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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, 2023
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) 2060 2055
(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 20, 2023, there were 26,492,632 outstanding shares of the registrant’s common stock (excluding 3,470,116 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,
2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents$36,640 $51,025 
Accounts receivable, net of allowance for doubtful accounts of $3,379 and $4,363, respectively
12,981 12,989 
Prepaid expenses and other current assets11,217 23,544 
Total current assets60,838 87,558 
Premises and equipment, net 2,168 4,222 
Right-of-use assets under operating leases3,628 5,321 
Goodwill55,960 55,960 
Intangible assets, net27,818 31,730 
Deferred tax assets, net4,982 5,048 
Other assets7,242 5,429 
Total assets$162,636 $195,268 
LIABILITIES AND DEFICIT
Current liabilities:
Accounts payable and accrued expenses$31,032 $33,507 
Deferred revenue3,303 3,711 
Other current liabilities 2,299 2,867 
Total current liabilities36,634 40,085 
Long-term debt211,980 245,493 
Deferred tax liabilities, net8,724 9,028 
Other non-current liabilities 18,232 19,536 
Commitments, contingencies and regulatory matters (Note 21)
Equity (deficit):
Common stock ($1.00 par value; 100,000 shares authorized, 29,963 issued and 26,482 outstanding as of September 30, 2023; 16,129 outstanding as of December 31, 2022)
29,963 25,413 
Additional paid-in capital176,128 149,348 
Retained earnings(166,125)118,948 
Treasury stock, at cost (3,481 shares as of September 30, 2023 and 9,284 shares as of December 31, 2022)
(153,561)(413,358)
Altisource deficit(113,595)(119,649)
Non-controlling interests661 775 
Total deficit(112,934)(118,874)
Total liabilities and deficit$162,636 $195,268 
See accompanying notes to condensed consolidated financial statements.
3

Table of Contents
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Condensed Statements of Operations and Comprehensive Loss
(in thousands, except per share data)

Three months ended
September 30,
Nine months ended
September 30,
2023202220232022
Revenue$36,213 $38,380 $110,909 $118,317 
Cost of revenue29,024 34,387 89,684 104,611 
Gross profit7,189 3,993 21,225 13,706 
Selling, general and administrative expenses10,734 14,556 35,169 43,055 
Loss from operations(3,545)(10,563)(13,944)(29,349)
Other income (expense), net:
Interest expense(9,890)(4,349)(26,554)(11,439)
Change in fair value of warrant liability2,225  1,145  
Debt amendment costs(59) (3,402) 
Other income (expense), net407 459 2,357 1,392 
Total other income (expense), net(7,317)(3,890)(26,454)(10,047)
Loss before income taxes and non-controlling interests(10,862)(14,453)(40,398)(39,396)
Income tax (provision) benefit(418)197 (2,586)(2,210)
Net loss(11,280)(14,256)(42,984)(41,606)
Net income attributable to non-controlling interests(62)(133)(155)(468)
Net loss attributable to Altisource$(11,342)$(14,389)$(43,139)$(42,074)
Loss per share:
Basic$(0.51)$(0.89)$(2.10)$(2.62)
Diluted$(0.51)$(0.89)$(2.10)$(2.62)
Weighted average shares outstanding:
Basic22,181 16,087 20,538 16,051 
Diluted22,181 16,087 20,538 16,051 
Comprehensive loss:
Comprehensive loss, net of tax$(11,280)$(14,256)$(42,984)$(41,606)
Comprehensive income attributable to non-controlling interests(62)(133)(155)(468)
Comprehensive loss attributable to Altisource$(11,342)$(14,389)$(43,139)$(42,074)
See accompanying notes to condensed consolidated financial statements.
4

Table of Contents
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Condensed Consolidated Statements of Equity (Deficit)
(in thousands)
 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)
Distribution 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)
5

Table of Contents
ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Condensed Consolidated Statements of Equity (Deficit)
(in thousands)
 Altisource Equity (Deficit)
Common stockAdditional paid-in capitalRetained earningsTreasury stock, at costNon-controlling interestsTotal
 Shares
Balance, December 31, 202225,413 $25,413 $149,348 $118,948 $(413,358)$775 $(118,874)
Net loss— — — (12,947)— 80 (12,867)
Distributions to non-controlling interest holders— — — — — (102)(102)
Share-based compensation expense— — 1,445 — — — 1,445 
Issuance of restricted share units and restricted shares— — — (6,058)6,058 —  
Issuance of common stock, net of issuance costs4,550 4,550 15,911 — — — 20,461 
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances
— — — (3,700)3,240 — (460)
Balance, March 31, 202329,963 $29,963 $166,704 $96,243 $(404,060)$753 $(110,397)
Net loss— — — (18,850)— 13 (18,837)
Distributions to non-controlling interest holders
— — — — — (100)(100)
Share-based compensation expense— — 1,242 — — — 1,242 
Issuance of restricted share units and restricted shares— — — (2,259)2,259 —  
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances
— — — (30)27 — (3)
Balance, June 30, 202329,963 $29,963 $167,946 $75,104 $(401,774)$666 $(128,095)
Net loss— — — (11,342)— 62 (11,280)
Distributions to non-controlling interest holders
— — — — — (67)(67)
Reclassification of warrant liability to equity— — 6,951 — — — 6,951 
Share-based compensation expense— — 1,231 — — — 1,231 
Sale of treasury stock, net of transaction costs— — — (228,269)246,643 — 18,374 
Issuance of restricted share units and restricted shares— — — (1,153)1,153 —  
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances
— — — (465)417 — (48)
Balance, September 30, 202329,963 $29,963 $176,128 $(166,125)$(153,561)$661 $(112,934)
See accompanying notes to condensed consolidated financial statements.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Condensed Consolidated Statements of Cash Flows
(in thousands)
Nine months ended
September 30,
20232022
Cash flows from operating activities:  
Net loss$(42,984)$(41,606)
Adjustments to reconcile net loss to net cash used in operating activities:  
Depreciation and amortization1,933 2,700 
Amortization of right-of-use assets under operating leases1,351 2,254 
Amortization of intangible assets3,912 3,849 
PIK accrual4,777  
Share-based compensation expense3,918 3,899 
Bad debt expense319 578 
Amortization of debt discount2,846 495 
Amortization of debt issuance costs1,846 712 
Deferred income taxes(224)(329)
Loss on disposal of fixed assets121 1 
Change in fair value of warrant liability(1,145) 
Changes in operating assets and liabilities:  
Accounts receivable(311)3,095 
Prepaid expenses and other current assets12,350 160 
Other assets(1,891)363 
Accounts payable and accrued expenses(2,475)(5,014)
Current and non-current operating lease liabilities(1,351)(2,444)
Other current and non-current liabilities(587)(1,006)
Net cash used in operating activities(17,595)(32,293)
Cash flows from investing activities:  
Additions to premises and equipment (863)
Proceeds from the sale of business 346 
Net cash used in investing activities (517)
Cash flows from financing activities:  
Proceeds from issuance of common stock, net of issuance costs20,461  
Proceeds from sale of treasury stock, net of transaction costs18,374  
Debt issuance and amendment costs(4,886) 
Repayments of long-term debt(30,000) 
Distributions to non-controlling interests(269)(892)
Payments of tax withholding on issuance of restricted share units and restricted shares(511)(1,051)
Net cash provided by (used in) financing activities3,169 (1,943)
Net decrease in cash, cash equivalents and restricted cash(14,426)(34,753)
Cash, cash equivalents and restricted cash at the beginning of the period54,273 102,149 
Cash, cash equivalents and restricted cash at the end of the period$39,847 $67,396 
Supplemental cash flow information:  
Interest paid$16,989 $10,167 
Income taxes (refunded) paid, net(4,034)2,556 
Acquisition of right-of-use assets with operating lease liabilities329 797 
Reduction of right-of-use assets from operating lease modifications or reassessments(671)(172)
Non-cash investing and financing activities:  
Net decrease in payables for purchases of premises and equipment$ $(65)
Warrants issued in connection with Amended Credit Agreement8,096  
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets and the unaudited condensed consolidated statements of cash flows:
September 30, 2023September 30, 2022
Cash and cash equivalents$36,640 $63,812 
Restricted cash3,207 3,584 
Total cash, cash equivalents and restricted cash reported in the statements of cash flows$39,847 $67,396 
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.
We conduct our operations through two reportable segments: Servicer and Real Estate and Origination. In addition, we report Corporate and Others separately (see Note 22 for a description of our business segments).
Basis of Accounting and Presentation
The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, the interim data includes all normal recurring adjustments considered necessary to fairly state the results for the interim periods presented. The preparation of interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our interim condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Intercompany transactions and accounts have been eliminated in consolidation. Certain prior year balance sheet amounts have been reclassified for consistency with 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 September 30, 2023, Lenders One had total assets of $0.2 million and total liabilities of $0.4 million. As of December 31, 2022, Lenders One had total assets of $1.2 million and total liabilities of $1.1 million.
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, 2022, as filed with the SEC on March 30, 2023.
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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.
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 loans owned by others.
During the three and nine months ended September 30, 2023, Ocwen was our largest customer, accounting for 43% 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 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, 2023 and 2022, we recognized revenue from Ocwen of $47.3 million and $47.2 million, respectively ($15.7 million and $17.2 million for the third quarter of 2023 and 2022, respectively). Revenue from Ocwen as a percentage of segment and consolidated revenue was as follows:
Three months ended September 30,Nine months ended
September 30,
2023202220232022
Servicer and Real Estate55 %56 %54 %52 %
Origination % % % %
Corporate and Others % % % %
Consolidated revenue43 %45 %43 %40 %
We earn additional revenue related to the portfolios serviced and subserviced by Ocwen when a party other than Ocwen or the MSRs owner selects Altisource as the service provider. For the nine months ended September 30, 2023 and 2022, we recognized revenue of $7.3 million ($2.3 million and $2.2 million for the third quarter of 2023 and 2022, 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, 2023, accounts receivable from Ocwen totaled $4.0 million, $2.8 million of which was billed and $1.2 million of which was unbilled. As of December 31, 2022, accounts receivable from Ocwen totaled $4.0 million, $3.2 million of which was billed and $0.8 million of which was unbilled.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)
Rithm
Rithm Capital Corp. (individually, together with one or more of its subsidiaries or one or more of its subsidiaries individually, “Rithm”) (formerly New Residential Investment Corp.) 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 Rithm is a significant client of Ocwen’s. As of June 30, 2023, approximately 16% of loans serviced and subserviced by Ocwen (measured in unpaid principal balance (“UPB”)) and approximately 68% of all delinquent loans that Ocwen services were related to Rithm MSRs or rights to MSRs (the “Subject MSRs”).
Rithm purchases brokerage services for real estate owned (“REO”) exclusively from us, irrespective of the subservicer, subject to certain limitations, for certain MSRs set forth in and pursuant to the terms of a Cooperative Brokerage Agreement, as amended, and related letter agreement (collectively, the “Brokerage Agreement”) with terms extending through August 2025.
For the nine months ended September 30, 2023 and 2022, we recognized revenue from Rithm of $2.3 million and $2.6 million, respectively ($0.7 million and $0.8 million for the third quarter of 2023 and 2022, respectively), under the Brokerage Agreement. For the nine months ended September 30, 2023 and 2022, we recognized additional revenue of $10.1 million and $10.4 million, respectively ($3.2 million and $3.0 million for the third quarter of 2023 and 2022, respectively), relating to the Subject MSRs when a party other than Rithm selects Altisource as the service provider.
NOTE 3 — ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consists of the following:
(in thousands)September 30,
2023
December 31,
2022
Billed$10,386 $11,993 
Unbilled5,974 5,359 
16,360 17,352 
Less: Allowance for credit losses(3,379)(4,363)
Total$12,981 $12,989 
Unbilled accounts receivable consist primarily of certain real estate asset management, REO sales, title and closing services for which we generally recognize revenue when the service is provided but collect upon closing of the sale, and foreclosure trustee services, for which we generally recognize revenues over the service delivery period but bill following completion of the service. We also include amounts in unbilled accounts receivable that are earned during a month and billed in the following month.
We are exposed to credit losses through our sales of products and services to our customers which are recorded as accounts receivable, net on the Company’s condensed consolidated financial statements. We monitor and estimate the allowance for credit losses based on our historical write-offs, historical collections, our analysis of past due accounts based on the contractual terms of the receivables, relevant market and industry reports and our assessment of the economic status of our customers, if known. Estimated credit losses are written off in the period in which the financial asset is determined to be no longer collectible. There can be no assurance that actual results will not differ from estimates or that consideration of these factors in the future will not result in an increase or decrease to our allowance for credit losses.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)
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:
Three months ended September 30, 2023
$4,314 $(203)$732 $3,379 
Three months ended September 30, 2022
4,792 (22)289 4,481 
Nine months ended September 30, 2023
$4,363 $319 $1,303 $3,379 
Nine months ended September 30, 2022
5,297 578 1,394 4,481 
______________________________________
(1)    Amounts written off as uncollectible or transferred to other accounts or utilized.
NOTE 4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
(in thousands)September 30,
2023
December 31,
2022
Prepaid expenses$2,746 $5,165 
Income taxes receivable510 7,031 
Maintenance agreements, current portion1,868 1,498 
Indemnity escrow receivable from Pointillist sale3,201 3,223 
Restricted cash23  
Surety bond collateral 4,000 
Other current assets2,869 2,627 
Total$11,217 $23,544 
NOTE 5 — PREMISES AND EQUIPMENT, NET
Premises and equipment, net consists of the following:
(in thousands)September 30,
2023
December 31,
2022
Computer hardware and software$46,568 $49,339 
Leasehold improvements1,011 5,794 
Furniture and fixtures102 3,832 
Office equipment and other24 346 
47,705 59,311 
Less: Accumulated depreciation and amortization(45,537)(55,089)
Total$2,168 $4,222 
Depreciation and amortization expense amounted to $1.9 million and $2.7 million for the nine months ended September 30, 2023 and 2022, respectively ($0.6 million and $0.9 million for the third quarter of 2023 and 2022, 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)September 30,
2023
December 31,
2022
Luxembourg$1,459 $2,455 
India602 1,129 
United States80 586 
Uruguay27 52 
Total$2,168 $4,222 
NOTE 6 — RIGHT-OF-USE ASSETS UNDER OPERATING LEASES, NET
Right-of-use assets under operating leases, net consists of the following:
(in thousands)September 30,
2023
December 31,
2022
Right-of-use assets under operating leases$7,334 $11,808 
Less: Accumulated amortization(3,706)(6,487)
Total$3,628 $5,321 
Amortization of operating leases was $1.4 million and $2.3 million for the nine months ended September 30, 2023 and 2022, respectively ($0.4 million and $0.5 million for the third quarter of 2023 and 2022, 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 — 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, 2023 and December 31, 2022
$30,681 $25,279 $ $55,960 
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,
2023
December 31,
2022
September 30,
2023
December 31,
2022
September 30,
2023
December 31,
2022
Definite lived intangible assets:
Customer related intangible assets9$214,307 $214,307 $(199,915)$(197,594)$14,392 $16,713 
Operating agreement2035,000 35,000 (23,917)(22,604)11,083 12,396 
Trademarks and trade names169,709 9,709 (7,366)(7,088)2,343 2,621 
Total$259,016 $259,016 $(231,198)$(227,286)$27,818 $31,730 
Amortization expense for definite lived intangible assets was $3.9 million and $3.8 million for the nine months ended September 30, 2023 and 2022, respectively ($1.4 million and $1.3 million for the third quarter of 2023 and 2022, respectively).
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)
Forecasted annual definite lived intangible asset amortization expense for 2023 through 2027 is $5.2 million, $5.1 million, $5.1 million, $4.9 million and $4.7 million, respectively.
NOTE 8 — OTHER ASSETS
Other assets consist of the following:
(in thousands)September 30,
2023
December 31,
2022
Restricted cash$3,184 $3,248 
Security deposits597 596 
Other3,461 1,585 
Total$7,242 $5,429 
NOTE 9 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accounts payable and accrued expenses consist of the following:
(in thousands)September 30,
2023
December 31,
2022
Accounts payable$16,404 $14,981 
Accrued expenses - general8,425 11,858 
Accrued salaries and benefits4,937 5,501 
Income taxes payable1,266 1,167 
Total$31,032 $33,507 
Other current liabilities consist of the following:
(in thousands)September 30,
2023
December 31,
2022
Operating lease liabilities$1,596 $2,097 
Other703 770 
Total$2,299 $2,867 
NOTE 10 — WARRANTS
On February 14, 2023, the lenders under the Amended Credit Agreement (see Note 11 for additional information) received warrants (the “Warrants”) to purchase 3,223,851 shares of Altisource common stock (the “Warrant Shares”). The number of Warrant Shares is subject to reduction based on the amount of par paydowns on the senior secured term loans (“SSTL”) in the aggregate using proceeds from issuances of equity interests or from junior indebtedness made prior to February 14, 2024 (“Aggregate Paydowns”) as set forth in the table below.
Aggregate PaydownsWarrant Shares
Less than $20 million3,223,851
$20 million+ but less than below2,578,743
$30 million+1,612,705
During the first quarter of 2023, Company made $20 million of Aggregate Paydowns. In the third quarter of 2023, the Company made an additional $10 million of Aggregate Paydowns. As a result, the number of Warrant Shares as of September 30, 2023 is 1,612,705.
The exercise price per share of common stock under each Warrant is equal to $0.01. The Warrants may be exercised at any time on and after February 14, 2024 and prior to their expiration date. The Warrants are exercisable on a cashless basis and are subject to customary anti-dilution provisions. The Warrants, if not previously exercised or terminated, will be automatically
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)
exercised on May 22, 2027. The Warrants are subject to a lock-up agreement, subject to customary exceptions, ending on February 16, 2024.
The Company determined that the Warrants are free standing financial instruments that are legally detachable and separately exercisable from the term loans under the Amended Credit Agreement. At inception, the Company also determined that the Warrants were not considered to be indexed to the Company’s stock because the number of Warrant Shares varies based on Aggregate Paydowns and as such were required to be classified as a liability pursuant to ASC 815-40, Derivatives and Hedging–Contracts in Entity’s Own Equity. The outstanding Warrants were recognized as a warrant liability on the balance sheet and were measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income (expense) in the statement of operations. On September 18, 2023, the Company reached the $30 million in Aggregate Paydowns threshold and the number of Warrant Shares is no longer variable. As a result, the Warrants are considered to be indexed to the Company’s stock and the Warrant Liability was reclassified to equity.
The fair value of the warrant liability was based on the number of Warrant Shares that were expected to be exercisable on and after February 14, 2024 and the Altisource share price less $0.01 at the measurement date.
The fair value of the warrant liability at each of the respective valuation dates is summarized below:
 Warrant LiabilityWarrant Shares based on Aggregate PaydownsExpected Warrant Shares that will be exercisable on February 14, 2024Fair Value per Warrant ShareFair Value
(in thousands)
Fair value at initial measurement date of February 14, 20233,223,8511,612,705$5.02$8,096 
Gain on change in fair value of warrant liability(694)
Fair value at March 31, 20232,578,7431,612,705$4.597,402 
Loss on change in fair value of warrant liability1,774 
Fair value at June 30, 20232,578,7431,612,705$5.69$9,176 
Gain on change in fair value of warrant liability(2,225)
Fair value at September 18, 20231,612,7051,612,705$4.31$6,951 
During the nine months ended September 30, 2023, the Company recorded a gain on changes in fair value of warrant liability of $1.1 million ($2.2 million for the third quarter of 2023). During the three and nine months ended September 30, 2022, there were no warrant liabilities outstanding.
NOTE 11 — LONG-TERM DEBT
Long-term debt consists of the following:
(in thousands)September 30,
2023
December 31,
2022
Senior Secured Term Loans$221,981 $247,204 
Less: Debt issuance and amendment costs, net(3,918)(878)
Less: Unamortized discount, net(6,083)(833)
Net Senior secured term loans211,980 245,493 
Total Long-term debt$211,980 $245,493 
Senior Secured Term Loans
In April 2018, Altisource Portfolio Solutions S.A. and its wholly-owned subsidiary, Altisource S.à r.l., entered into a credit agreement with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and certain lenders (the “Credit Agreement”). Under the Credit Agreement, Altisource borrowed $412 million in the form of SSTL. Effective February 14, 2023, Altisource Portfolio Solutions S.A. and Altisource S.à r.l. entered into Amendment No. 2 to the Credit Agreement (as amended by Amendment No. 2, the “Amended Credit Agreement”). Altisource Portfolio Solutions S.A. and its subsidiaries, subject to the applicable exclusions in the Amended Credit Agreement, are guarantors on the SSTL (collectively,
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)
the “Guarantors”). Effective June 1, 2023, the administrative agent and collateral agent of the Amended Credit Agreement changed to Wilmington Trust, N.A.
The maturity date of the SSTL under the Amended Credit Agreement is April 30, 2025. If Aggregate Paydowns are equal to or greater than $30 million, then the maturity date of the SSTL may be extended at the Company’s option to April 30, 2026. Such extension is conditioned upon the Company’s payment of a 2% payment-in-kind extension fee on or before April 30, 2025 and subject to the representations and warranties being true and correct as of such date and there being no default or event of default being in existence as of such date. During the nine months ended September 30, 2023, Company made $30 million of Aggregate Paydowns.
All amounts outstanding under the SSTL will become due on the earlier of (i) the maturity date, and (ii) the date on which the loans are declared to be due and owing by the administrative agent at the request (or with the consent) of the Required Lenders (as defined in the Amended Credit Agreement; other capitalized terms, unless defined herein, are defined in the Amended Credit Agreement) or as otherwise provided in the Amended Credit Agreement upon the occurrence of any event of default. There are no mandatory repayments of the SSTL except as set forth herein until the April 30, 2025 maturity when the balance is due.
In addition to the scheduled principal payments, subject to certain exceptions, the SSTL is subject to mandatory prepayment upon issuances of debt, certain casualty and condemnation events and sales of assets, as well as 50% of Consolidated Excess Cash Flow, as calculated in accordance with the provisions of the Amended Credit Agreement.
Altisource may incur incremental indebtedness under the Amended Credit Agreement from one or more incremental lenders, which may include existing lenders, in an aggregate incremental principal amount not to exceed $50 million, subject to certain conditions set forth in the Amended Credit Agreement. The lenders have no obligation to provide any incremental indebtedness.
Through March 29, 2023, the SSTL’s interest rate was the Adjusted Eurodollar Rate plus 4.00%. Beginning March 30, 2023, the SSTL bears interest at rates based upon, at our option, the Secured Overnight Financing Rate (“SOFR”) or the Base Rate, as defined in the Amended Credit Agreement. If the Company selects SOFR, the term loans initially bear interest at a rate per annum equal to SOFR plus 5.00% payable in cash plus 5.00% payable in kind (“PIK”). If the Company selects Base Rate, the loans initially bear interest at a rate per annum equal to the Base Rate plus 4.00% payable in cash plus 5.00% PIK. Base Rate term loans bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Base Rate and (y) 2.00% plus (ii) 4.00%. The PIK component of the interest rate is subject to adjustment based on the amount of Aggregate Paydowns as set forth in the table below. The PIK component of the interest rate was 3.75% for the three months ended September 30, 2023 and 4.50% for the three months ended June 30, 2023. The interest rate as of September 30, 2023 was 14.09%.
Aggregate PaydownsPIK Component of Interest Rate
Less than $20 million5.00%
$20 million+ but less than below4.50%
$30 million+ but less than below3.75%
$40 million+ but less than below3.50%
$45 million+ but less than below3.00%
$50 million+ but less than below2.50%
$55 million+ but less than below2.00%
$60 million+ but less than below1.00%
$65 million+ but less than below0.50%
$70 million+0.00%
If, as of the end of any calendar quarter, (i) the amount of unencumbered cash and cash equivalents of Altisource S.à r.l. and its direct and indirect subsidiaries on a consolidated basis plus (ii) the undrawn commitment amount under the Revolver is, or is forecast as of the end of the immediately subsequent calendar quarter to be, less than $35 million, then up to 2.00% in interest otherwise payable in cash in the following quarter may be paid in kind at the Company’s election.
The payment of all amounts owing by Altisource under the Amended Credit Agreement is guaranteed by the Guarantors and is secured by a pledge of all equity interests of certain subsidiaries of Altisource, as well as a lien on substantially all of the assets of Altisource S.à r.l. and the Guarantors, subject to certain exceptions.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)
The Amended Credit Agreement includes covenants that restrict or limit, among other things, our ability, subject to certain exceptions and baskets, to incur indebtedness; incur liens on our assets; sell, transfer or dispose of assets; make Restricted Junior Payments including share repurchases, dividends and repayment of junior indebtedness; make investments; dispose of equity interests of any Material Subsidiaries; engage in a line of business substantially different than existing businesses and businesses reasonably related, complimentary or ancillary thereto; amend material debt agreements or other material contracts; engage in certain transactions with affiliates; enter into sale/leaseback transactions; grant negative pledges or agree to such other restrictions relating to subsidiary dividends and distributions; make changes to our fiscal year; and engage in mergers and consolidations.
The Amended Credit Agreement contains certain events of default including (i) failure to pay principal when due or interest or any other amount owing on any other obligation under the Amended Credit Agreement within five days of becoming due, (ii) material incorrectness of representations and warranties when made, (iii) breach of certain other covenants, subject to cure periods described in the Amended Credit Agreement, (iv) failure to pay principal or interest on any other debt that equals or exceeds $5.0 million when due, (v) default on any other debt that equals or exceeds $5.0 million that causes, or gives the holder or holders of such debt the ability to cause, an acceleration of such debt, (vi) occurrence of a Change of Control, (vii) bankruptcy and insolvency events, (viii) entry by a court of one or more judgments against us in an aggregate amount in excess of $10.0 million that remain unbonded, undischarged or unstayed for a certain number of days after the entry thereof, (ix) the occurrence of certain ERISA events, (x) the failure of certain Loan Documents to be in full force and effect and (xi) failure to comply in any material respects with the terms of the Warrants or the Warrant Purchase Agreement. If any event of default occurs and is not cured within applicable grace periods set forth in the Credit Agreement or waived, all loans and other obligations could become due and immediately payable and the facility could be terminated.
The lenders under the Amended Credit Agreement received Warrants to purchase shares of Altisource common stock. The number of Warrant Shares is subject to reduction based on the amount of Aggregate Paydowns (see Note 10 for additional information).
The fair value of the Warrants on February 14, 2023 was $8.1 million and was recorded as an increase in debt discount. In connection with Amendment No. 2, the Company paid $4.9 million to the lenders and to third parties on behalf of the lenders. The $4.9 million payment was recorded as an increase in debt issuance and amendment costs. In connection with Amendment No. 2, the Company paid $3.4 million to advisors and recorded these payments as other expense in the condensed consolidated statements of operations and comprehensive loss.
Deer Park Road Management Company, LP (“Deer Park”), a related party, owns approximately 15% of Altisource’s common stock and $40.2 million of Altisource debt under the Amended Credit Agreement as of September 30, 2023. Deer Park’s Chief Investment Officer and managing partner was a member of Altisource’s Board of Directors until his resignation on March 1, 2022. The replacement director appointed by the Board of Directors is a current employee of Deer Park. In connection with the Amended Credit Agreement, Deer Park received 583 thousand Warrants. During the nine months ended September 30, 2023, Deer Park received interest of $2.0 million from the Altisource SSTL.
As of September 30, 2023, debt issuance and amendment costs were $3.9 million, net of $5.5 million of accumulated amortization. As of December 31, 2022, debt issuance costs were $0.9 million, net of $3.6 million of accumulated amortization.
Revolver
On June 22, 2021 Altisource S.à r.l, a subsidiary of Altisource Portfolio Solutions S.A., entered into a revolving credit facility with STS Master Fund, Ltd. (“STS”) (the “Revolver”). STS is an investment fund managed by Deer Park.
The Revolver was amended effective February 14, 2023 (the “Amended Revolver”). Under the terms of the Amended Revolver, STS will make loans to Altisource from time to time, in amounts requested by Altisource and Altisource may voluntarily prepay all or any portion of the outstanding loans at any time. The Amended Revolver provides Altisource the ability to borrow a maximum amount of $15.0 million. Amounts that are repaid may be re-borrowed in accordance with the limitations set forth below.
The maturity date of the Amended Revolver coincides with the maturity date of the SSTL under the Amended Credit Agreement, as it may be extended. The outstanding balance on the Amended Revolver is due and payable on such maturity date.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)
Borrowings under the Amended Revolver bear interest of 10.00% per annum in cash and 3.00% per annum PIK and are payable quarterly on the last business day of each March, June, September and December. In connection with the Amended Revolver, Altisource is required to pay a usage fee equal to $0.75 million at the initial extension of credit pursuant to the Amended Revolver.
Altisource’s obligations under the Amended Revolver are secured by a first-priority lien on substantially all of the assets of the Company, which lien will be pari passu with liens securing the SSTL under the Amended Credit Agreement.
The Amended Revolver contains additional representations, warranties, covenants, terms and conditions customary for transactions of this type, that restrict or limit, among other things, our ability to use the proceeds of credit only for general corporate purposes.
The Amended Revolver contains certain events of default including (i) failure to pay principal when due or interest or any other amount owing on any other obligation under the Amended Revolver within three business days of becoming due, (ii) failure to perform or observe any material provisions of the Amended Revolver Documents to be performed or complied with and such failure continues for a period of 30 days after written notice is given by the Lender to the Borrower, (iii) material incorrectness of representations and warranties when made, (iv) default on any other debt that equals or exceeds $40.0 million that causes, or gives the holder or holders of such debt the ability to cause, an acceleration of such debt, (v) entry by a court of one or more judgments against us in an aggregate amount in excess of $40.0 million that remain unbonded, undischarged or unstayed for a certain number of days after the entry thereof, (vi) occurrence of a Change of Control, (vii) bankruptcy and insolvency events. If any event of default occurs and is not cured within applicable grace periods set forth in the Amended Revolver or waived, all loans and other obligations could become due and immediately payable and the facility could be terminated.
As of September 30, 2023 and December 31, 2022, there was no outstanding debt under the Amended Revolver and Revolver, respectively. As of September 30, 2023 and December 31, 2022, debt issuance costs were $0.2 million, net of $0.4 million of accumulated amortization, and $0.3 million, net of $0.3 million of accumulated amortization, respectively. Debt issuance costs for the Amended Revolver and Revolver are included in other assets in the accompanying consolidated balance sheet.
NOTE 12 — OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consist of the following:
(in thousands)September 30,
2023
December 31,
2022
Income tax liabilities$16,036 $16,079 
Operating lease liabilities2,179 3,371 
Deferred revenue13 82 
Other non-current liabilities4 4 
Total$18,232 $19,536 
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)
NOTE 13 — FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS
The following table presents the carrying amount and estimated fair value of financial instruments and certain liabilities measured at fair value as of September 30, 2023 and December 31, 2022. The following fair values are estimated using market information and what the Company believes to be appropriate valuation methodologies under GAAP:
September 30, 2023December 31, 2022
(in thousands)Carrying amountFair valueCarrying amountFair value
Level 1Level 2Level 3Level 1Level 2Level 3
Assets:
Cash and cash equivalents$36,640 $36,640 $ $ $51,025 $51,025 $ $ 
Restricted cash3,207 3,207   3,248 3,248   
Short-term receivable3,201   3,201 3,223   3,223 
Liabilities:
Senior secured term loans221,981  177,585  247,204  200,235  
Fair Value Measurements on a Recurring Basis
Cash and cash equivalents and restricted cash are carried at amounts that approximate their fair values due to the highly liquid nature of these instruments and were measured using Level 1 inputs.
The fair value of our SSTL is based on quoted market prices. Based on the frequency of trading, we do not believe that there is an active market for our debt. Therefore, the quoted prices are considered Level 2 inputs.
In connection with the sale of Pointillist on December 1, 2021, $3.5 million was deposited into an escrow account to satisfy certain indemnification claims that may arise on or prior to the first anniversary of the sale closing. The deposit was recorded as a short-term receivable. We measure short-term receivables without a stated interest rate based on the present value of the future payments.
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 43% of its revenue from Ocwen for the three and nine months ended September 30, 2023 (see Note 2 for additional information on Ocwen revenues and accounts receivable balance). The Company strives to mitigate its concentrations of credit risk with respect to accounts receivable by actively monitoring past due accounts and the economic status of larger customers, if known.
NOTE 14 — SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION
Share Repurchase Program
On May 16, 2023, our shareholders approved the renewal and amendment of the share repurchase program previously approved by the shareholders on May 15, 2018. Under the program, we are authorized to purchase up to 3.1 million shares of our common stock, based on a limit of 15% 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 $25.00 per share, for a period of five years from the date of approval. As of September 30, 2023, approximately 3.1 million shares of common stock remain available for repurchase under the program. There were no purchases of shares of common stock during the nine months ended September 30, 2023 and 2022. Luxembourg law limits share repurchases to the balance of Altisource Portfolio Solutions S.A. (unconsolidated parent company) retained earnings, less the value of shares repurchased. As of September 30, 2023, we can repurchase up to approximately $60 million of our common stock under Luxembourg law. Under the Amended Credit Agreement, we are not permitted to repurchase shares except for limited circumstances.
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ALTISOURCE PORTFOLIO SOLUTIONS S.A.
Notes to Condensed Consolidated Financial Statements (Continued)
Public offerings of Common Stock
On February 14, 2023, Altisource closed on an underwritten public offering to sell 4,550,000 shares of its common stock, at a price of $5.00 per share, generating net proceeds of $20.5 million, after deducting the underwriting discounts and commissions and other offering expenses.
On September 7, 2023, Altisource closed on an underwritten public offering to sell 5,590,277 shares of its common stock, at a price of $3.60 per share, generating net proceeds of $18.4 million, after deducting the underwriting discounts and commissions and other offering expenses.
Share-Based Compensation
We issue share-based awards in the form of stock options, restricted shares and restricted share units for certain employees, officers and directors. We recognized share-based compensation expense of $3.9 million and $3.9 million for the nine months ended September 30, 2023 and 2022, respectively ($1.2 million and $1.3 million for the third quarter of 2023 and 2022, respectively). As of September 30, 2023, estimated unrecognized compensation costs related to share-based awards amounted to $3.2 million, which we expect to recognize over a weighted average remaining requisite service period of approximately