What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-03 compared with 2021-03-11 · 281 added, 452 removed, 861 unchanged (46% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm

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

Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Operations and Comprehensive Loss for the years ended

December 31, 2020, 2019 and 2018

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

Consolidated Statements of Equity for the years ended December 31, 2021 and 2020

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

and subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive income (loss), equity, and cash flows for the three years in the period ended December 31, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

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, 2020, 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 11, 2021 expressed an unqualified opinion.

Adoption of New Accounting Standards

As discussed in Note 25 to the financial statements, the Company changed its method of accounting for leases as a result of the adoption of Accounting Standards Codification (“ASC”) Topic 842, Leases , effective January 1, 2019, under the modified retrospective transition approach.

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

Emphasis of Concentration of Revenue and Uncertainties

As discussed in Note 3 to the financial statements, Ocwen Financial Corporation (“Ocwen”) is the Company’s largest customer.

As discussed in Note 3 to the financial statements, Ocwen Financial Corporation (together with its subsidiaries, “Ocwen”) is the Company’s largest customer.

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

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(“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.

As discussed in Note 24 to the financial statements, NRZ can terminate its sub-servicing agreement with Ocwen in exchange for the payment of a termination fee.

During the second quarter of 2020, Ocwen informed the Company that an MSR investor instructed Ocwen to use a field services provider other than the Company on properties associated with certain MSRs.

Ocwen also communicated to the Company in the fourth quarter of 2020 that the same investor instructed Ocwen to use a provider for default valuations and certain title services other than the Company on properties associated with certain MSRs and commenced moving these referrals to other providers in the fourth quarter of 2020.

Ocwen also communicated to the Company 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 the Company on properties associated with certain MSRs and commenced moving these referrals to other providers in the fourth quarter of 2020.

Ocwen has disclosed that it is subject to a number of regulatory matters and may become subject to future adverse regulatory or other actions.

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Note 24 also discusses potential events that could further significantly reduce the Company’s revenue.

Opinion on the Supplemental Information

The Schedule II - Valuation and Qualifying Accounts schedule listed in the index at Item 15 of the Form 10-K (the “valuation and qualifying accounts schedule”) has been subjected to audit procedures performed in conjunction with the audit of the Company’s financial statements.

The valuation and qualifying accounts schedule is the responsibility of the Company’s management.

Our audit procedures included determining whether the valuation and qualifying accounts schedule reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the valuation and qualifying accounts schedule.

In forming our opinion on the valuation and qualifying accounts schedule, we evaluated whether the valuation and qualifying accounts schedule, including its form and content, is presented in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the valuation and qualifying accounts schedule is fairly stated, in all material respects, in relation to the financial statements as a whole.

Basis for Opinion

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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 (i) relates 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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 22 to the financial statements, the Company is subject to income taxes in Luxembourg, as well as in the United States and a number of other foreign jurisdictions.

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 including evaluating uncertainties under ASC Topic 740, Income Taxes , and complexities in determining the recoverability of deferred tax assets in both domestic and foreign jurisdictions, based on the weight of positive and negative evidence, which includes anticipated future reversals of deferred tax liabilities, projections of future taxable income, and tax planning strategies.

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 valuation of the foreign tax provisions primarily due to the Company’s multinational 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 the uncertain tax positions;

(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;

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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;

• 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 permanent and temporary differences 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;

• 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.

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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 .

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March 3, 2022

Clearwater, Florida

Petersburg, Florida

Report of Independent Registered Public Accounting Firm

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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, cash flows and financial statement schedule as of December 31, 2020 and 2019 and for the three years in the period ended December 31, 2020 of the Company, and our report dated March 11, 2021, expressed an unqualified opinion on those financial statements and included an explanatory paragraph related to the change in the method of accounting for leases as a result of Accounting Standards Codification Topic 842, Leases , effective January 1, 2019, and an emphasis of matter paragraph regarding concentration of revenue and uncertainties with Ocwen Financial Corporation (“Ocwen”) and uncertainties faced by Ocwen.

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

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March 3, 2022

Clearwater, Florida

Petersburg, Florida

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

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Prepaid expenses and other current assets 21,864 19,479

Investment in equity securities — 42,618

Total current assets 138,004 100,155

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Total assets $ 257,808 $ 265,685

LIABILITIES AND EQUITY

LIABILITIES AND EQUITY (DEFICIT)

Current liabilities:

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share data)

For the years ended December 31,

2020 2019 2018

Revenue $ 178,453 $ 365,547

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Gross profit 7,087 60,353

Operating expenses (income):

Operating expense (income):

Selling, general and administrative expenses 67,049 92,736

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Restructuring charges — 11,972

(Loss) income from operations ( 44,355 ) 18,053 42,495

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

Other income (expense), net:

Interest expense ( 14,547 ) ( 17,730 )

Unrealized gain (loss) on investment in equity securities 4,004 14,431 ( 12,972 )

Other income (expense), net 375 1,348 ( 1,870 )

Unrealized gain on investment in equity securities — 4,004

Other income, net 864 375

Total other income (expense), net ( 13,683 ) ( 13,351 )

(Loss) income before income taxes and non-controlling interests ( 57,706 ) 12,439 1,399

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

Income tax provision ( 3,232 ) ( 8,609 )

Net loss ( 66,315 ) ( 305,857 ) ( 2,699 )

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

Net income attributable to non-controlling interests ( 241 ) ( 841 )

Net loss attributable to Altisource $ ( 67,156 ) $ ( 307,969 ) $ ( 5,382 )

Loss per share:

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

Earnings (loss) per share:

Basic $ 0.75 $ ( 4.31 )

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Diluted 16,063 15,598

Comprehensive loss:

Net loss $ ( 66,315 ) $ ( 305,857 ) $ ( 2,699 )

Other comprehensive loss, net of tax:

Reclassification of unrealized gain on investment in equity securities, net of income tax provision of $ 200 , to retained earnings from the cumulative effect of an accounting change

Comprehensive loss, net of tax ( 66,315 ) ( 305,857 ) ( 3,432 )

Comprehensive income (loss):

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

Comprehensive income attributable to non-controlling interests ( 241 ) ( 841 )

Comprehensive loss attributable to Altisource $ ( 67,156 ) $ ( 307,969 ) $ ( 6,115 )

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

See accompanying notes to consolidated financial statements .

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Altisource Equity (Deficit)

Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Treasury stock, at cost Non-controlling interests Total

Common stock Additional paid-in capital Retained earnings Treasury stock, at cost Non-controlling interests Total

Balance, January 1, 2020 25,413 $ 25,413 $ 133,669 $ 272,026 $ ( 453,934 ) $ 1,469 $ ( 21,357 )

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Distributions to non-controlling interest holders

Share-based compensation expense — — 10,192 — — — — 10,192

Cumulative effect of an accounting change (Note 5 and 18) — — — ( 9,715 ) ( 733 ) — — ( 10,448 )

Exercise of stock options and issuance of restricted shares — — — ( 19,245 ) — 22,889 — 3,644

Treasury shares withheld for the payment of tax on restricted share issuances and stock option exercises — — — ( 1,603 ) — 778 — ( 825 )

Repurchase of shares — — — — — ( 40,362 ) — ( 40,362 )

Balance, December 31, 2018 25,413 25,413 122,667 590,655 — ( 443,304 ) 1,237 296,668

Net loss — — — ( 307,969 ) — — 2,112 ( 305,857 )

Distributions to non-controlling interest holders

— — — — — ( 1,101 ) ( 1,101 )

Share-based compensation expense — — 7,804 — — — 7,804

Exercise of stock options and issuance of restricted share units and restricted shares — — — ( 7,222 ) — 7,622 — 400

Treasury shares withheld for the payment of tax on restricted share issuances and stock option exercises

— — — ( 3,438 ) — 1,743 — ( 1,695 )

Repurchase of shares

— — — — — ( 19,995 ) — ( 19,995 )

Issuance of restricted share units and restricted shares — — — ( 9,548 ) 9,548 — —

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 )

Balance, December 31, 2020 25,413 25,413 141,473 190,383 ( 441,034 ) 1,209 ( 82,556 )

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

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

Exercise of stock options and issuance of restricted share units and restricted shares — — — ( 9,548 ) — 9,548 — —

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 — — — ( 4,511 ) 3,497 — ( 1,014 )

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For the years ended December 31,

2020 2019 2018

Cash flows from operating activities:

Net loss $ ( 66,315 ) $ ( 305,857 ) $ ( 2,699 )

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

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

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

Depreciation and amortization 4,592 14,890

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Amortization of intangible assets 9,467 14,720

Unrealized (gain) loss on investment in equity securities ( 4,004 ) ( 14,431 ) 12,972

Goodwill and intangible assets write-off from business exits — 5,900 2,640

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

Share-based compensation expense 2,825 7,804

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Gain on sale of businesses ( 88,930 ) —

Loss on debt refinancing — — 4.434

Changes in operating assets and liabilities (excludes effect of sale of businesses):

Other non-cash items 137 —

Changes in operating assets and liabilities:

Accounts receivable 2,963 14,973

Short-term investments in real estate — 39,873 ( 10,468 )

Prepaid expenses and other current assets 1,146 ( 4,140 )

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Other current and non-current liabilities 1,542 297

Net cash (used in) provided by operating activities ( 22,401 ) 46,688 68,402

Net cash used in operating activities ( 60,405 ) ( 22,401 )

Cash flows from investing activities:

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Proceeds from the sale of businesses 104,141 3,307

Other investing activities — 422 —

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

Cash flows from financing activities:

Proceeds from issuance of long-term debt — — 407,880

Repayments and repurchases of long-term debt ( 46,622 ) ( 44,996 ) ( 486,759 )

Proceeds from revolving credit facility 20,000 —

Repayments of long-term debt and revolving credit facility ( 20,000 ) ( 46,622 )

Debt issuance costs ( 531 ) —

Proceeds from stock option exercises — 400 3,644

Purchase of treasury shares — ( 19,995 ) ( 40,362 )

Proceeds from convertible debt payable to related parties (Note 2) 1,200 —

Distributions to non-controlling interests ( 1,959 ) ( 1,101 )

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Net cash used in financing activities ( 2,304 ) ( 49,310 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 24,487 ) 22,537 ( 44,797 )

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

Cash, cash equivalents and restricted cash at the beginning of the period 62,096 86,583

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Non-cash investing and financing activities:

Net increase (decrease) in payables for purchases of premises and equipment $ 139 $ ( 101 ) $ ( 32 )

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

See accompanying notes to consolidated financial statements.

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(“Pointillist”) and contributed the Pointillist ® customer journey analytics business and $ 8.5 million to it.

Pointillist is owned by Altisource and management of Pointillist.

Management of Pointillist owns a non-controlling interest representing 12.1 % of the outstanding equity of Pointillist.

Additional equity shares of Pointillist are available for issuance to management and board members of Pointillist.

Altisource has no ongoing obligation to provide future funding to Pointillist.

Pointillist is presented in the accompanying consolidated financial statements on a consolidated basis and the portion of Pointillist owned by Pointillist management is reported as non-controlling interests.

On May 27, 2021, Pointillist issued $ 1.3 million in principal of convertible notes to related parties with a maturity date of January 1, 2023.

The notes bore interest at a rate of 7 % per annum.

The principal and unpaid accrued interest then outstanding under the notes (1) would automatically convert to Pointillist equity at the earlier of the time Pointillist receives proceeds of $ 5.0 million or more from the sale of its equity or January 1, 2023, or (2) are repaid in cash or converted into Pointillist common stock equity based on a $ 13.1 million Pointillist valuation (at the Lenders’ option) in the event of a corporate transaction or initial public offering of Pointillist.

On December 1, 2021, the notes were converted to Pointillist equity and Altisource and other shareholders of Pointillist sold all of the equity interests in Pointillist (See Note 4 for additional information).

Prior to the sale, Pointillist was owned by Altisource and management of Pointillist, with management of Pointillist owning a non-controlling interest representing 12.1 % of the outstanding equity of Pointillist.

Through December 1, 2021 Pointillist is presented in the accompanying consolidated financial statements on a consolidated basis and the portion of Pointillist owned by Pointillist management is reported as non-controlling interests as of December 31, 2020.

Use of Estimates

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We classify all highly liquid instruments with an original maturity of three months or less at the time of purchase as cash equivalents.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Accounts Receivable, Net

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The carrying value of accounts receivable, net, approximates fair value.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Premises and Equipment, Net

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The market comparisons include an analysis of revenue and earnings multiples of guideline public companies compared to the Company.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Intangible Assets, Net

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We amortize intangible assets that we deem to have definite lives in proportion to actual and expected customer revenues or on a straight-line basis over their useful lives, generally ranging from 4 to 20 years.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

We perform tests for impairment if conditions exist that indicate the carrying value may not be recoverable.

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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 loss 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.

We recorded expenses of $ 0.6 million, $ 0.9 million and $ 1.2 million for the years ended December 31, 2020, 2019 and 2018, respectively, related to our discretionary contributions.

We recorded expenses of $ 0.5 million and $ 0.6 million for the years ended December 31, 2021 and 2020, respectively, related to our discretionary contributions.

Revenue Recognition

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We invoice customers based on our contractual arrangements with each customer, which may not be consistent with the period that revenues are recognized.

When there is a timing difference between when we invoice customers and when revenues are recognized, we record either a contract asset (unbilled accounts receivable) or a contract liability (deferred revenue or other current liabilities), as appropriate.

When there is a timing difference between when we invoice customers and when revenues

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

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:

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• 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

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

because generally we have control over selection of vendors and the vendor relationships are with us, rather than with our customers.

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.

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Earlier Stage Business

• For our customer journey analytics platform, we recognize revenue primarily based on subscription fees.

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

• For our Financial Services business (sold on July 1, 2019, see Note 4), we generally earned fees for our post-charge-off consumer debt collection services as a percentage of the amount we collected on delinquent consumer receivables and recognized revenue following collection from the borrowers.

For mortgage charge-off collections performed on behalf of our clients, we recognized revenue as a percentage of amounts collected following collection from the borrowers.

We provided customer relationship management services for which we typically earned and recognized revenue on a per-person, per-call or per-minute basis as the related services were performed.

• 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.

• For short-term investments in real estate (wind down completed in 2019, see Note 8), we recognized revenue associated with our sales of short-term investments in real estate on a gross basis (i.e., the selling price of the property) as we assumed the risks and rewards of ownership of the asset.

• For our consumer real estate brokerage (discontinued in the fourth quarter of 2019, see Note 8), we recognized revenue on a net basis (i.e., the commission on the sale) as we performed services as an agent without assuming the risks and rewards of ownership of the asset and the commission earned on the sale was a fixed percentage or amount.

Share-Based Compensation

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Recently Adopted Accounting Pronouncements

In January 2017, the FASB issued Accounting Standards Update (“ASU”) No.

2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment.

This standard simplified the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test.

Prior guidance required that companies compute the implied fair value of goodwill under Step 2 by performing procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.

This updated standard requires companies to perform annual or interim goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount.

An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

The Company adopted this standard effective January 1, 2020 and has applied it prospectively.

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

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement .

This standard modified certain disclosure requirements such as the valuation processes for Level 3 fair value measurements.

This standard also requires new disclosures such as the disclosure of certain assumptions used to develop significant unobservable inputs for Level 3 fair value measurements.

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.

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In August 2020, the FASB issued ASU No.

2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) .

This standard aligns the requirements for capitalizing implementation costs in a hosting arrangement service contract with the existing guidance for capitalizing implementation costs incurred for an internal-use software license.

This standard also requires capitalizing or expensing implementation costs based on the nature of the costs and the project stage during which they are incurred and establishes additional disclosure requirements.

The Company adopted this standard effective January 1, 2020 and has applied it prospectively.

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

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses ( Topic 326 ):

Measurement of Credit Losses on Financial Instruments .

This ASU and its related amendments (collectively, the "Credit Loss Standard") introduced the current expected credit losses (“CECL”) methodology for the measurement of credit losses on financial assets measured at

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

amortized cost basis, replacing the previous incurred loss methodology.

The CECL model applies to financial assets measured at amortized cost, including trade and other receivables, net, investments in leases, loans receivable held-to-maturity securities and off-balance sheet exposures.

The Credit Loss Standard requires consideration of a broader range of information to estimate expected credit losses, including historical information and current conditions through a reasonable forecast period.

The Credit Loss Standard requires that the income statement reflect the measurement of credit losses for newly recognized financial assets as well as the expected increase or decrease of expected credit losses that have taken place during the period, which may result in earlier recognition of certain losses.

The Company adopted this standard effective January 1, 2020 utilizing a modified retrospective approach, which did not have any impact on the Company’s consolidated financial statements (See Note 6).

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 December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

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

Early adoption of this standard is permitted.

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

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting and in January 2021, the FASB issued ASU No.

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

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

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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

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Revenue from Ocwen primarily consists of revenue earned from the loan portfolios serviced and subserviced by Ocwen when Ocwen engages us as the service provider, and revenue earned directly from Ocwen, pursuant to the Ocwen Services Agreements.

For the years ended December 31, 2020, 2019 and 2018, we recognized revenue from Ocwen of $ 197.8 million, $ 362.7 million and $ 437.4 million, respectively.

For the years ended December 31, 2021 and 2020, we recognized revenue from Ocwen of $ 55.6 million and $ 197.8 million, respectively.

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

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

For the years ended December 31, 2020, 2019 and 2018, we recognized revenue of $ 23.8 million, $ 37.5 million and $ 47.1 million, respectively, related to the portfolios serviced by Ocwen when a party other than Ocwen or the MSR owner selected 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.

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

In February 2019, Altisource and Ocwen entered into agreements that, among other things, facilitated Ocwen’s transition from REALServicing ® and related technologies to another mortgage servicing software platform, establish a process for Ocwen to review and approve the assignment of one or more of our agreements to potential buyers of Altisource’s business lines, requiring Ocwen to use Altisource as service provider for certain service referrals totaling an amount equal to 100 % of the

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

applicable service referrals on certain portfolios plus an amount equal to not less than 90 % of applicable service referrals from certain other portfolios (determined on a service by service basis), subject to certain additional restrictions and limitations, and affirm Altisource’s role as a strategic service provider to Ocwen through August 2025.

In connection with these agreements, Altisource expressly preserved and did not waive any of its existing contractual rights relating to service referrals, other than with respect to Ocwen transitioning from the REALServicing and related technologies.

If Altisource fails certain performance standards for specified periods of time, then Ocwen may terminate Altisource as a provider for the applicable service(s), subject to certain limitations and Altisource’s right to cure.

Ocwen’s transition to another mortgage servicing platform was completed during 2019.

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 to date and the designated service provider, Altisource believes that Ocwen received these directions from New Residential Investment Corp.

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”).

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

We estimate that $ 70.1 million, $ 150.2 million and $ 171.0 million of service revenue from Ocwen for the years ended December 31, 2020, 2019 and 2018, 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.

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.

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

We estimate that $ 18.2 million, $ 33.2 million and $ 40.1 million of service revenue from Ocwen for the years ended December 31, 2020, 2019 and 2018, respectively, was derived from default valuations and title services referrals from the NRZ portfolios.

Altisource believes that any action taken by Ocwen to redirect these service referrals breaches Altisource's agreement with Ocwen.

We are currently in discussions with Ocwen to address this matter, and have reserved all of our rights with respect to this matter.

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

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, 2020, NRZ MSRs or rights to MSRs relating to approximately 36 % of loans serviced and subserviced by Ocwen (measured in unpaid principal balance (“UPB”)).

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.

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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.

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.

(“Genesys”) for $ 150.0 million (the “Purchase Price”) (the “Transaction”).

The Purchase Price consisted of (1) an up-front payment of $ 144.5 million, subject to certain adjustments, (2) $ 0.5 million deposited into an escrow account to be used to satisfy potential deficits between estimated closing date working capital and actual closing date working capital (the “Working Capital Escrow”), with excess amounts remaining after satisfying such deficits (if any) being paid to the sellers, and (3) $ 5.0 million deposited into an escrow account to satisfy certain Genesys indemnification claims that may arise on or prior to the first anniversary of the sale closing and, at Genesys’ election, any working capital deficits that exceed the Working Capital Escrow (the “Indemnification Escrow”), with the balance to be paid to the sellers thereafter.

The Transaction closed on December 1, 2021.

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

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

The 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 )

For the years ended December 31, 2020, 2019 and 2018, we recognized revenue from NRZ of $ 8.6 million, $ 12.5 million and $ 28.7 million, respectively, under the Brokerage Agreement.

For the years ended December 31, 2020, 2019 and 2018, we recognized additional revenue of $ 35.1 million, $ 60.0 million and $ 83.6 million, respectively, relating to the Subject MSRs when a party other than NRZ selects Altisource as the service provider.

NOTE 4 — SALE OF BUSINESSES

Financial Services Business

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(“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.

In connection with the sale, we recognized a $ 17.8 million pretax gain on sale for the year ended December 31, 2019.

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

The parties also entered into a transition services agreement to provide for the management and orderly transition of certain services and technologies to TSI for periods ranging from 2 months to 13 months, subject to additional 3 month extensions.

These services included support for information technology systems and infrastructure, facilities management, finance, compliance and human resources functions and were charged to TSI on a fixed fee or hourly basis.

As of December 31, 2020 , all of the transition services and technologies have been fully transitioned to TSI.

Rental Property Management Business

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The proceeds from the transaction totaled $ 18.0 million, payable in two installments.

The first installment of $ 15.0 million was received on the closing date of August 8, 2018.

The second installment of $ 3.0 million is to be received 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.

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 and $ 2.4 million as of December 31, 2020 and 2019, respectively.

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 loss.

As of December 31, 2019, we held 3.5 million shares of RESI common stock ( no comparative amount as of December 31, 2020).

As of December 31, 2019 and 2018, the fair value of our investment was $ 42.6 million and $ 36.2 million, respectively ( no comparative amount as of December 31, 2020).

During the years ended December 31, 2020, 2019 and 2018, we recognized an unrealized gain (loss) from the change in fair value of $ 4.0 million, $ 14.4 million and $( 13.0 ) million, respectively, in the consolidated statements of operations and comprehensive loss.

In January 2016, the FASB issued ASU No.

2016-01, Financial Instruments - Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities , that required equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.

This standard was effective for the Company on January 1, 2018.

The adoption of this standard resulted in a cumulative effect adjustment to increase retained earnings and decrease accumulated other comprehensive income by $ 0.7 million, net of income tax provision, on January 1, 2018.

The unrealized gain for years ended December 31, 2020 and 2019 included $ 4.1 million and $ 2.0 million of net gains recognized on RESI shares sold during the period, respectively ( no comparative amount for the year ended December 31, 2018).

During the years ended December 31, 2020, 2019 and 2018, we earned dividends of $ 0.5 million, $ 1.7 million and $ 2.5 million, respectively, related to this investment.

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.

During the year ended December 31, 2019, the Company sold 0.7 million shares for net proceeds of $ 8.0 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 6 — ACCOUNTS RECEIVABLE, NET

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We also include amounts in unbilled accounts receivable that are earned during a month and billed in the following month.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

The Company adopted this standard effective January 1, 2020 utilizing a modified retrospective approach, which did not have any impact on the Company’s consolidated financial statements.

We are exposed to credit losses through our sales of products and services to our customers which are recorded as accounts receivable, net on the Company’s consolidated financial statements.

We monitor and estimate the allowance for credit losses based on our historical write-offs, historical collections, our analysis of past due accounts based on the contractual terms of the receivables, relevant market and industry reports and our assessment of the economic status of our customers, if known.

Estimated credit losses are written off in the period in which the financial asset is no longer collectible.

Estimated credit losses are written off in the period in which the financial asset is determined to be no longer collectible.

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

Prior to January 1, 2020, our allowance for credit losses represents an amount that we estimate to be uncollectible.

Bad debt expense amounted to $ 2.2 million, $ 0.7 million and $ 2.8 million for the years ended December 31, 2020, 2019 and 2018, respectively, and is included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss.

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)

Balance at End of Period

Allowance for expected credit losses:

Year ended December 31, 2021 $ 5,581 $ 1,354 $ 1,638 $ 5,297

Year ended December 31, 2020 4,472 2,229 1,120 5,581

______________________________________

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

NOTE 7 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

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(in thousands) 2021 2020

Maintenance agreements, current portion $ 2,513 $ 1,923

Income taxes receivable $ 8,403 $ 7,053

Prepaid expenses 2,865 4,812

Maintenance agreements, current portion 1,717 2,513

Other current assets 8,879 5,101

Total $ 21,864 $ 19,479

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 8 — DISCONTINUATION OF LINES OF BUSINESS

In October 2019, the Company announced its plans to wind down and close the Owners.com business, which was completed by December 31, 2019.

Owners.com was a technology-enabled real estate brokerage and provider of related mortgage brokerage and title services.

Owners.com was not material in relation to the Company’s results of operations or financial position.

In connection with the wind down of Owners.com, the Company wrote off $ 5.2 million of goodwill and $ 0.7 million of intangible assets (see Note 11).

In addition, wind down expenses were included in the Project Catalyst restructuring charges (see Note 24).

Buy-Renovate-Lease-Sell

On November 26, 2018, the Company announced its plans to sell its short-term investments in real estate (“BRS Inventory”) and discontinue the Company’s Buy-Renovate-Lease-Sell (“BRS”) business.

Altisource’s BRS business focused on buying, renovating, leasing and selling single-family homes to real estate investors.

The BRS business was not material in relation to the Company’s results of operations or financial position.

The Company completed the sale of the BRS Inventory during the year ended December 31, 2019.

NOTE 8 — PREMISES AND EQUIPMENT, NET

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Total $ 6,873 $ 11,894

Depreciation and amortization expense amounted to $ 14.9 million, $ 18.5 million and $ 30.8 million for the years ended December 31, 2020, 2019 and 2018, 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.

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).

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

(in thousands) 2021 2020

United States $ 5,530 $ 13,426

Luxembourg $ 3,883 $ 5,451

United States 1,932 5,530

India 999 822

Uruguay 59 91

Philippines — 95

Total $ 6,873 $ 11,894

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Total $ 7,594 $ 18,213

Amortization of operating leases was $ 10.2 million and $ 11.8 million for the years ended December 31, 2020 and 2019, respectively ( no comparative amount for the year ended December 31, 2018), 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.

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).

NOTE 10 — GOODWILL AND INTANGIBLE ASSETS, NET

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(in thousands) Total

Balance as of January 1, 2019 $ 81,387

Disposition (1)

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

Write-off (1)

Balance as of December 31, 2020 and 2019 $ 73,849

Balance as of December 31, 2021

______________________________________

(1) During 2019, the Company sold the Financial Services Business (see Note 4) which had $ 2.4 million of goodwill attributed to it.

(2) During 2019, we recorded a $ 5.2 million write-off of goodwill attributable to the Owners.com business, as a result of our decision to wind down and close the business (see Note 8).

(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.

Intangible Assets, Net

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

Intellectual property — — 300 — ( 175 ) — 125

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

Total $ 259,016 $ 262,712 $ ( 222,157 ) $ ( 216,386 ) $ 36,859 $ 46,326

Amortization expense for definite lived intangible assets was $ 9.5 million and $ 14.7 million for the years ended December 31, 2021 and 2020, respectively .

Forecasted annual definite lived intangible asset amortization expense for 2022 through 2026 is $ 5.1 million, $ 5.1 million, $ 5.1 million, $ 5.1 million and $ 4.9 million, respectively.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Amortization expense for definite lived intangible assets was $ 14.7 million, $ 19.0 million and $ 28.4 million for the years ended December 31, 2020, 2019 and 2018, respectively .

Expected annual definite lived intangible asset amortization expense for 2021 through 2025 is $ 9.5 million, $ 5.1 million, $ 5.1 million, $ 5.1 million and $ 5.1 million, respectively.

NOTE 11 — OTHER ASSETS

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(in thousands) 2021 2020

Security deposits $ 2,416 $ 3,473

Restricted cash $ 4,017 $ 3,833

Security deposits 1,043 2,416

Other 1,072 3,601

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Unamortized discount, net ( 1,494 ) ( 2,159 )

Long-term debt $ 242,656 $ 287,882

Total Senior secured term loans 244,078 242,656

Credit Facility — —

Debt issuance costs, net ( 441 ) —

Total Credit facility ( 441 ) —

Total Long-term debt $ 243,637 $ 242,656

Credit Agreement

Altisource Portfolio Solutions S.A.

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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.

The Term B Loans mature in April 2024 and the revolving credit facility matures in April 2023.

The Term B Loans mature in April 2024.

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

Altisource Portfolio Solutions S.A.

and certain subsidiaries are guarantors of the term loan and the revolving credit facility (collectively, the “Guarantors”).

Proceeds from the Term B Loans were used to repay the Company’s prior senior secured term loan, which had an outstanding balance of $ 412.1 million as of April 3, 2018.

In connection with the refinancing, we recognized a loss of $ 4.4 million from the write-off of unamortized debt issuance costs and debt discount in the second quarter of 2018.

This loss was included in other income (expense), net in the consolidated statements of operations and comprehensive loss.

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 due until April 2024, when the balance is due at maturity.

During 2020 and 2019, the Company sold 3.5 million and 0.7 million, respectively, RESI shares for net proceeds of $ 46.6 million and $ 8.0 million, respectively, and used the net proceeds to repay a portion of the senior secured term loan (see Note 5).

Also during 2019, the Company used net proceeds of $ 37.0 million from the sale of the Financial Services Business (see Note 4) to repay a portion of the senior secured term loan.

In addition, the Company repaid $ 49.9 million of the Term B Loans in the fourth quarter of 2018 from proceeds from the sale certain of the BRS Inventory received during December 2018 and in anticipation of receiving additional proceeds during the first half of 2019 (see Note 8).

Also during 2018, the Company used the proceeds received from the sale of the rental property management business (see Note 4) to repay $ 15.0 million of the Term B Loans.

These repayments were applied to contractual amortization payments in the direct order of maturity.

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;

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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).

Our leverage ratio exceeded 3.50 to 1.00 during the year ended December 31, 2020.

However, because the Company did not generate any Consolidated Excess Cash Flow in 2020, no amounts are 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.

Our leverage ratio exceeded 3.00 to 1.00 during the year ended December 31, 2020.

The lenders have no obligation to provide any incremental indebtedness.

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The interest rate as of December 31, 2021 was 5.00 %.

Loans under the revolving credit facility bear interest at rates based upon, at our option, the Adjusted Eurodollar Rate or the Base Rate.

Adjusted Eurodollar Rate revolving loans bear interest at a rate per annum equal to the sum of (i) the Adjusted Eurodollar Rate for a three month interest period plus (ii) 4.00 %.

Base Rate revolving loans bear interest at a rate per annum equal to the sum of (i) the Base Rate plus (ii) 3.00 %.

The unused commitment fee is 0.50 %.

Borrowings under the revolving credit facility are not permitted 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, 2020.

There were no borrowings outstanding under the revolving credit facility as of December 31, 2020.

The payment of all amounts owing by Altisource under the Credit Agreement is guaranteed by the Guarantors and is secured by a pledge of all equity interests of certain subsidiaries of Altisource, as well as a lien on substantially all of the assets of Altisource S.à r.l.

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and engage in mergers and consolidations.

and to the extent any Revolving Credit Loans are outstanding on the last day of a fiscal quarter, permit the Total Leverage Ratio to be greater than 3.50 :1.00 as of the last day of such fiscal quarter, subject to a customary cure provision (the “Revolving Financial Covenant”).

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Credit Agreement, (iv) a breach of the Revolving Financial Covenant, subject to a customary cure provision and not an Event of Default with respect to the Term Loans unless and until the Required Revolving Lenders accelerate the Revolving Credit Loans, (v) failure to pay principal or interest on any other debt that equals or exceeds $ 40.0 million when due, (vi) 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, (vii) occurrence of a Change of Control, (viii) bankruptcy and insolvency events, (ix) 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, (x) the occurrence of certain ERISA events and (xi) the failure of certain Loan Documents to be in full force and effect.

The Credit Agreement contains certain events of default including (i) failure to pay principal when due or interest or any other amount owing on any other obligation under the Credit Agreement within five days of becoming due, (ii) material incorrectness of representations and warranties when made, (iii) breach of certain other covenants, subject to cure periods described in the Credit Agreement, (iv) failure to pay principal or interest on any other debt that equals or exceeds $ 40.0 million when due, (v) 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, (vi) occurrence of a Change of Control, (vii) bankruptcy and insolvency events, (viii) entry by a court of one or more judgments against us in an amount in excess of $ 40.0 million that remain unbonded, undischarged or unstayed for a certain number of days after the entry thereof, (ix) the occurrence of certain ERISA events and (x) the failure of certain Loan Documents to be in full force and effect.

If any event of default occurs and is not cured within applicable grace periods set forth in the Credit Agreement or waived, all loans and other obligations could become due and immediately payable and the facility could be terminated.

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As of December 31, 2020, debt issuance costs were $ 2.4 million, net of $ 2.2 million of accumulated amortization.

Interest expense on the senior secured term loans, including amortization of debt issuance costs and the net debt discount, totaled $ 17.7 million, $ 21.4 million and $ 26.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Interest expense on the senior secured term loans, including amortization of debt issuance costs and the net debt discount, totaled $ 13.9 million and $ 17.7 million for the years ended December 31, 2021 and 2020, respectively.

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.

Amounts that are repaid may be re-borrowed in accordance with the limitations set forth below.

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

on June 22, 2022, the difference between the then outstanding balance above $ 15.0 million and $ 15.0 million, 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 )

NOTE 14 — OTHER NON-CURRENT LIABILITIES

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Total $ 19,266 $ 25,239

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 15 — FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

6 unchanged sentences

Restricted cash 4,017 4,017 — — 3,833 3,833 — —

Investment in equity securities — — — — 42,618 42,618 — —

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

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

2 unchanged sentences

Cash and cash equivalents and restricted cash are carried at amounts that approximate their fair values due to the highly liquid nature of these instruments and were measured using Level 1 inputs.

Investment in equity securities is carried at fair value and consists of 3.5 million shares of RESI common stock as of December 31, 2019 ( no comparative amount as of December 31, 2020).

The investment in equity securities is measured using Level 1 inputs as these securities have quoted prices in active markets.

The fair value of our senior secured term loan is based on quoted market prices.

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Therefore, the quoted prices are considered Level 2 inputs.

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

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).

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.

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Our policy is to deposit our cash and cash equivalents with larger, highly rated financial institutions.

The Company derived 54 % of its revenues from Ocwen for the year ended December 31, 2020 (see Note 3 for additional information on Ocwen revenues and accounts receivable balance).

The Company derived 31 % of its revenue from Ocwen for the year ended December 31, 2021 (see Note 3 for additional information on Ocwen revenues and accounts receivable balance).

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

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 16 — SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

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The holders of shares of Altisource common stock generally are entitled to one vote for each share on all matters voted on by shareholders, and the holders of such shares generally will possess all voting power.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Equity Incentive Plan

7 unchanged sentences

As of December 31, 2021, approximately 2.4 million shares of common stock remain available for repurchase under the program.

There were no purchases of shares of common stock during the year ended December 31, 2020.

We purchased 1.0 million shares at an average price of $ 20.33 per share during the year ended December 31, 2019 and 1.6 million shares at an average price of $ 25.53 per share during the year ended December 31, 2018.

There were no purchases of shares of common stock during the years ended December 31, 2021 and 2020.

Luxembourg law limits share repurchases to the balance of Altisource Portfolio Solutions S.A.

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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 leverage ratio exceeded 3.50 to 1.00 during the year ended December 31, 2020.

Share-Based Compensation

We issue share-based awards in the form of stock options, restricted shares and restricted share units for certain employees, officers and directors.

We recognized share-based compensation expense of $ 7.8 million, $ 11.9 million and $ 10.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

We recognized share-based compensation expense of $ 2.8 million and $ 7.8 million for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, estimated unrecognized compensation costs related to share-based awards amounted to $ 2.4 million, which we expect to recognize over a weighted average remaining requisite service period of approximately 1.29 years.

11 unchanged sentences

A total of 140 thousand market-based options were outstanding as of December 31, 2021.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Performance-Based Options.

These option grants generally will vest if certain specific financial measures are achieved;

one-fourth vests on each anniversary of the grant date.

For certain other financial measures, options cliff-vest upon the achievement of the specific performance during the period from 2019 through 2021.

typically with one-fourth vesting on each anniversary of the grant date.

The award of performance-based options is adjusted based on the level of achievement specified in the award agreements.

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If the performance criteria achieved is below a certain threshold, the options are canceled.

The options generally expire on the earlier of ten years after the date of grant or following termination of service.

The options generally expire on the earlier of ten years after the date of grant or following termination of service, unless the performance criteria is met prior to termination of service in which case vesting will generally continue in accordance with the provisions of the award agreement.

There were 366 thousand performance-based options outstanding as of December 31, 2021.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

There were no stock options granted during 2021 and 2020.

Outstanding stock options increased by 228 thousand in February 2019 in connection with the determination of the level of achievement for certain performance-based options granted in 2018.

The Company granted 277 thousand stock options (at a weighted average exercise price of $ 25.15 per share) during the year ended December 31, 2018.

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

Black-Scholes Binomial

Risk-free interest rate (%) 2.66 – 3.10

Expected stock price volatility (%) 70.31 – 71.86

71.36 – 71.86

Expected dividend yield —

Expected option life (in years) 6.00 – 6.25

Fair value $ 16.17 – $ 19.68

$ 14.67 – $ 20.26

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.

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(in thousands, except per share data) 2021 2020

Weighted average grant date fair value of stock options granted per share $ — $ — $ 16.31

Intrinsic value of options exercised — 54 4,609

Grant date fair value of stock options that vested $ 1,203 $ 2,730

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Exercisable as of December 31, 2021 525,707 28.48 4.63 —

In 2018, the Company modified the performance thresholds that are required to be met in order for vesting to occur for 263 thousand stock options granted to 16 employees during the year ended December 31, 2018.

The award modification did not change the inputs into the valuation model or the Company’s assessment of the probability of vesting as of the effective date of the modifications.

Consequently, no incremental compensation expense was required as a result of this modification.

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, 2021:

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(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:

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$ 180.01 — $ 190.00

$ 170.01 — $ 180.00

$ 180.01 — $ 190.00

Over $ 190.00

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Other Share-Based Awards

The Company’s other share-based and similar types of awards are composed of restricted shares and restricted share units.

The restricted shares and restricted share units are composed of a combination of service-based awards, performance-based awards and market-based awards.

The Company’s other share-based and similar types of awards are comprised of restricted shares and restricted share units.

The restricted shares and restricted share units are comprised of a combination of service-based awards, performance-based awards and market-based awards.

Service-Based Awards.

These awards generally vest over two to four year periods with (a) vesting in equal annual installments, or (b) vesting of all of the restricted shares and restricted share units at the end of the vesting period.

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

A total of 249 thousand service-based awards were outstanding as of December 31, 2021.

Beginning in 2019, service-based restricted share units were awarded as a component of most employees’ annual incentive compensation.

Performance-Based Awards.

These awards generally vest if certain specific financial measures are achieved;

generally one-third vests on each anniversary of the grant date or the awards cliff-vest on the third anniversary of the grant date.

The number of performance-based restricted shares and restricted share units that may vest will be based on the level of achievement, as specified in the award agreements.

If the performance criteria achieved is above certain financial performance levels, participants have the opportunity to vest in up to 150 % of the restricted share unit award for certain awards.

If the performance criteria achieved is below a certain thresholds, the award is canceled.

generally one-third vests on each anniversary of the grant date or cliff-vest on the third anniversary of the grant date.

The number of performance-based restricted shares and restricted share units that may vest is based on the level of achievement, as specified in the award agreements.

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 150 % of the restricted share unit award for certain awards.

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

A total of 187 thousand performance-based awards were outstanding as of December 31, 2021.

1 unchanged sentence

50 % of these awards generally vest if certain specific market conditions are achieved over a 30 -day period and the remaining 50 % of these awards generally vest on the one year anniversary of the initial vesting.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Company estimates the grant date fair value of these awards using a lattice (binomial) model.

The Company estimates the grant date fair value of these awards using a lattice (binomial) model.

A total of 112 thousand market-based awards were outstanding as of December 31, 2021.

6 unchanged sentences

The Company granted 368 thousand restricted share units (at a weighted average grant date fair value of $ 9.57 per share) during the year ended December 31, 2021.

These grants include 82 thousand performance-based awards that include both a performance condition and a market condition, and 194 thousand market-based awards for the year ended December 31, 2020.

The Company granted 68 thousand performance-based awards that include both a performance condition and a market condition for the year ended December 31, 2019 ( no comparative amounts for the year ended December 31, 2018).

There were no market-based awards granted for the years ended December 31, 2019 and 2018.

These grants include 29 thousand performance-based awards that include both a performance condition and a market condition, and 89 thousand performance-based awards for the year ended December 31, 2021.

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:

12 unchanged sentences

Fair value $ 10.16 $ — $ — $ 12.58

In 2018, the Company modified the vesting condition to remove the requirement that a certain employee be employed by the Company in order for the restricted shares to vest for 31 thousand restricted shares granted in the fourth quarter of 2017 and the first quarter of 2018.

The award modification did not change the inputs into the valuation model or the Company’s assessment of the probability of vesting as of the effective date of the modifications.

Consequently, no incremental compensation expense was required as a result of this modification.

During the year ended December 31, 2019, Pointillist issued 1.1 million shares of its common stock, or 12.1 % of Pointillist equity to Pointillist management in exchange for their services.

The fair value of the Pointillist shares of $ 0.9 million was recognized as share-based compensation expense for the year ended December 31, 2019.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 17 — REVENUE

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service revenue, revenue from reimbursable expenses and non-controlling interests.

Service revenue consists of amounts attributable to our fee-based services and sales of short-term investments in real estate.

Service revenue consists of amounts attributable to our fee-based services.

Reimbursable expenses and non-controlling interests are pass-through items for which we earn no margin.

9 unchanged sentences

Total $ 178,453 $ 365,547

The Company adopted ASU No.

2014-09, Revenue from Contracts from Customers (Topic 606) , and related interpretations (“Topic 606”), effective January 1, 2018 retrospectively with the cumulative effect recognized on the date of initial application (the modified retrospective approach) for all contracts.

As a result of this adoption, the Company recognized an $ 11.2 million increase in deferred revenue, a $ 1.1 million increase in unbilled accounts receivable, a $ 0.3 million increase in other current liabilities and a $ 10.4 million decrease in retained earnings as of January 1, 2018.

Disaggregation of Revenue

3 unchanged sentences

For the year ended December 31, 2020 332,084 17,178 16,285 365,547

For the year ended December 31, 2018 719,739 88,424 30,039 838,202

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Contract Balances

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Our contract liabilities consist of current deferred revenue and other non-current liabilities as reported on the accompanying consolidated balance sheets.

Revenue recognized that was included in the contract liability at the beginning of the period was $ 4.8 million, $ 9.8 million and $ 20.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

Revenue recognized that was included in the contract liability at the beginning of the period was $ 5.5 million and $ 4.8 million for the years ended December 31, 2021 and 2020, respectively.

NOTE 18 — COST OF REVENUE

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

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

The components of cost of revenue were as follows for the years ended December 31:

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Depreciation and amortization 3,162 12,310

Cost of real estate sold — 42,763 47,659

Total $ 171,366 $ 305,194

NOTE 19 — SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include payroll and employee benefits associated with personnel employed in executive, sales and marketing, finance, law, compliance, human resources, vendor management, facilities and risk management roles.

Selling, general and administrative expenses include payroll and employee benefits associated with personnel employed in executive, sales and marketing, finance, technology, law, compliance, human resources, vendor management, facilities and risk management roles.

This category also includes professional services fees, occupancy costs, marketing costs, depreciation and amortization of non-operating assets and other expenses.

2 unchanged sentences

Compensation and benefits $ 28,367 $ 35,521

Occupancy related costs 19,363 26,042 30,851

Amortization of intangible assets 14,720 19,021 28,412

Professional services 10,163 11,444

Amortization of intangible assets 9,467 14,720

Occupancy related costs 9,332 19,363

Marketing costs 2,157 3,325

6 unchanged sentences

Interest income $ 4 $ 114

Loss on debt refinancing — — ( 4,434 )

Other, net 860 261

11 unchanged sentences

Total $ 15,285 $ ( 57,706 )

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

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

(in thousands) 2021 2020

15 unchanged sentences

$ 705 $ ( 5,033 )

Income tax (provision) benefit $ ( 8,609 ) $ ( 318,296 ) $ ( 4,098 )

We operate under a tax holiday in Uruguay.

The Philippines and India tax holidays expired on June 30, 2019 and March 31, 2019 with the election of the reduced income tax rate, respectively.

Income tax provision $ ( 3,232 ) $ ( 8,609 )

We operate in a Uruguay free trade zone that provides an indefinite future tax benefit.

The tax holiday is conditioned upon our meeting certain employment and investment thresholds.

The impact of these tax holidays decreased foreign taxes by $ 0.1 million ($ 0.01 per diluted share), $ 0.3 million ($ 0.02 per diluted share) and $ 0.7 million ($ 0.04 per diluted share) for the years ended December 31, 2020, 2019 and 2018, respectively.

The impact of these tax holidays decreased foreign taxes by $ 0.1 million ($ 0.01 per diluted share) and $ 0.1 million ($ 0.01 per diluted share) for the years ended December 31, 2021 and 2020, respectively.

The Company accounts for certain income and expense items differently for financial reporting purposes and income tax purposes.

21 unchanged sentences

Valuation allowance ( 389,147 ) ( 372,227 )

Non-current deferred tax (liabilities) assets, net $ ( 3,403 ) $ 1,626

Non-current deferred tax liabilities, net $ ( 2,642 ) $ ( 3,403 )

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.

1 unchanged sentence

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 recorded a valuation allowance of $ 372.2 million and $ 355.6 million for the year ending December 31, 2020 and 2019, respectively.

Previously, the Company has not recognized deferred taxes on cumulative earnings of non-Luxembourg affiliates.

In 2019 with the sale of the NCI business and the impending closure of the Philippines, taxes of $ 0.9 million were provided on the Philippines earnings.

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

The Company also recognized income tax expense on 2020 earnings in India.

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

The other non-Luxembourg earnings reinvested as of December 31, 2020 were approximately $ 13.8 million, which if distributed would result in additional tax due totaling approximately $ 0.5 million.

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.

The Company had a deferred tax asset of $ 368.8 million as of December 31, 2021 relating to Luxembourg, U.S.

federal, state and foreign net operating losses compared to $ 353.4 million as of December 31, 2020.

As of December 31, 2020 and 2019, a valuation allowance of $ 349.8 million and $ 337.7 million, respectively, has been established related to Luxembourg net operating loss (“NOL”), a valuation allowance of $ 0.8 million and $ 0.5 million, respectively, has been established related to state NOLs and a valuation allowance of $ 2.4 million and $ 0.1 million, respectively, has been established related to U.S.

federal NOLs.

As of December 31, 2021 and 2020, a valuation allowance of $ 367.8 million and $ 349.8 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 $ 1,476.8 million as of December 31, 2021 and approximately $ 1,415.9 million as of December 31, 2020.

These losses are scheduled to expire between the years 2023 and 2041.

The deferred tax asset created from the sale of the Financial Services Business was adjusted to reflect the final capital loss balance of $ 10.4 million in the U.S.

Because it is not more likely than not the Company will have sufficient taxable income of the appropriate character (a capital gain) in the carryforward period, a full valuation allowance has been established related to the capital loss.

On September 20, 2019, the corporate income tax rate in India lowered from 34.94% to 25.17% retroactive to April 1, 2019.

The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future.

As of December 31, 2020, the amount recorded related to remeasurement of our deferred tax balance was $ 1.4 million.

On April 25, 2019, the Luxembourg Parliament voted to approve the 2019 Budget Law.

The new legislation reduced the overall effective corporate income tax rate from 26.01% to 24.94% for accounting periods beginning on or after January 1,

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 24.94 %.

As of December 31, 2019, the amount recorded related to remeasurement of our deferred tax balance was $ 14.0 million.

In addition, the Company had a deferred tax asset of $ 0.8 million and $ 0.9 million as of December 31, 2021 and 2020, respectively, relating to state tax credits.

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 net operating loss generated in the U.S.

The CARES Act allows a five year carryback of the $ 14.8 million net operating loss generated in the U.S.

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 and a valuation allowance against deferred tax assets the Company believes it is more likely than not will not be realized

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

2020 2019 2018

Statutory tax rate 24.94 % 24.94 %

3 unchanged sentences

Uncertain tax positions 11.82 ( 2.94 )

Unrecognized tax loss — ( 67.18 ) —

Income tax rate change — ( 2.40 )

Tax rate differences on foreign earnings 6.46 ( 6.62 )

Tax Exempt Income ( 145.91 ) —

Other ( 2.70 ) 3.04

13 unchanged sentences

As of December 31, 2021 and 2020, the Company had recorded accrued interest and penalties related to unrecognized tax benefits of $ 5.8 million and $ 4.6 million, respectively.

NOTE 23 — LOSS PER SHARE

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

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

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

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 loss per share are calculated as follows for the years ended December 31:

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

(in thousands, except per share data) 2021 2020

Net loss attributable to Altisource $ ( 67,156 ) $ ( 307,969 ) $ ( 5,382 )

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

Weighted average common shares outstanding, basic 15,839 15,598

Dilutive effect of stock options, restricted shares and

restricted share units

Weighted average common shares outstanding, diluted 16,063 15,598

Loss per share:

Earnings (loss) per share:

Basic $ 0.75 $ ( 4.31 )

Diluted $ 0.74 $ ( 4.31 )

For the years ended December 31, 2020, 2019 and 2018, 1.6 million, 1.6 million and 1.2 million, respectively, stock options, restricted shares and restricted share units were excluded from the computation of loss per share, as a result of the following:

• As a result of the net loss attributable to Altisource for the years ended December 31, 2020, 2019 and 2018, 0.2 million, 0.3 million and 0.5 million, respectively, stock options, restricted shares and restricted share units in each period were excluded from the computation of diluted loss per share, as their impacts were anti-dilutive

• For the years ended December 31, 2020, 2019 and 2018, 0.5 million, 0.5 million and 0.3 million, respectively, stock options were anti-dilutive and have been excluded from the computation of diluted loss per share because their exercise price was greater than the average market price of our common stock

• For the years ended December 31, 2020, 2019 and 2018, 0.9 million, 0.8 million and 0.5 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 an annualized rate of return to shareholders that have not yet been met in each period have been excluded from the computation of diluted loss per share.

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 years ended December 31, 2020, 2019 and 2018, Altisource incurred $ 12.0 million, $ 14.1 million and $ 11.6 million, respectively, of severance costs, professional services fees, facility consolidation costs, technology costs and business wind down costs related to the reorganization plan.

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).

NOTE 24 — COMMITMENTS, CONTINGENCIES AND REGULATORY MATTERS

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

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,

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

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 loss reimbursement, $ 0.3 million and $ 6.2 million net loss for the years ended December 31, 2020, 2019 and 2018, respectively, in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss.

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

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.

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As discussed in Note 3, during the year ended December 31, 2021, Ocwen was our largest customer, accounting for 31 % of our total revenue.

Additionally, 7 % of our revenue for the year ended December 31, 2020 was earned on the loan portfolios serviced by Ocwen, when a party other than Ocwen or the MSR owner selected Altisource as the service provider.

Additionally, 5 % of our revenue for the year ended December 31, 2021 was earned on the loan portfolios serviced by Ocwen, when a party other than Ocwen or the MSRs owner selected Altisource as the service provider.

Ocwen has disclosed that it is subject to a number of ongoing federal and state regulatory examinations, consent orders, inquiries, subpoenas, civil investigative demands, requests for information and other actions and is subject to pending and threatened legal proceedings, some of which include claims against Ocwen for substantial monetary damages.

In addition to monetary damages, various complaints have sought to obtain injunctive relief, consumer redress, refunds, restitution, disgorgement, civil penalties, costs and fees and other relief.

Existing or future similar matters could result in, and in some cases, have resulted in, adverse regulatory or other actions against Ocwen.

Previous regulatory actions against Ocwen have subjected Ocwen to independent oversight of its operations and placed certain restrictions on its ability to acquire servicing rights.

Existing or future similar matters could result in adverse regulatory or other actions against Ocwen.

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, 2020, NRZ MSRs or rights to MSRs relating to approximately 36 % of loans serviced and subserviced by Ocwen (measured in UPB).

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 .

5 unchanged sentences

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 to date and the designated service provider, Altisource believes that Ocwen received these directions from NRZ.

Based upon the impacted portfolios and the designated service provider, Altisource believes that Ocwen received these directions from NRZ.

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

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

We estimate that $ 70.1 million, $ 150.2 million and $ 171.0 million of service revenue from Ocwen for the year ended December 31, 2020, 2019 and 2018, respectively, was derived from Field Services referrals from the NRZ portfolios.

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

We estimate that $ 18.2 million, $ 33.2 million and $ 40.1 million of service revenue from Ocwen for the year ended December 31, 2020, 2019 and 2018, respectively, was derived from default valuations and title services referrals from the NRZ portfolios.

Altisource believes that any action taken by Ocwen to redirect these service referrals breaches Altisource's agreement with Ocwen.

We are currently in discussions with Ocwen to address this matter, and have reserved all of our rights with respect to this matter.

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

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 servicing rights or subservicing arrangements or remaining non-GSE servicing rights or subservicing arrangements and Altisource fails to be retained as a service provider

• The contractual relationship between Ocwen and NRZ changes significantly and this change results in a change in our status as a provider of services related to the Subject MSRs

• 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

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

5 unchanged sentences

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

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) and in July 2018, the FASB issued ASU No.

2018-10, Codification Improvements to Topic 842, Leases and ASU No.

2018-11, Leases (Topic 842):

Targeted Improvements (collectively “Topic 842”).

Topic 842 introduced a new lessee model that brings substantially all leases on the balance sheet.

The Company adopted Topic 842 effective January 1, 2019 using the modified retrospective transition approach.

In addition, the Company elected the practical expedients permitted under the transition guidance within the new standard, including allowing the Company to carry forward its historical lease classification, using hindsight to determine the lease term for existing leases, combining fixed lease and non-lease components and excluding short-term leases.

Adoption of this new standard resulted in the recognition of $ 42.1 million of right-of-use assets in right-of-use assets under operating leases, $ 45.5 million of operating lease liabilities ($ 16.7 million in other current liabilities and $ 28.8 million in other non-current liabilities) and reduced accrued rent and lease incentives of $ 3.4 million in accounts payable and accrued expenses and other non-current liabilities on the accompanying consolidated balance sheets.

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

3 unchanged sentences

We sublease certain office space to third parties.

Sublease income was $ 1.4 million, $ 1.7 million and $ 1.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Sublease income was $ 1.0 million and $ 1.4 million for the years ended December 31, 2021 and 2020, respectively.

The amortization periods of right-of-use assets are generally limited by the expected lease term.

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

As of December 31, 2020, we entered into a five year lease for additional office space which has not yet commenced.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

15 unchanged sentences

Present value of lease liabilities $ 7,922

We have executed three standby letters of credit totaling $ 0.8 million related to three office leases that are secured by restricted cash balances.

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

Escrow Balances

2 unchanged sentences

Amounts held in escrow accounts were $ 27.5 million and $ 20.0 million as of December 31, 2021 and 2020, respectively.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

NOTE 26 — QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables contain selected unaudited statement of operations information for each quarter of 2020 and 2019.

The following information reflects all recurring adjustments necessary for a fair presentation of the information for the periods presented.

The operating results for any quarter are not necessarily indicative of results for any future period.

Our business can be affected by seasonality.

2020 quarter ended (1)(2)(3)(4)(5)(6)

(in thousands, except per share data) March 31, June 30, September 30, December 31,

Revenue $ 121,444 $ 95,342 $ 88,795 $ 59,966

Gross profit 26,863 12,714 16,225 4,551

Loss before income taxes and non-controlling interests ( 9,124 ) ( 33,747 ) ( 11,140 ) ( 3,695 )

Net loss ( 11,545 ) ( 34,864 ) ( 12,897 ) ( 7,009 )

Net loss attributable to Altisource ( 11,650 ) ( 35,061 ) ( 13,237 ) ( 7,208 )

Loss per share:

Basic $ ( 0.75 ) $ ( 2.25 ) $ ( 0.85 ) $ ( 0.46 )

Diluted $ ( 0.75 ) $ ( 2.25 ) $ ( 0.85 ) $ ( 0.46 )

Weighted average shares outstanding:

Basic 15,497 15,601 15,637 15,657

Diluted 15,497 15,601 15,637 15,657

2019 quarter ended (1)(2)(3)(4)(5)(7)(8)

(in thousands, except per share data) March 31, June 30, September 30, December 31,

Revenue $ 169,935 $ 196,535 $ 141,493 $ 140,688

Gross profit 45,720 43,821 30,771 35,083

(Loss) income before income taxes and non-controlling interests ( 3,966 ) 11,909 12,955 ( 8,459 )

Net (loss) income ( 2,744 ) ( 4,604 ) 7,576 ( 306,085 )

Net (loss) income attributable to Altisource ( 3,184 ) ( 5,844 ) 7,165 ( 306,106 )

(Loss) earnings per share:

Basic $ ( 0.20 ) $ ( 0.36 ) $ 0.45 $ ( 19.66 )

Diluted $ ( 0.20 ) $ ( 0.36 ) $ 0.44 $ ( 19.66 )

Weighted average shares outstanding:

Basic 16,292 16,214 15,897 15,568

Diluted 16,292 16,214 16,151 15,568

______________________________________

(1) The sum of quarterly amounts, including per share amounts, may not equal amounts reported for year-to-date periods.

This is due to the effects of rounding and changes in the number of weighted average shares outstanding for each period.

(2) The income tax provisions on losses before income taxes and non-controlling interests for each quarter of 2020 were primarily driven by the income in our US and other foreign operations from transfer pricing on services provided to our Luxembourg operating company and no tax benefit on pretax losses from our Luxembourg operating company.

During the fourth quarter of 2019, we recognized net income tax provision of $ 318.3 million, which included an increase in the valuation allowance in connection with the Luxembourg net operating loss carryforward of $ 291.5 million, the impact of a decrease in the Luxembourg statutory income tax rate on deferred taxes of $ 1.7 million and foreign income tax reserves of $ 5.6 million.

During the second quarter of 2019, we recognized $ 12.3 million as a result of the change in the Luxembourg statutory income tax rate on deferred taxes.

(3) During the first quarter of 2020, second quarter of 2020, third quarter of 2020 and fourth quarter of 2020, we recognized unrealized (losses) gains from our investment in RESI common shares of $( 1.3 ) million, $( 11.2 ) million, $ 0.1 million and $ 16.4 million, respectively.

During the first quarter of 2019, second quarter of 2019, third quarter of 2019 and fourth quarter of 2019, we recognized unrealized gains (losses) from our investment in RESI common shares of $ 2.2 million, $ 11.8 million, $( 2.3 ) million and $ 2.7 million, respectively.

(4) In August 2018, we initiated Project Catalyst, a restructuring plan intended to optimize our operations and reduce costs to align our cost structure with our anticipated revenues and improve our operating margins.

During the first quarter of 2020,

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Consolidated Financial Statements ( Continued )

second quarter of 2020, third quarter of 2020 and fourth quarter of 2020, we recognized $ 2.9 million, $ 5.8 million, $ 2.2 million and $ 1.1 million, respectively, of severance costs, professional services fees, facility consolidation costs, technology costs and business wind down costs related to the restructuring plan.

During the first quarter of 2019, second quarter of 2019, third quarter of 2019 and fourth quarter of 2019, we recognized $ 4.4 million, $ 1.9 million, $ 2.8 million and $ 5.0 million, respectively, of severance costs, professional services fees, facility consolidation costs, technology costs and business wind down costs related to the restructuring plan.

(5) In connection with a United States Supreme Court decision in June 2018, we analyzed our services for potential exposure to sales tax in various jurisdictions in the United States and recognized a net loss reimbursement of $( 0.6 ) million and $( 2.1 ) million for the third and fourth quarter of 2020, respectively.

In addition, we recognized a net (loss reimbursement) loss of $ 2.1 million and $( 1.7 ) million in the first and third quarter of 2019, respectively.

(6) During the third quarter of 2020 we recognized $ 0.7 million of severance in connection with cost savings initiatives (no comparable amounts in 2019).

(7) In July 2019, we sold the Financial Services Business to TSI for $ 44.0 million consisting of an up-front payment of $ 40.0 million, subject to a working capital adjustment and transaction costs upon closing of the sale, and an additional $ 4.0 million payment on the one year anniversary of the sale closing.

We recognized a $ 17.6 million pretax gain on sale in the third quarter of 2019 and a working capital true-up gain of an additional $ 0.3 million in the fourth quarter of 2019.

(8) In connection with the wind down of Owners.com, we wrote off $ 5.2 million of goodwill and $ 0.7 million of intangible assets during the fourth quarter of 2019.

In November 2018, we announced our plans to sell the BRS Inventory and discontinue the BRS business.

During the second quarter of 2019, we recognized a loss on the sale of the BRS Inventory of $ 1.8 million.

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