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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
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)
Luxembourg98-0554932
(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) 27 61 49 00
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $1.00 par value
ASPSNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

As of May 4, 2021, there were 15,807,497 outstanding shares of the registrant’s common stock (excluding 9,605,251 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,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$41,335 $58,263 
Accounts receivable, net19,956 22,413 
Prepaid expenses and other current assets20,965 19,479 
Total current assets82,256 100,155 
Premises and equipment, net 11,092 11,894 
Right-of-use assets under operating leases16,301 18,213 
Goodwill73,849 73,849 
Intangible assets, net43,727 46,326 
Deferred tax assets, net5,385 5,398 
Other assets7,091 9,850 
Total assets$239,701 $265,685 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses$56,712 $56,779 
Deferred revenue4,595 5,461 
Other current liabilities 7,536 9,305 
Total current liabilities68,843 71,545 
Long-term debt243,039 242,656 
Deferred tax liabilities, net9,423 8,801 
Other non-current liabilities 23,654 25,239 
Commitments, contingencies and regulatory matters (Note 23)
Equity (deficit):
Common stock ($1.00 par value; 100,000 shares authorized, 25,413 issued and 15,795 outstanding as of March 31, 2021; 15,664 outstanding as of December 31, 2020)
25,413 25,413 
Additional paid-in capital142,911 141,473 
Retained earnings158,890 190,383 
Treasury stock, at cost (9,618 shares as of March 31, 2021 and 9,749 shares as of December 31, 2020)
(432,373)(441,034)
Altisource deficit(105,159)(83,765)
Non-controlling interests(99)1,209 
Total deficit(105,258)(82,556)
Total liabilities and deficit$239,701 $265,685 

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,
20212020
Revenue$50,465 $121,444 
Cost of revenue50,158 94,581 
Gross profit307 26,863 
Operating expenses:
Selling, general and administrative expenses18,886 28,093 
Restructuring charges  2,925 
Loss from operations(18,579)(4,155)
Other income (expense), net
Interest expense(3,442)(4,716)
Unrealized loss on investment in equity securities  (1,347)
Other income (expense), net949 1,094 
Total other income (expense), net(2,493)(4,969)
Loss before income taxes and non-controlling interests(21,072)(9,124)
Income tax provision(843)(2,421)
Net loss(21,915)(11,545)
Net income attributable to non-controlling interests(87)(105)
Net loss attributable to Altisource$(22,002)$(11,650)
Loss per share:
Basic$(1.40)$(0.75)
Diluted$(1.40)$(0.75)
Weighted average shares outstanding:
Basic15,717 15,497 
Diluted15,717 15,497 
Comprehensive loss:
Comprehensive loss, net of tax$(21,915)$(11,545)
Comprehensive income attributable to non-controlling interests(87)(105)
Comprehensive loss attributable to Altisource$(22,002)$(11,650)

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
 Altisource Equity (Deficit)
Common stockAdditional paid-in capitalRetained earningsTreasury stock, at costNon-controlling interestsTotal
 Shares
Balance, December 31, 201925,413 $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, 202025,413 $25,413 $136,563 $252,466 $(447,229)$1,263 $(31,524)
Balance, December 31, 202025,413 $25,413 $141,473 $190,383 $(441,034)$1,209 $(82,556)
Net loss— $— $— $(22,002)$— $87 $(21,915)
Distributions to non-controlling interest holders— — — — — (1,395)(1,395)
Share-based compensation expense— — 1,438 — — — 1,438 
Issuance of restricted share units and restricted shares— — — (5,905)5,905 —  
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances
— — — (3,586)2,756 — (830)
Balance, March 31, 202125,413 $25,413 $142,911 $158,890 $(432,373)$(99)$(105,258)
See accompanying notes to condensed consolidated financial statements.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three months ended
March 31,
20212020
Cash flows from operating activities:  
Net loss$(21,915)$(11,545)
Adjustments to reconcile net loss to net cash used in operating activities:  
Depreciation and amortization1,184 4,117 
Amortization of right-of-use assets under operating leases1,927 2,706 
Amortization of intangible assets2,599 4,209 
Unrealized loss on investment in equity securities 1,347 
Share-based compensation expense1,438 2,894 
Bad debt expense217 342 
Amortization of debt discount168 167 
Amortization of debt issuance costs215 184 
Deferred income taxes562 126 
Loss on disposal of fixed assets7 39 
Changes in operating assets and liabilities:  
Accounts receivable2,240 (303)
Prepaid expenses and other current assets(1,486)(36)
Other assets258 612 
Accounts payable and accrued expenses11 (3,116)
Current and non-current operating lease liabilities(1,941)(3,354)
Other current and non-current liabilities(2,294)(37)
Net cash used in operating activities(16,810)(1,648)
Cash flows from investing activities:  
Additions to premises and equipment(467)(511)
Proceeds from the sale of business3,000  
Net cash provided by (used in) investing activities2,533 (511)
Cash flows from financing activities:  
Distributions to non-controlling interests(1,395)(311)
Payments of tax withholding on issuance of restricted share units and restricted shares(830)(1,205)
Net cash used in financing activities(2,225)(1,516)
Net decrease in cash, cash equivalents and restricted cash(16,502)(3,675)
Cash, cash equivalents and restricted cash at the beginning of the period62,096 86,583 
Cash, cash equivalents and restricted cash at the end of the period$45,594 $82,908 
Supplemental cash flow information:  
Interest paid$3,090 $4,415 
Income taxes paid (received), net902 (1,720)
Acquisition of right-of-use assets with operating lease liabilities15 705 
Reduction of right-of-use assets from operating lease modifications or reassessments (1,273)
Non-cash investing and financing activities:  
Net (decrease) increase in payables for purchases of premises and equipment$(78)$103 
See accompanying notes to condensed consolidated financial statements.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements
NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION
Description of Business
Altisource Portfolio Solutions S.A., together with its subsidiaries (which may be referred to as “Altisource,” the “Company,” “we,” “us” or “our”), is an integrated service provider and marketplace for the real estate and mortgage industries. Combining operational excellence with a suite of innovative services and technologies, Altisource helps solve the demands of the ever-changing markets we serve.
We are publicly traded on the NASDAQ Global Select Market under the symbol “ASPS.” We are organized under the laws of the Grand Duchy of Luxembourg.
Basis of Accounting and Presentation
The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, the interim data includes all normal recurring adjustments considered necessary to fairly state the results for the interim periods presented. The preparation of interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our interim condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Intercompany transactions and accounts have been eliminated in consolidation.
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, 2021, Lenders One had total assets of $1.9 million and total liabilities of $0.7 million. As of December 31, 2020, Lenders One had total assets of $2.3 million and total liabilities of $0.1 million.
In 2019, Altisource created Pointillist, Inc. (“Pointillist”) and contributed the Pointillist® customer journey analytics business and $8.5 million to it. Pointillist is owned by Altisource and management of Pointillist. Management of Pointillist owns a non-controlling interest representing 12.1% of the outstanding equity of Pointillist. Additional equity shares of Pointillist are available for issuance to management and board members of Pointillist. 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, 2020, as filed with the SEC on March 11, 2021.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)

Fair Value Measurements
Fair value is defined as an exit price, representing the amount that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:
Level 1Quoted prices in active markets for identical assets and liabilities
Level 2Observable inputs other than quoted prices included in Level 1
Level 3Unobservable 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 December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 is 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 adopted this standard effective January 1, 2021 and has applied it 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 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 and in January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. This standard applies only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. This standard provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting, in response to concerns about structural risks of interbank offered rates, and, particularly, the risk of cessation of LIBOR. This standard is effective from the period from March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a topic or an industry subtopic, the standard must be applied prospectively for all eligible contract modifications for that topic or industry subtopic. The Company is currently evaluating the impact this guidance may have on its condensed consolidated financial statements.
NOTE 2 — CUSTOMER CONCENTRATION
Ocwen
Ocwen Financial Corporation (together with its subsidiaries, “Ocwen”) is a residential mortgage loan servicer of mortgage servicing rights (“MSRs”) it owns, including those MSRs in which others have an economic interest, and a subservicer of MSRs owned by others.
During the three months ended March 31, 2021, Ocwen was our largest customer, accounting for 34% 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.
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, 2021 and 2020, we recognized revenue from Ocwen of $16.9 million and $74.2 million, respectively. Revenue from Ocwen as a percentage of consolidated revenue was 34% and 61% for the three months ended March 31, 2021 and 2020, respectively.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)

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, 2021 and 2020, we recognized revenue of $2.6 million and $7.8 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.
During the second quarter of 2020, Ocwen informed us that an MSR investor instructed Ocwen to use a field services provider other than Altisource on properties associated with certain MSRs. Based upon the impacted portfolios to date and the designated service provider, Altisource believes that Ocwen received these directions from New Residential Investment Corp. (individually, together with one or more of its subsidiaries or one or more of its subsidiaries individually, “NRZ”). We believe Ocwen commenced using another field services provider for these properties in July 2020 and continued to transition services during the third quarter of 2020. We believe that the transition to the replacement field service provider was largely completed as of September 30, 2020. We estimate that $0.2 million and $29.3 million of service revenue from Ocwen for the three months ended March 31, 2021 and 2020, respectively, was derived from Field Services referrals from the NRZ portfolios. Ocwen also communicated to Altisource in the fourth quarter of 2020 that the same investor instructed Ocwen to use a provider for default valuations and certain default title services other than Altisource on properties associated with such certain MSRs and commenced moving these referrals to other service providers in the fourth quarter of 2020. We anticipate that the transition of such default valuations and title services will continue during the course of 2021. We estimate that $1.0 million and $8.0 million of service revenue from Ocwen for the three months ended March 31, 2021 and 2020, respectively, was derived from default valuations and title services referrals from the NRZ portfolios.
To address the reduction in revenue, Altisource is undertaking several measures to further reduce its cost structure and strengthen its operations.
In addition, we entered into an agreement with Ocwen on May 5, 2021 (the “Agreement”) pursuant to which the term of the services agreements between us and Ocwen were extended from August 2025 through August 2030 and the scope of solutions we provide to Ocwen were expanded to, among other things, include the opportunity to provide field services, first and second chance foreclosure auctions, and title services on Ocwen’s Federal Housing Administration (“F.H.A.”), Veterans Affairs (“V.A.”) and United States Department of Agriculture (“U.S.D.A.”) loans, subject to a process to confirm Altisource’s ability to meet reasonable performance requirements. The Agreement established a framework for us to expand the foreclosure trustee solutions we provide to Ocwen in additional states, and, as mutually agreed upon by the parties, to deliver reverse mortgage related solutions to Ocwen, subject to negotiation of appropriate statements of work or other agreements, a process to confirm Altisource’s ability to meet reasonable performance requirements, and technical integrations, as may be applicable. The Agreement further resolved the contractual dispute between the parties related to Ocwen’s transfer to NRZ the rights to designate service providers other than Altisource, including mutual releases with respect to such dispute. The Agreement also addressed Ocwen’s rights in the event of certain change of control or sale of a business transactions by us on or after September 1, 2028.
As of March 31, 2021, accounts receivable from Ocwen totaled $4.1 million, $3.1 million of which was billed and $1.0 million of which was unbilled. As of December 31, 2020, accounts receivable from Ocwen totaled $5.9 million, $5.1 million of which was billed and $0.8 million of which was unbilled.
NRZ
NRZ is a real estate investment trust that invests in and manages investments primarily related to residential real estate, including MSRs and excess MSRs.
Ocwen has disclosed that NRZ is its largest client. As of March 31, 2021, approximately 36% of loans serviced and subserviced by Ocwen (measured in unpaid principal balance (“UPB”)) were related to NRZ MSRs or rights to MSRs. In July 2017 and January 2018, Ocwen and NRZ entered into a series of agreements pursuant to which the parties agreed, among other things, to undertake certain actions to facilitate the transfer from Ocwen to NRZ of Ocwen’s legal title to certain of its MSRs (the “Subject MSRs”) and under which Ocwen will subservice mortgage loans underlying the MSRs for an initial term of five years, subject to early termination rights.
On August 28, 2017, Altisource, through its licensed subsidiaries, entered into a Cooperative Brokerage Agreement, as amended, and related letter agreement (collectively, the “Brokerage Agreement”) with NRZ which extends through August 2025. Under this agreement and related amendments, Altisource remains the exclusive provider of brokerage services for real estate owned (“REO”) associated with the Subject MSRs, irrespective of the subservicer, subject to certain limitations. NRZ’s brokerage subsidiary receives a cooperative brokerage commission on the sale of REO properties from these portfolios subject to certain exceptions.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)

The Brokerage Agreement may be terminated by NRZ upon the occurrence of certain specified events. Termination events include, but are not limited to, a breach of the terms of the Brokerage Agreement (including, without limitation, the failure to meet performance standards and non-compliance with law in a material respect), the failure to maintain licenses which failure materially prevents performance of the contract, regulatory allegations of non-compliance resulting in an adversarial proceeding against NRZ, voluntary or involuntary bankruptcy, appointment of a receiver, disclosure in a Form 10-K or Form 10-Q that there is significant uncertainty about Altisource’s ability to continue as a going concern, failure to maintain a specified level of cash and an unapproved change of control.
For the three months ended March 31, 2021 and 2020, we recognized revenue from NRZ of $0.8 million and $2.7 million, respectively, under the Brokerage Agreement. For the three months ended March 31, 2021 and 2020, we recognized additional revenue of $3.4 million and $12.0 million, respectively, relating to the Subject MSRs when a party other than NRZ selects Altisource as the service provider.
NOTE 3— SALE OF A 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 was to be received on the earlier of a RESI change of control or on August 8, 2023. On October 19, 2020, RESI announced that it had entered into a definitive merger agreement to sell RESI. The merger closed on January 11, 2021 and the Company subsequently received the $3.0 million payment. The present value of the second installment is included in other assets in the accompanying condensed consolidated balance sheets at a discounted value of $2.5 million as of December 31, 2020 (no comparative amount as of March 31, 2021).
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, 2021 and December 31, 2020, we held no shares of RESI common stock. During the three months ended March 31, 2020, we recognized an unrealized loss from the change in fair value of $(1.3) million (no comparative amount for the three months ended March 31, 2021). During the three months ended March 31, 2020, we earned dividends of $0.5 million (no comparative amount for the three months ended March 31, 2021), related to this investment.
NOTE 5 — ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consists of the following:
(in thousands)March 31,
2021
December 31,
2020
Billed$17,489 $19,703 
Unbilled8,215 8,291 
25,704 27,994 
Less: Allowance for credit losses(5,748)(5,581)
Total$19,956 $22,413 
Unbilled accounts receivable consist primarily of certain real estate asset management, REO sales, title and closing services for which we generally recognize revenue when the service is provided but collect upon closing of the sale, and foreclosure trustee services, for which we generally recognize revenues over the service delivery period but bill following completion of the service. We also include amounts in unbilled accounts receivable that are earned during a month and billed in the following month.
We are exposed to credit losses through our sales of products and services to our customers which are recorded as accounts receivable, net on the Company’s condensed consolidated financial statements. We monitor and estimate the allowance for credit losses based on our historical write-offs, historical collections, our analysis of past due accounts based on the contractual terms of the receivables, relevant market and industry reports and our assessment of the economic status of our customers, if known. Estimated credit losses are written off in the period in which the financial asset is determined to be no longer
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)

collectible. There can be no assurance that actual results will not differ from estimates or that consideration of these factors in the future will not result in an increase or decrease to our allowance for credit losses.
Changes in allowance for expected credit losses consist of the following:
Additions
(in thousands)Balance at Beginning of PeriodCharged to Expenses
Deductions Note (1)
Balance at End of Period
Allowance for expected credit losses:
March 31, 2021$5,581 $217 $50 $5,748 
December 31, 20204,472 2,229 1,120 5,581 
______________________________________
(1)    Amounts written off as uncollectible or transferred to other accounts or utilized.
NOTE 6 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
(in thousands)March 31,
2021
December 31,
2020
Income taxes receivable$8,509 $7,053 
Maintenance agreements, current portion2,205 2,513 
Prepaid expenses5,149 4,812 
Other current assets5,102 5,101 
Total$20,965 $19,479 
NOTE 7 — PREMISES AND EQUIPMENT, NET
Premises and equipment, net consists of the following:
(in thousands)March 31,
2021
December 31,
2020
Computer hardware and software$52,289 $52,837 
Leasehold improvements14,835 14,792 
Furniture and fixtures5,560 5,882 
Office equipment and other1,694 1,817 
74,378 75,328 
Less: Accumulated depreciation and amortization(63,286)(63,434)
Total$11,092 $11,894 
Depreciation and amortization expense amounted to $1.2 million and $4.1 million for the three months ended March 31, 2021 and 2020, respectively, and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets in the accompanying condensed consolidated statements of operations and comprehensive loss.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)

Premises and equipment, net consist of the following, by country:
(in thousands)March 31,
2021
December 31,
2020
United States$5,084 $5,530 
Luxembourg5,054 5,451 
India875 822 
Uruguay79 91 
Total$11,092 $11,894 
NOTE 8 — RIGHT-OF-USE ASSETS UNDER OPERATING LEASES, NET
Right-of-use assets under operating leases, net consists of the following:
(in thousands)March 31,
2021
December 31,
2020
Right-of-use assets under operating leases$30,111 $31,932 
Less: Accumulated amortization(13,810)(13,719)
Total$16,301 $18,213 
Amortization of operating leases was $1.9 million and $2.7 million for the three months ended March 31, 2021 and 2020, respectively, and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets in the accompanying condensed consolidated statements of operations and comprehensive loss.
NOTE 9 — GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill
Goodwill consists of the following:
(in thousands)Total
Balance as of March 31, 2021 and December 31, 2020$73,849 
Intangible Assets, net
Intangible assets, net consist of the following:
 
Weighted average estimated useful life
(in years)
Gross carrying amountAccumulated amortizationNet book value
(in thousands)March 31,
2021
December 31,
2020
March 31,
2021
December 31,
2020
March 31,
2021
December 31,
2020
Definite lived intangible assets:
Customer related intangible assets9$214,973 $214,973 $(189,981)$(187,923)$24,992 $27,050 
Operating agreement2035,000 35,000 (19,564)(19,126)15,436 15,874 
Trademarks and trade names169,709 9,709 (6,410)(6,307)3,299 3,402 
Non-compete agreements 1,230  (1,230)  
Other intangible assets 1,800  (1,800)  
Total$259,682 $262,712 $(215,955)$(216,386)$43,727 $46,326 
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)

Amortization expense for definite lived intangible assets was $2.6 million and $4.2 million for the three months ended March 31, 2021 and 2020, respectively. Expected annual definite lived intangible asset amortization expense for 2021 through 2025 is $9.5 million, $5.1 million, $5.1 million, $5.1 million and $5.1 million, respectively.
NOTE 10 — OTHER ASSETS
Other assets consist of the following:
(in thousands)March 31,
2021
December 31,
2020
Restricted cash$4,259 $3,833 
Security deposits1,770 2,416 
Other1,062 3,601 
Total$7,091 $9,850 
NOTE 11 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accounts payable and accrued expenses consist of the following:
(in thousands)March 31,
2021
December 31,
2020
Accounts payable$18,903 $16,797 
Accrued expenses - general20,608 24,422 
Accrued salaries and benefits12,841 11,226 
Income taxes payable4,360 4,334 
Total$56,712 $56,779 
Other current liabilities consist of the following:
(in thousands)March 31,
2021
December 31,
2020
Operating lease liabilities$7,118 $7,609 
Other418 1,696 
Total$7,536 $9,305 
NOTE 12 — LONG-TERM DEBT
Long-term debt consists of the following:
(in thousands)March 31,
2021
December 31,
2020
Senior secured term loans$247,204 $247,204 
Less: Debt issuance costs, net(2,174)(2,389)
Less: Unamortized discount, net(1,991)(2,159)
Long-term debt$243,039 $242,656 
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”).
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)

There are no mandatory repayments of the Term B Loans due until April 2024, when the balance is due at maturity, except as otherwise described herein. All amounts outstanding under the Term B Loans will become due on the earlier of (i) April 3, 2024, and (ii) the date on which the loans are declared to be due and owing by the administrative agent at the request (or with the consent) of the Required Lenders (as defined in the Credit Agreement; other capitalized terms, unless defined herein, are defined in the Credit Agreement) or as otherwise provided in the Credit Agreement upon the occurrence of any event of default.
In addition to the scheduled principal payments, subject to certain exceptions, the Term B Loans are subject to mandatory prepayment upon issuances of debt, certain casualty and condemnation events and sales of assets, as well as from a percentage of Consolidated Excess Cash Flow if our leverage ratio as of each year-end computation date is greater than 3.00 to 1.00, as calculated in accordance with the provisions of the Credit Agreement (the percentage increases if our leverage ratio exceeds 3.50 to 1.00). Our leverage ratio exceeded 3.50 to 1.00 for the twelve months ended March 31, 2021. The Company did not generate any Consolidated Excess Cash Flow in first quarter of 2021.
Altisource may incur incremental indebtedness under the Credit Agreement from one or more incremental lenders, which may include existing lenders, in an aggregate incremental principal amount not to exceed $125.0 million, subject to certain conditions set forth in the Credit Agreement, including a sublimit of $80.0 million with respect to incremental revolving credit commitments and, after giving effect to the incremental borrowing, the Company’s leverage ratio does not exceed 3.00 to 1.00. Our leverage ratio exceeded 3.00 to 1.00 for the twelve months ended March 31, 2021. 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, 2021 was 5.00%.
Loans under the revolving credit facility bear interest at rates based upon, at our option, the Adjusted Eurodollar Rate or the Base Rate. Adjusted Eurodollar Rate revolving loans bear interest at a rate per annum equal to the sum of (i) the Adjusted Eurodollar Rate for a three month interest period plus (ii) 4.00%. Base Rate revolving loans bear interest at a rate per annum equal to the sum of (i) the Base Rate plus (ii) 3.00%. The unused commitment fee is 0.50%. Borrowings under the revolving credit facility are not permitted if our leverage ratio exceeds 3.50 to 1.00. Our leverage ratio exceeded 3.50 to 1.00 for the twelve months ended March 31, 2021. There were no borrowings outstanding under the revolving credit facility as of March 31, 2021.
The payment of all amounts owing by Altisource under the Credit Agreement is guaranteed by the Guarantors and is secured by a pledge of all equity interests of certain subsidiaries of Altisource, as well as a lien on substantially all of the assets of Altisource S.à r.l. and the Guarantors, subject to certain exceptions.
The Credit Agreement includes covenants that restrict or limit, among other things, our ability, subject to certain exceptions and baskets, to incur indebtedness; incur liens on our assets; sell, transfer or dispose of assets; make Restricted Junior Payments including share repurchases, dividends and repayment of junior indebtedness; make investments; dispose of equity interests of any Material Subsidiaries; engage in a line of business substantially different than existing businesses and businesses reasonably related, complimentary or ancillary thereto; amend material debt agreements or other material contracts; engage in certain transactions with affiliates; enter into sale/leaseback transactions; grant negative pledges or agree to such other restrictions relating to subsidiary dividends and distributions; make changes to our fiscal year; and engage in mergers and consolidations; and to the extent any Revolving Credit Loans are outstanding on the last day of a fiscal quarter, permit the Total Leverage Ratio to be greater than 3.50:1.00 as of the last day of such fiscal quarter, subject to a customary cure provision (the “Revolving Financial Covenant”).
The Credit Agreement contains certain events of default including (i) failure to pay principal when due or interest or any other amount owing on any other obligation under the Credit Agreement within five days of becoming due, (ii) material incorrectness of representations and warranties when made, (iii) breach of certain other covenants, subject to cure periods described in the Credit Agreement, (iv) a breach of the Revolving Financial Covenant, subject to a customary cure provision and not an Event of Default with respect to the Term Loans unless and until the Required Revolving Lenders accelerate the Revolving Credit Loans, (v) failure to pay principal or interest on any other debt that equals or exceeds $40.0 million when due, (vi) default on any other debt that equals or exceeds $40.0 million that causes, or gives the holder or holders of such debt the ability to cause, an acceleration of such debt, (vii) occurrence of a Change of Control, (viii) bankruptcy and insolvency events, (ix) entry by a court of one or more judgments against us in an amount in excess of $40.0 million that remain unbonded, undischarged or unstayed for a certain number of days after the entry thereof, (x) the occurrence of certain ERISA events and (xi) the failure of certain Loan Documents to be in full force and effect. If any event of default occurs and is not cured within applicable grace periods
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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, 2021, debt issuance costs were $2.2 million, net of $2.3 million of accumulated amortization. As of December 31, 2020, debt issuance costs were $2.4 million, net of $2.2 million of accumulated amortization.
NOTE 13 — OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consist of the following:
(in thousands)March 31,
2021
December 31,
2020
Operating lease liabilities$10,846 $12,281 
Income tax liabilities12,392 12,414 
Deferred revenue373 504 
Other non-current liabilities43 40 
Total$23,654 $25,239 
NOTE 14 — FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS
The following table presents the carrying amount and estimated fair value of financial instruments and certain liabilities measured at fair value as of March 31, 2021 and December 31, 2020. The following fair values are estimated using market information and what the Company believes to be appropriate valuation methodologies under GAAP:
March 31, 2021December 31, 2020
(in thousands)Carrying amountFair valueCarrying amountFair value
Level 1Level 2Level 3Level 1Level 2Level 3
Assets:
Cash and cash equivalents$41,335 $41,335 $ $ $58,263 $58,263 $ $ 
Restricted cash4,259 4,259   3,833 3,833   
Long-term receivable    2,531   2,531 
Liabilities:
Senior secured term loan247,204  210,124  247,204  201,472  
Fair Value Measurements on a Recurring Basis
Cash and cash equivalents and restricted cash are carried at amounts that approximate their fair values due to the highly liquid nature of these instruments and were measured using Level 1 inputs.
The fair value of our senior secured term loan 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 was to receive $3.0 million on the earlier of a RESI change of control or on August 8, 2023. On October 19, 2020, RESI announced that it had entered into a definitive merger agreement to sell RESI. The merger closed on January 11, 2021 and the Company subsequently received the $3.0 million payment (See Note 3 for additional information). We measure long-term receivables without a stated interest rate based on the present value of the future payments.
There were no transfers between different levels during the periods presented.
Concentrations of Credit Risk
Financial instruments that subject us to concentrations of credit risk primarily consist of cash and cash equivalents and accounts receivable. Our policy is to deposit our cash and cash equivalents with larger, highly rated financial institutions. The Company derived 34% of its revenue from Ocwen for the three months ended March 31, 2021 (see Note 2 for additional information on
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Ocwen revenues and accounts receivable balance). The Company strives to mitigate its concentrations of credit risk with respect to accounts receivable by actively monitoring past due accounts and the economic status of larger customers, if known.
NOTE 15 — 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, 2021, approximately 2.4 million shares of common stock remain available for repurchase under the program. There were no purchases of shares of common stock during the three months ended March 31, 2021 and 2020. 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, 2021, we can repurchase up to approximately $86 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 $398 million as of March 31, 2021, and may prevent repurchases in certain circumstances, including if our leverage ratio exceeds 3.50 to 1.00. Our leverage ratio exceeded 3.50 to 1.00 for the twelve months ended March 31, 2021.
Share-Based Compensation
We issue share-based awards in the form of stock options, restricted shares and restricted share units for certain employees, officers and directors. We recognized share-based compensation expense of $1.4 million and $2.9 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, estimated unrecognized compensation costs related to share-based awards amounted to $7.7 million, which we expect to recognize over a weighted average remaining requisite service period of approximately 1.60 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 249 thousand service-based options were outstanding as of March 31, 2021.
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 198 thousand market-based options were outstanding as of March 31, 2021.
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 446 thousand performance-based options outstanding as of March 31, 2021.
There were no stock options granted during the three months ended March 31, 2021 and 2020.
The fair values of the service-based options and performance-based options are determined using the Black-Scholes option
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pricing model and the fair values of the market-based options were determined using a lattice (binomial) model.
We determined the expected option life of all service-based stock option grants using the simplified method, determined based on the graded vesting term plus the contractual term of the options, divided by two. We use the simplified method because we believe that our historical data does not provide a reasonable basis upon which to estimate expected option life.
The following table summarizes 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)20212020
Grant date fair value of stock options that vested1,186 1,650 
The following table summarizes the activity related to our stock options:
 Number of optionsWeighted average exercise price
Weighted average contractual term (in years)
Aggregate intrinsic value (in thousands)
Outstanding as of December 31, 2020899,914 $32.47 5.63$ 
Forfeited/expired(6,762)29.10   
Outstanding as of March 31, 2021893,152 32.49 5.40 
Exercisable as of March 31, 2021627,389 28.23 5.41 
Other Share-Based Awards
The Company’s other share-based and similar types of awards are composed of restricted shares and restricted share units. The restricted shares and restricted share units are composed of a combination of service-based awards, performance-based awards and market-based awards.
Service-Based Awards. These awards generally vest over two to four year periods with (a) vesting in equal annual installments, or (b) vesting of all of the restricted shares and restricted share units at the end of the vesting period. A total of 433 thousand service-based awards were outstanding as of March 31, 2021. Beginning in 2019, the Company granted service-based restricted share units as a component of most employees’ annual incentive compensation rather than cash.
Performance-Based Awards. These awards generally vest if certain specific financial measures are achieved; generally one-third vests on each anniversary of the grant date or cliff-vest on the third anniversary of the grant date. The number of performance-based restricted shares and restricted share units that may vest is based on the level of achievement as specified in the award agreements. If the performance criteria achieved is above certain financial performance levels and Altisource’s share performance is above certain established criteria, participants have the opportunity to vest in up to 150% of the restricted share unit award for certain awards. If the performance criteria achieved is below certain thresholds, the award is canceled. A total of 252 thousand performance-based awards were outstanding as of March 31, 2021.
Market-Based Awards. 50% of these awards generally vest if certain specific market conditions are achieved over a 30-day period and the remaining 50% of these awards generally vest on the one year anniversary of the initial vesting. The Company estimates the grant date fair value of these awards using a lattice (binomial) model. A total of 176 thousand market-based awards were outstanding as of March 31, 2021.
Performance-Based and Market-Based Awards. These awards generally vest if certain specific financial measures are achieved and if certain specific market conditions are achieved. If the performance criteria achieved is above certain financial performance levels and Altisource’s share performance is above certain established criteria, participants have the opportunity to vest in up to 300% of the restricted share unit award for certain awards. If the performance criteria or the market criteria is below certain thresholds, the award is canceled. The Company estimates the grant date fair value of these awards using a Monte Carlo simulation model. A total of 96 thousand performance-based and market-based awards were outstanding as of March 31, 2021.
The Company granted 338 thousand restricted share units (at a weighted average grant date fair value of $9.53 per share) during the three months ended March 31, 2021. These grants include 29 thousand performance-based awards that include both a
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Notes to Condensed Consolidated Financial Statements (Continued)

performance condition and a market condition. The Company granted 37 thousand performance-based awards that include both a performance condition and a market condition for the three months ended March 31, 2020. There were no market-based awards granted for the three months ended March 31, 2021 and 2020, respectively.
The following table summarizes the activity related to our restricted shares and restricted share units:
Number of restricted shares and restricted share units
Outstanding as of December 31, 2020878,521 
Granted337,971 
Issued(131,054)
Forfeited/canceled(128,470)
Outstanding as of March 31, 2021956,968 
NOTE 16 — REVENUE
We classify revenue in three categories: service revenue, revenue from reimbursable expenses and non-controlling interests. Service revenue consists of amounts attributable to our fee-based services. Reimbursable expenses and non-controlling interest are pass-through items for which we earn no margin. Reimbursable expenses consist of amounts we incur on behalf of our customers in performing our fee-based services that we pass directly on to our customers without a markup. Non-controlling interests represent the earnings of Lenders One, a consolidated entity that is a mortgage cooperative managed, but not owned, by Altisource. The Lenders One members’ earnings are included in revenue and reduced from net income to arrive at net income attributable to Altisource (see Note 1). Our services are provided to customers located in the United States. The components of revenue were as follows for the three months ended March 31:
(in thousands)20212020
Service revenue$48,080 $113,176 
Reimbursable expenses2,013 7,845 
Non-controlling interests372 423 
Total$50,465 $121,444 
Disaggregation of Revenue
Disaggregation of total revenues by major source is as follows:
(in thousands)Revenue recognized when services are performed or assets are soldRevenue related to technology platforms and professional servicesReimbursable expenses revenueTotal revenue
Three months ended March 31, 202145,251 3,201 2,013 50,465 
Three months ended March 31, 2020108,008 5,591 7,845 121,444 
Contract Balances
Our contract assets consist of unbilled accounts receivable (see Note 5). Our contract liabilities consist of current deferred revenue and other non-current liabilities as reported on the accompanying condensed consolidated balance sheets. Revenue recognized that was included in the contract liability at the beginning of the period was $2.2 million and $2.5 million for the three months ended March 31, 2021 and 2020, respectively.
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NOTE 17 — 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 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)20212020
Compensation and benefits$22,035 $25,916 
Outside fees and services18,723