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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 September 30, 2022
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.)
33, Boulevard Prince Henri
L-1724 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 October 28, 2022, there were 16,123,433 outstanding shares of the registrant’s common stock (excluding 9,289,315 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)
September 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$63,812 $98,132 
Accounts receivable, net14,335 18,008 
Prepaid expenses and other current assets21,704 21,864 
Total current assets99,851 138,004 
Premises and equipment, net 4,970 6,873 
Right-of-use assets under operating leases5,965 7,594 
Goodwill55,960 55,960 
Intangible assets, net33,010 36,859 
Deferred tax assets, net6,023 6,386 
Other assets5,503 6,132 
Total assets$211,282 $257,808 
LIABILITIES AND DEFICIT
Current liabilities:
Accounts payable and accrued expenses$41,456 $46,535 
Deferred revenue4,050 4,342 
Other current liabilities 3,095 3,870 
Total current liabilities48,601 54,747 
Long-term debt244,844 243,637 
Deferred tax liabilities, net8,849 9,028 
Other non-current liabilities 17,508 19,266 
Commitments, contingencies and regulatory matters (Note 21)
Equity (deficit):
Common stock ($1.00 par value; 100,000 shares authorized, 25,413 issued and 16,117 outstanding as of September 30, 2022; 15,911 outstanding as of December 31, 2021)
25,413 25,413 
Additional paid-in capital148,197 144,298 
Retained earnings131,124 186,592 
Treasury stock, at cost (9,296 shares as of September 30, 2022 and 9,502 shares as of December 31, 2021)
(414,102)(426,445)
Altisource deficit(109,368)(70,142)
Non-controlling interests848 1,272 
Total deficit(108,520)(68,870)
Total liabilities and deficit$211,282 $257,808 
See accompanying notes to condensed consolidated financial statements.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share data)
Three months ended
September 30,
Nine months ended
September 30,
2022202120222021
Revenue$38,380 $43,243 $118,317 $139,749 
Cost of revenue34,387 40,667 104,611 134,862 
Gross profit3,993 2,576 13,706 4,887 
Selling, general and administrative expenses14,556 16,604 43,055 52,046 
Loss from operations(10,563)(14,028)(29,349)(47,159)
Other income (expense), net:
Interest expense(4,349)(3,755)(11,439)(10,672)
Other income (expense), net459 (115)1,392 791 
Total other income (expense), net(3,890)(3,870)(10,047)(9,881)
Loss before income taxes and non-controlling interests(14,453)(17,898)(39,396)(57,040)
Income tax benefit (provision)197 (430)(2,210)(1,857)
Net loss(14,256)(18,328)(41,606)(58,897)
Net (income) loss attributable to non-controlling interests(133)59 (468)151 
Net loss attributable to Altisource$(14,389)$(18,269)$(42,074)$(58,746)
Loss per share:
Basic$(0.89)$(1.15)$(2.62)$(3.71)
Diluted$(0.89)$(1.15)$(2.62)$(3.71)
Weighted average shares outstanding:
Basic16,087 15,831 16,051 15,816 
Diluted16,087 15,831 16,051 15,816 
Comprehensive loss:
Comprehensive loss, net of tax$(14,256)$(18,328)$(41,606)$(58,897)
Comprehensive (income) loss attributable to non-controlling interests(133)59 (468)151 
Comprehensive loss attributable to Altisource$(14,389)$(18,269)$(42,074)$(58,746)
See accompanying notes to condensed consolidated financial statements.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
 Altisource Equity (Deficit)
Common stockAdditional paid-in capitalRetained earningsTreasury stock, at costNon-controlling interestsTotal
 Shares
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)
Net loss— — — (18,475)— (179)(18,654)
Distributions to non-controlling interest holders
— — — — — (356)(356)
Share-based compensation expense
— — 641 — — — 641 
Issuance of restricted share units and restricted shares— — — (4,574)4,574 —  
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances
— — — (571)474 — (97)
Balance, June 30, 202125,413 $25,413 $143,552 $135,270 $(427,325)$(634)$(123,724)
Net loss— — — (18,269)— (59)(18,328)
Distributions to non-controlling interest holders
— — — — — (53)(53)
Share-based compensation expense
— — 431 — — — 431 
Issuance of restricted share units and restricted shares — — — (84)84 —  
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances— — — (36)27 — (9)
Balance, September 30, 202125,413 $25,413 $143,983 $116,881 $(427,214)$(746)$(141,683)
See accompanying notes to condensed consolidated financial statements.
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 Altisource Equity (Deficit)
Common stockAdditional paid-in capitalRetained earningsTreasury stock, at costNon-controlling interestsTotal
 Shares
Balance, December 31, 202125,413 $25,413 $144,298 $186,592 $(426,445)$1,272 $(68,870)
Net loss— — — (12,190)— 161 (12,029)
Distributions to non-controlling interest holders— — — — — (264)(264)
Share-based compensation expense— — 1,290 — — — 1,290 
Issuance of restricted share units and restricted shares— — — (6,560)6,560 —  
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances
— — — (4,046)3,032 — (1,014)
Balance, March 31, 202225,413 $25,413 $145,588 $163,796 $(416,853)$1,169 $(80,887)
Net loss— — — (15,495)— 174 (15,321)
Distributions to non-controlling interest holders— — — — — (486)(486)
Share-based compensation expense— — 1,289 — — — 1,289 
Issuance of restricted share units and restricted shares
— — — (2,384)2,384 —  
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances
— — — (38)29 — (9)
Balance, June 30, 202225,413 $25,413 $146,877 $145,879 $(414,440)$857 $(95,414)
Net loss— — — (14,389)— 133 (14,256)
Distributions to non-controlling interest holders— — — — — (142)(142)
Share-based compensation expense— — 1,320 — — — 1,320 
Issuance of restricted share units and restricted shares— — — (260)260 —  
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances— — — (106)78 — (28)
Balance, September 30, 202225,413 $25,413 $148,197 $131,124 $(414,102)$848 $(108,520)
See accompanying notes to condensed consolidated financial statements.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine months ended
September 30,
20222021
Cash flows from operating activities:  
Net loss$(41,606)$(58,897)
Adjustments to reconcile net loss to net cash used in operating activities:  
Depreciation and amortization2,700 3,479 
Amortization of right-of-use assets under operating leases2,254 6,340 
Amortization of intangible assets3,849 8,183 
Share-based compensation expense3,899 2,510 
Bad debt expense578 1,268 
Amortization of debt discount495 499 
Amortization of debt issuance costs712 623 
Deferred income taxes(329)8 
Loss on disposal of fixed assets1 117 
Other non-cash items 137 
Changes in operating assets and liabilities:  
Accounts receivable3,095 1,846 
Prepaid expenses and other current assets160 598 
Other assets363 1,439 
Accounts payable and accrued expenses(5,014)(2,738)
Current and non-current operating lease liabilities(2,444)(6,958)
Other current and non-current liabilities(1,006)413 
Net cash used in operating activities(32,293)(41,133)
Cash flows from investing activities:  
Additions to premises and equipment(863)(1,125)
Proceeds from the sale of business346 3,000 
Net cash (used in) provided by investing activities(517)1,875 
Cash flows from financing activities:  
Proceeds from revolving credit facility 20,000 
Debt issuance costs (531)
Proceeds from convertible debt payable to related parties (Note 1)
 1,200 
Distributions to non-controlling interests(892)(1,804)
Payments of tax withholding on issuance of restricted share units and restricted shares(1,051)(936)
Net cash (used in) provided by financing activities(1,943)17,929 
Net decrease in cash, cash equivalents and restricted cash(34,753)(21,329)
Cash, cash equivalents and restricted cash at the beginning of the period102,149 62,096 
Cash, cash equivalents and restricted cash at the end of the period$67,396 $40,767 
Supplemental cash flow information:  
Interest paid$10,167 $9,373 
Income taxes paid, net2,556 2,736 
Acquisition of right-of-use assets with operating lease liabilities797 6,976 
Reduction of right-of-use assets from operating lease modifications or reassessments(172)(5,665)
Non-cash investing and financing activities:  
Net decrease in payables for purchases of premises and equipment$(65)$(47)
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited consolidated balance sheets and the unaudited consolidated statements of cash flows:
September 30, 2022September 30, 2021
Cash and cash equivalents$63,812 $36,492 
Restricted cash3,584 4,275 
Total cash, cash equivalents and restricted cash reported in the statements of cash flows$67,396 $40,767 
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 periods. Actual results could differ from those estimates. Intercompany transactions and accounts have been eliminated in consolidation.
Effective January 1, 2022, our reportable segments changed as a result of a change in the way our Chief Executive Officer (our chief operating decision maker) manages our businesses, allocates resources and evaluates performance, and the related changes in our internal organization. We now report our operations through two reportable segments: Servicer and Real Estate and Origination. In addition, we report Corporate and Others separately. Prior to the January 1, 2022 change in reportable segments, the Company operated with one reportable segment (total Company). Prior year comparable period segment disclosures have been restated to conform to the current year presentation. See Note 22 for a description of our business segments.
Altisource consolidates Best Partners Mortgage Cooperative, Inc., which is managed by The Mortgage Partnership of America, L.L.C. (“MPA”), a wholly-owned subsidiary of Altisource. Best Partners Mortgage Cooperative, Inc. is a mortgage cooperative doing business as Lenders One® (“Lenders One”). MPA provides services to Lenders One under a management agreement that ends on December 31, 2025 (with renewals for three successive five-year periods at MPA’s option).
The management agreement between MPA and Lenders One, pursuant to which MPA is the management company, represents a variable interest in a variable interest entity. MPA is the primary beneficiary of Lenders One as it has the power to direct the activities that most significantly impact the cooperative’s economic performance and the right to receive benefits from the cooperative. As a result, Lenders One is presented in the accompanying condensed consolidated financial statements on a consolidated basis and the interests of the members are reflected as non-controlling interests. As of September 30, 2022, Lenders One had total assets of $1.1 million and total liabilities of $0.8 million. As of December 31, 2021, Lenders One had total assets of $2.2 million and total liabilities of $1.4 million.
In 2019, Altisource created Pointillist, Inc. (“Pointillist”) and contributed the Pointillist® customer journey analytics business and $8.5 million to it. On May 27, 2021, Pointillist issued $1.3 million in principal of convertible notes to related parties with a maturity date of January 1, 2023. The notes bore interest at a rate of 7% per annum. The principal and unpaid accrued interest then outstanding under the notes (1) would automatically convert to Pointillist equity at the earlier of the time Pointillist receives proceeds of $5.0 million or more from the sale of its equity or January 1, 2023, or (2) are repaid in cash or converted into Pointillist common stock equity based on a $13.1 million Pointillist valuation (at the Lenders’ option) in the event of a corporate transaction or initial public offering of Pointillist. On December 1, 2021, the notes were converted to Pointillist equity and Altisource and other shareholders of Pointillist sold all of the equity interests in Pointillist (See Note 3 for additional information). Prior to the sale, Pointillist was owned by Altisource and management of Pointillist, with management of Pointillist owning a non-controlling interest representing 12.1% of the outstanding equity of Pointillist. Through December 1, 2021, Pointillist is presented in the accompanying condensed consolidated financial statements on a consolidated basis and the portion of Pointillist owned by Pointillist management is reported as non-controlling interests.
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Notes to Condensed Consolidated Financial Statements (Continued)
These interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 3, 2022.
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.
Future Adoption of New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 and nine months ended September 30, 2022, Ocwen was our largest customer, accounting for 40% of our total revenue for the nine months ended September 30, 2022 (45% of our revenue for the third quarter of 2022). Ocwen purchases certain mortgage services from us under the terms of services agreements and amendments thereto (collectively, the “Ocwen Services Agreements”) with terms extending through August 2030. Certain of the Ocwen Services Agreements contain a “most favored nation” provision and also grant the parties the right to renegotiate pricing, among other things.
Revenue from Ocwen primarily consists of revenue earned from the loan portfolios serviced and subserviced by Ocwen when Ocwen engages us as the service provider, and revenue earned directly from Ocwen, pursuant to the Ocwen Services Agreements. For the nine months ended September 30, 2022 and 2021, we recognized revenue from Ocwen of $47.2 million and $44.7 million, respectively ($17.2 million and $13.6 million for the third quarter of 2022 and 2021, respectively). Revenue from Ocwen as a percentage of segment and consolidated revenue was as follows:
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)
Three months ended September 30,Nine months ended
September 30,
2022202120222021
Servicer and Real Estate56 %51 %52 %50 %
Origination % % % %
Corporate and Others % % %1 %
Consolidated revenue45 %31 %40 %32 %
We earn additional revenue related to the portfolios serviced and subserviced by Ocwen when a party other than Ocwen or the MSR owner selects Altisource as the service provider. For the nine months ended September 30, 2022 and 2021, we recognized revenue of $7.3 million and $7.4 million, respectively ($2.2 million and $1.9 million for the third quarter of 2022 and 2021, respectively), of such revenue. These amounts are not included in deriving revenue from Ocwen and revenue from Ocwen as a percentage of revenue discussed above.
As of September 30, 2022, accounts receivable from Ocwen totaled $4.9 million, $4.3 million of which was billed and $0.6 million of which was unbilled. As of December 31, 2021, accounts receivable from Ocwen totaled $3.0 million, $2.8 million of which was billed and $0.2 million of which was unbilled.
RITM
Rithm Capital Corp. (individually, together with one or more of its subsidiaries or one or more of its subsidiaries individually, “RITM”) (formerly New Residential Investment Corp., or “NRZ”) is a real estate investment trust that invests in and manages investments primarily related to residential real estate, including MSRs and excess MSRs.
Ocwen has disclosed that RITM is its largest client. As of June 30, 2022, approximately 18% of loans serviced and subserviced by Ocwen (measured in unpaid principal balance (“UPB”)) were related to RITM MSRs or rights to MSRs (the “Subject MSRs”).
RITM purchases brokerage services for real estate owned (“REO”) exclusively from us, irrespective of the subservicer, subject to certain limitations, for certain MSRs set forth in and pursuant to the terms of a Cooperative Brokerage Agreement, as amended, and related letter agreement (collectively, the “Brokerage Agreement”) with terms extending through August 2025.
For the nine months ended September 30, 2022 and 2021, we recognized revenue from RITM of $2.6 million and $2.4 million, respectively ($0.8 million and $0.7 million for the third quarter of 2022 and 2021, respectively), under the Brokerage Agreement. For the nine months ended September 30, 2022 and 2021, we recognized additional revenue of $10.4 million and $10.9 million, respectively ($3.0 million and $3.4 million for the third quarter of 2022 and 2021, respectively), relating to the Subject MSRs when a party other than RITM selects Altisource as the service provider.
NOTE 3 — SALE OF BUSINESSES
Pointillist Business
On October 6, 2021, Altisource and other shareholders of Pointillist entered into a definitive Stock Purchase Agreement (as amended, the “SPA”) to sell all of the equity interests in Pointillist to Genesys Cloud Services, Inc. (“Genesys”) for $150.0 million (the “Purchase Price”) (the “Transaction”). The Purchase Price consisted of (1) an up-front payment of $144.5 million, subject to certain adjustments, (2) $0.5 million deposited into an escrow account to be used to satisfy potential deficits between estimated closing date working capital and actual closing date working capital (the “Working Capital Escrow”), with excess amounts remaining after satisfying such deficits (if any) being paid to the sellers, and (3) $5.0 million deposited into an escrow account to satisfy certain Genesys indemnification claims that may arise on or prior to the first anniversary of the sale closing and, at Genesys’ election, any working capital deficits that exceed the Working Capital Escrow (the “Indemnification Escrow”), with the balance to be paid to the sellers thereafter. The Transaction closed on December 1, 2021. On a fully diluted basis, Altisource owned approximately 69% of the equity of Pointillist. After working capital and other applicable adjustments, Altisource received approximately $106.0 million from the sale of its Pointillist equity and the collection of outstanding receivables, with $102.2 million received at closing, approximately $0.3 million deposited into the Working Capital Escrow and approximately $3.5 million deposited into the Indemnification Escrow. The Working Capital Escrow was received in May 2022. The present value of the amounts in escrow is included in other current assets in the accompanying condensed consolidated balance sheets at a discounted value of $3.4 million and $3.6 million as of September 30, 2022 and December 31, 2021, respectively.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)
Rental Property Management Business
In August 2018, Altisource entered into an amendment to its agreements with Front Yard Residential Corporation (“RESI”) to sell Altisource’s rental property management business to RESI and permit RESI to internalize certain services that had been provided by Altisource. The proceeds from the transaction totaled $18.0 million, payable in two installments. The first installment of $15.0 million was received in August 2018 and the second installment of $3.0 million was received in January 2021.
NOTE 4 — ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consists of the following:
(in thousands)September 30,
2022
December 31,
2021
Billed$13,384 $17,907 
Unbilled5,432 5,398 
18,816 23,305 
Less: Allowance for credit losses(4,481)(5,297)
Total$14,335 $18,008 
Unbilled accounts receivable consist primarily of certain real estate asset management, REO sales, title and closing services for which we generally recognize revenue when the service is provided but collect upon closing of the sale, and foreclosure trustee services, for which we generally recognize revenues over the service delivery period but bill following completion of the service. We also include amounts in unbilled accounts receivable that are earned during a month and billed in the following month.
We are exposed to credit losses through our sales of products and services to our customers which are recorded as accounts receivable, net on the Company’s condensed consolidated financial statements. We monitor and estimate the allowance for credit losses based on our historical write-offs, historical collections, our analysis of past due accounts based on the contractual terms of the receivables, relevant market and industry reports and our assessment of the economic status of our customers, if known. Estimated credit losses are written off in the period in which the financial asset is determined to be no longer collectible. There can be no assurance that actual results will not differ from estimates or that consideration of these factors in the future will not result in an increase or decrease to our allowance for credit losses.
Changes in the allowance for expected credit losses consist of the following:
Additions
(in thousands)Balance at Beginning of PeriodCharged to Expenses
Deductions Note (1)
Balance at End of Period
Allowance for expected credit losses:
Nine months ended September 30, 2022
$5,297 $578 $1,394 $4,481 
Twelve months ended December 31, 2021
5,581 1,354 1,638 5,297 
______________________________________
(1)    Amounts written off as uncollectible or transferred to other accounts or utilized.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)
NOTE 5 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
(in thousands)September 30,
2022
December 31,
2021
Income taxes receivable$6,214 $8,403 
Maintenance agreements, current portion1,794 1,717 
Prepaid expenses3,614 2,865 
Surety bond collateral4,000 2,000 
Other current assets6,082 6,879 
Total$21,704 $21,864 
NOTE 6 — PREMISES AND EQUIPMENT, NET
Premises and equipment, net consists of the following:
(in thousands)September 30,
2022
December 31,
2021
Computer hardware and software$49,339 $50,452 
Leasehold improvements5,848 5,927 
Furniture and fixtures3,840 4,441 
Office equipment and other440 811 
59,467 61,631 
Less: Accumulated depreciation and amortization(54,497)(54,758)
Total$4,970 $6,873 
Depreciation and amortization expense amounted to $2.7 million and $3.5 million for the nine months ended September 30, 2022 and 2021, respectively ($0.9 million and $1.1 million for the third quarter of 2022 and 2021, respectively), and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets in the accompanying condensed consolidated statements of operations and comprehensive loss.
NOTE 7 — RIGHT-OF-USE ASSETS UNDER OPERATING LEASES, NET
Right-of-use assets under operating leases, net consists of the following:
(in thousands)September 30,
2022
December 31,
2021
Right-of-use assets under operating leases$12,529 $19,595 
Less: Accumulated amortization(6,564)(12,001)
Total$5,965 $7,594 
Amortization of operating leases was $2.3 million and $6.3 million for the nine months ended September 30, 2022 and 2021, respectively ($0.5 million and $1.8 million for the third quarter of 2022 and 2021, respectively), and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets 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)
NOTE 8 — GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill
The following is a summary of goodwill by segment:
(in thousands)Servicer and Real EstateOriginationCorporate and OthersTotal
Balance as of September 30, 2022 and December 31, 2021
$30,681 $25,279 $ $55,960 
We determined that each reportable segment represents a reporting unit. Goodwill was allocated to each reporting unit based on the relative fair value of each of our reporting units.
Intangible Assets, net
Intangible assets, net consist of the following:
 
Weighted average estimated useful life
(in years)
Gross carrying amountAccumulated amortizationNet book value
(in thousands)September 30,
2022
December 31,
2021
September 30,
2022
December 31,
2021
September 30,
2022
December 31,
2021
Definite lived intangible assets:
Customer related intangible assets9$214,307 $214,307 $(196,844)$(194,594)$17,463 $19,713 
Operating agreement2035,000 35,000 (22,166)(20,854)12,834 14,146 
Trademarks and trade names169,709 9,709 (6,996)(6,709)2,713 3,000 
Total$259,016 $259,016 $(226,006)$(222,157)$33,010 $36,859 
Amortization expense for definite lived intangible assets was $3.8 million and $8.2 million for the nine months ended September 30, 2022 and 2021, respectively ($1.3 million and $2.7 million for the