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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-34354
 
 
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
(Exact name of registrant as specified in its Charter)
 
Luxembourg
98-0554932
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
40, avenue Monterey
L-2163 Luxembourg
Grand Duchy of Luxembourg
(Address of principal executive offices)
(352) 24 69 79 00
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, $1.00 par value
 
ASPS
 
NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ   No o
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 þ   No o
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 o
Accelerated filer þ
Non-accelerated filer o  
Smaller reporting company o
 
Emerging growth company o
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 o   No þ

As of April 24 , 2020 , there were 15,570,432 outstanding shares of the registrant’s common stock (excluding 9,842,316 shares held as treasury stock).
 

Table of Contents

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

FORM 10-Q

 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2
Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Interim Condensed Consolidated Financial Statements (Unaudited)

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
 
March 31,
2020
 
December 31,
2019
 
 
 
 
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
79,098

 
$
82,741

Investment in equity securities (Note 4)
41,271

 
42,618

Accounts receivable, net
43,576

 
43,615

Prepaid expenses and other current assets
17,660

 
15,214

Total current assets
181,605

 
184,188

 
 
 
 
Premises and equipment, net (Note 8)
20,984

 
24,526

Right-of-use assets under operating leases (Note 9)
26,064

 
29,074

Goodwill
73,849

 
73,849

Intangible assets, net
56,837

 
61,046

Deferred tax assets, net
1,244

 
1,626

Other assets
8,012

 
10,810

 
 
 
 
Total assets
$
368,595

 
$
385,119

 
 
 
 
LIABILITIES AND EQUITY
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
64,658

 
$
67,671

Deferred revenue
5,482

 
5,183

Other current liabilities (Note 12)
14,582

 
14,724

Total current liabilities
84,722

 
87,578

 
 
 
 
Long-term debt
288,233

 
287,882

Other non-current liabilities (Note 14)
27,164

 
31,016

 
 
 
 
Commitments, contingencies and regulatory matters (Note 24)


 


 
 
 
 
Equity (deficit):
 
 
 
Common stock ($1.00 par value; 100,000 shares authorized, 25,413 issued and 15,559 outstanding as of March 31, 2020; 15,454 outstanding as of December 31, 2019)
25,413

 
25,413

Additional paid-in capital
136,563

 
133,669

Retained earnings
252,466

 
272,026

Treasury stock, at cost (9,854 shares as of March 31, 2020 and 9,959 shares as of December 31, 2019)
(447,229
)
 
(453,934
)
Altisource deficit
(32,787
)
 
(22,826
)
 
 
 
 
Non-controlling interests
1,263

 
1,469

Total deficit
(31,524
)
 
(21,357
)
 
 
 
 
Total liabilities and deficit
$
368,595

 
$
385,119


See accompanying notes to condensed consolidated financial statements .

3
Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share data)
 
 
Three months ended
 March 31,
 
 
2020
 
2019
 
 
 
 
 
Revenue
 
$
121,444

 
$
169,935

Cost of revenue
 
94,581

 
124,215

 
 
 
 
 
Gross profit
 
26,863

 
45,720

Operating expenses:
 
 
 
 
Selling, general and administrative expenses
 
28,093

 
41,926

Restructuring charges (Note 23)
 
2,925

 
4,420

 
 
 
 
 
Loss from operations
 
(4,155
)
 
(626
)
Other income (expense), net:
 
 
 
 
Interest expense
 
(4,716
)
 
(5,952
)
Unrealized (loss) gain on investment in equity securities (Note 4)
 
(1,347
)
 
2,238

Other income (expense), net
 
1,094

 
374

Total other income (expense), net
 
(4,969
)
 
(3,340
)
 
 
 
 
 
Loss before income taxes and non-controlling interests
 
(9,124
)
 
(3,966
)
Income tax (provision) benefit
 
(2,421
)
 
1,222

 
 
 
 
 
Net loss
 
(11,545
)
 
(2,744
)
Net income attributable to non-controlling interests
 
(105
)
 
(440
)
 
 
 
 
 
Net loss attributable to Altisource
 
$
(11,650
)
 
$
(3,184
)
 
 
 
 
 
Loss per share:
 
 
 
 
Basic
 
$
(0.75
)
 
$
(0.20
)
Diluted
 
$
(0.75
)
 
$
(0.20
)
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
Basic
 
15,497

 
16,292

Diluted
 
15,497

 
16,292

 
 
 
 
 
Comprehensive loss:
 
 
 
 
 
 
 
 
 
Comprehensive loss, net of tax
 
$
(11,545
)
 
$
(2,744
)
Comprehensive income attributable to non-controlling interests
 
(105
)
 
(440
)
 
 
 
 
 
Comprehensive loss attributable to Altisource
 
$
(11,650
)
 
$
(3,184
)

See accompanying notes to condensed consolidated financial statements .

4
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)



 
Altisource Equity (Deficit)
 
 
 
 
 
Common stock
 
Additional paid-in capital
 
Retained earnings
 
Treasury stock, at cost
 
Non-controlling interests
 
Total
 
Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2018
25,413

 
$
25,413

 
$
122,667

 
$
590,655

 
$
(443,304
)
 
$
1,237

 
$
296,668

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
—

 
—

 
—

 
(3,184
)
 
—

 
440

 
(2,744
)
Distributions to non-controlling interest holders
—

 
—

 
—

 
—

 
—

 
(620
)
 
(620
)
Share-based compensation expense
—

 
—

 
2,621

 
—

 
—

 
—

 
2,621

Exercise of stock options and issuance of restricted share units and restricted shares
—

 
—

 
—

 
(1,549
)
 
1,577

 
—

 
28

Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances
—

 
—

 
—

 
(1,163
)
 
578

 
—

 
(585
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, March 31, 2019
25,413

 
$
25,413

 
$
125,288

 
$
584,759

 
$
(441,149
)
 
$
1,057

 
$
295,368

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2019
25,413

 
$
25,413

 
$
133,669

 
$
272,026

 
$
(453,934
)
 
$
1,469

 
$
(21,357
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
—

 
—

 
—

 
(11,650
)
 
—

 
105

 
(11,545
)
Distributions to non-controlling interest holders
—

 
—

 
—

 
—

 
—

 
(311
)
 
(311
)
Share-based compensation expense
—

 
—

 
2,894

 
—

 
—

 
—

 
2,894

Issuance of restricted share units and restricted shares
—

 
—

 
—

 
(4,796
)
 
4,796

 
—

 
—

Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances
—

 
—

 
—

 
(3,114
)
 
1,909

 
—

 
(1,205
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, March 31, 2020
25,413

 
$
25,413

 
$
136,563

 
$
252,466

 
$
(447,229
)
 
$
1,263

 
$
(31,524
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to condensed consolidated financial statements .




5
Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands )
 
Three months ended
 March 31,
 
2020
 
2019
 
 
 
 
Cash flows from operating activities:
 

 
 

Net loss
$
(11,545
)
 
$
(2,744
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 
 

Depreciation and amortization
4,117

 
5,631

Amortization of right-of-use assets under operating leases
2,706

 
3,738

Amortization of intangible assets
4,209

 
8,647

Unrealized loss (gain) on investment in equity securities
1,347

 
(2,238
)
Share-based compensation expense
2,894

 
2,621

Bad debt expense
342

 
155

Amortization of debt discount
167

 
153

Amortization of debt issuance costs
184

 
170

Deferred income taxes
126

 
582

Loss on disposal of fixed assets
39

 
331

Changes in operating assets and liabilities:
 

 
 

Accounts receivable
(303
)
 
1,091

Short-term investments in real estate
—

 
(401
)
Prepaid expenses and other current assets
(36
)
 
(781
)
Other assets
612

 
(92
)
Accounts payable and accrued expenses
(3,116
)
 
(16,318
)
Current and non-current operating lease liabilities
(3,354
)
 
(3,480
)
Other current and non-current liabilities
(37
)
 
(3,720
)
Net cash used in operating activities
(1,648
)
 
(6,655
)
 
 
 
 
Cash flows from investing activities:
 

 
 

Additions to premises and equipment
(511
)
 
(790
)
Net cash used in investing activities
(511
)
 
(790
)
 
 
 
 
Cash flows from financing activities:
 

 
 

Proceeds from stock option exercises
—

 
28

Distributions to non-controlling interests
(311
)
 
(620
)
Payments of tax withholding on issuance of restricted share units and restricted shares
(1,205
)
 
(585
)
Net cash used in financing activities
(1,516
)
 
(1,177
)
 
 
 
 
Net decrease in cash, cash equivalents and restricted cash
(3,675
)
 
(8,622
)
Cash, cash equivalents and restricted cash at the beginning of the period
86,583

 
64,046

 
 
 
 
Cash, cash equivalents and restricted cash at the end of the period
$
82,908

 
$
55,424

 
 
 


Supplemental cash flow information:
 

 
 

Interest paid
$
4,415

 
$
5,634

Income taxes (received) paid, net
(1,720
)
 
2,410

Acquisition of right-of-use assets with operating lease liabilities
705

 
209

Reduction of right-of-use assets from operating lease modifications or reassessments
(1,273
)
 
—

 
 
 
 
Non-cash investing and financing activities:
 

 
 

Net increase in payables for purchases of premises and equipment
$
103

 
$
28

See accompanying notes to condensed consolidated financial statements.

6
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.
Basis of Accounting and Presentation
The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, the interim data includes all normal recurring adjustments considered necessary to fairly state the results for the interim periods presented. The preparation of interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our interim condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Intercompany transactions and accounts have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year presentation.
Altisource consolidates Best Partners Mortgage Cooperative, Inc., which is managed by The Mortgage Partnership of America, L.L.C. (“MPA”), a wholly-owned subsidiary of Altisource. Best Partners Mortgage Cooperative, Inc. is a mortgage cooperative doing business as Lenders One ® (“Lenders One”). MPA provides services to Lenders One under a management agreement that ends on December 31, 2025 (with renewals for 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 March 31, 2020 , Lenders One had total assets of $2.0 million and total liabilities of $0.6 million . As of December 31, 2019 , Lenders One had total assets of $1.6 million and total liabilities of $0.3 million .
In 2019, Altisource created Pointillist, Inc. (“Pointillist”) and contributed the Pointillist ® customer journey analytics business and $8.5 million to it. Pointillist is owned by Altisource and management of Pointillist. Management of Pointillist owns a non-controlling interest representing 12.1% of the outstanding equity of Pointillist. Additional equity shares of Pointillist are available for issuance to management and board members of Pointillist. Altisource has no ongoing obligation to provide future funding to Pointillist. Pointillist is presented in the accompanying condensed consolidated financial statements on a consolidated basis and the portion of Pointillist owned by Pointillist management is reported as non-controlling interests.
These interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 , as filed with the SEC on March 5, 2020 .

7
Table of Content
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements ( Continued )


Fair Value Measurements
Fair value is defined as an exit price, representing the amount that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:
Level 1 — Quoted prices in active markets for identical assets and liabilities
Level 2 — Observable inputs other than quoted prices included in Level 1
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities
Financial assets and financial liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.
Recently Adopted Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This standard simplified the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Prior guidance required that companies compute the implied fair value of goodwill under Step 2 by performing procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. This standard requires companies to perform annual or interim goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Company adopted this standard effective January 1, 2020 and is applied prospectively. Adoption of this new standard did not have any impact on the Company’s condensed consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement . This standard modified certain disclosure requirements such as the valuation processes for Level 3 fair value measurements. This standard also requires new disclosures such as the disclosure of certain assumptions used to develop significant unobservable inputs for Level 3 fair value measurements. The Company adopted this standard effective January 1, 2020. Adoption of this new standard did not have any impact on the Company’s condensed consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) . This standard aligns the requirements for capitalizing implementation costs in a hosting arrangement service contract with the existing guidance for capitalizing implementation costs incurred for an internal-use software license. This standard also requires capitalizing or expensing implementation costs based on the nature of the costs and the project stage during which they are incurred and establishes additional disclosure requirements. The Company adopted this standard effective January 1, 2020 and is applied prospectively. Adoption of this new standard did not have any impact on the Company’s condensed consolidated financial statements.
Future Adoption of New Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . This standard is part of the FASB’s initiative to reduce complexity in accounting standards by instituting several simplifying provisions and removing several exceptions pertaining to income tax accounting. This standard will be effective for annual periods beginning after December 15, 2020, including interim periods within that reporting period. Early adoption of this standard is permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements.

8
Table of Content
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements ( Continued )


In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . 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 consolidated financial statements.
NOTE 2 — CUSTOMER CONCENTRATION
Ocwen
Ocwen Financial Corporation (together with its subsidiaries, “Ocwen”) is a residential mortgage loan servicer of mortgage servicing rights (“MSRs”) it owns, including those MSRs in which others have an economic interest, and a subservicer of MSRs owned by others.
During the three months ended March 31, 2020 , Ocwen was our largest customer, accounting for 61% of our total 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 2025. Certain of the Ocwen Services Agreements contain a “most favored nation” provision and also grant the parties the right to renegotiate pricing, among other things.
In February 2019, Altisource and Ocwen entered into agreements that, among other things, facilitated Ocwen’s transition from REALServicing and related technologies to another mortgage servicing software platform, establish a process for Ocwen to review and approve the assignment of one or more of our agreements to potential buyers of Altisource’s business lines, requiring Ocwen to use Altisource as service provider for certain service referrals totaling an amount equal to 100% of the applicable service referrals on certain portfolios plus an amount equal to not less than 90% of applicable service referrals from certain other portfolios (determined on a service by service basis), subject to certain additional restrictions and limitations, and affirm Altisource’s role as a strategic service provider to Ocwen through August 2025. In connection with these agreements, Altisource expressly preserved and did not waive any of its existing contractual rights relating to service referrals, other than with respect to Ocwen transitioning from the REALServicing and related technologies. If Altisource fails certain performance standards for specified periods of time, then Ocwen may terminate Altisource as a provider for the applicable service(s), subject to certain limitations and Altisource’s right to cure. Ocwen’s transition to another mortgage servicing platform was completed during 2019. For the three months ended March 31, 2020 and 2019 , service revenue from REALServicing and related technologies was $0.9 million and $8.2 million , respectively.
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 three months ended March 31, 2020 and 2019 , we recognized revenue from Ocwen of $74.2 million and $98.3 million , respectively. Revenue from Ocwen as a percentage of consolidated revenue was 61% and 58% for the three months ended March 31, 2020 and 2019 , respectively.
We earn additional revenue related to the portfolios serviced and subserviced by Ocwen when a party other than Ocwen or the MSR owner selects Altisource as the service provider. For the three months ended March 31, 2020 and 2019 , we recognized revenue of $7.8 million and $11.1 million , respectively, related to the portfolios serviced by Ocwen when a party other than Ocwen or the MSR owner selected Altisource as the service provider. These amounts are not included in deriving revenue from Ocwen and revenue from Ocwen as a percentage of revenue discussed above.
As of March 31, 2020 , accounts receivable from Ocwen totaled $21.4 million , $18.1 million of which was billed and $3.3 million of which was unbilled. As of December 31, 2019 , accounts receivable from Ocwen totaled $19.1 million , $15.7 million of which was billed and $3.4 million of which was unbilled.

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Table of Content
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements ( Continued )


NRZ
New Residential Investment Corp. (individually, together with one or more of its subsidiaries or one or more of its subsidiaries individually, “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 NRZ is its largest client. As of December 31, 2019, NRZ owned MSRs or rights to MSRs relating to approximately 56% of loans serviced and subserviced by Ocwen (measured in unpaid principal balance (“UPB”)). In July 2017 and January 2018, Ocwen and NRZ entered into a series of agreements pursuant to which the parties agreed, among other things, to undertake certain actions to facilitate the transfer from Ocwen to NRZ of Ocwen’s legal title to certain of its MSRs (the “Subject MSRs”) and under which Ocwen will subservice mortgage loans underlying the MSRs for an initial term of five years, subject to early termination rights.
On August 28, 2017, Altisource, through its licensed subsidiaries, entered into a Cooperative Brokerage Agreement, as amended, and related letter agreement (collectively, the “Brokerage Agreement”) with NRZ which extends through August 2025. Under this agreement and related amendments, Altisource remains the exclusive provider of brokerage services for real estate owned (“REO”) associated with the Subject MSRs, irrespective of the subservicer, subject to certain limitations. NRZ’s brokerage subsidiary receives a cooperative brokerage commission on the sale of REO properties from these portfolios subject to certain exceptions.
The Brokerage Agreement can, at Altisource’s discretion, be terminated by Altisource if a services agreement is not signed by Altisource and NRZ. A services agreement has not been signed. The parties continue to operate under the Brokerage Agreement. The Brokerage Agreement may otherwise only be terminated upon the occurrence of certain specified events. Termination events include, but are not limited to, a breach of the terms of the Brokerage Agreement (including, without limitation, the failure to meet performance standards and non-compliance with law in a material respect), the failure to maintain licenses which failure materially prevents performance of the contract, regulatory allegations of non-compliance resulting in an adversarial proceeding against NRZ, voluntary or involuntary bankruptcy, appointment of a receiver, disclosure in a Form 10-K or Form 10-Q that there is significant uncertainty about Altisource’s ability to continue as a going concern, failure to maintain a specified level of cash and an unapproved change of control.
For the three months ended March 31, 2020 and 2019 , we recognized revenue from NRZ of $2.7 million and $4.0 million , respectively, under the Brokerage Agreement. For the three months ended March 31, 2020 and 2019 , we recognized additional revenue of $12.0 million and $17.7 million , respectively, relating to the Subject MSRs when a party other than NRZ selects Altisource as the service provider.
NOTE 3 — SALE OF BUSINESSES
Financial Services Business
On July 1, 2019, Altisource sold its Financial Services business, consisting of its post-charge-off consumer debt and mortgage charge-off collection services and customer relationship management services (the “Financial Services Business”) to Transworld Systems Inc. (“TSI”) for $44.0 million consisting of an up-front payment of $40.0 million , subject to a working capital adjustment (finalized during 2019) and transaction costs upon closing of the sale, and an additional $4.0 million payment on the one year anniversary of the sale closing. The parties also entered into a transition services agreement to provide for the management and orderly transition of certain services and technologies to TSI for periods ranging from 2 months to 13 months . These services include support for information technology systems and infrastructure, facilities management, finance, compliance and human resources functions and are charged to TSI on a fixed fee or hourly basis. As of April 1, 2020, all of the transition services other than certain information technology systems and infrastructure have been fully transitioned to TSI.
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 on the closing date of August 8, 2018. The second installment of $3.0 million is required to be paid on the earlier of a RESI change of control or on August 8, 2023 (see Note 4 for a discussion of the February 17, 2020 RESI merger announcement and resulting potential change of control of RESI). The present value of the second installment is included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets as of March 31, 2020 at a discounted value of $2.4 million and is included in other assets in the accompanying condensed consolidated balance sheets as of December 31, 2019 and has a discounted value of $2.4 million .

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


NOTE 4 — INVESTMENT IN EQUITY SECURITIES
During 2016, we purchased 4.1 million shares of RESI common stock. This investment is reflected in the accompanying condensed consolidated balance sheets at fair value and changes in fair value are included in other income (expense), net in the accompanying condensed consolidated statements of operations and comprehensive loss. As of March 31, 2020 and December 31, 2019 , we held 3.5 million shares of RESI common stock. As of March 31, 2020 and December 31, 2019 , the fair value of our investment was $41.3 million and $42.6 million , respectively. During the three months ended March 31, 2020 and 2019 , we recognized an unrealized (loss) gain from the change in fair value of $(1.3) million and $2.2 million , respectively. During the three months ended March 31, 2020 and 2019 , we earned dividends of $0.5 million and $0.6 million , respectively, related to this investment.
On February 17, 2020, RESI entered into a merger agreement to be acquired by affiliates of Amherst Single Family Residential Partners VI, LP (“Amherst”) for $12.50 in cash per share. Also on February 17, 2020, the Company entered into a Voting and Support Agreement with an affiliate of Amherst pursuant to which the Company agreed, among other things and subject to the terms and conditions of the Voting and Support Agreement, to vote its shares in favor of the merger. Concurrently with the execution of the Voting and Support Agreement, the Company entered into a side letter with RESI pursuant to which RESI agreed, among other things and subject to the terms and conditions of the side letter, to reimburse the Company for: (a) certain out-of-pocket legal fees and legal expenses should the Company or its officers, directors, employees or other representatives (collectively, the “Indemnified Parties”) incur such costs or expenses in connection with any stockholder’s claims or proceedings against RESI or derivatively on behalf of RESI, in which the Indemnified Parties or their representatives are named parties, with respect to any of the merger agreement, the Voting and Support Agreement, the merger or other transactions contemplated thereby; and (b) any amounts for which the Indemnified Parties are found liable or are required to pay pursuant to any settlement or other voluntary disposition with respect to any such proceeding.
NOTE 5 — ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consists of the following:
(in thousands)
 
March 31,
2020
 
December 31,
2019
 
 
 
 
 
Billed
 
$
36,388

 
$
35,921

Unbilled
 
12,002

 
12,166


 
48,390

 
48,087

Less: Allowance for credit losses
 
(4,814
)
 
(4,472
)
 
 
 
 
 
Total
 
$
43,576

 
$
43,615

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.
NOTE 6 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
(in thousands)
 
March 31,
2020
 
December 31,
2019
 
 
 
 
 
Maintenance agreements, current portion
 
$
1,845

 
$
1,923

Income taxes receivable
 
2,605

 
5,098

Prepaid expenses
 
6,972

 
3,924

Other current assets
 
6,238

 
4,269

 
 
 
 
 
Total
 
$
17,660

 
$
15,214


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Notes to Condensed Consolidated Financial Statements ( Continued )


NOTE 7 — DISCONTINUATION OF LINES OF BUSINESS
Owners.com
In October 2019, the Company announced its plans to wind down and close the Owners.com business, which was completed by December 31, 2019. Owners.com was a technology-enabled real estate brokerage and provider of related mortgage brokerage and title services. Owners.com was not material in relation to the Company’s results of operations or financial position. Wind down expenses were included in the Project Catalyst restructuring charges (see Note 23 ).
Buy-Renovate-Lease-Sell
On November 26, 2018, the Company announced its plans to sell its short-term investments in real estate (“BRS Inventory”) and discontinue the Company’s Buy-Renovate-Lease-Sell (“BRS”) business. Altisource’s BRS business focused on buying, renovating, leasing and selling single-family homes to real estate investors. The BRS business was not material in relation to the Company’s results of operations or financial position. The Company completed the sale of the BRS Inventory during the year ended December 31, 2019.
NOTE 8 — PREMISES AND EQUIPMENT, NET
Premises and equipment, net consists of the following:
(in thousands)
 
March 31,
2020
 
December 31,
2019
 
 
 
 
 
Computer hardware and software
 
$
137,838

 
$
144,608

Leasehold improvements
 
21,756

 
23,800

Furniture and fixtures
 
7,893

 
8,775

Office equipment and other
 
3,632

 
4,004

 
 
171,119

 
181,187

Less: Accumulated depreciation and amortization
 
(150,135
)
 
(156,661
)
 
 
 
 
 
Total
 
$
20,984

 
$
24,526

Depreciation and amortization expense amounted to $4.1 million and $5.6 million for the three months ended March 31, 2020 and 2019 , 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.
Premises and equipment, net consist of the following, by country:
(in thousands)
 
March 31,
2020
 
December 31,
2019
 
 
 
 
 
United States
 
$
11,305

 
$
13,426

Luxembourg
 
8,819

 
10,295

India
 
660

 
671

Philippines
 
86

 
95

Other
 
114

 
39

 
 
 
 
 
Total
 
$
20,984

 
$
24,526


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Notes to Condensed Consolidated Financial Statements ( Continued )


NOTE 9 — RIGHT-OF-USE ASSETS UNDER OPERATING LEASES, NET
Right-of-use assets under operating leases consist of the following:
(in thousands)
 
March 31,
2020
 
December 31,
2019
 
 
 
 
 
Right-of-use assets under operating leases
 
$
39,161

 
$
39,729

Less: Accumulated amortization
 
(13,097
)
 
(10,655
)
 
 
 
 
 
Total
 
$
26,064

 
$
29,074

Amortization of operating leases was $2.7 million and $3.7 million for the three months ended March 31, 2020 and 2019, 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 10 — GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill
Goodwill during the three months ended March 31, 2020 is as follows:
(in thousands)
 
Total
 
 
 
Balance as of March 31, 2020 and December 31, 2019
 
$
73,849

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)
 
 
March 31,
2020
 
December 31,
2019
 
March 31,
2020
 
December 31,
2019
 
March 31,
2020
 
December 31,
2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Definite lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Customer related intangible assets
 
9
 
$
214,973

 
$
214,973

 
$
(179,164
)
 
$
(176,043
)
 
$
35,809

 
$
38,930

Operating agreement
 
20
 
35,000

 
35,000

 
(17,814
)
 
(17,376
)
 
17,186

 
17,624

Trademarks and trade names
 
16
 
9,709

 
9,709

 
(5,996
)
 
(5,893
)
 
3,713

 
3,816

Non-compete agreements
 
4
 
1,230

 
1,230

 
(1,221
)
 
(1,215
)
 
9

 
15

Intellectual property
 
—
 
—

 
300

 
—

 
(175
)
 
—

 
125

Other intangible assets
 
5
 
1,800

 
3,745

 
(1,680
)
 
(3,209
)
 
120

 
536

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
$
262,712

 
$
264,957

 
$
(205,875
)
 
$
(203,911
)
 
$
56,837

 
$
61,046

Amortization expense for definite lived intangible assets was $4.2 million and $8.6 million for three months ended March 31, 2020 and 2019 , respectively . Expected annual definite lived intangible asset amortization expense for 2020 through 2024 is $13.9 million , $10.3 million , $5.1 million , $5.1 million and $5.1 million , respectively.

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


NOTE 11 — OTHER ASSETS
Other assets consist of the following:
(in thousands)
 
March 31,
2020
 
December 31,
2019
 
 
 
 
 
Security deposits
 
$
3,019

 
$
3,473

Restricted cash
 
3,810

 
3,842

Other
 
1,183

 
3,495

 
 
 
 
 
Total
 
$
8,012

 
$
10,810

NOTE 12 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accounts payable and accrued expenses consist of the following:
(in thousands)
 
March 31,
2020
 
December 31,
2019
 
 
 
 
 
Accounts payable
 
$
23,026

 
$
22,431

Accrued expenses - general
 
24,387

 
24,558

Accrued salaries and benefits
 
14,317

 
18,982

Income taxes payable
 
2,928

 
1,700

 
 
 
 
 
Total
 
$
64,658

 
$
67,671

Other current liabilities consist of the following:
(in thousands)
 
March 31,
2020
 
December 31,
2019
 
 
 
 
 
Operating lease liabilities
 
$
11,406

 
$
11,398

Unfunded cash account balances
 
1,687

 
1,820

Other
 
1,489

 
1,506

 
 
 
 
 
Total
 
$
14,582

 
$
14,724

NOTE 13 — LONG-TERM DEBT
Long-term debt consists of the following:
(in thousands)
 
March 31,
2020
 
December 31,
2019
 
 
 
 
 
Senior secured term loans
 
$
293,826

 
$
293,826

Less: Debt issuance costs, net
 
(2,935
)
 
(3,119
)
Less: Unamortized discount, net
 
(2,658
)
 
(2,825
)
 
 
 
 
 
Long-term debt
 
$
288,233

 
$
287,882

Altisource Portfolio Solutions S.A. and its wholly-owned subsidiary, Altisource S.à r.l. entered into a credit agreement (the “Credit Agreement”) in April 2018 with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and certain lenders. Under the Credit Agreement, Altisource borrowed $412.0 million in the form of Term B Loans and obtained a $15.0 million revolving credit facility. The Term B Loans mature in April 2024 and the revolving credit facility matures in April 2023. Altisource Portfolio Solutions S.A. and certain subsidiaries are guarantors of the term loan and the revolving credit facility (collectively, the “Guarantors”).
There are no mandatory repayments of the Term B Loans due until March 2023, when $1.3 million is due to be repaid. Thereafter, the Term B Loans must be repaid in consecutive quarterly principal installments of $3.1 million , with the balance due at maturity. All amounts outstanding under the Term B Loans will become due on the earlier of (i) April 3, 2024, and (ii) the date on which

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


the loans are declared to be due and owing by the administrative agent at the request (or with the consent) of the Required Lenders (as defined in the Credit Agreement; other capitalized terms, unless defined herein, are defined in the Credit Agreement) or as otherwise provided in the Credit Agreement upon the occurrence of any event of default.
In addition to the scheduled principal payments, subject to certain exceptions, the Term B Loans are subject to mandatory prepayment upon issuances of debt, certain casualty and condemnation events and sales of assets, as well as from a percentage of Consolidated Excess Cash Flow if our leverage ratio is greater than 3.00 to 1.00 , as calculated in accordance with the provisions of the Credit Agreement (the percentage increases if our leverage ratio exceeds 3.50 to 1.00 ). Certain mandatory prepayments reduce future contractual amortization payments in direct order of maturity by an amount equal to the mandatory prepayment.
Altisource may incur incremental indebtedness under the Credit Agreement from one or more incremental lenders, which may include existing lenders, in an aggregate incremental principal amount not to exceed $125.0 million , subject to certain conditions set forth in the Credit Agreement, including a sublimit of $80.0 million with respect to incremental revolving credit commitments. The lenders have no obligation to provide any incremental indebtedness.
The Term B Loans bear interest at rates based upon, at our option, the Adjusted Eurodollar Rate or the Base Rate. Adjusted Eurodollar Rate term loans bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Adjusted Eurodollar Rate for a three month interest period and (y) 1.00% plus (ii) 4.00% . Base Rate term loans bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Base Rate and (y) 2.00% plus (ii) 3.00% . The interest rate as of March 31, 2020 was 5.45% .
Loans under the revolving credit facility bear interest at rates based upon, at our option, the Adjusted Eurodollar Rate or the Base Rate. Adjusted Eurodollar Rate revolving loans bear interest at a rate per annum equal to the sum of (i) the Adjusted Eurodollar Rate for a three month interest period plus (ii) 4.00% . Base Rate revolving loans bear interest at a rate per annum equal to the sum of (i) the Base Rate plus (ii) 3.00% . The unused commitment fee is 0.50% . There were no borrowings outstanding under the revolving credit facility as of March 31, 2020 .
The payment of all amounts owing by Altisource under the Credit Agreement is guaranteed by the Guarantors and is secured by a pledge of all equity interests of certain subsidiaries of Altisource, as well as a lien on substantially all of the assets of Altisource S.à r.l. and the Guarantors, subject to certain exceptions.
The Credit Agreement includes covenants that restrict or limit, among other things, our ability, subject to certain exceptions and baskets, to incur indebtedness; incur liens on our assets; sell, transfer or dispose of assets; make Restricted Junior Payments including share repurchases, dividends and repayment of junior indebtedness; make investments; dispose of equity interests of any Material Subsidiaries; engage in a line of business substantially different than existing businesses and businesses reasonably related, complimentary or ancillary thereto; amend material debt agreements or other material contracts; engage in certain transactions with affiliates; enter into sale/leaseback transactions; grant negative pledges or agree to such other restrictions relating to subsidiary dividends and distributions; make changes to our fiscal year; and engage in mergers and consolidations; and to the extent any Revolving Credit Loans are outstanding on the last day of a fiscal quarter, permit the Total Leverage Ratio to be greater than 3.50 : 1.00 as of the last day of such fiscal quarter, subject to a customary cure provision (the “Revolving Financial Covenant”).
The Credit Agreement contains certain events of default including (i) failure to pay principal when due or interest or any other amount owing on any other obligation under the Credit Agreement within five days of becoming due, (ii) material incorrectness of representations and warranties when made, (iii) breach of certain other covenants, subject to cure periods described in the Credit Agreement, (iv) a breach of the Revolving Financial Covenant, subject to a customary cure provision and not an Event of Default with respect to the Term Loans unless and until the Required Revolving Lenders accelerate the Revolving Credit Loans, (v) failure to pay principal or interest on any other debt that equals or exceeds $40.0 million when due, (vi) default on any other debt that equals or exceeds $40.0 million that causes, or gives the holder or holders of such debt the ability to cause, an acceleration of such debt, (vii) occurrence of a Change of Control, (viii) bankruptcy and insolvency events, (ix) entry by a court of one or more judgments against us in an amount in excess of $40.0 million that remain unbonded, undischarged or unstayed for a certain number of days after the entry thereof, (x) the occurrence of certain ERISA events and (xi) the failure of certain Loan Documents to be in full force and effect. If any event of default occurs and is not cured within applicable grace periods set forth in the Credit Agreement or waived, all loans and other obligations could become due and immediately payable and the facility could be terminated.
As of March 31, 2020 , debt issuance costs were $2.9 million , net of $1.6 million of accumulated amortization. As of December 31, 2019 , debt issuance costs were $3.1 million , net of $1.4 million of accumulated amortization.

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


NOTE 14 — OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consist of the following:
(in thousands)
 
March 31,
2020
 
December 31,
2019
 
 
 
 
 
Operating lease liabilities
 
$
16,041

 
$
19,707

Income tax liabilities
 
10,557

 
10,935

Deferred revenue
 
261

 
88

Other non-current liabilities
 
305

 
286

 
 
 
 
 
Total
 
$
27,164

 
$
31,016

NOTE 15 — 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 March 31, 2020 and December 31, 2019 . The following fair values are estimated using market information and what the Company believes to be appropriate valuation methodologies under GAAP:
 
 
March 31, 2020
 
December 31, 2019
(in thousands)
 
Carrying amount
 
Fair value
 
Carrying amount
 
Fair value
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
79,098

 
$
79,098

 
$
—

 
$
—

 
$
82,741

 
$
82,741

 
$
—

 
$
—

Restricted cash
 
3,810

 
3,810

 
—

 
—

 
3,842

 
3,842

 
—

 
—

Investment in equity securities
 
41,271

 
41,271

 
—

 
—

 
42,618

 
42,618

 
—

 
—

Short-term receivable (Note 3)
 
2,410

 
—

 
—

 
2,410

 
—

 
—

 
—

 
—

Long-term receivable (Note 3)
 
—

 
—

 
—

 
—

 
2,371

 
—

 
—

 
2,371

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior secured term loan
 
293,826

 
—

 
220,370

 
—

 
293,826

 
—

 
277,666

 
—

Fair Value Measurements on a Recurring Basis
Cash and cash equivalents and restricted cash are carried at amounts that approximate their fair values due to the highly liquid nature of these instruments and were measured using Level 1 inputs.
Investment in equity securities is carried at fair value and consists of 3.5 million shares of RESI common stock as of March 31, 2020 and December 31, 2019 . The investment in equity securities is measured using Level 1 inputs as these securities have quoted prices in active markets.
The fair value of our senior secured term loan is based on quoted market prices. Based on the frequency of trading, we do not believe that there is an active market for our debt. Therefore, the quoted prices are considered Level 2 inputs.
In connection with the sale of the rental property management business in August 2018, Altisource will receive $3.0 million on the earlier of a RESI change of control or on August 8, 2023 (see Note 3 for additional information). We measure long-term receivables without a stated interest rate based on the present value of the future payments.
There were no transfers between different levels during the periods presented.
Concentrations of Credit Risk
Financial instruments that subject us to concentrations of credit risk primarily consist of cash and cash equivalents and accounts receivable. Our policy is to deposit our cash and cash equivalents with larger, highly rated financial institutions. The Company derives over 50% of its revenue from Ocwen (see Note 2 for additional information on Ocwen revenues and accounts receivable

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


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 16 — 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 March 31, 2020 , 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 three months ended March 31, 2020 and 2019. Luxembourg law limits share repurchases to the balance of Altisource Portfolio Solutions S.A. (unconsolidated parent company) retained earnings, less the value of shares repurchased. As of March 31, 2020 , we can repurchase up to approximately $98 million of our common stock under Luxembourg law. Our Credit Agreement also limits the amount we can spend on share repurchases, which limit was approximately $452 million as of March 31, 2020 , and may prevent repurchases in certain circumstances.
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 $2.9 million and $2.6 million for the three months ended March 31, 2020 and 2019 , respectively. As of March 31, 2020 , estimated unrecognized compensation costs related to share-based awards amounted to $10.8 million , which we expect to recognize over a weighted average remaining requisite service period of approximately 1.68 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 388 thousand service-based options were outstanding as of March 31, 2020 .
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 496 thousand market-based options were outstanding as of March 31, 2020 .
Performance-Based Options. These option grants generally will vest if certain specific financial measures are achieved; one-fourth vests on each anniversary of the grant date. For certain other financial measures, options cliff-vest upon the achievement of the specific performance during the period from 2019 through 2021. The award of performance-based options is adjusted based on the level of achievement specified in the award agreements. If the performance criteria achieved is above threshold performance levels, participants have the opportunity to vest in 50% to 200% of the option grants, depending upon performance achieved. If the performance criteria achieved is below a certain threshold, the options are canceled. The options generally expire on the earlier of ten years after the date of grant or following termination of service. There were 464 thousand performance-based options outstanding as of March 31, 2020 .
There were no stock options granted during the three months ended March 31, 2020 and 2019 . Outstanding stock options increased by 228 thousand in February 2019 in connection with the determination of the level of achievement for certain performance-based options granted in 2018.
The fair values of the service-based options and performance-based options are determined using the Black-Scholes option pricing model and the fair values of the market-based options were determined using a lattice (binomial) model.

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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.
The following table summarizes the total intrinsic value of stock options exercised and the grant date fair value of stock options that vested during the periods presented:
 
 
Three months ended March 31,
(in thousands, except per share amounts)
 
2020
 
2019
 
 
 
 
 
Intrinsic value of options exercised
 
$
—

 
$
10

Grant date fair value of stock options that vested
 
1,650

 
2,182

The following table summarizes the activity related to our stock options:
 
Number of options
 
Weighted average exercise price
 
Weighted average contractual term (in years)
 
Aggregate intrinsic value (in thousands)
 
 
 
 
 
 
 
 
Outstanding as of December 31, 2019
1,468,046

 
$
29.19

 
4.60
 
$
94

Forfeited/expired
(119,816
)
 
21.89

 
 
 
 

 
 
 
 
 
 
 
 
Outstanding as of March 31, 2020
1,348,230

 
29.84

 
4.68
 
—

 
 
 
 
 
 
 
 
Exercisable as of March 31, 2020
909,530

 
26.88

 
3.63
 
—

Other Share-Based Awards
The Company’s other share-based and similar types of awards are composed of restricted shares and restricted share units. The restricted shares and restricted share units are composed of a combination of service-based awards and performance-based awards.
Service-Based Awards. These awards generally vest over two to four year periods with (a) vesting in equal annual installments, or (b) vesting of all of the restricted shares and restricted share units at the end of the vesting period. A total of 476 thousand service-based awards were outstanding as of March 31, 2020 . Beginning in 2019, service-based restricted share units were awarded as a component of most employees’ annual incentive compensation rather than cash.
Performance-Based Awards. These awards generally vest if certain specific financial measures are achieved; one-third vests on each anniversary of the grant date or cliff-vest on the third anniversary of the grant date. The number of performance-based restricted shares and restricted share units that may vest will be based on the level of achievement as specified in the award agreements. If the performance criteria achieved is above certain financial performance levels and Altisource’s share performance is above certain established criteria, participants have the opportunity to vest in up to 225% 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 275 thousand performance-based awards were outstanding as of March 31, 2020 .
The Company granted 296 thousand restricted share units (at a weighted average grant date fair value of $18.29 per share) during the three months ended March 31, 2020 .
The following table summarizes the activity related to our restricted shares and restricted share units:

Number of restricted shares and restricted share units
 
 
Outstanding as of December 31, 2019
636,146

Granted
296,101

Issued
(105,381
)
Forfeited/canceled
(76,099
)
 
 
Outstanding as of March 31, 2020
750,767


18
Table of Content
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements ( Continued )


NOTE 17 — 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 and sales of short-term investments in real estate. Reimbursable expenses and non-controlling interests are pass-through items for which we earn no margin. Reimbursable expenses consist of amounts we incur on behalf of our customers in performing our fee-based services that we pass directly on to our customers without a markup. Non-controlling interests represent the earnings of Lenders One, 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 for the three months ended March 31:
(in thousands)
 
2020
 
2019
 
 
 
 
 
Service revenue
 
$
113,176

 
$
164,999

Reimbursable expenses
 
7,845

 
4,496

Non-controlling interests
 
423

 
440

 
 
 
 
 
Total
 
$
121,444

 
$
169,935

Disaggregation of Revenue
Disaggregation of total revenues by major source is as follows:
(in thousands)
 
Revenue recognized when services are performed or assets are sold
 
Revenue related to technology platforms and professional services
 
Reimbursable expenses revenue
 
Total revenue
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2020
 
$
108,008

 
$
5,591

 
$
7,845

 
$
121,444

Three months ended March 31, 2019
 
147,755

 
17,684

 
4,496

 
169,935

Contract Balances
Our contract assets consist of unbilled accounts receivable (see Note 5 ). Our contract liabilities consist of current deferred revenue as reported on the accompanying condensed consolidated balance sheets and non-current deferred revenue (see Note 14 ). Revenue recognized that was included in the contract liability at the beginning of the period was $2.5 million and $4.9 million for the three months ended March 31, 2020 and 2019 , respectively.
NOTE 18 — COST OF REVENUE
Cost of revenue principally includes payroll and employee benefits associated with personnel employed in customer service and operations roles, fees paid to external providers related to the provision of services, cost of real estate sold, reimbursable expenses, technology and telecommunications costs as well as depreciation and amortization of operating assets. The components of cost of revenue were as follows for the three months ended March 31:
(in thousands)
 
2020
 
2019
 
 
 
 
 
Compensation and benefits
 
$
25,916

 
$
41,368

Outside fees and services
 
48,140

 
62,581

Technology and telecommunications
 
9,232

 
9,478

Reimbursable expenses
 
7,845

 
4,496

Depreciation and amortization
 
3,448

 
4,198

Cost of real estate sold
 
—

 
2,094

 
 
 
 
 
Total
 
$
94,581

 
$
124,215


19
Table of Content
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements ( Continued )


NOTE 19 — SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses include payroll and employee benefits associated with personnel employed in executive, sales and marketing, finance, 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 for the three months ended March 31:
(in thousands)
 
2020
 
2019
 
 
 
 
 
Compensation and benefits
 
$
12,012

 
$
11,353

Occupancy related costs
 
5,421

 
7,474

Amortization of intangible assets
 
4,209

 
8,647

Professional services
 
2,635

 
5,476

Marketing costs
 
1,437

 
2,932

Depreciation and amortization
 
669

 
1,433

Other
 
1,710

 
4,611

 
 
 
 
 
Total
 
$
28,093

 
$
41,926

NOTE 20 — OTHER INCOME (EXPENSE), NET
Other income (expense), net consists of the following for the three months ended March 31:
(in thousands)
 
2020
 
2019
 
 
 
 
 
Interest income
 
$
74

 
$
151

Other, net
 
1,020

 
223

 
 
 
 
 
Total
 
$
1,094

 
$
374

NOTE 21 — INCOME TAXES
We recognized an income tax (provision) benefit of $(2.4) million and $1.2 million for the three months ended March 31, 2020 and 2019 , respectively. The increase in the income tax provision for the three months ended March 31, 2020 was driven by income tax on transfer pricing income from US and foreign operations other than our Luxembourg operating company and no tax benefit on the pretax loss from our Luxembourg operating company. In addition, the decrease in the India income tax rate resulted in a higher tax provision for the three months ended March 31, 2020 in connection with adjustments to deferred tax assets in India.
NOTE 22 — 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 for the three months ended March 31:
(in thousands, except per share data)