What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-30 compared with 2022-03-03 · 388 added, 357 removed, 785 unchanged (49% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm (PCAOB ID 199 )

Report of Independent Registered Public Accounting Firm (PCAOB ID 49 )

Report of Independent Registered Public Accounting Firm (PCAOB ID 199 )

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2021 and 2020

Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended December 31, 2022 and 2021

Consolidated Statements of Equity for the years ended December 31, 2022 and 2021

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Altisource Portfolio Solutions S.A.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Altisource Portfolio Solutions S.A.

and subsidiaries (the Company) as of December 31, 2022, the related consolidated statements of operations and comprehensive (loss) income, equity, and cash flows for the year then ended, and the related notes (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Emphasis of a Matter

As discussed in Notes 3, 14, and 22 to the financial statements, the Company has a concentration of revenue associated with its largest customer, Ocwen Financial Corporation (together with its subsidiaries, Ocwen).

The Company has disclosed various uncertainties associated with Ocwen.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for Income Taxes

As described in Notes 2 and Note 20 to the financial statements, the Company is subject to income taxes in the United States and a number of foreign jurisdictions.

Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities.

Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties.

The Company recorded $5.0 million of net deferred tax assets, $9.0 million of net deferred tax liabilities, and $16.7 million of total unrecognized tax benefits, including interest and penalties, as of December 31, 2022.

The Company also recorded a $5.3 million income tax provision for the year ending December 31, 2022.

We identified the accounting for income taxes as a critical audit matter because of the specialized expertise and high degree of auditor judgment required in auditing the income tax provision due to the Company’s presence in foreign jurisdictions, transfer pricing determinations, and evaluating the reasonableness of uncertain tax positions.

Our audit procedures related to the Company’s accounting for income taxes included the following, among others:

• We tested components of the income tax provision for significant jurisdictions, including evaluating permanent and temporary differences between book and tax reporting balances, and tested the application of statutory tax rates;

• With the assistance of our tax professionals, including international tax professionals, we:

◦ Evaluated the reasonableness of management's estimates by considering the application of foreign tax jurisdiction laws and regulations;

◦ Evaluated the transfer pricing analyses provided by the Company and tested certain transfer pricing computations;

◦ Evaluated the completeness of uncertain tax positions and the reasonableness of the outcomes and measurements.

/s/ RSM US LLP

We have served as the Company’s auditor since 2022.

Jacksonville, Florida

March 30, 2023

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Altisource Portfolio Solutions S.A.

and subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive income (loss), equity, and cash flows for the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America (“U.S.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March March 3, 2022 expressed an unqualified opinion

We have audited the accompanying consolidated balance sheet of Altisource Portfolio Solutions S.A.

and subsidiaries (the “Company”) as of December 31, 2021, and the related consolidated statements of operations and comprehensive income (loss), equity, and cash flows for the year in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements, present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America (“U.S.

Emphasis of Concentration of Revenue and Uncertainties

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Ocwen purchases certain mortgage services from the Company under the terms of services agreements with terms extending through August 2030.

Ocwen has disclosed that New Residential Investment Corp.

(“NRZ”) is its largest client.

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 mortgage servicing rights (“MSRs”) and under which Ocwen will subservice mortgage loans underlying these MSRs for an initial term of five years, subject to early termination rights.

Ocwen has disclosed that Rithm Capital Corp.

(“Rithm”, formerly New Residential Investment Corp., or “NRZ” is its largest client.

In July 2017 and January 2018, Ocwen and Rithm 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 Rithm of Ocwen’s legal title to certain mortgage servicing rights (“MSRs”) and under which Ocwen will subservice mortgage loans underlying these MSRs for an initial term of five years, subject to early termination rights.

As discussed in Note 22 to the financial statements, NRZ can terminate its sub-servicing agreement with Ocwen in exchange for the payment of a termination fee.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for Income Taxes

As described further in Note 2 and Note 21 to the financial statements, the Company is subject to income taxes in Luxembourg, as well as the United States and a number of other foreign jurisdictions.

The application of tax laws to the Company’s operations can be complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities.

Significant judgment is required in the application of tax laws to each of the different jurisdictions to determine the consolidated income tax expense.

The application of different tax laws also requires judgment in evaluating tax positions, uncertainties under ASC Topic 740, Income Taxes , and complexities in determining the recoverability of deferred tax assets in both domestic and foreign jurisdictions.

We identified the evaluation of the accounting for income taxes as a critical audit matter.

The principal considerations for our determination that auditing income taxes is a critical audit matter included:

(i) the specialized expertise and experience necessary in evaluating the completeness and accuracy of the foreign tax provisions primarily due to the Company’s presence in numerous foreign jurisdictions with varying complexity in tax laws and regulations;

(ii) the subjective auditor judgment involved in evaluating the transfer pricing methodology and existence of uncertain tax positions;

(iii) the complex auditor judgment involved in evaluating the valuation of the Company’s identified uncertain tax positions;

and (iv) the complex auditor judgment involved in evaluating the various forms of available positive and negative evidence regarding the recoverability of deferred tax assets, specifically due to the Company’s multinational presence.

The primary procedures we performed to address this critical audit matter included:

• Testing the design and operating effectiveness of certain internal controls over the Company’s income tax reporting process, including controls related to the identification and application of tax laws in different jurisdictions, the recoverability of deferred tax assets, and the identification and evaluation of significant assumptions used in determining the assessment of uncertain tax positions in foreign locations;

• Obtaining an understanding of the Company’s overall legal entity structure by reading and evaluating the Company’s organizational charts and associated documentation, including legal documents;

• Testing the income tax provision in each significant taxable jurisdiction, including performing procedures designed to test the completeness and accuracy of the statutory rates used and permanent and temporary differences identified by obtaining an understanding of the tax laws applicable in the respective jurisdiction and evaluating communications with tax advisors and governmental taxing authorities, accounting records, tax returns, and other evidential documentation, including assessing the completeness and accuracy of the underlying data used by the Company in its calculations;

• Evaluating and testing the appropriateness of the methods and assumptions used in developing the Company’s estimate of the recoverability of its deferred tax assets and the identification and assessment of the valuation of uncertain tax positions in each of its taxable jurisdictions, including the determination of whether the methods were consistent with the requirements of U.S.

GAAP, whether the data was appropriately used, and whether the significant assumptions were reasonable and appropriately applied within the methods.

In addition, we involved domestic and international tax professionals with specialized skills and knowledge who assisted in (1) obtaining an understanding of the tax laws in each respective jurisdiction;

(2) assessing tax positions and transfer pricing studies;

and (3) evaluating the Company’s interpretation of tax law and its assessment and measurement of certain tax uncertainties and expected outcomes by interpreting tax laws and evaluating and reading advice obtained from the Company’s external specialists as well as correspondence with governmental taxing authorities.

Disposal of Business - Fair Value of the Single Reporting Unit

As described in Note 4 to the financial statements, the Company and other shareholders of Pointillist, Inc.

(“Pointillist”) entered into a definitive Stock Purchase Agreement to sell all of the equity interests in Pointillist to Genesys Cloud Services, Inc.

(the “Transaction”).

The Company received approximately $106.0 million from the sale.

During 2021, as a result of this Transaction, the Company performed a relative fair value analysis, resulting in the allocation of approximately $17.9 million of goodwill attributable to the operations of Pointillist used to determine the gain on disposal.

We identified the auditing of the reporting unit operations retained in performing the relative fair value analysis used to determine the goodwill associated with the sale of Pointillist as a critical audit matter.

The principal consideration for this determination was the degree of auditor judgment necessary in evaluating the significant assumptions used by the Company in developing the estimate of the fair value of the Company’s remaining single reporting unit using the discounted cash flow and guideline public company approach.

The primary procedures we performed to address this critical audit matter included:

• Obtaining an understanding of management’s process for developing the estimated fair value of the Company’s operations after the Transaction.

• Testing the effectiveness of certain internal controls over the Company’s process for estimating the fair value, including controls related to the identification of the appropriate valuation models and determination of significant assumptions used in determining the fair value estimate under the income and market approach.

• Evaluating the appropriateness of the valuation methods used in developing the fair value estimate using the discounted cash flow and guideline public company approaches, including the determination of whether the methods were consistent with best practices for estimating fair value in financial reporting and requirements of U.S.

GAAP, whether the inputs and assumptions were appropriately used, the significant inputs and assumptions were appropriately applied within each method, and evaluating the weighting of each method in determining the overall conclusion of fair value.

• Testing the data used in developing the fair value estimate under the discounted cash flow and guideline public company approach, including procedures to determine whether the data was complete and accurate, sufficiently precise, and whether the changes in the sources of data from the prior year were reasonable.

• Identifying and evaluating the significant assumptions used in developing the fair value of the reporting unit retained under the discounted cash flow and guideline public company approach, including evaluating whether:

◦ The projected future cash flows, including the long term revenue growth rates and gross margin assumptions, used by management were reasonable considering current and past performance, consistency with the external market and industry data, and consistency with evidence obtained from procedures performed in other areas of the audit;

◦ The discount rate was reasonable by comparing it to a weighted average cost of capital that was independently developed using publicly available market data for comparable entities and discount rates used in previous impairment analyses;

◦ Relevant market multiples of comparable publicly-traded companies with similar characteristics were selected by management.

In addition, the audit effort involved the use of valuation professionals with specialized skill and knowledge to assist in the evaluation of the Company’s valuation models and the application of the methods and assumptions used in developing the discounted cash flow and guideline public company approach, including the discount rate and applicable market multiples.

/s/ Mayer Hoffman McCann P.C.

We have served as the Company’s auditor since 2016.

March 3, 2022

Petersburg, Florida

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of Altisource Portfolio Solutions S.A.:

Opinion on Internal Control Over Financial Reporting

We have audited Altisource Portfolio Solutions S.A.

and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in 2 013 Internal Control - Integrated Framework issued by the COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets and related consolidated statements of operations and comprehensive income (loss), consolidated statement of equity and consolidated statement of cash flows as of December 31, 2021 and 2020 and for the two years in the period ended December 31, 2021 of the Company, and our report dated March 3, 2022, expressed an unqualified opinion on those consolidated financial statements and included an emphasis of matter paragraph regarding concentration of revenue and uncertainties

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Mayer Hoffman McCann P.C.

March 3, 2022

We have served as the Company’s auditor from 2016 through 2022.

March 3, 2022, except for Note 23, as to which the date is December 12, 2022

Petersburg, Florida

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Total assets $ 195,005 $ 257,808

LIABILITIES AND EQUITY (DEFICIT)

LIABILITIES AND DEFICIT

Current liabilities:

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Operations and Comprehensive (Loss) Income

(in thousands, except per share data)

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Selling, general and administrative expenses 54,755 67,049

Gain on sale of businesses ( 88,930 ) —

Restructuring charges — 11,972

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

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

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

Other income (expense), net:

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

Unrealized gain on investment in equity securities — 4,004

Other income, net 2,254 864

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

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

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

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

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

Net (loss) income ( 52,833 ) 12,053

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

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

Earnings (loss) per share:

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

(Loss) earnings per share:

Basic $ ( 3.32 ) $ 0.75

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Diluted 16,070 16,063

Comprehensive income (loss):

Comprehensive income (loss), net of tax 12,053 ( 66,315 )

Comprehensive (loss) income:

Comprehensive (loss) income, net of tax ( 52,833 ) 12,053

Comprehensive income attributable to non-controlling interests ( 585 ) ( 241 )

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

Comprehensive (loss) income attributable to Altisource $ ( 53,418 ) $ 11,812

See accompanying notes to consolidated financial statements .

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Balance, January 1, 2021 25,413 $ 25,413 $ 141,473 $ 190,383 $ ( 441,034 ) $ 1,209 $ ( 82,556 )

Net loss — — — ( 67,156 ) — 841 ( 66,315 )

Distributions to non-controlling interest holders

Net income — — — 11,812 — 241 12,053

Non-controlling interests eliminated on deconsolidation (Note 2)

— — — — — 1,781 1,781

Distributions to non-controlling interest holders — — — — — ( 1,959 ) ( 1,959 )

Share-based compensation expense — — 2,825 — — — 2,825

Issuance of restricted share units and restricted shares — — — ( 11,092 ) 11,092 — —

Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances and stock option exercises — — — ( 4,939 ) 3,352 — ( 1,587 )

Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances — — — ( 4,511 ) 3,497 — ( 1,014 )

Balance, December 31, 2021 25,413 25,413 144,298 186,592 ( 426,445 ) 1,272 ( 68,870 )

Net income — — — 11,812 — 241 12,053

Non-controlling interests eliminated on deconsolidation (Note 2) — — — — — 1,781 1,781

Net loss — — — ( 53,418 ) — 585 ( 52,833 )

Distributions to non-controlling interest holders — — — — — ( 1,082 ) ( 1,082 )

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Issuance of restricted share units and restricted shares — — — ( 9,747 ) 9,747 — —

Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances and stock option exercises — — — ( 4,511 ) 3,497 — ( 1,014 )

Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances — — — ( 4,479 ) 3,340 — ( 1,139 )

Balance, December 31, 2022 25,413 $ 25,413 $ 149,348 $ 118,948 $ ( 413,358 ) $ 775 $ ( 118,874 )

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Cash flows from operating activities:

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

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Net (loss) income $ ( 52,833 ) $ 12,053

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Depreciation and amortization 3,440 4,592

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Amortization of intangible assets 5,129 9,467

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

Share-based compensation expense 5,050 2,825

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Loss on disposal of fixed assets 10 47

Gain on sale of businesses ( 88,930 ) —

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

Other non-cash items — 137

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Additions to premises and equipment ( 863 ) ( 1,379 )

Proceeds received from sale of equity securities — 46,622

Proceeds from the sale of businesses 346 104,141

Net cash provided by investing activities 102,762 47,224

Other investing activities ( 250 ) —

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

Cash flows from financing activities:

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Net cash used in financing activities ( 2,221 ) ( 2,304 )

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

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

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

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Non-cash investing and financing activities:

Net (decrease) increase in payables for purchases of premises and equipment $ ( 116 ) $ 139

Net decrease in payables for purchases of premises and equipment $ ( 64 ) $ ( 116 )

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets and the consolidated statements of cash flows as of December 31:

Cash and cash equivalents $ 51,025 $ 98,132

Restricted cash 3,248 4,017

Total cash, cash equivalents and restricted cash reported in the statements of cash flow $ 54,273 $ 102,149

See accompanying notes to consolidated financial statements.

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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).

NOTE 2 — BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Non-United States dollar transactions and balances have been measured in United States dollars in accordance with ASC Topic 830, Foreign Currency Matters .

All transaction gains and losses from the measurement of monetary balance sheet items denominated in non-United States dollar currencies are reflected in the consolidated statements of operations and comprehensive income (loss) as income or expenses, as appropriate.

All transaction gains and losses from the measurement of monetary balance sheet items denominated in non-United States dollar currencies are reflected in the consolidated statements of operations and comprehensive (loss) income as income or expenses, as appropriate.

Defined Contribution 401(k) Plan

Some of our employees currently participate in a defined contribution 401(k) plan under which we may make matching contributions equal to a discretionary percentage determined by us.

Some of our employees participate in a defined contribution 401(k) plan under which we may make matching contributions equal to a discretionary percentage determined by us.

We recorded expenses of $ 0.2 million and $ 0.5 million for the years ended December 31, 2022 and 2021, respectively, related to our discretionary contributions.

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are recognized, we record either a contract asset (unbilled accounts receivable) or a contract liability (deferred revenue or other current liabilities), as appropriate.

Descriptions of our principal revenue generating activities are as follows:

Core Businesses

Field Services

• 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 software-as-a-service (“SaaS”) platform, we recognize revenue over the period during which we perform the services.

• Reimbursable expenses revenue related to our property preservation and inspection 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.

• 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 real estate owned (“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.

• 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 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 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.

• Reimbursable expenses revenue related to our title and foreclosure trustee services businesses 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 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.

See Note 23 for descriptions of our principal revenue generating activities.

Share-Based Compensation

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The Company has made an accounting policy election to account for forfeitures in compensation expense as they occur.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

We record income taxes in accordance with ASC Topic 740, Income Taxes (“ASC Topic 740”).

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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, interest expense, 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.

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Diluted net income per share reflects the assumed conversion of all dilutive securities using the treasury stock method.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

This standard is part of the FASB’s initiative to reduce complexity in accounting standards by instituting several simplifying provisions and removing several exceptions pertaining to income tax accounting.

This standard is effective for annual periods beginning after December 15, 2020, including interim periods within that reporting period.

The Company adopted this standard effective January 1, 2021 and has applied it prospectively.

Adoption of this new standard did not have any impact on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU No.

2020-06, Debt - Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Topic 815).

This standard simplifies the accounting for certain financial instruments with characteristics of liability and equity, particularly convertible debt instruments.

This standard is effective for annual periods beginning after December 15, 2021, including interim periods within that reporting period.

Early adoption is permitted for annual periods beginning after December 15, 2020.

The Company early adopted this standard effective January 1, 2021 and has applied it prospectively.

Adoption of this new standard did not have a material impact on the Company’s consolidated financial statements.

Future Adoption of New Accounting Pronouncements

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform on Financial Reporting and in January 2021, the FASB issued ASU No.

2021-01, Reference Rate Reform (Topic 848):

This standard applies only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

This standard provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting, in response to concerns about structural risks of interbank offered rates, and, particularly, the risk of cessation of LIBOR.

This standard is effective from the period from March 12, 2020 through December 31, 2022.

An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued.

Once elected for a topic or an industry subtopic, the standard must be applied prospectively for all eligible contract modifications for that topic or industry subtopic.

The Company is currently evaluating the impact this guidance may have on its consolidated financial statements.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 3 — CUSTOMER CONCENTRATION

Ocwen Financial Corporation (together with its subsidiaries, “Ocwen”) is a residential mortgage loan servicer of mortgage servicing rights (“MSRs”) it owns, including those MSRs in which others have an economic interest, and a subservicer of MSRs owned by others.

During the year ended December 31, 2022, Ocwen was our largest customer, accounting for 41 % of our total revenue.

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Revenue from Ocwen as a percentage of consolidated revenue was 41 % and 31 % for the years ended December 31, 2022 and 2021, 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.

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 New Residential Investment Corp.

(individually, together with one or more of its subsidiaries or one or more of its subsidiaries individually, “NRZ”).

We believe Ocwen commenced using another field services provider for these properties in July 2020 and continued to transition services during the third quarter of 2020.

We believe that the transition to the replacement field service provider was largely completed as of September 30, 2020.

We estimate that $ 0.5 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 (the “Agreement”) 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 Federal Housing Administration (“FHA”) loans and field services on Ocwen’s FHA, Veterans Affairs and United States Department of Agriculture loans (collectively, “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.

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.

As of December 31, 2020, accounts receivable from Ocwen totaled $ 5.9 million, $ 5.1 million of which was billed and $ 0.8 million of which was unbilled.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NRZ is a real estate investment trust that invests in and manages investments primarily related to residential real estate, including MSRs and excess MSRs.

Ocwen has disclosed that NRZ is its largest client.

As of December 31, 2021, approximately 21 % of loans serviced and subserviced by Ocwen (measured in unpaid principal balance (“UPB”) were related to NRZ MSRs or rights to MSRs.

In July 2017 and January 2018, Ocwen and NRZ entered into a series of agreements pursuant to which the parties agreed, among other things, to undertake certain actions to facilitate the transfer from Ocwen to NRZ of Ocwen’s legal title to certain of its MSRs (the “Subject MSRs”) and under which Ocwen will subservice mortgage loans underlying the MSRs for an initial term of five years , subject to early termination rights.

On August 28, 2017, Altisource, through its licensed subsidiaries, entered into a Cooperative Brokerage Agreement, as amended, and related letter agreement (collectively, the “Brokerage Agreement”) with NRZ which extends through August 2025.

Under this agreement and related amendments, Altisource remains the exclusive provider of brokerage services for 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.

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.

Rithm Capital Corp.

(individually, together with one or more of its subsidiaries or one or more of its subsidiaries individually, “Rithm”) (formerly New Residential Investment Corp., or “NRZ”) is a real estate investment trust that invests in and manages investments primarily related to residential real estate, including MSRs and excess MSRs.

Ocwen has disclosed that Rithm is its largest client.

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

Rithm purchases brokerage services for real estate owned (“REO”) exclusively from us, irrespective of the subservicer, subject to certain limitations, for certain MSRs set forth in and pursuant to the terms of a Cooperative Brokerage Agreement, as amended, and related letter agreement (collectively, the “Brokerage Agreement”) with terms extending through August 2025.

For the 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.

NOTE 4 — SALE OF BUSINESSES

Pointillist Business

On October 6, 2021 Altisource and other shareholders of Pointillist entered into a definitive Stock Purchase Agreement (as amended, the “SPA”) to sell all of the equity interests in Pointillist to Genesys Cloud Services, Inc.

On October 6, 2021 Altisource and other 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”) (the “Transaction”).

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After working capital and other applicable adjustments, Altisource received approximately $ 106.0 million from the sale of its Pointillist equity and the collection of outstanding receivables, with $ 102.2 million received at closing, approximately $ 0.3 million deposited into the Working Capital Escrow and approximately $ 3.5 million deposited into the Indemnification Escrow.

The present value of the amounts in escrow is included in other current assets in the accompanying consolidated balance sheets at a discounted value of $ 3.6 million as of December 31, 2021 (no comparative amount as of December 31, 2020).

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

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Financial Services Business

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

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

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.

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.

The present value of the amounts in escrow is included in other current assets in the accompanying consolidated balance sheets at a discounted value of $ 3.2 million and $ 3.6 million as of December 31, 2022 and 2021, respectively.

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.

Rental Property Management Business

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The first installment of $ 15.0 million was received in August 2018 and the second installment of $ 3.0 million was received in January 2021.

The present value of the second installment is included in other assets in the accompanying consolidated balance sheets at a discounted value of $ 2.5 million as of December 31, 2020 (no comparative amount as of December 31, 2021).

NOTE 5 — INVESTMENT IN EQUITY SECURITIES

During 2016, we purchased 4.1 million shares of RESI common stock.

This investment is reflected in the accompanying consolidated balance sheets at fair value and changes in fair value are included in other income (expense), net in the accompanying consolidated statements of operations and comprehensive income (loss).

As of December 31, 2021 and December 31, 2020, we held no shares of RESI common stock.

During the year ended December 31, 2020 we recognized an unrealized gain from the change in fair value of $ 4.0 million in the consolidated statements of operations and comprehensive income (loss) ( no comparative amount for the year ended December 31, 2021).

The unrealized gain for year ended December 31, 2020 included $ 4.1 million of net gains recognized on RESI shares sold during the period ( no comparative amount for the year ended December 31, 2021).

During the year ended December 31, 2020 we earned dividends of $ 0.5 million related to this investment ( no comparative amount for the year ended December 31, 2021).

During the year ended December 31, 2020, the Company sold all of its remaining 3.5 million shares 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.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 5 — ACCOUNTS RECEIVABLE, NET

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There can be no assurance that actual results will not differ from estimates or that consideration of these factors in the future will not result in an increase or decrease to our allowance for credit losses.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Changes in allowance for expected credit losses consist of the following:

(in thousands) Balance at Beginning of Period Charged to Expenses Deductions Note (1)

Changes in the allowance for expected credit losses consist of the following:

(in thousands) Balance at Beginning of Period Charged to Expenses Charged to Other Accounts Note (1)

Deductions Note (2)

Balance at End of Period

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______________________________________

(1) Primarily includes amounts previously written off which were credited directly to this account when recovered.

(2) Amounts written off as uncollectible or transferred to other accounts or utilized.

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Maintenance agreements, current portion 1,498 1,717

Surety bond collateral 4,000 2,000

Other current assets 5,850 6,879

Total $ 23,544 $ 21,864

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 7 — PREMISES AND EQUIPMENT, NET

8 unchanged sentences

Total $ 4,222 $ 6,873

Depreciation and amortization expense amounted to $ 4.6 million and $ 14.9 million for the years ended December 31, 2021 and 2020, respectively, and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets in the consolidated statements of operations and comprehensive income (loss).

Depreciation and amortization expense amounted to $ 3.4 million and $ 4.6 million for the years ended December 31, 2022 and 2021, respectively, and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets in the consolidated statements of operations and comprehensive (loss) income.

Premises and equipment, net consist of the following by country as of December 31:

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Total $ 4,222 $ 6,873

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 8 — RIGHT-OF-USE ASSETS UNDER OPERATING LEASES, NET

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Total $ 5,321 $ 7,594

Amortization of operating leases was $ 7.9 million and $ 10.2 million for the years ended December 31, 2021 and 2020, respectively, and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets in the consolidated statements of operations and comprehensive income (loss).

Amortization of operating leases was $ 2.7 million and $ 7.9 million for the years ended December 31, 2022 and 2021, respectively, and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets in the consolidated statements of operations and comprehensive (loss) income.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 9 — GOODWILL AND INTANGIBLE ASSETS, NET

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(in thousands) Total

Balance as of January 1, 2020 and December 31, 2020 $ 73,849

Balance as of January 1, 2021 $ 73,849

Write-off (1)

Balance as of December 31, 2021

Balance as of December 31, 2021 and 2022

______________________________________

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Pointillist was determined to be a business within the Company’s existing reporting unit.

We determined that each reportable segment represents a reporting unit.

Goodwill was allocated to each reporting unit based on the relative fair value of each of our reporting units.

Intangible Assets, net

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Trademarks and trade names 16 9,709 9,709 ( 7,088 ) ( 6,709 ) 2,621 3,000

Non-compete agreements — — 1,230 — ( 1,230 ) — —

Other intangible assets — — 1,800 — ( 1,800 ) — —

Total $ 259,016 $ 259,016 $ ( 227,286 ) $ ( 222,157 ) $ 31,730 $ 36,859

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Forecasted annual definite lived intangible asset amortization expense for 2023 through 2027 is $ 5.1 million, $ 5.1 million, $ 5.1 million, $ 4.9 million and $ 4.7 million, respectively.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 10 — OTHER ASSETS

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Total $ 5,166 $ 6,132

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 11 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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Altisource Portfolio Solutions S.A.

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

entered into a credit agreement (the “Credit Agreement”) in April 2018 with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and certain lenders.

and its wholly-owned subsidiary, Altisource S.à r.l., entered into a credit agreement (the “Credit Agreement”) in April 2018 with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and certain lenders.

Under the Credit Agreement, Altisource borrowed $ 412.0 million in the form of Term B Loans and obtained a $ 15.0 million revolving credit facility.

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and certain subsidiaries are guarantors of the Term B Loans (collectively, the “Guarantors”).

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

There are no mandatory repayments of the Term B Loans except as set forth below until the April 2024 maturity when the balance is due.

During 2020, the Company sold 3.5 million RESI shares for net proceeds of $ 46.6 million, and used the net proceeds to repay a portion of the senior secured term loan (see Note 5).

This repayment was applied to contractual amortization payments in the direct order of maturity.

All amounts outstanding under the Term B Loans will become due on the earlier of (i) April 3, 2024, and (ii) the date on which 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).

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

3.50 to 1.00).

Our leverage ratio exceeded 3.50 to 1.00 during the year ended December 31, 2022.

However, because the Company did not generate any Consolidated Excess Cash Flow in 2022, no amounts were due under this provision.

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.

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Interest expense on the senior secured term loans, including amortization of debt issuance costs and the net debt discount, totaled $ 16.4 million and $ 13.9 million for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, maturities of our long-term debt are as follows:

(in thousands) Maturities

Altisource entered into an amendment to the Credit Agreement effective February 14, 2023.

See Note 24, Subsequent Events.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Maturities of our long-term debt are as follows:

(in thousands) Maturities

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 Master Fund, Ltd.

(“STS”) (the “Credit Facility”).

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.

(“STS”) (the “Revolver”).

STS is an investment fund managed by Deer Park Road Management Company, LP (“Deer Park”).

Deer Park owns approximately 24 % of Altisource’s common stock as of December 31, 2022.

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.

Under the terms of the 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 Revolver 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.

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:

Outstanding amounts borrowed pursuant to the Revolver 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, on June 22, 2023, the difference between the then outstanding balance above $ 10.0 million and $ 10.0 million, 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 at 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.

Debt issuance costs were $ 0.4 million, net of $ 0.1 million of accumulated amortization.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Borrowings under the Revolver bear interest at 9.00 % per annum and are payable quarterly on the last business day of each March, June, September and December.

In connection with the Revolver, 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 Revolver 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 Altisource subsidiary.

The Revolver contains additional representations, warranties, covenants, terms and conditions customary for transactions of this type, that restrict or limit, among other things, our ability to use the proceeds of credit only for general corporate purposes.

The Revolver contains certain events of default including (i) failure to pay principal when due or interest or any other amount owing on any other obligation under the Revolver within three business days of becoming due, (ii) failure to perform or observe any material provisions of the Revolver 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 Revolver or waived, all loans and other obligations could become due and immediately payable and the facility could be terminated.

As of December 31, 2022 and 2021, there was no outstanding debt under the Revolver.

As of December 31, 2022, debt issuance costs were $ 0.3 million, net of $ 0.3 million of accumulated amortization.

As of December 31, 2021, debt issuance costs were $ 0.4 million, net of $ 0.1 million of accumulated amortization.

Altisource entered into an amendment to the Revolver effective February 14, 2023.

See Note 24, Subsequent Events.

NOTE 13 — OTHER NON-CURRENT LIABILITIES

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Total $ 19,536 $ 19,266

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 14 — FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

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Short-term receivable 3,223 — — 3,223 3,643 — — 3,643

Long-term receivable — — — — 2,531 — — 2,531

Senior secured term loan 247,204 — 200,235 — 247,204 — 224,956 —

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Therefore, the quoted prices are considered Level 2 inputs.

In connection with the sale of Pointillist in December 1, 2021, Altisource is to receive $ 3.5 million on the first anniversary of the sale closing and $ 0.3 million following the confirmation of closing date working capital (See Note 4 for additional information).

In connection with the sale of Pointillist on December 1, 2021, $ 3.5 million was deposited into the Indemnification Escrow and $ 0.3 million was deposited into the Working Capital Escrow.

These amounts were recorded as short-term receivables.

Altisource received the Working Capital Escrow in May 2022.

The Indemnification Escrow funds have not yet been received.

(See Note 4 for additional information).

We measure short-term receivables without a stated interest rate based on the present value of the future payments.

In connection with the sale of the rental property management business in August 2018, Altisource was to receive $ 3.0 million on the earlier of a RESI change of control or on August 8, 2023.

On October 19, 2020, RESI announced that it had entered into a definitive merger agreement to sell RESI.

The merger closed on January 11, 2021 and the Company subsequently received the $ 3.0 million payment (See Note 4 for additional information).

We measure long-term receivables without a stated interest rate based on the present value of the future payments.

There were no transfers between different levels during the periods presented.

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The Company strives to mitigate its concentrations of credit risk with respect to accounts receivable by actively monitoring past due accounts and the economic status of larger customers, if known.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 15 — SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

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Expired and forfeited awards are available for reissuance.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

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 Credit 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.

Our Credit Agreement also limits the amount we can spend on share repurchases and may prevent repurchases in certain circumstances, including if our leverage ratio exceeds 3.50 to 1.00.

Our leverage ratio exceeded 3.50 to 1.00 during the year ended December 31, 2022.

Share-Based Compensation

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A total of 96 thousand market-based options were outstanding as of December 31, 2022.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Performance-Based Options.

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There were 461 thousand performance-based options outstanding as of December 31, 2022.

There were no stock options granted during 2021 and 2020.

The fair values of the service-based options and performance-based options are determined using the Black-Scholes option pricing model and the fair values of the market-based options were determined using a lattice (binomial) model.

The Company granted 120 thousand stock options (at a weighted average exercise price of $ 11.86 per share) for the year ended December 31, 2022 ( no comparative amount for the year ended December 31, 2021).

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

The fair values of the performance-based options are determined using the Black-Scholes option pricing model.

The following assumptions were used to determine the fair values as of the grant date for the year ended December 31,:

Black-Scholes

Risk-free interest rate (%) 1.62 - 4.20

Expected stock price volatility (%) 67.75 - 67.99

Expected dividend yield —

Expected option life (in years) 6

Fair value $ 7.27 - $ 7.63

We determined the expected option life of all service-based stock option grants using the simplified method, determined based on the graded vesting term plus the contractual term of the options, divided by two.

2 unchanged sentences

(in thousands, except per share data) 2022 2021

Weighted average grant date fair value of stock options granted per share $ 8.25 $ —

Intrinsic value of options exercised — —

Grant date fair value of stock options that vested $ 1,031 $ 1,203

3 unchanged sentences

Outstanding as of December 31, 2021 687,339 $ 27.99 4.57 $ —

Granted 120,000 11.86

Forfeited ( 62,062 ) 58.95

1 unchanged sentence

Exercisable as of December 31, 2022 542,290 25.44 4.17 —

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

The following table summarizes information about stock options outstanding and exercisable as of December 31, 2022:

16 unchanged sentences

______________________________________

687,339 525,707

______________________________________

(1) These options contain market-based and performance-based components as described above.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

The following table summarizes the market prices necessary in order for the market-based options to begin to vest:

6 unchanged sentences

$ 170.01 — $ 180.00

$ 180.01 — $ 190.00

Over $ 190.00

6 unchanged sentences

Service-Based Awards.

These awards generally vest over two to four year periods with vesting in equal annual installments.

These awards generally vest over two to four year periods.

A total of 391 thousand service-based awards were outstanding as of December 31, 2022.

12 unchanged sentences

These awards generally vest if certain specific financial measures are achieved and if certain specific market conditions are achieved.

If the performance criteria achieved is above certain financial performance levels and Altisource’s share performance is above certain established criteria, participants have the opportunity to vest in up to 300 % of the restricted share unit award for certain awards.

If the performance criteria achieved is above certain financial performance levels and Altisource’s share performance is above certain established criteria, participants have the

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

opportunity to vest in up to 300 % of the restricted share unit award for certain awards.

If the performance criteria or the market criteria is below certain thresholds, the award is canceled.

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These grants include 46 thousand performance-based awards that include both a performance condition and a market condition, and 46 thousand performance-based awards for the year ended December 31, 2022.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

The following table summarizes the activity related to our restricted shares and restricted share units:

27 unchanged sentences

Total $ 153,120 $ 178,453

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Disaggregation of Revenue

Disaggregation of total revenues by major source is as follows:

Disaggregation of total revenues by major source was as follows:

(in thousands) Revenue recognized when services are performed or assets are sold Revenue related to technology platforms and professional services Reimbursable expenses revenue Total revenue

1 unchanged sentence

For the year ended December 31, 2021 157,855 14,043 6,555 178,453

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Contract Balances

12 unchanged sentences

Total $ 131,305 $ 171,366

Transactions with Related Parties

In May 2022, John G.

Aldridge, Jr., the Managing Partner of Aldridge Pite LLP (“Aldridge Pite”), joined the Board of Directors of Altisource.

Aldridge Pite provides eviction and other real estate related services to the Company.

Between May 2022 and December 2022, the Company recognized $ 0.5 million of reimbursable expenses relating to services provided to Aldridge Pite.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 18 — SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

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Total $ 2,254 $ 864

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 20 — INCOME TAXES

The components of income before income taxes and non-controlling interests consist of the following for the years ended December 31:

The components of (loss) income before income taxes and non-controlling interests consist of the following for the years ended December 31:

(in thousands) 2022 2021

5 unchanged sentences

Total $ ( 47,567 ) $ 15,285

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

The income tax provision consists of the following for the years ended December 31:

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We measure deferred income tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

A summary of the tax effects of the temporary differences is as follows for the years ended December 31:

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Unrealized losses 10,112 10,397

Depreciation 144 61

Non-current deferred tax liabilities:

Intangible assets ( 9,082 ) ( 8,290 )

Depreciation 61 ( 441 )

Other non-U.S.

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A valuation allowance is provided when it is deemed more likely than not that some portion or all of a deferred tax asset will not be realized.

In determining whether a valuation allowance is needed requires an extensive analysis of positive and negative evidence regarding realization of the deferred tax assets and, inherent in that, an assessment of the likelihood of sufficient future taxable income.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

taxable income.

When there is a cumulative pretax loss for financial reporting for the current and two preceding years (i.e., a three year cumulative loss), this is a significant element of negative evidence that would be difficult to overcome on a more likely than not or any other basis.

Therefore, the Company’s valuation allowance was $ 389.1 million and $ 372.2 million for the year ending December 31, 2021 and 2020, respectively.

Prior to 2020, the Company did not recognize deferred taxes on cumulative earnings of subsidiaries other than Luxembourg and the Philippines because the Company intended for those earnings to be indefinitely reinvested.

In 2020, the Company recognized income tax expense on $ 68 million of accumulated earnings in India that had previously been considered indefinitely reinvested and began recognizing income tax expense on earnings in India.

In 2021, the Company recognized income tax expense on a $ 15 million dividend from the Company’s India subsidiary to its parent.

The Company continues to remain indefinitely reinvested in all other non-Luxembourg earnings not previously discussed.

The other non-Luxembourg earnings reinvested as of December 31, 2021 were approximately $ 3.7 million, which if distributed would result in no additional tax due.

Therefore, the Company’s valuation allowance was $ 404.1 million and $ 389.1 million as of December 31, 2022 and 2021, respectively.

The Company does not recognize deferred taxes on cumulative earnings of its U.S.

subsidiaries because the Company intends for those earnings to be indefinitely reinvested.

As of January 1, 2021, approximately $ 15 million of earnings in India were deemed to be indefinitely reinvested.

During 2021, the Company recognized income tax expense on the $ 15 million as the Company no longer intended for India earnings to be indefinitely reinvested.

The other non-Luxembourg earnings that are indefinitely reinvested as of December 31, 2022 were approximately $ 3.8 million, which if distributed would result in no additional tax due.

The Company had a deferred tax asset of $ 383.9 million as of December 31, 2022 relating to Luxembourg, U.S.

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As of December 31, 2022 and 2021, a valuation allowance of $ 383.1 million and $ 367.8 million, respectively, has been established related to Luxembourg net operating loss (“NOL”).

As of December 31, 2020 a valuation allowance of $ 0.8 million has been established related to state NOLs and a valuation allowance of $ 2.4 million has been established related to U.S.

federal NOLs ( no comparative amounts for the year ended December 31, 2021).

The gross amount of net operating losses available for carryover to future years is approximately $ 1,537.7 million as of December 31, 2022 and approximately $ 1,476.8 million as of December 31, 2021.

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Some of the state tax credit carryforwards have an indefinite carryforward period.

The Company is taking advantage of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act signed into law on March 27, 2020 by utilizing a five year carryback of the full $ 14.8 million net operating loss generated in the U.S.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

The effective tax rate differs from the Luxembourg statutory tax rate due to tax rate differences on foreign earnings, increases in uncertain tax positions, state taxes, remeasurement of deferred tax assets related to tax rate changes, a decrease in unrecognized tax benefits, tax exempt income primarily from the sale of Pointillist (see Note 4) and a valuation allowance against deferred tax assets the Company believes it is more likely than not will not be realized

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act signed into law on March 27, 2020 allowed the Company to utilize a five year carryback of the full $ 14.8 million net operating loss generated in the U.S.

The Company’s income tax receivable related to such carryback was $ 5.1 million and $ 6.0 million as of December 31, 2022 and 2021, respectively.

The Company received $ 5.1 million related to such receivable in the first quarter of 2023.

The effective tax rate differs from the Luxembourg statutory tax rate due to tax rate differences on foreign earnings, increases in uncertain tax positions, state taxes, a decrease in unrecognized tax benefits, tax exempt income primarily from the sale of Pointillist (see Note 4) and a valuation allowance against deferred tax assets the Company believes it is more likely than not will not be realized

The following table reconciles the Luxembourg statutory tax rate to our effective tax rate for the years ended December 31:

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Uncertain tax positions ( 6.80 ) 11.82

Income tax rate change — ( 2.40 )

Tax rate differences on foreign earnings ( 1.21 ) 6.46

Tax Exempt Income 0.19 ( 145.91 )

Provision to Return 3.45 —

Other 0.51 ( 2.70 )

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The Company has open tax years in the United States (2016 through 2021), India (2011 through 2022) and Luxembourg (2016 through 2021).

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

The following table summarizes changes in unrecognized tax benefits during the years ended December 31:

8 unchanged sentences

As of December 31, 2022 and 2021, the Company had recorded accrued interest and penalties related to unrecognized tax benefits of $ 7.6 million and $ 5.8 million, respectively.

NOTE 22 — EARNINGS PER SHARE

Basic earnings (loss) per share is computed by dividing earnings (loss) available to common shareholders by the weighted average number of common shares outstanding for the period.

Diluted earnings (loss) per share reflects the assumed conversion of all dilutive securities using the treasury stock method.

Diluted net earnings (loss) per share excludes all dilutive securities because their impact would be anti-dilutive, as described below.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Basic and diluted earnings (loss) per share are calculated as follows for the years ended December 31:

NOTE 21 — (LOSS) EARNINGS PER SHARE

Basic (loss) earnings per share is computed by dividing (loss) earnings available to common shareholders by the weighted average number of common shares outstanding for the period.

Diluted (loss) earnings per share reflects the assumed conversion of all dilutive securities using the treasury stock method.

Diluted net (loss) earnings per share excludes all dilutive securities because their impact would be anti-dilutive, as described below.

Basic and diluted (loss) earnings per share are calculated as follows for the years ended December 31:

(in thousands, except per share data) 2022 2021

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

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

Weighted average common shares outstanding, basic 16,070 15,839

2 unchanged sentences

Weighted average common shares outstanding, diluted 16,070 16,063

Earnings (loss) per share:

(Loss) earnings per share:

Basic $ ( 3.32 ) $ 0.75

Diluted $ ( 3.32 ) $ 0.74

For the years ended December 31, 2021 and, 2020, 1.2 million and 1.6 million, respectively, stock options, restricted shares and restricted share units were excluded from the computation of earnings (loss) per share, as a result of the following:

• For the year ended December 31, 2020, 0.2 million stock options, restricted shares and restricted share units were anti-dilutive and have been excluded from the computation of diluted earnings (loss) per share as a result of the net loss attributable to Altisource for the year ended December 31, 2020.

• For the years ended December 31, 2021 and 2020, 0.3 million and 0.5 million, respectively, stock options were anti-dilutive and have been excluded from the computation of diluted earnings (loss) per share because their exercise price was greater than the average market price of our common stock

• For the years ended December 31, 2021 and 2020, 0.9 million and 0.9 million, respectively, stock options, restricted shares and restricted share units, which begin to vest upon the achievement of certain market criteria related to our common stock price, performance criteria and a total shareholder return compared to the market benchmark that have not yet been met in each period have been excluded from the computation of diluted earnings (loss) per share.

NOTE 23 — RESTRUCTURING CHARGES

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 plan ( no comparative amount for the year ended December 31, 2021).

For the years ended December 31, 2022 and 2021, 1.3 million and 1.2 million, respectively, of stock options, restricted shares and restricted share units were excluded from the computation of (loss) earnings per share, as a result of the following:

• For the year ended December 31, 2022, 0.2 million stock options, restricted shares and restricted share units were anti-dilutive and have been excluded from the computation of diluted (loss) earnings per share as a result of the net (loss) income attributable to Altisource for the year ended December 31, 2022.

• For the years ended December 31, 2022 and 2021, 0.2 million and 0.3 million, respectively, of stock options were anti-dilutive and have been excluded from the computation of diluted (loss) earnings per share because their exercise price was greater than the average market price of our common stock.

• For the years ended December 31, 2022 and 2021, 0.9 million and 0.9 million, respectively, of stock options, restricted shares and restricted share units, which begin to vest upon the achievement of certain market criteria related to our common stock price, performance criteria and a total shareholder return compared to the market benchmark that have not yet been met in each period have been excluded from the computation of diluted (loss) earnings per share.

NOTE 22 — COMMITMENTS, CONTINGENCIES AND REGULATORY MATTERS

1 unchanged sentence

For proceedings where the reasonable estimate of loss is a range, we record a best estimate of loss within the range.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

We are currently involved in legal actions in the course of our business, some of which seek monetary damages.

4 unchanged sentences

We believe it is premature to predict the potential outcome or to estimate any potential financial impact in connection with these inquiries.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

On June 21, 2018, the United States Supreme Court rendered a 5-4 majority decision in South Dakota v.

Wayfair, Inc., holding that a state may require a remote seller with no physical presence in the state to collect and remit sales tax on goods and services provided to purchasers in the state, overturning existing court precedent.

During the year ended December 31, 2019, the Company completed the analysis of its services for potential exposure to sales tax in various jurisdictions in the United States.

The Company recognized a $( 2.7 ) million net loss reimbursement for the year ended December 31, 2020 ( no comparative amount for the year ended December 31, 2021), in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

The Company began invoicing, collecting and remitting sales tax in applicable jurisdictions in 2019.

Future changes in our estimated sales tax exposure could result in a material adjustment to our consolidated financial statements, which would impact our financial condition and results of operations.

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-government-sponsored enterprise (“GSE”) servicing rights or subservicing arrangements or may lose one or more of its state servicing or origination licenses.

1 unchanged sentence

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.

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.

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

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

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 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.

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 GSE or FHA 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 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.

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.

There can be no assurance that our plans will be successful or our operations will be profitable.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

We lease certain premises and equipment, primarily consisting of office space and information technology equipment.

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Our leases generally have expected lease terms at adoption of one to six years .

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Information about our lease terms and our discount rate assumption is as follows as of December 31:

Information about our lease terms and our discount rate assumption was as follows as of December 31:

Weighted average remaining lease term (in years) 2.99 3.30

12 unchanged sentences

Present value of lease liabilities $ 5,468

We have executed two standby letters of credit totaling $ 0.6 million related to two office leases that are secured by restricted cash balances.

We have executed no standby letters of credit related to office leases that are secured by restricted cash balances.

Escrow Balances

2 unchanged sentences

Amounts held in escrow accounts were $ 13.2 million and $ 27.5 million as of December 31, 2022 and 2021, respectively.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 23 — SEGMENT REPORTING

Our business segments are based upon our organizational structure, which focuses primarily on the services offered, and are consistent with the internal reporting used by our Chief Executive Officer (our chief operating decision maker) to evaluate operating performance and to assess the allocation of our resources.

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.

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

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, risk management, as well as eliminations between reportable segments.

Descriptions of our principal revenue generating activities are as follows:

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, 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 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 recognized revenue based on the number of loans on the system.

We generally recognize 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.

• 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 software-as-a-service (“SaaS”), we recognize revenue over the period during which we perform the services.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

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.

During the years ended December 31, 2022 and 2021, Ocwen was our largest customer.

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 %

Disaggregation of Revenue

Disaggregation of total revenues by segment and major source was as follows for the years ended December 31:

(in thousands) Revenue recognized when services are performed or assets are sold Revenue related to technology platforms and professional services Reimbursable expenses revenue Total revenue

Servicer and Real Estate $ 101,716 $ 10,416 $ 7,529 $ 119,661

Originations 32,915 34 510 33,459

For the year ended December 31, 2022 $ 134,631 $ 10,450 $ 8,039 $ 153,120

(in thousands) Revenue recognized when services are performed or assets are sold Revenue related to technology platforms and professional services Reimbursable expenses revenue Total revenue

Servicer and Real Estate $ 98,610 $ 9,180 $ 5,846 $ 113,636

Originations 59,245 42 709 59,996

Corporate and Others — 4,821 — 4,821

For the year ended December 31, 2021 $ 157,855 $ 14,043 $ 6,555 $ 178,453

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Financial Information

Financial information for our segments is as follows:

For the year ended December 31, 2022

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

Revenue $ 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 )

For the year ended December 31, 2021

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

Revenue $ 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

Total assets for our segments are as follows:

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

Total assets:

December 31, 2022 $ 63,696 $ 53,984 $ 77,325 $ 195,005

December 31, 2021 61,832 59,741 136,235 257,808

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Changes in goodwill during the years ended December 31, 2022 and 2021 are summarized below:

(in thousands) Servicer and Real Estate Origination Corporate and Others Total

Balance as of January 1, 2021 $ 30,681 $ 25,279 $ 17,889 $ 73,849

Write-off (1)

— — ( 17,889 ) ( 17,889 )

Balance as of December 31, 2021 and 2022

$ 30,681 $ 25,279 $ — $ 55,960

______________________________________

(1) During 2021, the Company sold its equity interest in Pointillist (See Note 4 for additional information) which had $ 17.9 million of goodwill attributed to it.

The amount of goodwill attributable to Pointillist was based on the relative fair values of Pointillist and the Company excluding Pointillist.

Pointillist was determined to be a business within the Company’s existing reporting unit.

We determined that each reportable segment represents a reporting unit.

Goodwill was allocated to each reporting unit based on the relative fair value of each of our reporting units.

NOTE 24 — SUBSEQUENT EVENTS

Public offering of Common Stock

On February 14, 2023, Altisource closed on an underwritten public offering to sell 4,550,000 shares of its common stock, at a price of $ 5.00 per share, generating net proceeds of approximately $ 21 million, after deducting the underwriting discounts and commissions and other offering expenses.

On February 22, 2023, Altisource used $ 20 million of the net proceeds of the offering to repay its term loans.

Term Loan Amendment

Altisource Portfolio Solutions S.A.

and its wholly-owned subsidiary, Altisource S.a.r.l., executed Amendment No.

2 (the “Second Amendment”) to the Credit Agreement effective February 14, 2023 (as amended by the Second Amendment, the “Amended Credit Agreement”).

The following is a summary of certain key terms of the Second Amendment and the Amended Credit Agreement.

• The maturity date of the term loans under the Amended Credit Agreement is April 30, 2025

• If the amount of par paydown that the Company makes on the term loans (excluding amortization and other required payments) in the aggregate using proceeds of junior capital raises (the “Par Paydown”) prior to February 14, 2024 (the “Paydown Measurement Date”) is equal to or greater than $ 30 million, then (subject to the representations and warranties being true and correct as of such date and there being no default or event of default being in existence as of such date) the maturity date of the term loans will be extended to April 30, 2026.

Such extension is conditioned upon the Company’s payment of a 2 % payment-in-kind extension fee

• The principal amortization of the term loans under the Amended Credit Agreement is 1.00 % per year through April 30, 2025 and, if applicable, 12 % per year for the year ended April 30, 2026

• The interest rate on the term loans will initially be Secured Overnight Financing Rate (“SOFR”) plus 5.00 % per annum payable in cash plus 5.00 % per annum payable in kind (“PIK”).

The PIK component of the interest rate will be subject to adjustment based on the amount of Par Paydown prior to the Paydown Measurement Date as set forth in the table below:

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Par Paydown PIK Component of Interest Rate

Less than $20 million 5.00 %

$20 million+ but less than below 4.50 %

$30 million+ but less than below 3.75 %

$40 million+ but less than below 3.50 %

$45 million+ but less than below 3.00 %

$50 million+ but less than below 2.50 %

$55 million+ but less than below 2.00 %

$60 million+ but less than below 1.00 %

$65 million+ but less than below 0.50 %

$70 million+ 0.00 %

• If, as of the end of any calendar quarter, (i) the amount of unencumbered cash and cash equivalents of Altisource S.à r.l.

and its direct and indirect subsidiaries on a consolidated basis plus (ii) the undrawn commitment amount under the Revolver is, or is forecast as of the end of the immediately subsequent calendar quarter to be, less than $ 35 million, then up to 2.00 % in interest otherwise payable in cash in the following quarter may be paid in kind at the Company’s election

• The lenders under the Amended Credit Agreement received warrants (the “Warrants”) to purchase 3,223,851 shares of Altisource common stock (the “Warrant Shares”).

The number of Warrant Shares is subject to reduction based on the amount of Par Paydown by the Paydown Measurement Date as set forth in the table below.

Par Paydown Warrant Shares

Less than $20 million 3,223,851

$20 million+ but less than below 2,578,743

$30 million+ 1,612,705

• The exercise price per share of common stock under each Warrant is equal to $ 0.01 .

The Warrants may be exercised at any time on and after the Paydown Measurement Date and prior to their expiration date.

The Warrants are exercisable on a cashless basis and will be subject to customary anti-dilution provisions.

The Warrants, if not previously exercised or terminated, will be automatically exercised on May 22, 2027.

The Warrants are subject to a lock-up agreement, subject to customary exceptions, ending two business days after the Paydown Measurement Date

• The lenders under the Amended Credit Agreement were paid an amendment fee equal to 1.0 %, substantially all of which was paid in cash at closing

• Various of the affirmative and negative covenants, mandatory prepayments, events of default and other terms to which the Company is subject under the Amended Credit Agreement have been modified including in many cases to be more restrictive or to reduce certain permissions previously available to the Company.

Revolver Amendment

The Company entered into Amendment No.

1 (the “First Revolver Amendment”) to the Revolver effective February 14, 2023.

The First Revolver Amendment establishes the credit available under the Revolver at $ 15 million, extends the facility termination and maturity date to coincide with the maturity date of the term loans under the Amended Credit Agreement, and increases the interest rate under the Revolver to 10 % per annum payable in cash and 3 % per annum PIK.

A usage fee of $ 750,000 will be payable upon the initial drawing under the Revolver following the effectiveness of the First Revolver Amendment.

The Revolver is secured by a first-priority lien on substantially all of the assets of the Company, which lien will be pari passu with liens securing the term loans under the Amended Credit Agreement, and the Revolver will continue to be guaranteed by Altisource and substantially all of the material subsidiaries of the Borrower.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data