payable to Ocwen	4,131		8,865
Payable to AAMC	—		141

Total	$	66,848	$	58,976

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Other current liabilities consist of the following:

	September 30,		December 31,
(in thousands)	2013		2012

Deferred revenue	$	1,512	$	2,482
Facility closure cost accrual, current portion	141		138
Book overdrafts	4,601		5,229
Other	3,117		2,574

Total	$	9,371	$	10,423

NOTE 11 — LONG-TERM DEBT

Long-term debt consists of the following:

	September 30,			December 31,
(in thousands)	2013			2012

Senior secured term loan	$	397,497		$	200,000
Less: Unamortized discount, net	(789		)	(1,973		)
Net long-term debt	396,708			198,027
Less: Current portion	(4,000		)	(2,000		)

Long-term debt, less current portion	$	392,708		$	196,027

On November 27, 2012, we entered into a senior secured term loan agreement with Bank of America, N.A., as administrative agent, and certain lenders, pursuant to which we borrowed $200 million. The senior secured term loan was issued with a 1.0% original issue discount ($2.0 million), resulting in net proceeds of $198.0 million (the “Initial Proceeds”), with the Company and certain wholly-owned subsidiaries acting as guarantors (collectively, the “Guarantors”).

On May 7, 2013, we amended the senior secured term loan agreement to increase the principal amount of the senior secured term loan by $200 million (the “Incremental Term Loan”), which was issued with a $1.0 million original issue premium, resulting in gross proceeds to the Company of $201.0 million.

The Initial Proceeds and the Incremental Term Loan must be repaid in equal consecutive quarterly principal installments of 0.25% of the initial principal amounts, with the balance due at maturity. The aggregate amount of each quarterly scheduled principal installment of the term loans is equal to approximately $1.0 million. All amounts outstanding under the senior secured term loan agreement will become due on the earlier of (i) November 27, 2019, being the seventh anniversary of the closing date of the senior secured term loan agreement or (ii) the date on which the loans are declared to be due and owed by the administrative agent at the request (or with the consent) of the lenders upon the occurrence of any event of default under the senior secured term loan agreement.

The Incremental Term Loan was used to fund a portion of the Company’s previously announced transaction with Ocwen related to the ResCap servicing portfolio (see Note 3), with the remainder to be used for stock repurchases and for general corporate purposes, including potential acquisitions. Additionally, the Incremental Term Loan was used to pay certain fees, commissions and expenses in connection with the Incremental Term Loan. The Company paid legal fees and other costs associated with the Incremental Term Loan of $2.4 million, which were recorded as debt issuance costs in other assets in the accompanying condensed consolidated balance sheets.

Additionally, the Incremental Term Loan modified the senior secured term loan agreement to, among other changes, provide for an additional $200 million incremental term loan facility accordion and increase the maximum amount of Restricted Payments (as defined in the senior secured term loan) that may be made by us, including increasing the amount of Company share repurchases permitted.

All of the term loans outstanding bear interest at rates based upon, at our option, the Adjusted Eurodollar Rate or the Base Rate (each as defined in the senior secured term loan agreement). Eurodollar Rate loans bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Adjusted Eurodollar Rate for the applicable interest period and (y) 1.25% plus (ii) a 4.50% margin. Base Rate loans bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Base Rate and (y) 2.25% plus (ii) a 3.50% margin. The interest rate at September 30, 2013 was 5.75%.

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Payments under the senior secured term loan agreement are guaranteed by the Guarantors and are secured by a pledge of all equity interests of certain subsidiaries, as well as a lien on substantially all of the assets of Altisource Solutions S.à r.l., a wholly-owned subsidiary of Altisource, and the Guarantors, subject to certain exceptions.

At September 30, 2013, debt issuance costs were $6.1 million, net of $0.8 million of accumulated amortization. At December 31, 2012, debt issuance costs were $4.3 million, net of $0.1 million of accumulated amortization. Debt issuance costs are included in other assets in the accompanying condensed consolidated balance sheets.

NOTE 12 — EQUITY AND SHARE-BASED COMPENSATION

Stock Repurchase Plan

In May 2012, our shareholders approved a stock repurchase program, which replaced the previous stock repurchase program. Under the program, we are authorized to purchase up to 3.5 million shares of our common stock in the open market in addition to amounts previously purchased under the prior program. From authorization of the previous program in May 2010 through September 30, 2013, we have purchased approximately 3.4 million shares of our common stock in the open market at an average price of $53.94 per share. We purchased 0.8 million shares of common stock (at an average price of $103.45 per share) and 0.3 million shares of common stock (at an average price of $63.25 per share) during the nine months ended September 30, 2013 and 2012, respectively (0.3 million shares at an average price of $134.86 per share for the third quarter of 2013 and no comparative amounts in the third quarter of 2012). Approximately 2.7 million shares of common stock remain available for repurchase under the program. Luxembourg law limits share repurchases to approximately the balance of Altisource Portfolio Solutions S.A. (unconsolidated parent company) retained earnings less shares repurchased. As of September 30, 2013, approximately $38 million was available to repurchase our common stock under Luxembourg law. Our $200 million senior secured term loan, increased to $400 million on May 7, 2013, also limits the amount we can spend on share repurchases in any year and may prevent repurchases in certain circumstances. As of September 30, 2013, approximately $107 million was available to repurchase our common stock under our senior secured term loan.

Share-Based Compensation

We issue share-based awards in the form of stock options and certain other equity-based awards for certain employees and officers. We recorded share-based compensation expense of $2.1 million and $2.0 million for the nine months ended September 30, 2013 and 2012, respectively ($0.6 million and $1.1 million for the third quarter of 2013 and 2012, respectively). The amount for the nine months ended September 30, 2012 includes the reversal of $0.8 million of share-based compensation expense related to the departure of an executive officer in March 2012.

Outstanding share-based compensation currently consists primarily of stock option grants that are a combination of service-based and market-based options.

Service-based Options. These options are granted at fair value on the date of grant. The options generally vest over four years with equal annual cliff-vesting and expire on the earlier of 10 years after the date of grant or following termination of service. A total of 0.8 million service-based awards were outstanding at September 30, 2013.

Market-based Options. These option grants have two components each of which vest only upon the achievement of certain criteria. The first component, which we refer to internally as “ordinary performance” grants, consists of two-thirds of the market-based grant and begins to vest if the stock price 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 internally as “extraordinary performance” grants, 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. The vesting schedule for all market-based awards is 25% upon achievement of the criteria and the remaining 75% in three equal annual installments. A total of 1.9 million market-based awards were outstanding at September 30, 2013.

The Company granted less than 0.1 million stock options (at a weighted average exercise price of $104.84 per share) and 0.3 million stock options (at a weighted average exercise price of $69.48 per share) during the nine months ended September 30, 2013 and 2012, respectively.

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

	Nine months ended September 30, 2013		Nine months ended September 30, 2012
	Black-Scholes	Binomial	Black-Scholes	Binomial

Risk-free interest rate	1.02% — 1.81%	0.01% — 2.71%	0.87% — 1.17%	0.08% — 2.04%

Expected stock price volatility	36.35% — 36.76%	36.40% — 36.80%	34.22% — 34.65%	34.20% — 34.60%
Expected dividend yield	—	—	—	—

Expected option life (in years)	6.25	—	6.25	—
Contractual life (in years)	—	14	—	14

Fair value	$31.33 — $49.14	$16.12 — $41.72	$19.25 — $29.80	$9.98 — $22.76

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

	Nine months ended September 30,
(in thousands, except per share amounts)	2013		2012

Weighted average fair value at grant date per share	$	32.59	$	20.77
Intrinsic value of options exercised	24,587		11,535
Fair value of options vested	1,867		1,491

Share-based compensation expense is recorded net of estimated forfeiture rates ranging from 1% to 10%.

As of September 30, 2013, estimated unrecognized compensation costs related to share-based payments amounted to $3.0 million, which we expect to recognize over a weighted average remaining requisite service period of approximately 2.9 years.

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 at December 31, 2012	3,058,309		$	17.69	6.1	$	211,072
Granted	75,000		104.84
Exercised	(279,531	)	17.12
Forfeited	(117,248	)	59.49
Outstanding at September 30, 2013	2,736,530		18.34		5.4	332,955

Exercisable at September 30, 2013	2,216,347		11.99		4.9	283,735

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NOTE 13 — COST OF REVENUE

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

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2013		2012		2013		2012

Compensation and benefits	$	39,600	$	28,840	$	108,923	$	84,314
Outside fees and services	56,611		31,084		137,851		91,494
Reimbursable expenses	29,496		24,326		73,061		77,846
Technology and telecommunications	5,459		6,900		18,010		17,890
Depreciation and amortization	3,095		3,137		10,350		7,241

Total	$	134,261	$	94,287	$	348,195	$	278,785

NOTE 14 — SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include payroll for personnel employed in executive, finance, legal, human resources, vendor management, risk and operational effectiveness roles. This category also includes occupancy costs, professional fees and depreciation and amortization on non-operating assets. The components of selling, general and administrative expenses were as follows:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2013		2012		2013		2012

Compensation and benefits	$	6,802	$	5,212	$	18,868	$	15,995
Professional services	2,168		2,089		5,184		5,550
Occupancy related costs	7,438		6,641		21,971		19,308
Amortization of intangible assets	8,620		1,201		18,857		3,833
Depreciation and amortization	1,390		701		3,441		1,797
Other	5,101		2,608		11,706		8,002

Total	$	31,519	$	18,452	$	80,027	$	54,485

NOTE 15 — OTHER INCOME (EXPENSE), NET

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

	Three months ended September 30,						Nine months ended September 30,
(in thousands)	2013			2012			2013			2012

Loss in equity affiliates	$	(54	)	$	(293	)	$	(176	)	$	(872	)
Interest income	14			49			881			75
Other, net	(213		)	(13		)	(176		)	(103		)

Total	$	(253	)	$	(257	)	$	529		$	(900	)

Loss in equity affiliates primarily represents our proportional share of the losses in Correspondent One (see Note 8), net of the gain on sale of Correspondent One (see Note 2).

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NOTE 16 — EARNINGS PER SHARE

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

Basic and diluted EPS are calculated as follows:

	Three months ended September 30,				Nine months ended September 30,
(in thousands, except per share data)	2013		2012		2013		2012

Net income attributable to Altisource	$	36,008	$	27,024	$	94,457	$	80,334

Weighted average common shares outstanding, basic	23,025		23,338		23,185		23,347
Dilutive effect of stock options	2,308		1,678		1,885		1,548

Weighted average common shares outstanding, diluted	25,333		25,016		25,070		24,895

Earnings per share
Basic	$	1.56	$	1.16	$	4.07	$	3.44
Diluted	$	1.42	$	1.08	$	3.77	$	3.23

For the nine months ended September 30, 2013 and 2012, less than 0.1 million options (less than 0.1 million for the third quarter of 2013 and 2012), that were anti-dilutive have been excluded from the computation of diluted EPS. These options were anti-dilutive because their exercise price was greater than the average market price of our common stock. Also excluded from the computation of diluted EPS for the nine months ended September 30, 2013 and 2012 are 0.1 million and 0.3 million options, respectively (0.1 million and 0.2 million options for the third quarter of 2013 and 2012, respectively), granted for shares that are issuable upon the achievement of certain market and performance criteria related to our common stock price and an annualized rate of return to investors that have not been met.

NOTE 17 — COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, we are involved in legal proceedings arising in the ordinary course of business. We record a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated, including expected insurance coverage. For proceedings where a range of loss is determined, we record a best estimate of loss within the range.

When legal proceedings are material, we disclose the nature of the litigation, and to the extent possible, the estimate of loss or range of loss. In the opinion of management, after consultation with legal counsel and considering insurance coverage where applicable, the outcome of current legal proceedings, both individually and in the aggregate, will not have a material impact on our financial condition, results of operations or cash flows.

Escrow Balances

We hold customers’ assets in escrow at various financial institutions pending completion of certain real estate activities. These amounts are held in escrow for limited periods of time, generally consisting of a few days and are not included in the condensed consolidated balance sheets. Amounts held in escrow were $56.8 million and $47.2 million as of September 30, 2013 and December 31, 2012, respectively.

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NOTE 18 — 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 to evaluate operating performance and to assess the allocation of our resources.

We classify our businesses into three reportable segments. The Mortgage Services segment provides services that span the mortgage and real estate lifecycle and are typically outsourced by loan servicers, loan originators and investors in single family homes. The Financial Services segment provides collection and customer relationship management services primarily to debt originators and servicers (e.g., credit card, auto lending, retail credit and mortgage) and the utility and insurance industries. The Technology Services segment principally consists of our REALSuite software applications as well as our information technology infrastructure services. The REALSuite platform provides a fully integrated set of software applications and technologies that manage the end-to-end lifecycle for residential and commercial mortgage loan servicing including the automated management and payment of a distributed network of vendors. In addition, our Corporate Items and Eliminations segment includes eliminations of transactions between the reporting segments, interest expense and costs related to corporate support functions including executive, finance, legal, human resources, vendor management, risk and operational effectiveness.

Financial information for our segments is as follows:

	Three months ended September 30, 2013
								Corporate
	Mortgage			Financial		Technology		Items and			Consolidated
(in thousands)	Services			Services		Services		Eliminations			Altisource

Revenue	$	164,661		$	27,267	$	25,175	$	(6,268	)	$	210,835
Cost of revenue	106,412			14,998		18,569		(5,718		)	134,261
Gross profit	58,249			12,269		6,606		(550		)	76,574
Selling, general and administrative expenses	14,224			4,616		2,621		10,058			31,519
Income from operations	44,025			7,653		3,985		(10,608		)	45,055
Other income (expense), net	(41		)	—		—		(6,400		)	(6,441		)
Income before income taxes and non-controlling interests	$	43,984		$	7,653	$	3,985	$	(17,008	)	$	38,614

	Three months ended September 30, 2012
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(in thousands)	Services			Services			Services			Eliminations			Altisource

Revenue	$	115,882		$	15,394		$	19,076		$	(6,364	)	$	143,988
Cost of revenue	72,774			11,784			15,418			(5,689		)	94,287
Gross profit	43,108			3,610			3,658			(675		)	49,701
Selling, general and administrative expenses	6,155			3,116			1,851			7,330			18,452
Income from operations	36,953			494			1,807			(8,005		)	31,249
Other income (expense), net	(290		)	(6		)	(5		)	34			(267		)
Income before income taxes and non-controlling interests	$	36,663		$	488		$	1,802		$	(7,971	)	$	30,982

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	Nine months ended September 30, 2013
									Corporate
	Mortgage			Financial			Technology		Items and			Consolidated
(in thousands)	Services			Services			Services		Eliminations			Altisource

Revenue	$	426,319		$	66,675		$	70,189	$	(17,411	)	$	545,772
Cost of revenue	267,859			40,831			55,088		(15,583		)	348,195
Gross profit	158,460			25,844			15,101		(1,828		)	197,577
Selling, general and administrative expenses	32,272			11,000			7,514		29,241			80,027
Income from operations	126,188			14,844			7,587		(31,069		)	117,550
Other income (expense), net	(153		)	(8		)	3		(13,615		)	(13,773		)
Income before income taxes and non-controlling interests	$	126,035		$	14,836		$	7,590	$	(44,684	)	$	103,777

	Nine months ended September 30, 2012
							Corporate
	Mortgage		Financial		Technology		Items and			Consolidated
(in thousands)	Services		Services		Services		Eliminations			Altisource

Revenue	$	341,446	$	49,649	$	53,984	$	(17,820	)	$	427,259
Cost of revenue	218,969		35,780		40,098		(16,062		)	278,785
Gross profit	122,477		13,869		13,886		(1,758		)	148,474
Selling, general and administrative expenses	17,458		10,550		5,519		20,958			54,485
Income from operations	105,019		3,319