What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2024-03-07 compared with 2023-03-30 · 56 added, 53 removed, 152 unchanged (42% of the section changed)

10 unchanged sentences

Technology and software-as-a-service (“SaaS”) Products

Our Technology and SaaS Products business includes Equator ® (a SaaS-based technology to manage real estate owned (“REO”), short sales, foreclosure, bankruptcy and eviction processes), Vendorly Invoice (a vendor invoicing and payment system), RentRange ® (a single family rental data, analytics and rent-based valuation solution), REALSynergy ® (a commercial loan servicing platform), and NestRange TM (an automated valuation model and analytics solution).

Our Technology and SaaS Products business includes Equator ® (a SaaS-based technology to manage real estate owned (“REO”), short sales, foreclosure, bankruptcy and eviction processes), Vendorly Invoice (a vendor invoicing and payment system), RentRange ® (a single and multi-family rental data, analytics and rent-based valuation solution), REALSynergy ® (a commercial loan servicing platform), and NestRange TM (an automated residential valuation model and analytics solution).

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

3 unchanged sentences

Technology and SaaS Products

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

Corporate and Others includes Pointillist, Inc.

(“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 and eliminations between reportable segments.

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

Corporate and Others includes 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 and eliminations between reportable segments.

We classify revenue in three categories:

8 unchanged sentences

2023 Highlights

Corporate and Financial

• Focused on growing the sales pipeline, improving operational efficiencies, reducing costs, and strengthening liquidity as the Company continued to seek to mitigate the impacts of the COVID-19 pandemic, governmental moratoriums and loss mitigation measures that affect the timing of the recovery of the market for default-related services

• Reduced 2022 Corporate and Others costs by $31.0 million, representing a 32% reduction, compared to 2021

• Ended 2022 with $51.0 million of cash and cash equivalents

• Ended 2022 with $196.2 million of net debt

• On February 14, 2023, the Company executed amendments to its senior secured term loans and revolving credit facility (together, “Credit Agreements”) that, among other things, extended the maturity dates to April 2025, with an option to extend to April 2026, subject to certain terms and conditions

• On February 14, 2023, Altisource generated approximately $21 million in net proceeds from the sale of its common stock (after deducting the underwriting discounts and commissions and other offering expenses)

• On February 22, 2023, the Company used $20 million of the proceeds of the offering to repay its term loans

Business and Industry

• The Servicer and Real Estate segment continues to benefit from the restart of the default business and efficiency initiatives with 47% gross profit growth on 4% service revenue growth compared to 2021

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

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

• The Servicer and Real Estate segment and Origination segment had strong sales wins that we estimate represent $9.4 million and $21.6 million, respectively, of annualized revenue on a stabilized basis

• The weighted sales pipeline in the Servicer and Real Estate segment represents $41 million to $51 million in estimated annual revenue on a stabilized basis based upon our forecasted probability of closing

• The weighted sales pipeline in the Origination segment represents $20 million to $25 million in estimated annual revenue on a stabilized basis based upon our forecasted probability of closing

Company, Corporate and Financial :

• Improved total Company loss from operations by $16.4 million in 2023 compared to 2022 by (1) improving operating income as a percentage of service revenue in the Servicer and Real Estate and Origination segments (together, “Business Segments”) to 19.1% in 2023 from 13.2% in 2022, and (2) reducing Corporate and Others operating loss as a percentage of total Company service revenue to (31.4)% in 2023 from (36.1)% in 2022, primarily through efficiency initiatives and cost savings measures

• Amended the senior secured term loans (“SSTL”) and revolving credit facility to, among other things, extend the maturity dates to April 2025, with options to extend both to April 2026, subject to certain terms and conditions

• Generated $38.8 million in net proceeds from the sale of common stock and used $30 million to partially repay the SSTL

• Ended the year with $32.5 million of cash and cash equivalents, $15.0 million available under a revolving credit facility and $191.6 million of net debt

Business Segments :

• In the face of serious market headwinds for both Business Segments, service revenue in the Servicer and Real Estate segment was only down 4% and service revenue in the Origination segment outperformed the overall market with a decline of 11% compared to a 36% decline in industrywide residential origination volume

• Improved income from operations in the Business Segments by $7.0 million to $26.1 million, representing 19.1% of service revenue, in 2023 compared to $19.0 million, representing 13.2% of service revenue, in 2022, primarily through efficiency and cost cutting initiatives

• Ended 2023 with a weighted average sales pipeline between $43 million and $53 million of potential estimated revenue on a stabilized basis based upon forecasted probability of closing (comprised of between $27 million and $33 million in the Servicer and Real Estate segment and between $16 million and $20 million in the Origination segment)

• Generated 2023 sales wins which we estimate represent potential annualized revenue on a stabilized basis of $58.4 million for the Servicer and Real Estate segment and $10.3 million for the Origination segment

• Industrywide foreclosure initiations were 4% lower in 2023 compared to 2022 (and 31% lower than the same pre-COVID-19 period in 2019)

• Industrywide foreclosure sales were 8% higher in 2023 compared to 2022 (and 46% lower than the same pre-COVID-19 period in 2019)

• Industrywide early-stage mortgage delinquencies (30-days late) increased by 15% and borrowers who have missed two payments (60-days past due) increased by 16% in December 2023 compared to December 2022

• Industrywide mortgage origination volume decreased by 36% in 2023 compared to 2022

• Industrywide seriously delinquent mortgage rate (90+ day past due and loans in foreclosure) decreased to 1.3% in December 2023 compared to 1.6% in December 2022

Our customers include large financial institutions, government-sponsored enterprises (“GSEs”), banks, asset managers, servicers, investors, property management firms, real estate brokerages, insurance companies, mortgage bankers, originators, correspondent and private money lenders.

12 unchanged sentences

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.

For the years ended December 31, 2023 and 2022, we recognized $9.2 million and $9.5 million, respectively, of such revenue.

These amounts are not included in deriving revenue from Ocwen and revenue from Ocwen as a percentage of revenue discussed above.

2 unchanged sentences

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”).

(individually, together with one or more of its subsidiaries or one or more of its subsidiaries individually, “Rithm”) (formerly New Residential Investment Corp.) is an asset manager focused on the real estate and financial services industries.

Ocwen has disclosed that Rithm is a significant client of Ocwen’s.

As of December 31, 2023, Ocwen reported that approximately 16% of loans serviced and subserviced by Ocwen (measured in unpaid principal balance (“UPB”)) and approximately 67% of all delinquent loans that Ocwen services were related to Rithm MSRs or rights to MSRs (the “Subject MSRs”).

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

3 unchanged sentences

Sales and Marketing

Our sales and marketing team has extensive relationship management and industry experience.

We believe our sales and marketing team has extensive relationship management and industry experience.

These individuals cultivate and maintain relationships throughout the industry sectors we serve.

5 unchanged sentences

We believe there are meaningful growth opportunities to sell our suite of services to new customers.

Given the highly regulated nature of the industries that we serve, and the comprehensive purchasing process that our institutional customers and prospects follow, the time and effort we spend in expanding relationships or winning new relationships is significant.

Given the highly regulated nature of the industries we serve, and the comprehensive purchasing process that our institutional customers and prospects follow, the time and effort we spend in expanding relationships or winning new relationships is significant.

For example, it can often take more than one year from the request for proposal or qualified lead stage to the selection of Altisource as a service provider.

4 unchanged sentences

These intellectual property rights are important factors in the success of our businesses.

As of December 31, 2022, we have been awarded one patent that expires in 2023, one patent that expires in 2024, seven patents that expire in 2025, two patents that expire in 2026, one patent that expires in 2027, two patents that expire in 2029, one patent that expires in 2030 and one patent that expires in 2036.

As of December 31, 2023, we have been awarded five patents that expire in 2025, one patent that expires in 2026, one patent that expires in 2027, one patent that expires in 2029, one patent that expires in 2030.

In addition, we have registered trademarks in a number of jurisdictions including the United States, the European Union (“EU”), India and five other jurisdictions.

3 unchanged sentences

This data generally relates to mortgage information, real property information and consumer information.

We gather this data from a variety of third party sources, including from governmental entities and, subject to licensed usage rights, we use this data in connection with the delivery of certain of our services, including combining it with proprietary data we generate to further enhance data and metrics in connection with our services.

We gather this data from a variety of third party sources, including from governmental entities and, subject to licensed usage rights, we use this data in connection with the delivery of

certain of our services, including combining it with proprietary data we generate to further enhance data and metrics in connection with our services.

Market and Competition

We sell our suite of services to mortgage servicers, mortgage originators, GSEs, buyers and sellers of homes for investment use and financial services firms.

The mortgage and real estate markets are very large and are influenced by macroeconomic factors such as credit availability, interest rates, home prices, inflation, unemployment rates, consumer confidence and the COVID-19 pandemic.

The markets to provide services for mortgage servicers and mortgage originators are highly competitive and generally consist of national companies, in-house providers and a large number of regional and local providers.

We typically compete based upon product and service awareness and offerings, product performance and service delivery, quality and control environment, technology integration and support, price and financial strength.

The markets to provide services for buyers and sellers of homes for investment are highly competitive and generally consist of several national companies, a large number of regional and local providers and start-up companies.

We typically compete based upon product and service awareness and offerings, product performance and service delivery, ease of transacting, price and personal service.

The markets for services provided to mortgage servicers and mortgage originators are highly competitive and generally consist of national companies, in-house providers and a large number of regional and local providers.

The markets for services provided to buyers and sellers of home for investment are highly competitive and generally consist of several national companies, a large number of regional and local providers and start-up companies.

We typically compete based upon product and service awareness and offerings, product performance and service delivery, national coverage, ease of transacting, price, quality and control environment, technology integration and support, customer service and personal service.

Our competitors may have greater financial resources, brand recognition, alternative or disruptive products and technology and other competitive advantages.

We cannot determine our market share with certainty, but believe for mortgage servicers we have a modest share of the market, and for the others we have a relatively small market share.

Common Stock Offering

On February 14, 2023, we closed an underwritten public offering of 4,550,000 shares of common stock (inclusive of 550,000 shares that were sold pursuant to the underwriters’ full exercise of their option to purchase additional shares of common stock), at a price to the public of $5.00 per share.

We received net proceeds from the offering of approximately $21 million, after deducting the underwriting discounts and commissions and other estimated offering expenses payable by us.

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

Public offerings of Common Stock

On February 14, 2023, Altisource closed on an underwritten public offering to sell 4,550,000 shares of its common stock, at a price of $5.00 per share, generating net proceeds of $20.5 million, after deducting the underwriting discounts and commissions and other offering expenses.

On September 7, 2023, Altisource closed on an underwritten public offering to sell 5,590,277 shares of its common stock, at a price of $3.60 per share, generating net proceeds of $18.4 million, after deducting the underwriting discounts and commissions and other offering expenses.

Term Loan Amendment

3 unchanged sentences

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

• If the amount of par paydown that we make 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 our 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

• If the amount of par paydown that we make on the term loans (excluding amortization and other required payments) in the aggregate using proceeds from issuances of equity interest or from junior indebtedness prior to February 14, 2024 ("Aggregate Paydowns”) 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 may be extended to April 30, 2026, at our option subject to 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 the maturity date is extended, 1% per month during the 12 month extension period.

• 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:

Par Paydown PIK Component of Interest Rate

The PIK component of the interest rate is subject to adjustment based on the amount of Aggregate Paydowns as set forth in the table below:

Aggregate Paydowns

PIK Component of Interest Rate

Less than $20 million 5.00%

8 unchanged sentences

$70 million+ 0.00%

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 our election

• If, as of the end of any calendar quarter, (i) our amount of unencumbered cash and cash equivalents on a consolidated basis plus (ii) the undrawn commitment amount under our revolving credit facility 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 our 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

The number of Warrant Shares is subject to reduction based on the amount of Aggregate Paydowns as set forth in the table below.

Aggregate Paydowns

Warrant Shares

Less than $20 million 3,223,851

2 unchanged sentences

• 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 may be exercised at any time on and after February 14, 2024 and prior to their expiration date.

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

The Warrants, if not previously exercised or terminated, will be automatically 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 Warrants are subject to a lock-up agreement, subject to customary exceptions, ending on February 16, 2024

• 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 we are 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 us

• Based on the February 2023 $20 million repayment of the term loans under the Amended Credit Agreement, the PIK component of the interest rate decreased to 4.50% and the number of Warrant Shares decreased to 2,578,743.

• Based on the $30 million of Aggregate Paydowns made by Company during the year ended December 31, 2023, the maturity date may be extended to April 30, 2026 at the Company's option (subject to conditions described above), the PIK component of the interest rate decreased to 3.75%, the number of Warrant Shares decreased to 1,612,705 and there is no contractual amortization due until the April 30, 2025 maturity date.

If the maturity date is extended to April 30, 2026, the Company is required to make mandatory repayments of $5.2 million in the first quarter of 2026 with the remaining balance due at the April 2026 maturity

• As of December 31, 2023 the outstanding amount of our SSTL was $224.1 million.

Revolver Amendment

On February 9, 2023, we entered into Amendment No.

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

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

The First Revolver Amendment establishes the credit available under our revolving credit facility 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 our revolving credit facility 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 our revolving credit facility following the effectiveness of the First Revolver Amendment.

A usage fee of $0.75 million will be payable upon the initial drawing under our revolving credit facility following the effectiveness of the First Revolver Amendment.

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

As of December 31, 2023, there are no outstanding amounts under the First Revolver Amendment and the First Amendment Revolver has never been drawn.

As of December 31, 2023, we had the following number of employees:

3 unchanged sentences

More specifically, revenues from property sales, loan originations and certain property preservation services in Field Services typically tend to be at their lowest level during the fall and winter months and at their highest level during the spring and summer months.

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

However, as a result of the COVID-19 pandemic and related measures and the rapid rise in mortgage interest rates, the seasonal impact to revenue may not follow historical patterns.

Government Regulation

29 unchanged sentences

The Dodd-Frank Act is extensive and includes reform of the regulation and supervision of financial institutions, as well as the regulation of derivatives, capital market activities and consumer financial services.

The Dodd-Frank Act, among other things, created the CFPB, a federal entity responsible for regulating consumer financial services and products.

The Dodd-Frank Act, among other things, created the CFPB, a

federal entity responsible for regulating consumer financial services and products.

Title XIV of the Dodd-Frank Act contains the Mortgage Reform and Anti-Predatory Lending Act (“Mortgage Act”).

16 unchanged sentences

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 1. Business