What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-30 compared with 2022-03-03 · 420 added, 266 removed, 223 unchanged (75% of the section changed)

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It also provides a brief description of significant transactions and events that affect the comparability of financial results and a discussion of the progress being made on our strategic initiatives.

Results of Operations.

This section, beginning on page 31, provides an analysis of our consolidated results of operations for the two years ended December 31, 2021.

Consolidated Results of Operations.

This section, beginning on page 35 , provides an analysis of our consolidated results of operations for the two years ended December 31, 2022 and 2021.

Segment Results of Operations.

This section, beginning on page 39 , provides analysis of our business segments’ results of operations for the years ended December 31, 2022 and 2021.

Liquidity and Capital Resources .

This section, beginning on page 36, provides an analysis of our cash flows for the two years ended December 31, 2021.

This section, beginning on page 46 , provides an analysis of our cash flows for the two years ended December 31, 2022 and 2021.

We also discuss restrictions on cash movements, future commitments and capital resources.

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Combining operational excellence with a suite of innovative services and technologies, Altisource helps solve the demands of the ever-changing markets we serve.

The Company operates with one reportable segment (total Company).

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.

The Servicer and Real Estate segment provides loan servicers and real estate investors with solutions and technologies that span the mortgage and real estate lifecycle.

Within the Servicer and Real Estate segment we provide:

Our Solutions business includes property preservation and inspection services, title insurance (as an agent) and settlement services, real estate valuation services, foreclosure trustee services, and residential and commercial construction inspection and risk mitigation services.

Our Marketplace business includes the Hubzu online real estate auction platform and real estate auction, real estate brokerage and asset management services.

Technology and SaaS Products

Our Technology and SaaS Products business includes Equator (a SaaS-based technology to manage REO, short sales, foreclosure, bankruptcy and eviction processes), Vendorly Invoice (a vendor invoicing and payment system),

RentRange (a single family rental data, analytics and rent-based valuation solution), REALSynergy (a commercial loan servicing platform), and NestRange (an automated valuation model and analytics solution).

The Origination segment provides originators with solutions and technologies that span the mortgage origination lifecycle.

Within the Origination segment we provide:

Our Solutions business includes title insurance (as an agent) and settlement services, real estate valuation services, and loan fulfillment, certification and certification insurance services.

Our Lenders One business includes management services provided to the Best Partners Mortgage Cooperative, Inc., doing business as Lenders One, and certain loan manufacturing and capital markets services provided to the members of the Lenders One cooperative.

Technology and SaaS Products

Our Technology and SaaS Products business includes Vendorly Monitor (a vendor management platform), LOLA (a marketplace to order services and a tool to automate components of the loan manufacturing process), TrelixAI (technology to manage the workflow and automate components of the loan fulfillment, pre and post-close quality control and service transfer processes), ADMS (a document management and data analytics delivery platform), and automated valuation technology.

Corporate and Others includes Pointillist (sold on December 1, 2021), interest expense and costs related to corporate functions including executive, infrastructure and certain technology groups, finance, law, compliance, human resources, vendor management, facilities and risk management.

We classify revenue in three categories:

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Strategy and Core Businesses

We are focused on becoming the premier provider of mortgage and real estate marketplaces and related technology enabled solutions to a broad and diversified customer base of residential loan investors, servicers, and originators.

The real estate and mortgage marketplaces represent very large markets, and we believe our scale and suite of offerings provide us with competitive advantages that could support our growth.

As we navigate the COVID-19 pandemic and its impacts on our business, we continue to evaluate our strategy and core businesses and seek to position our businesses to provide long term value to our shareholders.

Through our offerings that support residential loan investors and servicers, we provide a suite of solutions and technologies intended to meet their growing and evolving needs.

Each of our business segments provides Altisource the potential to grow and diversify our customer and revenue base.

We believe these business segments address very large markets and directly leverage our core competencies and distinct competitive advantages.

Our business segments and strategic initiatives follow:

Servicer and Real Estate:

Through our offerings that support residential real estate and loan investors and servicers, we provide a suite of solutions and technologies intended to meet their growing and evolving needs.

We are focused on growing referrals from our existing customer base and attracting new customers to our offerings.

We have a customer base that includes GSEs, asset managers, and several large bank and non-bank servicers including Ocwen and NRZ.

We have a customer base that includes GSEs, asset managers, and several large bank and non-bank servicers including Ocwen and Rithm.

We believe we are one of only a few providers with a broad suite of servicer solutions, nationwide coverage and scalability.

Further, we believe we are well positioned to gain market share from existing and new customers in the event delinquency rates remain elevated following the expiration of the foreclosure moratoriums and forbearance plans, or customers and prospects consolidate to larger, full-service providers or outsource services that have historically been performed in-house.

We also provide services to mortgage loan originators (or other similar mortgage market participants).

We provide a suite of solutions and technologies to meet the evolving and growing needs of lenders, mortgage purchasers and securitizers.

Further, we believe we are well positioned to gain market share from existing and new customers as they consolidate to larger, full-service providers or outsource services that have historically been performed in-house.

Through our offerings that support mortgage loan originators (or other similar mortgage market participants), we provide a suite of solutions and technologies to meet the evolving and growing needs of lenders, mortgage purchasers and securitizers.

We are focused on growing business from our existing customer base, attracting new customers to our offerings and developing new offerings.

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We believe our suite of services, technologies and unique access to the members of the Lenders One mortgage cooperative position us to grow our relationships with our existing customer base by growing membership of Lenders One, increasing member adoption of existing solutions and developing and cross-selling new offerings.

Further, we believe we are well positioned to gain market share from existing and new customers as customers and prospects consolidate to larger, full-service providers or outsource services that have historically been performed in-house.

Our earlier stage business consists of Pointillist, a majority owned subsidiary of Altisource.

Further, we believe we are well positioned to gain market share from existing and new customers as customers and prospects look to Lenders One to help them improve their profitability and better compete.

We developed the Pointillist business through our consumer analytics capabilities.

We believe the Pointillist business is a potentially disruptive SaaS-based platform which provides unique customer journey analytics at scale and enables customers to engage through our intelligent platform.

During 2019, we created Pointillist as a separate legal entity to position it for accelerated growth and outside investment and contributed the Pointillist business and $8.5 million to it.

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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 October 6, 2021, the shareholders of Pointillist, entered into a definitive Stock Purchase Agreement to sell all of the equity interests in Pointillist to Genesys for $150.0 million.

On October 6, 2021, the shareholders of Pointillist, entered into a definitive Stock Purchase Agreement to sell all of the equity interests in Pointillist to Genesys Cloud Services, Inc.

(“Genesys”) for $150.0 million.

The Purchase Price consisted of (1) an up-front payment of $144.5 million, subject to certain adjustments, (2) $0.5 million deposited into 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, with the balance to be paid to the sellers thereafter.

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On a fully diluted basis, we owned approximately 69% of the equity of Pointillist.

After working capital and other applicable adjustments, we 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.

We recognized a pre-tax and after-tax gain of $88.9 million from the sale.

After working capital and other applicable adjustments, we received approximately $106.0 million from the sale of our 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.

Altisource received the Working Capital Escrow in May 2022.

The Indemnification Escrow funds have not yet been received.

During the year ended December 31, 2022, the Company recognized a loss of $(0.2) million based on estimated losses from claims expected to be made against the Indemnification Escrow account.

During the year ended December 31, 2021, the Company recognized a pre-tax and after-tax gain of $88.9 million from the sale of Pointillist.

COVID-19 Pandemic Impacts

In response to the COVID-19 pandemic, various governmental entities and servicers implemented unprecedented foreclosure and eviction moratoriums, forbearance programs and loss mitigation measures to help mitigate the impact to borrowers and renters.

As a result of these measures and other related actions, industry-wide foreclosure initiations were 89% and 67% lower for the years ended December 31, 2021 and 2020, compared to the same period in 2019, respectively (with such foreclosure initiations representing 3%, 38% and 96% of seriously delinquent loans as of the beginning of the year in 2021, 2020 and 2019, respectively).

The decline in foreclosure initiations resulted in significantly lower REO referrals to Altisource and negatively impacted virtually all of Altisource’s default related services performed on delinquent loans, loans in foreclosure and REO.

At the same time, beginning in the first half of 2020 the Federal Reserve lowered the target for the federal funds rate to 0% to 0.25% and bought billions of dollars of mortgage backed securities on the secondary market to reduce interest rates.

As a result of the lower interest rate environment, mortgage originations were 77% and 82% higher for the years ended December 31, 2021 and 2020 compared to 2019, respectively (according to the Mortgage Bankers Association) driving higher demand for origination related services.

We cannot predict the duration of the pandemic and future governmental measures.

The Federal government’s foreclosure and eviction moratoriums expired at the end of July 2021.

The CFPB’s rules on temporary loss mitigation measures essentially prohibited foreclosure initiations until January 1, 2022 other than a few exceptions, including for those loans that were 120 days or more delinquent prior to the pandemic.

Based on these events, we believe the demand for our Default business will grow in 2022 after the expiration of the CFPB’s temporary loss mitigation rules, and stabilize during 2023 when we anticipate foreclosures commenced after the expiration of the foreclosure moratoriums, forbearance plans and temporary loss mitigation rules become REO and are sold.

We further anticipate that despite the forecasted decline in origination volumes in 2022 compared to 2021, our origination business will continue to grow from new customer wins, and cross selling existing and new offerings to customers.

During 2021, to address lower revenue, Altisource worked to (1) reduce our cost structure, (2) maintain the infrastructure to deliver default related services for our customer base and support the anticipated increase in demand following the expiration of the moratoriums and forbearance plans, (3) accelerate the growth of our originations businesses, and (4) generate cash.

In response to the COVID-19 pandemic, beginning in March 2020, various governmental entities and servicers implemented unprecedented foreclosure and eviction moratoriums, forbearance programs and loss mitigation measures to help mitigate the impact to borrowers and renters.

As a result of these measures and other related actions, industrywide foreclosure initiations were 88% lower in 2021, compared to 2019, and foreclosure sales were 76% lower.

The Federal government’s foreclosure moratorium expired on July 1, 2021 and the CFPB’s temporary loss mitigation measures expired on December 31, 2021.

Despite the expiration of such governmental measures, we believe servicers are proceeding slowly with foreclosure initiations for borrowers in default.

Industrywide foreclosure initiations were 368% higher in 2022 compared to 2021, although still 45% lower than the pre-COVID-19 period in 2019.

Industrywide foreclosure sales were 39% higher in 2022 compared to 2021, although still 67% lower than the pre-COVID-19 period in 2019.

The decline in foreclosure initiations and foreclosure sales throughout the pandemic, partially offset by the restart of the default market, significantly decreased default related referrals to Altisource and continues to negatively impact virtually all of Altisource’s default related services revenue.

We cannot predict the duration of the pandemic and future governmental and industry measures.

Based on the expirations of the Federal government’s foreclosure and eviction moratoriums and the CFPB’s rules on temporary loss mitigation measures, we believe the demand for our Default business will grow.

We estimate that in today’s environment it typically takes on average two years to convert foreclosure initiations to foreclosure sales and six months to market and sell the REO.

Due to this timing, we anticipate that our later stage foreclosure auction and REO asset management services will not fully benefit from the early 2022 higher foreclosure initiations until late 2023 or early 2024.

During 2021 and 2022, to address lower revenue, we worked to (1) reduce our cost structure, (2) maintain the infrastructure to deliver default related services for our customer base and support the anticipated increase in demand following the expiration of the moratoriums and forbearance plans and CFPB’s rules on temporary loss mitigation measures, (3) grow Lenders One membership, launch new solutions and increase customer adoption of our solutions to accelerate the growth of our origination business, and (4) generate cash from the 2021 sale of Pointillist.

Share Repurchase Program

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As of December 31, 2022, we can repurchase up to approximately $69 million of our common stock under Luxembourg law.

Our senior secured term loan agreement also limits the amount we can spend on share repurchases, which limit was approximately $437 million as of December 31, 2021, and may prevent repurchases in certain circumstances, including if our leverage ratio exceeds 3.50 to 1.00.

Under the Amended Credit Agreement, we are not permitted to repurchase shares except for limited circumstances.

Ocwen Related Matters

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In addition to the above, Ocwen may become subject to future adverse regulatory or other actions.

Ocwen has disclosed that NRZ is its largest client.

As of December 31, 2021, approximately 21% of loans serviced and subserviced by Ocwen (measured in 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 the Subject MSRs and under which Ocwen will subservice mortgage loans underlying the MSRs for an initial term of five years.

NRZ can terminate its sub-servicing agreement with Ocwen in exchange for the payment of a termination fee.

The existence or outcome of Ocwen regulatory matters or the termination of the NRZ sub-servicing agreement with Ocwen may have significant adverse effects on Ocwen’s business and/or our continuing relationship with Ocwen.

Ocwen has disclosed that Rithm is its largest client.

As of December 31, 2022, approximately 17% of loans serviced and subserviced by Ocwen (measured in UPB) were related to Rithm MSRs or rights to MSRs.

The existence or outcome of Ocwen regulatory matters or the termination of the Rithm sub-servicing agreement with Ocwen may have significant adverse effects on Ocwen’s business.

For example, Ocwen may be required to alter the way it conducts business, including the parties it contracts with for services, it may be required to seek changes to its existing pricing structure with us, it may lose its non-GSE servicing rights or subservicing arrangements or may lose one or more of its state servicing or origination licenses.

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Any or all of these effects and others could result in our eventual loss of Ocwen as a customer or a reduction in the number and/or volume of services they purchase from us or the loss of other customers.

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 and the designated service provider, Altisource believes that Ocwen received these directions from 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 $0.5 million and $70.1 million of service revenue from Ocwen for the years ended December 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, with the bulk of such transition occurring during 2021.

We anticipate that the transition of such default valuations and title services will continue during the course of 2022.

We estimate that $2.9 million and $18.2 million of service revenue from Ocwen for the years ended December 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 undertook several measures to further reduce its cost structure, strengthen its operations and generate cash.

On May 5, 2021 we entered into an Agreement with Ocwen pursuant to which the terms of certain services agreements between us and Ocwen were extended from August 2025 through August 2030 and the scope of solutions we provide to Ocwen was expanded to include, among other things, the opportunity for the Company to provide first and second chance foreclosure auctions on Government Loans, and title services on FHA and Veterans Affairs loans, subject to a process to confirm Altisource’s ability to meet reasonable performance requirements, which process is continuing.

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.

Since the date of the Agreement, Ocwen has transitioned over 2,300 of its foreclosure auction inventory on Government Loans to us and increased our percentage of field services referrals on its Government Loans.

In addition to expected reductions in our revenue from the transition of referrals for default related services previously identified, if any of the following events occurred, Altisource’s revenue could be further significantly reduced and our results of operations could be materially adversely affected, including from the possible impairment or write-off of goodwill, intangible assets, property and equipment, other assets and accounts receivable:

• Altisource loses Ocwen as a customer or there is an additional significant reduction in the volume of services they purchase from us

• Ocwen loses, sells or transfers a significant portion of its servicing rights or subservicing arrangements and Altisource fails to be retained as a service provider

• The contractual relationship between Ocwen and NRZ changes significantly, including Ocwen’s sub-servicing arrangement with NRZ expiring without renewal, and this change results in a change in our status as a provider of services related to the Subject MSRs

If any of the following events occurred, Altisource’s revenue could be significantly reduced and our results of operations could be materially adversely affected, including from the possible impairment or write-off of goodwill, intangible assets, property and equipment, other assets and accounts receivable:

• Altisource loses Ocwen as a customer or there is a significant reduction in the volume of services they purchase from us

• Ocwen loses, sells or transfers a significant portion of its GSE or Federal Housing Administration servicing rights or subservicing arrangements or remaining other servicing rights or subservicing arrangements and Altisource fails to be retained as a service provider

• The contractual relationship between Ocwen and Rithm changes significantly, including Ocwen’s sub-servicing arrangement with Rithm expiring without renewal, and this change results in a change in our status as a provider of services related to the Subject MSRs

• Ocwen loses state servicing licenses in states with a significant number of loans in Ocwen’s servicing portfolio

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Management cannot predict whether any of these events will occur or the amount of any impact they may have on Altisource.

However, we are focused on diversifying and growing our revenue and customer base and we have a sales and marketing strategy to support these efforts.

We are seeking to diversify and grow our revenue and customer base and we have a sales and marketing strategy to support these efforts.

Moreover, in the event one or more of these events materially negatively impact Altisource, we believe the variable nature of our cost structure would allow us to realign our cost structure to address some of the impact to revenue and that current liquidity would be sufficient to meet our working capital, capital expenditures, debt service and other cash needs.

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The following items impact the comparability of our results:

• The Company’s financial performance in its default businesses was negatively impacted by the COVID-19 pandemic for the year ended December 31, 2021.

Governmental, and in some instances servicer, measures to provide support to borrowers, including foreclosure and eviction moratoriums, forbearance programs, and loss mitigation measures, reduced referral volumes and inflows of REO.

COVID-19 pandemic related governmental restrictions and changing vendor and consumer behavior also impacted financial performance.

These impacts were partially offset by stronger performance from the Company’s origination businesses that benefited from lower interest rates, customer wins and new offerings for the year ended December 31, 2021 compared to 2020.

Across the Company’s three core businesses, service revenue from customers other than Ocwen, NRZ and Front Yard Residential Corporation (“RESI”) for the year ended December 31, 2021 decreased by 5% compared to 2020.

Compared to the year ended December 31, 2020, the decrease is primarily from a 64% decline in our default business, partially offset by a 11% growth in our origination businesses.

Service revenue from our default and other business was $107.2 million and $290.9 million for the years

ended December 31, 2021 and 2020, respectively, and service revenue from our origination business was $58.0 million and $52.3 million for the years ended December 31, 2021 and 2020, respectively.

• On October 6, 2021, the shareholders of Pointillist, a majority owned subsidiary of Altisource, entered into a definitive Stock Purchase Agreement to sell all of the equity interests in Pointillist to Genesys for $150.0 million.

The transaction closed on December 1, 2021.

• Industrywide foreclosure initiations were 368% higher in 2022, compared to 2021 (although still 45% lower than the pre-COVID-19 period in 2019), as the foreclosure market is beginning to recover following expiration of the Federal government’s foreclosure moratorium on July 31, 2021 and the CFPB’s temporary loss mitigation measures on December 31, 2021

• Industrywide foreclosure sales were 39% higher in 2022, compared to 2021 (although still 67% lower than the same pre-COVID-19 period in 2019)

• On December 1, 2021, the equity interests of Pointillist, a majority owned subsidiary of Altisource, were sold for $150.0 million.

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.

We recognized a pre-tax and after-tax gain of $88.9 million from the sale.

For the year ended December 31, 2021 and 2020, service revenue from Pointillist was $4.8 million and $2.2 million, respectively.

• Altisource used approximately $20.0 million of the proceeds from the sale of its equity interest in Pointillist to repay the outstanding balance on its revolving line of credit.

We recognized a pre-tax and after-tax (loss) gain of $(0.2) million and $88.9 million from the sale for the years ended December 31, 2022 and 2021, respectively.

For the year ended December 31 2021, service revenue from Pointillist was $4.8 million (no comparative amount for the year ended December 31, 2022)

• During the year ended December 31, 2021, Altisource used approximately $20.0 million of the proceeds from the sale of its equity interest in Pointillist to repay the outstanding balance on its revolving line of credit.

This revolving line of credit remains available to Altisource according to its terms

• 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 and the designated service provider, Altisource believes that Ocwen received these directions from 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 anticipate that the transition of such default valuations and title services will continue during the course of 2022.

We estimate that $2.9 million and $18.2 million of service revenue from Ocwen for the years ended December 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 undertook several measures to further reduce its cost structure, strengthen its operations and generate cash.

• During the year ended December 31, 2020 we recognized an unrealized gain of $4.0 million from the change in fair value on our investment in RESI in other income (expense), net in the consolidated statements of operations and comprehensive income (loss) from a change in the market value of RESI common shares (no comparative amount for the year ended December 31, 2021).

In 2020, the Company sold all of its remaining 3.5 million shares of RESI for net proceeds of $46.6 million.

As required by our senior secured term loan agreement, the Company used the net proceeds to repay a portion of its senior secured term loan.

• In August 2018, Altisource initiated Project Catalyst, a project intended to optimize its operations and reduce costs to better align its cost structure with its anticipated revenues and improve its operating margins (finalized in 2020).

During the year ended December 31, 2020, Altisource incurred $12.0 million of severance costs, professional services fees, facility consolidation costs, technology costs and business wind down costs related to the reorganization plan (no comparative amount for the year ended December 31, 2021).

• On July 1, 2019, Altisource sold its Financial Services business, consisting of its post-charge-off consumer debt and mortgage charge-off collection services and customer relationship management services (the “Financial Services Business”) to Transworld Systems Inc.

(“TSI”) for $44.0 million consisting of an upfront payment of $40.0 million, subject to a working capital adjustment (finalized during 2019) and transaction costs upon closing of the sale, and an additional $4.0 million payment on the one year anniversary of the sale closing.

On July 1, 2020, the Company received net proceeds of $3.3 million representing TSI’s final installment payment less certain amounts owed to TSI.

• The Company recognized an income tax provision of $5.3 million for the year ended December 31, 2022.

The income tax provision for the year ended December 31, 2021 was driven by no income tax provision on the gain on sale of Pointillist, income tax on transfer pricing income from India, no tax benefit on the pretax loss from our Luxembourg operating company and Pointillist, uncertain tax position and tax on unrepatriated earnings in India.

The income tax provision for the year ended December 31, 2022 was driven by income tax expense on transfer pricing income from India, no tax benefit on the pretax loss from our Luxembourg operating company, uncertain tax positions and anticipated withholdings tax on current year earnings in India.

• The Company recognized an income tax provision of $3.2 million for the year ended December 31, 2021.

The income tax provision on losses before income taxes and non-controlling interests for the year ended December 31, 2020 was primarily driven by income in our US and other foreign operations from transfer pricing on services provided to our Luxembourg operating company, no tax benefit on the pretax losses from our Luxembourg operating company for the

year ended December 31, 2020 and tax expense on unrepatriated earnings in India, partially offset by lower transfer pricing rates due to the COVID-19 pandemic.

RESULTS OF OPERATIONS

Following is a discussion of our results of operations for the years ended December 31, 2021 and 2020.

CONSOLIDATED RESULTS OF OPERATIONS

The following is a discussion of our consolidated results of operations for the years ended December 31, 2022 and 2021.

For a more detailed discussion of the factors that affected the results of our business segments in these periods, see “Segment Results of Operations” below.

The following table sets forth information on our consolidated results of operations for the years ended December 31:

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Service revenue

Servicer and Real Estate $ 112,132 4 $ 107,790

Originations 32,364 (44) 58,002

Corporate and Others — (100) 4,821

Service revenue 144,496 (15) 170,613

Reimbursable expenses 8,039 23 6,555

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Selling, general and administrative expenses 54,755 (18) 67,049

Gain on sale of businesses (88,930) N/M —

Restructuring charges — (100) 11,972

Income (loss) from operations 28,968 165 (44,355)

Loss (gain) on sale of business 242 100 (88,930)

(Loss) income from operations (33,182) (215) 28,968

Other income (expense), net:

Interest expense (16,639) 14 (14,547)

Unrealized gain on investment in equity securities — (100) 4,004

Other income, net 2,254 161 864

Total other income (expense), net (14,385) (5) (13,683)

Income (loss) before income taxes and non-controlling interests 15,285 126 (57,706)

(Loss) income before income taxes and non-controlling interests (47,567) (411) 15,285

Income tax provision (5,266) 63 (3,232)

Net income (loss) 12,053 118 (66,315)

Net (loss) income (52,833) N/M 12,053

Net income attributable to non-controlling interests (585) 143 (241)

Net income (loss) attributable to Altisource $ 11,812 118 $ (67,156)

Net (loss) income attributable to Altisource $ (53,418) N/M $ 11,812

Gross profit/service revenue 15 % 4 %

Income (loss) from operations/service revenue (23) % 17 %

Earnings (loss) per share:

Basic $ 0.75 117 $ (4.31)

Diluted $ 0.74 117 $ (4.31)

(Loss) earnings per share:

Basic $ (3.32) N/M $ 0.75

Diluted $ (3.32) N/M $ 0.74

Weighted average shares outstanding:

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N/M — not meaningful.

Revenue by line of business consists of the following for the years ended December 31:

(in thousands, except per share data) 2021 % Increase (decrease) 2020

Service revenue:

Field Services $ 45,576 (71) $ 157,100

Marketplace 35,956 (56) 82,189

Mortgage and Real Estate Solutions 83,627 (20) 103,906

Earlier Stage Business 4,821 115 2,243

Other 633 (66) 1,875

Total service revenue 170,613 (51) 347,313

Reimbursable expenses:

Field Services 1,459 (66) 4,344

Marketplace 2,481 (70) 8,331

Mortgage and Real Estate Solutions 2,615 (28) 3,610

Total reimbursable expenses 6,555 (60) 16,285

Non-controlling interests:

Mortgage and Real Estate Solutions 1,285 (34) 1,949

Total revenue $ 178,453 (51) $ 365,547

N/M — not meaningful.

2021 service revenue of $170.6 million was 51% lower than 2020 primarily from COVID-19 pandemic related foreclosure and eviction moratoriums and borrower forbearance plans, and an MSR investor’s 2020 instructions to Ocwen to transition field services, title and valuation referrals historically provided to Altisource to the MSR investor’s captive vendors.

The decrease for the year ended December 31, 2021 was partially offset by an increase in revenue from our origination business of 11%, from higher origination related volumes driven by a lower interest rate environment, customer wins and new offerings.

We recognized reimbursable expense revenue of $6.6 million for the year ended December 31, 2021, a 60% decrease compared to the year ended December 31, 2020.

The decreases in reimbursable expense revenue for the year ended December 31, 2021 was consistent with the decline in service revenue discussed above.

We recognized service revenue of $144.5 million for the year ended December 31, 2022, a 15% decrease compared to the year ended December 31, 2021.

The increase in service revenue in the Servicer and Real Estate segment for the year ended December 31, 2022 was primarily driven by increases across all our Solutions, Marketplace and Technology and SaaS Products businesses as the default market continues to recover.

The increase in the Solutions business was driven by revenue growth in all of the businesses except for Field Services.

Revenue in the Solutions businesses grew as the default market continues to recover.

Revenue in the Field Services declined due to fewer preservation referrals per property.

Revenue in the other Solutions businesses grew as the default market began to recover following the expiration of the pandemic related borrower relief measures.

The increase in the Marketplace business was driven by a higher number of homes sold, partially offset by lower average sales prices and lower average commission rate from a higher percentage of foreclosure auctions.

The increase in the Technology and SaaS Products business was from higher professional services revenue in the Equator business.

The decrease in service revenue in the Origination segment for the year ended December 31, 2022 was primarily driven by the overall market decline in mortgage origination.

The decline in Lenders One revenue was lower than the overall market decline as we gained traction with our solutions that are designed to help our members save money.

The decline in the Solutions business revenue was greater than the overall market decline as customers transitioned services in-house to retain their employees in some of our Solutions businesses and a greater percentage of revenue in some of these businesses was derived from refinance transactions which declined faster than the market.

The decrease in service revenue in Corporate and Other was from the December 2021 Pointillist sale.

We recognized reimbursable expense revenue of $8.0 million for the year ended December 31, 2022, a 23% increase compared to the year ended December 31, 2021.

The increase in reimbursable expense revenue for the year ended December 31, 2022 was largely due to a higher volume of asset resolution and asset management activities.

Certain of our revenues can be impacted by seasonality.

2 unchanged sentences

Cost of Revenue and Gross Profit

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

Cost of revenue principally includes payroll and employee benefits associated with personnel employed in customer service, operations and technology 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.

Cost of revenue consists of the following for the years ended December 31:

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We recognized cost of revenue of $131.3 million for the year ended December 31, 2022, a 23% decrease compared to the year ended December 31, 2021.

The decrease in outside fees and services was primarily driven by lower service revenue in the Field Services, Marketplace and Mortgage and Real Estate Solutions businesses, discussed in the revenue section above.

Compensation and benefits decreased primarily due to cash cost savings measures taken in 2020 in response to the COVID-19 related decrease in service revenue and reduction in revenue from Ocwen discussed in the revenue section above.

The Company also continued to reduce employee costs in the year ended December 31, 2021 as a result of the extension of the expiration of foreclosure moratoriums and forbearance plans.

In addition, depreciation and amortization was lower from the completion of the depreciation periods of certain premises and equipment and the reduction in capital expenditures.

The decrease in reimbursable expenses was consistent with the changes in reimbursable expense revenue discussed in the revenue section above.

Gross profit decreased to $7.1 million, representing 4% of service revenue, for the year ended December 31, 2021 compared to $60.4 million, representing 17% of service revenue, for the year ended December 31, 2020.

Gross profit as a percentage of service revenue in 2021 decreased compared to 2020, primarily due to revenue mix with lower revenue from the higher margin Marketplace businesses and lower gross profit margin in the Field Services business.

These decreases were partially offset by our COVID-19 cash cost savings measures.

Compensation and benefits for the year ended December 31, 2022 decreased primarily due to cash cost savings measures taken in 2021, the December 2021 sale of Pointillist and from lower service revenue in the Origination segment.

Outside fees and services for the year ended December 31, 2022 decreased primarily from lower service revenue in the Origination segment, as discussed in the revenue section above, and from lower Field Services revenue in the Solutions business of the Servicer and Real Estate segment.

In addition, the increases in reimbursable expenses were consistent with the changes in reimbursable expense revenue discussed in the revenue section above.

Gross profit increased to $21.8 million, representing 15% of service revenue, for the year ended December 31, 2022 compared to $7.1 million, representing 4% of service revenue, for the year ended December 31, 2021.

Gross profit as a percentage of service revenue for the year ended December 31, 2022 increased compared to the year ended December 31, 2021 primarily due

to revenue mix with higher revenue from the higher margin businesses in Servicer and Real Estate, the December 1, 2021 Pointillist sale, our COVID-19 cash cost savings measures and lower incentive payments as well as the payment of incentive payments in stock as opposed to cash, partially offset by lower gross profit margin in the Origination business from lower revenue.

Selling, General and Administrative Expenses

13 unchanged sentences

The decrease was primarily driven by lower compensation and benefits, occupancy related costs and amortization of intangible assets.

Compensation and benefits decreased primarily due to cash cost savings measures taken in 2020 and 2021 in response to the COVID-19 related decrease in service revenue and reduction in revenue from Ocwen discussed in the revenue section above.

The decreases in occupancy related costs primarily resulted from facility consolidation initiatives.

The decrease in amortization of intangible assets was driven by the completion of the amortization period of certain intangible assets during 2021 and 2020.

In addition, the decrease in marketing costs were primarily driven by COVID-19 cost savings measures and the decline in revenue.

Other Operating Expenses (Income)

Other operating expenses (income) include the gain on sale of businesses and restructuring charges.

Other operating expenses (income) consist of the following for the years ended December 31:

(in thousands) 2021 % Increase (decrease) 2020

Gain on sale of businesses $ (88,930) N/M $ —

Restructuring charges — (100) 11,972

Other operating (income) expenses, net $ (88,930) N/M $ 11,972

N/M — not meaningful.

Compensation and benefits for the year ended December 31, 2022 decreased primarily due to cash cost savings initiatives and lower incentive payments as well as the payment of incentive payments in stock as opposed to cash.

Occupancy related costs for the year ended December 31, 2022 decreased primarily from facility consolidation initiatives.

Amortization of intangible assets for the year ended December 31, 2022 decreased from the completion of the amortization period of certain intangible assets during 2021.

The decreases for year ended December 31, 2022 were partially offset by increases in marketing costs from Lenders One convention activities that were cancelled in the first quarter of 2021 due to the pandemic.

Other Operating Income

On December 1, 2021, Altisource sold its equity interest in Pointillist (see subsection Strategy and Core Businesses in MD&A Overview for more details).

We recognized a pre-tax and after-tax gain of $88.9 million from the sale.

In August 2018, Altisource initiated Project Catalyst, a project intended to optimize its operations and reduce costs to better align its cost structure with its anticipated revenues and improve its operating margins (finalized in 2020).

During the year ended December 31, 2020 we incurred $12.0 million (no comparative amount for the year ended December 31, 2021), of severance costs, professional services fees, facility consolidation costs, technology costs and business wind down costs related to the reorganization plan.

Income (Loss) from Operations

Income from operations increased to $29.0 million, representing 17% of service revenue, for the year ended December 31, 2021 compared to a loss from operations of $(44.4) million, representing (13)% of service revenue, for the year ended December 31, 2020.

Income from operations as a percentage of service revenue increased for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily as a result of the gain on sale of business recognized during the year ended December 31, 2021, lower SG&A expenses and restructuring charges, partially offset by lower gross profit margins, as discussed above.

Altisource received the Working Capital Escrow in May 2022.

The Indemnification Escrow funds have not yet been received.

During the year ended December 31, 2022, the Company recognized a loss of $(0.2) million based on estimated losses from claims expected to be made against the Indemnification Escrow account.

During the year ended December 31, 2021, the Company recognized a pre-tax and after-tax gain of $88.9 million from the sale of Pointillist.

(Loss) income from operations

Loss from operations was $(33.2) million, representing (23)% of service revenue, for the year ended December 31, 2022 compared to income from operations of $29.0 million, representing 17% of service revenue, for the year ended December 31, 2021.

(Loss) income from operations as a percentage of service revenue decreased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily as a result of the gain on sale of business recognized during the year ended December 31, 2021, partially offset by higher 2022 gross profit margins and a greater percentage reduction in 2022 SG&A expenses than the percentage change in revenue, discussed above.

Other Income (Expense), net

Other income (expense), net principally includes interest expense, unrealized gain (loss) on our investment in RESI common shares and other non-operating gains and losses.

Other income (expense), net principally includes interest expense and other non-operating gains and losses.

Other income (expense), net was $(14.4) million for the year ended December 31, 2022 compared to $(13.7) million for the year ended December 31, 2021.

The increase in other expense for the year ended December 31, 2021 was primarily driven by a $4.0 million unrealized gain on our investment in RESI common shares in 2020 (no comparative amount in 2021).

The increase in other expense was partially offset by lower interest expense during the year ended December 31, 2021.

Interest expense decreased primarily due to lower average outstanding balances of the senior secured term loan as a result of repayments during 2020 and lower interest rates.

For the year ended December 31, 2021, the interest rate of the senior secured term loan was 5.0% compared to 5.3% for the year ended December 31, 2020.

The change for the year ended December 31, 2022 is primarily driven by an increase of $(2.1) million in interest expense driven by higher interest rate on our senior secured term loan partially offset by lower average outstanding balance on the Revolver and higher interest income and foreign currency exchange gains.

Income Tax Provision

We recognized an income tax provision of $5.3 million and $3.2 million for the years ended December 31, 2022 and 2021, respectively.

ended December 31, 2020 and tax expense on unrepatriated earnings in India, partially offset by lower transfer pricing rates due to the COVID-19 pandemic.

SEGMENT RESULTS OF OPERATIONS

The following section provides a discussion of pretax results of operations of our business segments.

Transactions between segments are accounted for as third party arrangements for purposes of presenting segment results of operations.

Financial information for our segments was as follows:

For the year ended December 31, 2022

(in thousands) Servicer and Real Estate Origination Corporate and Others Consolidated Altisource

Service revenue $ 112,132 $ 32,364 $ — $ 144,496

Reimbursable expenses 7,529 510 — 8,039

Non-controlling interest — 585 — 585

119,661 33,459 — 153,120

Cost of revenue 81,148 32,052 18,105 131,305

Gross profit (loss) 38,513 1,407 (18,105) 21,815

Selling, general and administrative expenses 12,057 8,825 33,873 54,755

Loss on sale of businesses — — 242 242

Income (loss) from operations 26,456 (7,418) (52,220) (33,182)

Total other income (expense), net 4 — (14,389) (14,385)

Income (loss) before income taxes and

non-controlling interests $ 26,460 $ (7,418) $ (66,609) $ (47,567)

Gross profit (loss) /service revenue 34 % 4 % N/M 15 %

Income (loss) from operations/service revenue 24 % (23) % N/M (23) %

_____________________________________

N/M — not meaningful.

For the year ended December 31, 2021

(in thousands) Servicer and Real Estate Origination Corporate and Others Consolidated Altisource

Service revenue $ 107,790 $ 58,002 $ 4,821 $ 170,613

Reimbursable expenses 5,846 709 — 6,555

Non-controlling interest — 1,285 — 1,285

113,636 59,996 4,821 178,453

Cost of revenue 87,427 49,012 34,927 171,366

Gross profit (loss) 26,209 10,984 (30,106) 7,087

Selling, general and administrative expenses 12,557 5,702 48,790 67,049

Gain on sale of businesses — — (88,930) (88,930)

Income from operations 13,652 5,282 10,034 28,968

Total other income (expense), net 8 — (13,691) (13,683)

Income (loss) before income taxes and

non-controlling interests $ 13,660 $ 5,282 $ (3,657) $ 15,285

Gross profit (loss) /service revenue 24 % 19 % N/M 4 %

Income from operations/service revenue 13 % 9 % 208 % 17 %

_____________________________________

N/M — not meaningful.

Servicer and Real Estate

Revenue by line of business was as follows for the years ended December 31:

(in thousands) 2022 2021 % Increase (decrease)

Service revenue:

Solutions $ 71,686 $ 69,475 3

Marketplace 29,020 28,009 4

Technology and SaaS Products 11,426 10,306 11

Total service revenue 112,132 107,790 4

Reimbursable expenses:

Solutions 3,203 3,364 (5)

Marketplace 4,326 2,482 74

Total reimbursable expenses 7,529 5,846 29

Total revenue $ 119,661 $ 113,636 5

We recognized service revenue of $112.1 million for the year ended December 31, 2022, a 4% increase compared to the year ended December 31, 2021.

We also recognized reimbursable expense revenue of $7.5 million for the year ended December 31, 2022, a 29% increase compared to the year ended December 31, 2021.

The increase in the Solutions business was primarily driven by higher revenues from our other Solutions businesses, partially offset by fewer preservation referrals per property in the Field Services business.

Revenue in the other Solutions businesses grew as the default market began to recover following the expiration of the pandemic related borrower relief measures.

The increase in the Technology and SaaS Products business was from higher professional services revenue in the Equator business.

Certain of our Servicer and Real Estate businesses are impacted by seasonality.

Revenues from property sales and certain property preservation services are generally lowest during the fall and winter months and highest during the spring and summer months.

However, as a result of the pandemic and related measures, the seasonal impact to revenue may not follow historical patterns.

Cost of Revenue and Gross Profit

Cost of revenue consisted of the following for the years ended December 31:

(in thousands) 2022 2021 % Increase (decrease)

Compensation and benefits $ 25,786 $ 29,573 (13)

Outside fees and services 40,235 41,860 (4)

Technology and telecommunications 6,627 9,066 (27)

Reimbursable expenses 7,529 5,846 29

Depreciation and amortization 971 1,082 (10)

Cost of revenue $ 81,148 $ 87,427 (7)

Cost of revenue for the year ended December 31, 2022 of $81.1 million decreased by 7% compared to the year ended December 31, 2021.

The decrease in cost of revenue for the year ended December 31, 2022 is primarily driven by lower compensation and benefits primarily due to cash cost savings initiatives and lower incentive payments as well as the payment of incentive payments in stock as opposed to cash and lower technology and telecommunications.

The decrease in technology and telecommunications was driven by a change in the terms of the vendor agreement for property management technologies executed in December 2021 and other cost savings initiatives.

In addition, outside fees and services decreased from lower Field

Services revenue in the Solutions business, as discussed above.

These decreases are partially offset by an increase in reimbursable expenses from a higher volume of asset resolution and asset management activities.

Gross profit increased to $38.5 million, representing 34% of service revenue, for the year ended December 31, 2022 compared to $26.2 million, representing 24% of service revenue, for the year ended December 31, 2021.

Gross profit as a percentage of service revenue in 2022 increased compared to 2021 due to our COVID-19 cash cost savings and efficiency measures as well as from revenue mix with higher revenue from the other higher margin default solution businesses.

Selling, General and Administrative Expenses

SG&A expenses consisted of the following for the years ended December 31:

(in thousands) 2022 2021 % Increase (decrease)

Compensation and benefits $ 2,594 $ 14 N/M

Occupancy related costs 931 828 12

Amortization of intangible assets 2,970 7,292 (59)

Professional services 2,711 2,473 10

Marketing costs 1,524 697 119

Depreciation and amortization 12 14 (14)

Other 1,315 1,239 6

Selling, general and administrative expenses $ 12,057 $ 12,557 (4)

_____________________________________

N/M — not meaningful.

SG&A for the year ended December 31, 2022 of $12.1 million decreased by 4% compared to the year ended December 31, 2021.

The decrease in SG&A for the year ended December 31, 2021 was primarily due to lower amortization of intangible assets driven by the completion of the amortization period of certain intangible assets during 2021.

These decreases were partially offset by higher compensation and benefits for the year ended December 31, 2021 from the assignment of sales and marketing employees to the business segments beginning in January 1, 2022 and higher marketing costs from higher participation in convention activities for the Solutions businesses and related Technology and SaaS Products business.

Income from Operations

Income from operations increased to $26.5 million, representing 24% of service revenue, for the year ended December 31, 2022 compared to $13.7 million, representing 13% of service revenue, for the year ended December 31, 2021.

The increase in operating income as a percentage of service revenue for the year ended December 31, 2022 was primarily the result of higher gross profit margins and the percentage reduction in SG&A expenses in excess of the percentage change in revenue, discussed above.

Revenue by business unit was as follows for the years ended December 31:

(in thousands) 2022 2021 % Increase (decrease)

Service revenue:

Solutions $ 11,025 $ 32,745 (66)

Lenders One 20,612 24,492 (16)

Technology and SaaS Products 727 765 (5)

Total service revenue 32,364 58,002 (44)

Reimbursable expenses:

Solutions 510 709 (28)

Total reimbursable expenses 510 709 (28)

Non-controlling interest 585 1,285 (54)

Total revenue $ 33,459 $ 59,996 (44)

We recognized service revenue of $32.4 million for the year ended December 31, 2022, a 44% decrease compared to the year ended December 31, 2021.

We also recognized reimbursable expense revenue of $0.5 million for the year ended December 31, 2022, a 28% decrease compared to the year ended December 31, 2021.

The decrease in service revenue in the Origination segment for the year ended December 31, 2022 was primarily driven by the overall market decline in mortgage origination.

The decline in Lenders One revenue was lower than the overall market decline as we gained traction with selling our solutions that are designed to help our members save money.

Cost of Revenue and Gross Profit

Cost of revenue consisted of the following for the years ended December 31:

(in thousands) 2022 2021 % Increase (decrease)

Compensation and benefits $ 13,955 $ 21,868 (36)

Outside fees and services 15,744 24,476 (36)

Technology and telecommunications 1,806 1,895 (5)

Reimbursable expenses 510 709 (28)

Depreciation and amortization 37 64 (42)

Cost of revenue $ 32,052 $ 49,012 (35)

Cost of revenue for the year ended December 31, 2022 of $32.1 million decreased by 35% compared to the year ended December 31, 2021.

The decrease in cost of revenue for the year ended December 31, 2022 was primarily driven by lower compensation and benefits and outside fees and services driven by the decrease in service revenue discussed above.

In addition, the decrease in reimbursable expenses for the year ended December 31, 2022 is consistent with the changes in reimbursable expense revenue discussed in the revenue section above.

Gross profit decreased to $1.4 million, representing 4% of service revenue, for the year ended December 31, 2022 compared to $11.0 million, representing 19% of service revenue, for the year ended December 31, 2021.

Gross profit as a percentage of service revenue decreased primarily as costs did not decline at the same rate that revenue declined.

Selling, General and Administrative Expenses

SG&A expenses consisted of the following for the years ended December 31:

(in thousands) 2022 2021 % Increase (decrease)

Compensation and benefits $ 2,887 $ 568 408

Occupancy related costs 543 303 79

Amortization of intangible assets 2,159 2,175 (1)

Professional services 815 934 (13)

Marketing costs 1,569 617 154

Other 852 1,105 (23)

Selling, general and administrative expenses $ 8,825 $ 5,702 55

SG&A for the year ended December 31, 2022 of $8.8 million increased by 55% compared to the year ended December 31, 2021.

The increase in SG&A for the year ended December 31, 2022 was primarily due to higher compensation and benefits from the assignment of sales and marketing employees to the business segments beginning in January 1, 2022.

In addition, the increase in marketing costs and other for the year ended December 31, 2022 was primarily from Lenders One convention activities that were cancelled in first quarter of 2021 due to the pandemic.

(Loss) income from Operations

Loss from operations was $(7.4) million, representing (23)% of service revenue, for the year ended December 31, 2022 compared to income from operations of $5.3 million, representing 9% of service revenue, for the year ended December 31, 2021.

The decrease in operating (loss) income as a percentage of service revenue for the year ended December 31, 2022 was primarily the result of lower gross profit margins and higher SG&A costs, as discussed above.

Corporate and Others

Revenue by business unit was as follows for the years ended December 31:

(in thousands) 2022 2021 % Increase (decrease)

Service revenue:

Pointillist $ — $ 4,821 (100)

Total service revenue — 4,821 (100)

Total revenue $ — $ 4,821 (100)

We recognized service revenue of $4.8 million for the year ended December 31, 2021 (no comparative amount for the year ended December 31, 2022).

The decrease in service revenue for the year ended December 31, 2022 was driven by the December 1, 2021 Pointillist sale.

Cost of Revenue

Cost of revenue consisted of the following for the years ended December 31:

(in thousands) 2022 2021 % Increase (decrease)

Compensation and benefits $ 8,323 $ 18,549 (55)

Outside fees and services — 50 (100)

Technology and telecommunications 8,504 14,312 (41)

Depreciation and amortization 1,278 2,016 (37)

Cost of revenue $ 18,105 $ 34,927 (48)

Cost of revenue for the year ended December 31, 2022 of $18.1 million decreased by 48% compared to the year ended December 31, 2021.

The decrease in cost of revenue for the year ended December 31, 2022 is primarily driven by lower compensation and benefits due to cash cost savings initiatives and the December 1, 2021 Pointillist sale.

In addition, technology and telecommunications decreased due to lower service contract costs as a result of the December 1, 2021, Pointillist sale and cost savings initiatives.

Selling, General and Administrative Expenses

SG&A in Corporate and Others include costs related to the corporate functions including executive, finance, technology, law, compliance, human resources, vendor management, facilities, risk management and eliminations between reportable segments.

SG&A expenses consisted of the following for the years ended December 31:

(in thousands) 2022 2021 % Increase (decrease)

Compensation and benefits $ 17,492 $ 27,785 (37)

Occupancy related costs 3,526 8,201 (57)

Professional services 8,069 6,756 19

Marketing costs 14 843 (98)

Depreciation and amortization 1,142 1,416 (19)

Other 3,630 3,789 (4)

Selling, general and administrative expenses $ 33,873 $ 48,790 (31)

SG&A for the year ended December 31, 2022 of $33.9 million decreased by 31% compared to the year ended December 31, 2021.

Compensation and benefits for the year ended December 31, 2022 decreased primarily due to cash cost savings initiatives, and from the assignment of sales and marketing employees to the business segments beginning in January 1, 2022.

In addition, the decrease in occupancy related costs for the year ended December 31, 2022 is primarily from facility consolidation initiatives.

Other Operating Income

On December 1, 2021, Altisource sold its equity interest in Pointillist (see subsection Strategy and Core Businesses in MD&A Overview for more details).

Altisource received the Working Capital Escrow in May 2022.

The Indemnification Escrow funds have not yet been received.

During the year ended December 31, 2022, the Company recognized a loss of $(0.2) million based on estimated losses from claims expected to be made against the Indemnification Escrow account.

During the year ended December 31, 2021, the Company recognized a pre-tax and after-tax gain of $88.9 million from the sale of Pointillist.

Other Income (Expense), net

Other income (expense), net principally includes interest expense and other non-operating gains and losses.

Other income (expense), net was $(14.4) million for the year ended December 31, 2022 compared to $(13.7) million for the year ended December 31, 2021.

The change for the year ended December 31, 2022 was primarily driven by an increase of $2.1 million in interest expense driven by higher interest rate on our senior secured term loan partially offset by higher interest income and foreign currency exchange gains.

LIQUIDITY AND CAPITAL RESOURCES

Our primary source of liquidity has historically been cash flow from operations, cash proceeds from sales of businesses and cash on hand.

However, due to the COVID-19 pandemic and an MSR investor’s instructions to Ocwen to transition field services, valuation and title services to the investor's captive service providers, revenue has declined significantly.

The lower revenue, partially offset by cost savings initiatives, resulted in negative operating cash flow from operations for the year ended December 31, 2021.

To increase our liquidity we entered into a $20 million revolving credit facility during the second quarter of 2021.

However, due to governmental and market responses to the COVID-19 pandemic, revenue has declined significantly.

The lower revenue, partially offset by cost savings initiatives, resulted in negative operating cash flow from operations for the years ended December 31, 2022 and 2021.

To increase our liquidity we entered into a $20.0 million revolving credit facility during the second quarter of 2021 ($15.0 million available as of December 31, 2022).

In addition, Altisource’s December 1, 2021 sale of its equity interest in Pointillist increased our liquidity.

The Pointillist sale generated approximately $106.0 million in cash, 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.

Finally, we believe the anticipated 2022 growth in our origination and default businesses along with our reduced cost structure should help reduce negative operating cash flow.

The Pointillist sale generated approximately $106.0 million in cash, with $102.2 million received at closing, approximately $0.3 million deposited into the Working Capital Escrow and received in May 2022, and approximately $3.5 million deposited into the Indemnification Escrow.

Finally, we believe our anticipated revenue growth from the return of the default market, on-boarding sales wins, and revenue mix together with our reduced cost structure, should help reduce negative operating cash flow.

We seek to deploy cash generated in a disciplined manner.

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Credit Agreement

In April 3, 2018, Altisource Portfolio Solutions S.A.

On April 3, 2018, Altisource Portfolio Solutions S.A.

and its wholly-owned subsidiary, Altisource S.à r.l.

entered into a credit agreement (the “Credit Agreement”) pursuant to which 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.

We terminated the revolving credit facility on December 1, 2021.

As of December 31, 2022, the principal balance of the Term B Loans was $247.2 million.

There are no mandatory repayments of the Term B Loans due until maturity in April 2024, except as otherwise described herein and in the Credit Agreement.

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;

The Credit Agreement was amended effective February 14, 2023 (the “Amended Credit Agreement”).

The Term B Loans under the Amended Credit Agreement mature in April 2025.

The maturity date can be extended by one year, to April 2026, at Altisource’s option if certain par paydowns in the aggregate using proceeds from issuances of equity interest or from junior indebtedness made prior to February 14, 2024 (“Aggregate Paydowns”) total $30 million or more and certain other conditions are satisfied.

In February 2023, the Company made payments toward the determination of Aggregate Paydowns of $20 million.

The principal amortization of the Term B Loans under the Amended Credit Agreement is 1% per year through April 2025 and, if applicable, 12% per year paid monthly for the year ended April 2026.

All amounts outstanding under the Term B Loans will become due on the earlier of (i) the maturity date described above, 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).

The interest rate on the Term B Loans as of December 31, 2022 was 7.67%, representing 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%.

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.

Under the Amended Credit Agreement, the Term B Loans bear interest at rates based upon, at our option, the Secured Overnight Financing Rate (“SOFR”) or the Base Rate.

SOFR 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”).

Base Rate 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%.

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 $50.0 million, subject to certain conditions set forth in the Amended Credit Agreement.

The lenders have no obligation to provide any incremental indebtedness.

The Credit Agreement includes covenants that restrict or limit, among other things, our ability, subject to certain exceptions and baskets, to incur additional debt, pay dividends and repurchase shares of our common stock.

Under the Amended Credit Agreement, we are not permitted to repurchase shares except for limited circumstances.

In the event we require additional liquidity, our ability to obtain it may be limited by the Credit Agreement.

Credit Facility

On June 22, 2021 Altisource S.à r.l, a subsidiary of Altisource Portfolio Solutions S.A., entered into a revolving credit facility with a related party, STS.

STS is an investment fund managed by Deer Park Road Management Company, LP.

Deer Park Road Management Company, LP owns approximately 24% of Altisource’s common stock as of December 31, 2021 and its Chief Investment Officer and managing partner is a member of Altisource’s Board of Directors.

Under the terms of the Credit Facility, 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 Credit Facility provides Altisource the ability to borrow a maximum amount of $20.0 million through June 22, 2022, $15.0 million through June 22, 2023, and $10.0 million until the end of the term.

On June 22, 2021 Altisource S.à r.l, a subsidiary of Altisource Portfolio Solutions S.A., entered into a revolving credit facility with a related party, STS Master Fund, Ltd.

(“STS”) (the “Revolver”).

STS is an investment fund managed by Deer Park.

Deer Park owns approximately 24% of Altisource’s common stock as of December 31, 2022 and owns Altisource debt as a lender pursuant to our senior secured term loan agreement, as amended and restated with an effective date of February 14, 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.

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.

Outstanding amounts borrowed pursuant to the Credit Facility will amortize over the three-year term as follows:

on June 22, 2022, the difference between the then outstanding balance above $15.0 million and $15.0 million, will be due and payable by Altisource;

on June 22, 2023, the difference between the then outstanding balance above $10.0 million and $10.0 million, will be due and payable by Altisource;

and on June 22, 2024, the then outstanding balance of the loan will be due and payable by Altisource.

Borrowings under the Credit Facility bear interest of 9.00% per annum and are payable quarterly on the last business day of each March, June, September and December, commencing on September 30, 2021.

In connection with the Credit Facility, Altisource is required to pay customary fees, including an upfront fee equal to $0.5 million at the initial extension of credit pursuant to the facility, an unused line fee of 0.5% and, an early termination fee in the event of a refinancing transaction.

Altisource’s obligations under the Credit Facility are secured by a lien on all equity in Altisource’s subsidiary incorporated in India, Altisource Business Solutions Private Limited, pursuant to a pledge agreement entered into by Altisource Asia Holdings Ltd I, a wholly owned subsidiary Altisource.

The Credit Facility 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 Credit Facility 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 Facility within three business days of becoming due, (ii) failure to perform or observe any material provisions of the Credit Documents to be performed or complied with, (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 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 Credit Facility or waived, all loans and other obligations could become due and immediately payable and the facility could be terminated.

As of December 31, 2021, there was no outstanding debt under the Credit Facility.

The maturity date of the Amended Revolver coincides with the maturity date of the Term B Loans 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.

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 first-priority lien on substantially all of the assets of the Company, which lien will be pari passu with liens securing the Term B Loans 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.

As of December 31, 2022, there was no outstanding debt under the Revolver.

The following table presents our cash flows for the years ended December 31:

(in thousands) 2022 % Increase (decrease) 2021

Cash flows used in operating activities $ (60,405) (170) $ (22,401)

Cash flows provided by investing activities 102,762 118 47,224

Cash flows used in financing activities (2,304) 95 (49,310)

Net increase (decrease) in cash, cash equivalents and restricted cash 40,053 264 (24,487)

Net Cash used in operating activities $ (44,888) 26 $ (60,405)

Net Cash (used in) provided by investing activities (767) (101) 102,762

Net Cash used in financing activities (2,221) 4 (2,304)

Net (decrease) increase in cash, cash equivalents and restricted cash (47,876) (220) 40,053

Cash, cash equivalents and restricted cash at the beginning of the period 102,149 65 62,096

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Cash Flows from Operating Activities

Cash flows from operating activities generally consist of the cash effects of transactions and events that enter into the determination of net income.

For the year ended December 31, 2021, cash flows used in operating activities were $(60.4) million, or approximately $(0.35) for every dollar of service revenue, compared to cash flows used in operating activities of $(22.4) million, or approximately $(0.06) for every dollar of service revenue, for the year ended December 31, 2020.

During the year ended December 31, 2021, the increase in cash used in operating activities was primarily driven by a $10.6 million increase in net loss excluding the gain on sale of business and a $26.3 million decrease in non-cash depreciation, amortization of intangibles, stock based compensation and deferred income tax expenses.

The increase in net loss excluding the gain on sale of business was primarily due to lower gross profit during the year ended December 31, 2021 from lower service revenue driven by the COVID-19 pandemic and the loss of certain services relating to one of Ocwen’s subservicing customers, partially offset by decreases in expenses as a result of COVID-19 cash cost savings measures, the Project Catalyst cost reduction initiatives and lower SG&A expenses.

Cash flows from operating activities generally consist of the cash effects of transactions and events that enter into the determination of net (loss) income.

For the year ended December 31, 2022, net cash used in operating activities was $(44.9) million, compared to net cash used in operating activities of $(60.4) million for the year ended December 31, 2021.

During the year ended December 31, 2022, the increase in cash used in operating activities was driven by a $24.3 million decrease in net loss excluding the gain (loss) on sale of business partially offset by a $1.5 million decrease in non-cash depreciation, amortization of intangibles, stock based compensation expenses and deferred income tax expenses, and a $7.4 million increase in cash used for working capital.

The decrease in net loss excluding the gain on sale of business was primarily due to higher gross profit during the year ended December 31, 2022 from revenue mix with higher revenue from the higher margin businesses in Servicer and Real Estate, our cash cost savings measures, the sale of Pointillist and lower SG&A expenses, partially offset by lower gross profit in the Origination business from lower revenue.

The increase in cash used for changes in working capital was primarily driven by higher cash payments for annual incentive compensation bonuses in the first quarter of 2022 by $3.7

million ($0 accrued as of December 31, 2022) and a fourth quarter of 2022 prepayment of insurance premiums of $2.4 million (prior year was paid in the first quarter of 2022).

Operating cash flows can be negatively impacted because of the nature of some of our services and the mix of services provided.

Certain services are performed immediately following or shortly after the referral,

but the collection of the receivable does not occur until a specific event occurs (e.g., the foreclosure is complete, the REO asset is sold, etc.).

Certain services are performed immediately following or shortly after the referral, but the collection of the receivable does not occur until a specific event occurs (e.g., the foreclosure is complete, the REO asset is sold, etc.).

Furthermore, lower margin services generate lower income and cash flows from operations.

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Cash flows from investing activities generally include additions to premises and equipment, acquisitions and sales of businesses, and sales of equity securities.

Cash flows provided by investing activities were $102.8 million and $47.2 million for the years ended December 31, 2021 and 2020, respectively.

The change in cash provided by investing activities was primarily driven by $104.1 million in proceeds from the sale of businesses for the year ended December 31, 2021, including $101.1 million from the sale of equity in Pointillist and $3.0 million in connection with the second installment from the August 2018 sale of the rental property management business to RESI, compared to $3.3 million in proceeds from the sale of the Financial Services Business for 2020.

We used $1.4 million and $2.7 million for the years ended December 31, 2021 and 2020, respectively, for additions to premises and equipment primarily related to investments in the development of certain software applications and facility improvements.

In addition, we sold 3.5 million shares of RESI stock for net proceeds of $46.6 million during the year ended December 31, 2020.

Net cash (used in) provided by investing activities was $(0.8) million and $102.8 million for the years ended December 31, 2022 and 2021, respectively.

In addition, we used $0.9 million for the year ended December 31, 2022 compared to $1.4 million in 2021, for additions to premises and equipment primarily related to investments in the development of certain software applications and facility improvements.

Cash Flows from Financing Activities

Cash flows from financing activities primarily included payments of tax withholdings on issuance of restricted share units and restricted shares, distributions to non-controlling interests, debt repayments and for the year ended December 31, 2021, included proceeds from issuance of debt and debt issuance costs.

Cash flows used in financing activities were $(2.3) million and $(49.3) million for the years ended December 31, 2021 and 2020, respectively.

During the years ended December 31, 2021 and 2020, we used $(20.0) million and $(46.6) million, respectively, for repayments of debt from proceeds from the sale of equity in Pointillist and from proceeds from the sale of RESI common shares as discussed in the cash flows from investing activities section above.

We distributed $(2.0) million and $(1.1) million, to non-controlling interests for the years ended December 31, 2021 and 2020, respectively.

In addition, we made payments of $(1.0) million and $(1.6) million for the years ended December 31, 2021 and 2020, respectively, to satisfy employee tax withholding obligations on the issuance of restricted shares.

These payments were made to tax authorities, at the employees’ direction, to satisfy the employees’ tax obligations rather than issuing a portion of vested restricted shares to employees.

During the year ended December 31, 2021, we received proceeds from the issuance of debt of $20.0 million and used $(0.5) million in debt issuance costs in connection with borrowings under the Credit Facility, and received proceeds from the Pointillist convertible notes payable to related parties of $1.2 million (no comparable amounts for the year ended December 31, 2020)

Short-term Liquidity Requirements after December 31, 2021

Our significant future short-term liquidity obligations primarily pertain to interest expense under the Credit Agreement (see Liquidity section above), lease payments and distributions to Lenders One members.

During the next 12 months, we expect to pay $12.4 million of interest expense (assuming no further principal repayments and the December 31, 2021 interest rate) under the Credit Agreement and make lease payments of $3.1 million.

We believe that our existing cash and cash equivalents balances and available borrowings under the Credit Facility, net of our anticipated cash flows used in operations, will be sufficient to meet our liquidity needs, including required interest and lease payments, for the next 12 months.

Long-term Liquidity Requirements after December 31, 2021

Our significant future long-term liquidity obligations primarily pertain to long-term debt repayments, interest expense under the Credit Agreement (see Liquidity section above) and operating lease payments on certain of our premises and equipment.

The outstanding balance of our Credit Agreement of $247.2 million is due on April 1, 2024.

During 2023 and 2024, we expect to pay $15.5 million of interest expense under the Credit Agreement (estimated future interest payments based on the interest rate as of December 31, 2021 and the April 1, 2024 maturity date).

During 2023 and 2024, we expect to make lease payments of $3.7 million.

During 2025 and 2026 we expect to make lease payments of $1.7 million.

For further information, see Note 13 and Note 24 to the consolidated financial statements.

We expect to fund long-term liquidity requirements with a combination of existing cash balances, cash generated by operating activities and proceeds from the refinancing of our Credit Agreement.

Cash flows from financing activities primarily included payments of tax withholdings on issuance of restricted share units and restricted shares, distributions to non-controlling interests, debt repayments and, for the year ended December 31, 2021, included proceeds from issuance of debt and debt issuance costs and the repayment of debt.

Net cash used in financing activities were $(2.2) million and $(2.3) million for the years ended December 31, 2022 and 2021, respectively.

During the years ended December 31, 2022 and 2021, we made payments of $(1.1) million and $(1.0) million, respectively, to satisfy employee tax withholding obligations on the issuance of restricted share units and restricted shares.

These payments were made to tax authorities, at the employees’ direction, to satisfy the employees’ tax obligations rather than issuing a portion of vested restricted share units and restricted shares to employees.

In addition, during the years ended December 31, 2022 and 2021, we distributed $(1.1) million and $(2.0) million, respectively, to non-controlling interests.

During the year ended December 31, 2021, we used $(20.0) million for repayments of debt from proceeds from the sale of equity in Pointillist and from proceeds from the sale of RESI common shares as discussed in the cash flows from investing activities section above.

During the year ended December 31, 2021, we received proceeds from the issuance of long-term debt of $20.0 million and paid $0.5 million in debt issuance costs in connection with borrowings under the Credit Facility (no comparable amount for the year ended December 31, 2022).

During the year ended December 31, 2021, we also received proceeds from the Pointillist convertible notes payable to related parties of $1.2 million (no comparable amount for the year ended December 31, 2022).

Future Uses of Cash

Our significant future liquidity obligations primarily pertain to the maturity of the Amended Credit Agreement, interest expense under the Amended Credit Agreement (see Liquidity section above), distributions to Lenders One members and operating lease payments on certain of our premises and equipment.

Significant future uses of cash include the following:

Payments Due by Period

(in thousands) Total 2023 2024-2025 2026-2027

Credit Agreement outstanding balance (1) (2)

$ 271,293 $ 20,000 $ 251,293 $ —

Interest expense payments (3)

54,997 22,899 32,099 —

Lease payments 6,415 2,657 3,122 636

Total $ 332,705 $ 45,556 $ 286,514 $ 636

______________________________________

(1) The outstanding balance of our Amended Credit Agreement of $247.2 million is due on April 30, 2025 and can be extended to April 30, 2026 if Aggregate Paydowns made prior to February 14, 2024 total $30 million or more.

The table herein reflects a maturity of April 2025 as the Company has not made Aggregate Paydowns of $30 million or more at the time of this filing.

The increase in outstanding balance is from the PIK component of our interest expense and is assumed to be paid in kind.

(2) In the first quarter of 2023, the Company made $20 million of payments toward the determination of Aggregate Paydowns.

Such amount is reflected in the 2023 column herein.

(3) Estimated future interest payments based on the SOFR interest rate as of February 14, 2023, the effective date of the Amended Credit Agreement, and the April 30, 2025 maturity date.

Based on the April 30, 2025 maturity date, no interest expense has been included beyond April 30, 2025.

We anticipate to fund future liquidity requirements with a combination of existing cash balances, cash anticipated to be generated by operating activities and, if needed, proceeds from the Amended Revolver.

For further information, see Note 12, Note 22 and Note 24 to the consolidated financial statements.

Off-Balance Sheet Arrangements

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Descriptions of our principal revenue generating activities are as follows:

Core Businesses

Field Services

Servicer and Real Estate

• For property preservation and inspection services and payment management technologies, we recognize transactional revenue when the service is provided.

• For vendor management transactions and our vendor management oversight SaaS platform, we recognize revenue over the period during which we perform the services.

• For reimbursable expenses related to our property preservation and inspection services, we recognize revenue when the service is provided and recognize an equal amount in cost of revenue.

These amounts are recognized on a gross basis, principally because generally we have control over selection of vendors and the vendor relationships are with us, rather than with our customers.

• For the real estate auction platform, real estate auction and real estate brokerage services, we recognize revenue on a net basis (i.e., the commission we retain on the sale) as we perform services as an agent without assuming the risks and rewards of ownership of the asset and the commission earned on the sale is a fixed percentage or amount.

• For SaaS based technology to manage REO, short sales, foreclosure, bankruptcy and eviction processes, we recognize revenue over the estimated average number of months the REO are on the platform.

We generally recognize revenue for professional services over the contract period.

• For reimbursable expenses revenue related to our real estate sales is included in revenue with an equal amount recognized in cost of revenue.

These amounts are recognized on a gross basis, principally because generally we have control over selection of vendors and the vendor relationships are with us, rather than with our customers.

Mortgage and Real Estate Solutions

• For the majority of the services we provide, we recognize transactional revenue when the service is provided.

• For title insurance services on real estate closings, we recognize revenue on a gross basis as we assume the responsibilities of the searches conducted and we are the primary obligor in the arrangement.

Underwriting fees related to the issuance of the title policy are recognized separately as outside fees and services.

• For loan disbursement processing services, we recognize revenue over the period during which we perform the processing services with full recognition upon completion of the disbursements.

• For vendor management transactions, we recognize revenue over the period during which we perform the services.

• For loan disbursement review services, we recognize revenue over the period during which we perform the processing services with full recognition upon completion of the disbursements.

• For foreclosure trustee services, we recognize revenue over the period during which we perform the related services, with full recognition upon completion and/or recording the related foreclosure deed.

We use judgment to determine the period over which we recognize revenue for certain of these services.

• For reimbursable expenses related to our title and foreclosure trustee services businesses, we recognize revenue when the service is provided and recognize an equal amount in cost of revenue.

• For the real estate auction platform, real estate auction and real estate brokerage services, we recognize revenue on a net basis (i.e., the commission on the sale) as we perform services as an agent without assuming the risks and rewards of ownership of the asset and the commission earned on the sale is a fixed percentage or amount.

• For SaaS based technology to manage REO, we recognize revenue over the estimated average number of months the REO are on the platform or ratably over the contract period.

We generally recognize revenue for professional services as services are provided.

• For loan servicing technologies, we recognize revenue based on the number of loans on the system.

We generally recognized revenue from professional services over the contract period.

• Reimbursable expenses revenue related to property preservation and inspection services, real estate sales, title services and foreclosure trustee services is included in revenue with an equal amount recognized in cost of revenue.

These amounts are recognized on a gross basis, principally because generally we have control over selection of vendors and the vendor relationships are with us, rather than with our customers.

Other Businesses

Earlier Stage Business

• For the majority of the services we provide, we recognize transactional revenue when the service is provided.

We recognize membership fees from Lender One members ratably over the term of membership.

• For vendor management oversight SaaS, we recognize revenue over the period during which we perform the services.

Corporate and Others

• For our customer journey analytics platform (sold on December 1, 2021), we recognized revenue primarily based on subscription fees.

We recognized revenue associated with implementation services and maintenance services ratably over the contract term.

• For loan servicing technologies, we recognized revenue based on the number of loans on the system.

We generally recognized revenue from professional services over the contract period.

Goodwill and Identifiable Intangible Assets

18 unchanged sentences

We recognize deferred income tax assets and liabilities for these differences between the financial reporting basis and the tax basis of our assets and liabilities as well as expected benefits of utilizing net operating loss and credit carryforwards.

The most significant temporary differences relate to accrued compensation, amortization, loss carryforwards and valuation allowances.

The most significant temporary differences relate to accrued compensation, amortization, loss

carryforwards and valuation allowances.

We measure deferred income tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we anticipate recovery or settlement of those temporary differences.

12 unchanged sentences

For the years ended December 31, 2022 and 2021, we recognized revenue from Ocwen of $63.5 million and $55.6 million, respectively.

Revenue from Ocwen as a percentage of consolidated revenue was 31% and 54% for the years ended December 31, 2021 and 2020, respectively.

We earn additional revenue related to the portfolios serviced and subserviced by Ocwen when a party other than Ocwen or the MSR owner selects Altisource as the service provider.

For the years ended December 31, 2021 and 2020, we recognized $9.5 million and $23.8 million, respectively, of such revenue.

Revenue from Ocwen as a percentage of segment and consolidated revenue was as follows:

Servicer and Real Estate 53 % 49 %

Origination — % — %

Corporate and Others — % — %

Consolidated revenue 41 % 31 %

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 both the years ended December 31, 2022 and 2021, we recognized $9.5 million, of such revenue.

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 and the designated service provider, Altisource believes that Ocwen received these directions from 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 anticipate that the transition of such default valuations and title services will continue during the course of 2022.

To address the reduction in revenue, Altisource undertook several measures to further reduce its cost structure, strengthen its operations and generate cash.

expanded to include, among other things, the opportunity for the Company to provide first and second chance foreclosure auctions on Government Loans, and title services on FHA and Veterans Affairs loans, subject to a process to confirm Altisource’s ability to meet reasonable performance requirements, which process is continuing.

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 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.

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.

Ocwen has disclosed that NRZ is its largest client.

As of December 31, 2021, approximately 21% of loans serviced and subserviced by Ocwen (measured in 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 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 Brokerage Agreement with NRZ which extends through August 2025.

Under this agreement and related amendments, Altisource remains the exclusive provider of brokerage services for REO associated with the Subject MSRs, irrespective of the subservicer, subject to certain limitations.

NRZ’s brokerage subsidiary receives a cooperative brokerage commission on the sale of REO properties from these portfolios subject to certain exceptions.

The Brokerage Agreement 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 years ended December 31, 2021 and 2020, we recognized revenue from NRZ of $3.1 million and $8.6 million, respectively, under the Brokerage Agreement.

For the years ended December 31, 2021 and 2020, we recognized additional revenue of $13.6 million and $35.1 million, respectively, relating to the Subject MSRs when a party other than NRZ selects Altisource as the service provider.

Ocwen has disclosed that Rithm is its largest client.

As of December 31, 2022, approximately 17% of loans serviced and subserviced by Ocwen (measured in UPB) were related to Rithm MSRs or rights to MSRs.

Rithm purchases brokerage services for 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 years ended December 31, 2022 and 2021, we recognized revenue from Rithm of $3.2 million and $3.1 million, respectively, under the Brokerage Agreement.

For the years ended December 31, 2022 and 2021, we recognized additional revenue of $13.0 million and $13.6 million, respectively, relating to the Subject MSRs when a party other than Rithm selects Altisource as the service provider.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis