UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2018~~2019



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-34354

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

(Exact name of Registrant as specified in its Charter)



Luxembourg	98-0554932
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

40, avenue Monterey

L-2163 Luxembourg

Grand Duchy of Luxembourg

(Address of principal executive offices) (Zip Code)

(352) 24 69 79 00

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth ~~company (as defined~~company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange ~~Act):~~Act.



Large accelerated filer o	Accelerated filer þ
Non-accelerated filer o ~~(Do not check if a smaller reporting company)~~	Smaller reporting company o
	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided bypursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of April ~~20, 2018,~~19, 2019, there were ~~17,204,646~~16,278,696 outstanding shares of the registrant’s shares of beneficial interest (excluding ~~8,208,102~~9,134,052 shares held as treasury stock).

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

FORM 10-Q



			Page
PART I — Financial Information

	Item 1	Interim Condensed Consolidated Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Operations and Comprehensive ~~Income~~Loss	4
		Condensed Consolidated Statements of Equity	5
		Condensed Consolidated Statements of Cash Flows	6
		Notes to Condensed Consolidated Financial Statements	7

	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2925

	Item 3	Quantitative and Qualitative Disclosures about Market Risk	4536

	Item 4	Controls and Procedures	4536

PART II — Other Information

	Item 1	Legal Proceedings	4637

	Item 1A	Risk Factors	4637

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	4637

	Item 6	Exhibits	4738

SIGNATURES			4839

PART I — FINANCIAL INFORMATION

Item 1. Interim Condensed Consolidated Financial Statements (Unaudited)

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)


	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018

ASSETS
Current assets:
Cash and cash equivalents	$	84,850		$	105,006		$	51,509		$	58,294
Investment in equity securities	41,652			49,153			38,419			36,181
Accounts receivable, net	50,839			52,740			28,634			36,466
Short-term investments in real estate							40,274			39,873
Assets held for sale (Note 3)							26,557			—
Prepaid expenses and other current assets	73,955			64,742			29,292			30,720
Total current assets	251,296			271,641			214,685			201,534

Premises and equipment, net	65,585			73,273
Premises and equipment, net (Notes 1 and 8)							74,991			45,631
Goodwill	86,283			86,283			79,009			81,387
Intangible assets, net	112,918			120,065			72,160			91,653
Deferred tax assets, net	305,679			303,707			308,509			309,089
Other assets	10,012			10,195			10,194			12,406

Total assets	$	831,773		$	865,164		$	759,548		$	741,700

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	66,475		$	84,400		$	64,538		$	87,240
Current portion of long-term debt	5,945			5,945			9,222			—
Deferred revenue	15,489			9,802			7,597			10,108
Other current liabilities	6,651			9,414
Liabilities held for sale (Note 3)							8,736			—
Other current liabilities (Notes 1 and 11)							20,743			7,030
Total current liabilities	94,560			109,561			110,836			104,378

Long-term debt, less current portion	401,716			403,336			322,577			331,476
Other non-current liabilities	15,415			12,282
Other non-current liabilities (Notes 1 and 13)							30,767			9,178

Commitments, contingencies and regulatory matters (Note 19)
Commitments, contingencies and regulatory matters (Note 22)

Equity:
Common stock ($1.00 par value; 100,000 shares authorized, 25,413 issued and 17,343 outstanding as of March 31, 2018; 100,000 shares authorized, 25,413 shares issued and 17,418 outstanding as of December 31, 2017)	25,413			25,413
Common stock ($1.00 par value; 100,000 shares authorized, 25,413 issued and 16,309 outstanding as of March 31, 2019; 16,276 outstanding as of December 31, 2018)							25,413			25,413
Additional paid-in capital	114,676			112,475			125,288			122,667
Retained earnings	600,253			626,600			584,759			590,655
Accumulated other comprehensive income	—			733
Treasury stock, at cost (8,070 shares as of March 31, 2018 and 7,995 shares as of December 31, 2017)	(421,486		)	(426,609		)
Treasury stock, at cost (9,104 shares as of March 31, 2019 and 9,137 shares as of December 31, 2018)							(441,149		)	(443,304		)
Altisource equity	318,856			338,612			294,311			295,431

Non-controlling interests	1,226			1,373			1,057			1,237
Total equity	320,082			339,985			295,368			296,668

Total liabilities and equity	$	831,773		$	865,164		$	759,548		$	741,700

See accompanying notes to condensed consolidated financial statements.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE ~~INCOME~~LOSS

(in thousands, except per share data)


	Three months ended March 31,						Three months ended March 31,
	2018			2017			2019			2018

Revenue	$	197,438		$	240,483		$	169,935		$	197,438
Cost of revenue	147,194			177,953			124,104			147,194

Gross profit	50,244			62,530			45,831			50,244
Operating expenses:
Selling, general and administrative expenses	43,124			47,701			41,240			43,124
Restructuring charges (Note 21)							4,420			—

Income from operations	7,120			14,829			171			7,120
Other income (expense), net:
Interest expense	(5,863		)	(5,798		)	(6,749		)	(5,863		)
Unrealized loss on investment in equity securities (Note 3)	(7,501		)	—
Unrealized gain (loss) on investment in equity securities (Note 4)							2,238			(7,501		)
Other income (expense), net	1,272			715			374			1,272
Total other income (expense), net	(12,092		)	(5,083		)	(4,137		)	(12,092		)

(Loss) income before income taxes and non-controlling interests	(4,972		)	9,746
Income tax benefit (provision)	1,365			(2,586		)
Loss before income taxes and non-controlling interests							(3,966		)	(4,972		)
Income tax benefit							1,222			1,365

Net (loss) income	(3,607		)	7,160
Net loss							(2,744		)	(3,607		)
Net income attributable to non-controlling interests	(525		)	(615		)	(440		)	(525		)

Net (loss) income attributable to Altisource	$	(4,132	)	$	6,545
Net loss attributable to Altisource							$	(3,184	)	$	(4,132	)

(Loss) earnings per share:
Loss per share:
Basic	$	(0.24	)	$	0.35		$	(0.20	)	$	(0.24	)
Diluted	$	(0.24	)	$	0.34		$	(0.20	)	$	(0.24	)

Weighted average shares outstanding:
Basic	17,378			18,662			16,292			17,378
Diluted	17,378			19,304			16,292			17,378

Comprehensive (loss) income:
Net (loss) income	$	(3,607	)	$	7,160
Other comprehensive income, 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 (Note 1)	(733		)	—
Unrealized gain on investment in equity securities, net of income tax provision of $4,725	—			12,723
Comprehensive loss:
Net loss							$	(2,744	)	$	(3,607	)
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							—			(733		)

Comprehensive (loss) income, net of tax	(4,340		)	19,883
Comprehensive loss, net of tax							(2,744		)	(4,340		)
Comprehensive income attributable to non-controlling interests	(525		)	(615		)	(440		)	(525		)

Comprehensive (loss) income attributable to Altisource	$	(4,865	)	$	19,268
Comprehensive loss attributable to Altisource							$	(3,184	)	$	(4,865	)

See accompanying notes to condensed consolidated financial statements.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)


	Altisource Equity																				Altisource Equity
	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			Accumulated other comprehensive income (loss)			Treasury stock, at cost			Non-controlling interests			Total
	Shares																				Shares

Balance, December 31, 2016	25,413	$	25,413	$	107,288	$	333,786		$	(1,745	)	$	(403,953	)	$	1,405		$	62,194

Comprehensive income:
Net income	—	—		—		6,545			—			—			615			7,160
Other comprehensive income, net of tax	—	—		—		—			12,723			—			—			12,723
Distributions to non-controlling interest holders	—	—		—		—			—			—			(569		)	(569		)
Share-based compensation expense	—	—		695		—			—			—			—			695
Cumulative effect of an accounting change (Note 13)	—	—		932		(932		)	—			—			—			—
Exercise of stock options	—	—		—		(2,872		)	—			3,624			—			752
Repurchase of shares	—	—		—		—			—			(10,590		)	—			(10,590		)

Balance, March 31, 2017	25,413	$	25,413	$	108,915	$	336,527		$	10,978		$	(410,919	)	$	1,451		$	72,365

Balance, December 31, 2017	25,413	$	25,413	$	112,475	$	626,600		$	733		$	(426,609	)	$	1,373		$	339,985		25,413	$	25,413	$	112,475	$	626,600		$	733		$	(426,609	)	$	1,373		$	339,985

Net (loss) income	—	—		—		(4,132		)	—			—			525			(3,607		)	—	—		—		(4,132		)	—			—			525			(3,607		)
Distributions to non-controlling interest holders	—	—		—		—			—			—			(672		)	(672		)	—	—		—		—			—			—			(672		)	(672		)
Share-based compensation expense	—	—		2,201		—			—			—			—			2,201			—	—		2,201		—			—			—			—			2,201
Cumulative effect of accounting changes (Note 1)	—	—		—		(9,715		)	(733		)	—			—			(10,448		)
Cumulative effect of accounting changes																					—	—		—		(9,715		)	(733		)	—			—			(10,448		)
Exercise of stock options and issuance of restricted shares	—	—		—		(12,500		)	—			15,117			—			2,617			—	—		—		(12,500		)	—			15,117			—			2,617
Repurchase of shares	—	—		—		—			—			(9,994		)	—			(9,994		)	—	—		—		—			—			(9,994		)	—			(9,994		)

Balance, March 31, 2018	25,413	$	25,413	$	114,676	$	600,253		$	—		$	(421,486	)	$	1,226		$	320,082		25,413	$	25,413	$	114,676	$	600,253		$	—		$	(421,486	)	$	1,226		$	320,082

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

Net (loss) income																					—	—		—		(3,184		)	—			—			440			(2,744		)
Distributions to non-controlling interest holders																					—	—		—		—			—			—			(620		)	(620		)
Share-based compensation expense																					—	—		2,621		—			—			—			—			2,621
Exercise of stock options and issuance of restricted shares																					—	—		—		(1,549		)	—			1,577			—			28
Treasury shares withheld for the payment of tax on restricted share unit and restricted share issuances and stock option exercises																					—	—		—		(1,163		)	—			578			—			(585		)

Balance, March 31, 2019																					25,413	$	25,413	$	125,288	$	584,759		$	—		$	(441,149	)	$	1,057		$	295,368

See accompanying notes to condensed consolidated financial statements.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Three months ended March 31,						Three months ended March 31,
	2018			2017			2019			2018

Cash flows from operating activities:
Net (loss) income	$	(3,607	)	$	7,160
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Net loss							$	(2,744	)	$	(3,607	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	8,721			10,008			9,369			8,721
Amortization of intangible assets	7,147			9,146			8,647			7,147
Change in the fair value of acquisition related contingent consideration	—			8
Unrealized loss on investment in equity securities	7,501			—
Unrealized (gain) loss on investment in equity securities							(2,238		)	7,501
Share-based compensation expense	2,201			695			2,621			2,201
Bad debt expense	724			1,903			155			724
Amortization of debt discount	89			105			153			89
Amortization of debt issuance costs	273			291			170			273
Deferred income taxes	(1,972		)	—			582			(1,972		)
Loss on disposal of fixed assets	489			1,480			331			489
Changes in operating assets and liabilities:
Changes in operating assets and liabilities (excludes assets and liabilities held for sale, see Note 3):
Accounts receivable	2,289			2,880			1,091			2,289
Short-term investments in real estate							(401		)	(9,915		)
Prepaid expenses and other current assets	(9,213		)	(4,749		)	(781		)	702
Other assets	481			(374		)	(92		)	481
Accounts payable and accrued expenses	(18,189		)	(10,177		)	(16,318		)	(18,189		)
Other current and non-current liabilities	(5,503		)	(36,735		)	(7,200		)	(5,503		)
Net cash used in operating activities	(8,569		)	(18,359		)	(6,655		)	(8,569		)

Cash flows from investing activities:
Additions to premises and equipment	(1,258		)	(1,944		)	(790		)	(1,258		)
Net cash used in investing activities	(1,258		)	(1,944		)	(790		)	(1,258		)

Cash flows from financing activities:
Repayment of long-term debt	(1,486		)	(1,486		)
Repayments and repurchases of long-term debt							—			(1,486		)
Debt issuance costs	(496		)	—			—			(496		)
Proceeds from stock option exercises	2,617			752			28			2,617
Purchase of treasury shares	(9,994		)	(10,590		)	—			(9,994		)
Distributions to non-controlling interests	(672		)	(569		)	(620		)	(672		)
Payments of tax withholding on issuance of restricted share units and restricted shares							(585		)	—
Net cash used in financing activities	(10,031		)	(11,893		)	(1,177		)	(10,031		)

Net decrease in cash, cash equivalents and restricted cash	(19,858		)	(32,196		)	(8,622		)	(19,858		)
Cash, cash equivalents and restricted cash at the beginning of the period	108,843			153,421			64,046			108,843

Cash, cash equivalents and restricted cash at the end of the period	$	88,985		$	121,225		$	55,424		$	88,985

Supplemental cash flow information:
Interest paid	$	5,269		$	5,456		$	5,634		$	5,269
Income taxes paid, net	946			6,515			2,410			946

Non-cash investing and financing activities:
Increase in payables for purchases of premises and equipment	$	264		$	2,094		$	28		$	264
Acquisition of right-to-use assets with lease obligations							209			—

See accompanying notes to condensed consolidated financial statements.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements

NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION

Description of Business

Altisource Portfolio Solutions S.A., together with its subsidiaries (which may be referred to as “Altisource,” the “Company,” “we,” “us” or “our”), is an integrated service provider and marketplace for the real estate and mortgage industries. Combining operational excellence with a suite of innovative services and technologies, Altisource helps solve the demands of the ever-changing markets we serve.

We are publicly traded on the NASDAQ Global Select Market under the symbol “ASPS.” We are organized under the laws of the Grand Duchy of Luxembourg.

Basis of Accounting and Presentation

The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, the interim data includes all normal recurring adjustments considered necessary to fairly state the results for the interim periods presented. The preparation of interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our interim condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Intercompany transactions and accounts have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year presentation.

Effective January 1, 2019, the Company reorganized its internal reporting structure in connection with Project Catalyst, a project initiated in August 2018 to optimize our operations and reduce costs to better align our cost structure with our anticipated revenues and improve our operating margins (see Note 21). The internal reorganization included, among other changes, the replacement of segment presidents with a chief operating officer, who is responsible for products, services and operations for the Company’s Mortgage Market and Real Estate Market businesses, reporting to our Chief Executive Officer (our chief operating decision maker) who manages our businesses, regularly reviews operating results and profitability, allocates resources and evaluates performance on a consolidated basis. Prior to January 1, 2019, the Company reported our operations through two reportable segments: Mortgage Market and Real Estate Market. In addition, we reported Other Businesses, Corporate and Eliminations separately. The prior year presentation has been reclassified to conform to the current year presentation.

Altisource consolidates Best Partners Mortgage Cooperative, Inc., which is managed by The Mortgage Partnership of America, L.L.C. (“MPA”), a wholly-owned subsidiary of Altisource. Best Partners Mortgage Cooperative, Inc. is a mortgage cooperative doing business as Lenders One^® (“Lenders One”). MPA provides services to Lenders One under a management agreement that ends on December 31, 2025 (with renewals for three successive five-year periods at MPA’s option).

The management agreement between MPA and Lenders One, pursuant to which MPA is the management company, represents a variable interest in a variable interest entity. MPA is the primary beneficiary of Lenders One as it has the power to direct the activities that most significantly impact the cooperative’s economic performance and the right to receive benefits from the cooperative. As a result, Lenders One is presented in the accompanying condensed consolidated financial statements on a consolidated basis and the interests of the members are reflected as non-controlling interests. As of March 31, 2019, Lenders One had total assets of $2.0 million and total liabilities of $0.9 million. As of December 31, 2018, Lenders One had total assets of ~~$4.8~~$2.7 million and total liabilities of ~~$3.2 million. As of December 31, 2017, Lenders One had total assets of $4.6 million and total liabilities of $3.1~~$1.3 million.

These interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, as filed with the SEC on February ~~22, 2018.~~26, 2019.

Table of Content

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

Fair Value Measurements

Fair value is defined as an exit price, representing the amount that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:

Level 1 — Quoted prices in active markets for identical assets and liabilities

Level 2 — Observable inputs other than quoted prices included in Level 1

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or ~~liabilities~~liabilities.

Financial assets and financial liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

~~Table of Content~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

Recently Adopted Accounting ~~Pronouncements~~

~~Revenue from Contracts with Customers~~Pronouncement

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2014-09,~~2016-02, ~~Revenue from Contracts with Customers~~Leases (Topic ~~606)~~ ~~and during 2016, the FASB issued additional guidance providing clarifications and corrections, including: ASU No. 2016-08,~~ ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),~~ ~~ASU No. 2016-10,~~ ~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,~~ ~~ASU No. 2016-12,~~ ~~Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,~~ ~~andASU No. 2016-20,~~ ~~Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers~~ ~~(collectively “Topic 606”)~~. Topic 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most prior revenue recognition guidance. This new standard requires that an entity recognize revenue for the transfer of promised goods or services to a customer in an amount that reflects the consideration that the entity expects to receive and consistent with the delivery of the performance obligation described in the underlying contract with the customer.

The Company adopted Topic 606 effective January 1, 2018 using the cumulative effect method. 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. Because the Company adopted Topic 606 retrospectively with a cumulative effect as of January 1, 2018, the comparative results as of December 31, 2017 and for the three months ended March 31, 2017 have not been restated and continue to be reported under Accounting Standards Codification Topic 605, ~~Revenue Recognition~~842) and ~~SEC Staff Accounting Bulletin Topic 13,~~ ~~Revenue Recognition~~. The details of the significant changes and quantitative impact of the adoption of Topic 606 are described below. Also see Note 14 for additional information on revenues, including disaggregation of revenue and contract balances.

~~As a result of the adoption of Topic 606, the Company’s accounting policy for revenue recognition is as follows:~~

~~We recognize revenue from the services we provide~~ in accordance with the 5-step process outlined in Topic 606. We recognize revenue when we satisfy a performance obligation by transferring control of a product or service to a customer in an amount that reflects the consideration that we expect to receive. This revenue can be recognized at a point in time or over time. 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. A description of our principal revenue generating activities by reportable segment are as follows:

~~Mortgage Market~~

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

For loan servicing technologies, we recognize revenue based on the number of loans on the system, on a per-transaction basis or over the estimated average number of months the loans and real estate owned (“REO”) are on the platform, as applicable. We generally recognize revenue for professional services relating to loan servicing technologies over the contract period. For our loan origination system, we generally recognize revenue over the contract term, beginning on the commencement date of each contract. For foreclosure trustee services, we recognize revenue over the period during which we perform the related services, with full recognition upon completion and/or recording the related foreclosure deed. For loan disbursement processing services, we recognize revenue over the period during which we perform the processing services with full recognition upon completion of the disbursements. We use judgment to determine the period over which we recognize revenue for certain of these services. For mortgage charge-off collections performed on behalf of our clients, we recognize revenue as a percentage of amounts collected following collection from the borrowers.

For real estate brokerage and auction services, we recognize revenue on a net basis 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.

Reimbursable expenses revenue, primarily related to our property preservation and inspection services, real estate sales and our foreclosure trustee services businesses, is included in revenue with an equal amount recognized in cost of revenue. These amounts are recognized on a gross basis, principally because generally we have control over selection of vendors and the vendor relationship is with us, rather than with our customers.

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~~Notes to Condensed Consolidated Financial Statements (Continued~~)

~~Real Estate Market~~

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

For our renovation services, revenue is recognized over the period of the construction activity, based on the estimated percentage of completion of the projects. We use judgment to determine the period over which we recognize revenue for certain of these services. For real estate brokerage and auction services, we recognize revenue on a net basis 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. For the buy-renovate-lease-sell business, we recognize revenue associated with our sales of short-term investments in real estate on a gross basis as we assume the risks and rewards of ownership of the asset.

Reimbursable expenses revenue, primarily related to our real estate sales business, is included in revenue with an equal offsetting expense recognized in cost of revenue. These amounts are recognized on a gross basis, principally because generally we have control over selection of vendors and the vendor relationship is with us, rather than with our customers.

~~Other Businesses, Corporate and Eliminations~~

For the majority of the services we provide, we recognize transactional revenue when the service is provided. We generally earn fees for our post-charge-off consumer debt collection services as a percentage of the amount we collect on delinquent consumer receivables and recognize revenue following collection from the borrowers. We provide customer relationship management services for which we typically earn and recognize revenue on a per-person, per-call or per-minute basis as the related services are performed.

For the information technology (“IT”) infrastructure services we provide to Ocwen Financial Corporation (“Ocwen”), Front Yard Residential Corporation (“RESI”) and Altisource Asset Management Corporation (“AAMC”), we recognize revenue primarily based on the number of users of the applicable systems, fixed fees and the number and type of licensed platforms. We recognize revenue associated with implementation services upon completion and maintenance ratably over the related service period.

~~The following table summarizes the impact of adopting Topic 606 on the Company’s condensed consolidated balance sheet as of March 31, 2018:~~

Impact of the adoption of Topic 606
(in thousands) As reported Adjustments Balances without adoption of Topic 606

Accounts receivable, net $ 50,839
$ (28 ) $ 50,811
Total current assets 251,296
(28 ) 251,268
Total assets 831,773
(28 ) 831,745

Other current liabilities 6,651
348
6,999
Deferred revenue 15,489
(6,655 ) 8,834
Total current liabilities 94,560
(6,307 ) 88,253

Deferred revenue, non-current 5,529
(3,890 ) 1,639

Retained earnings 600,253
10,169
610,422
Altisource equity 318,856
10,169
329,025
Total equity 320,082
10,169
330,251
Total liabilities and equity 831,773
(28 ) 831,745

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

~~The following table summarizes the impact of adopting Topic 606 on the Company’s condensed consolidated statement of operations and comprehensive income for the three months ended March 31, 2018:~~

Impact of the adoption of Topic 606
(in thousands) As reported Adjustments Balances without adoption of Topic 606

Revenue $ 197,438
$ 412
$ 197,850
Cost of revenue 147,194
797
147,991
Gross profit 50,244
(385 ) 49,859
Income from operations 7,120
(385 ) 6,735
Loss before income taxes and non-controlling interests (4,972 ) (385 ) (5,357 )
Income tax benefit 1,365
106
1,471
Net loss (3,607 ) (279 ) (3,886 )
Net loss attributable to Altisource (4,132 ) (279 ) (4,411 )

The adoption of Topic 606 did not have any impact on net cash flows used in operating, financing or investing activities on the Company’s condensed consolidated statement of cash flows for the three months ended March 31, 2018.

~~Financial Instruments~~

~~In January 2016,~~July 2018, the FASB issued ASU No. ~~2016-01,~~2018-10, ~~Financial Instruments - Overall (Subtopic 825-10): Recognition~~Codification Improvements to Topic 842, Leases and ~~Measurement of Financial Assets and Financial Liabilities~~. This standard requires 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. The standard also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. It also amends certain financial statement presentation and disclosure requirements associated with the fair value of financial instruments. 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 on January 1, 2018. Changes in the fair value of the Company’s investment in RESI subsequent to January 1, 2018, as well as any equity investments acquired in the future, will be reflected as a component of net income in the Company’s condensed consolidated statements of operations and comprehensive income.

~~Other Recently Adopted Accounting Pronouncements~~

~~In August 2016, the FASB issued~~ ASU No. ~~2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~. This standard addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This standard was effective for the Company on January 1, 2018, and the adoption of this guidance did not have any effect on the Company’s condensed consolidated statement of cash flows.

~~In October 2016, the FASB issued ASU No. 2016-16,~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.~~ This standard requires that companies recognize the income tax consequences of an intra-entity transfer of an asset (other than inventory) when the transfer occurs. Previous guidance prohibited companies from recognizing current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This standard was effective for the Company on January 1, 2018, and the adoption of this guidance did not have any effect on the Company’s results of operations and financial position.

~~In November 2016, the FASB issued ASU No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~. This standard requires that companies include restricted cash and restricted cash equivalents in their cash and cash equivalent balances in the statement of cash flows. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This standard was effective for the Company on January 1, 2018, and was adopted using the retrospective transition method, as required by the standard. The adoption of this standard resulted in the classification of the Company’s restricted cash with cash and cash equivalents reported in the Company’s condensed consolidated statements of cash flows. As a result, the Company included $4.1 million, $3.8 million, $4.1 million and $4.1 million of restricted cash with cash and cash equivalents in its condensed consolidated statements of cash flows as of March 31, 2018, December 31, 2017, March 31, 2017 and December 31, 2016, respectively.

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~~Notes to Condensed Consolidated Financial Statements (Continued~~)

~~In January 2017, the FASB issued ASU No. 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business.~~ This standard clarifies the definition of a business and provides a screen to determine if a set of inputs, processes and outputs is a business. The screen requires that when substantially all of the fair value of gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the assets acquired would not be a business. Under the new guidance, in order to be considered a business, an acquisition must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. In addition, the standard narrows the definition of the term “output” so that it is consistent with how it is described in Topic 606. ~~This standard was effective for the Company on January 1, 2018, and the adoption of this guidance did not have any effect on the Company’s results of operations and financial position.~~

~~In February 2017, the FASB issued ASU No. 2017-05,~~ Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets~~. This standard was issued to clarify the scope of Subtopic 610-20,~~ ~~Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets~~, and to add guidance for partial sales of nonfinancial assets. Subtopic 610-20 provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. This standard was effective for the Company on January 1, 2018, and the adoption of this guidance did not have any effect on the Company’s results of operations and financial position.

~~In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting~~. This standard provides guidance about which changes to the terms or conditions of a share-based payment award require the application of modification accounting. This standard requires companies to continue to apply modification accounting, unless the fair value, vesting conditions and classification of an award all do not change as a result of the modification. This standard was effective for the Company on January 1, 2018, and the adoption of this guidance did not have any effect on the Company’s results of operations and financial position.

~~Future Adoption of New Accounting Pronouncements~~

~~In February 2016, the FASB issued ASU No. 2016-02,~~2018-11, Leases (Topic 842): Targeted Improvements (collectively “Topic 842”). ~~This standard~~Topic 842 introduces a new lessee model that brings substantially all leases on the balance sheet. This standard ~~will require companies~~requires lessees to recognize lease assets and lease liabilities on their balance sheets and disclose key information about leasing arrangements in their financial statements. ~~This standard will be effective for annual periods beginning after December 15, 2018, including interim periods within that reporting period. Early application of this standard is permitted.~~ The Company ~~is currently evaluating~~adopted Topic 842 effective January 1, 2019 using the ~~impact of this guidance on its results of operations and financial position. Based on the Company’s preliminary analysis of arrangements where~~modified retrospective transition approach. In addition, the Company ~~is a lessee, we estimate that~~elected the practical expedients permitted under the transition guidance within the new standard, ~~if implemented as~~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 ~~March 31, 2018, would result~~this new standard resulted in ~~approximately $22.0~~the recognition of $42.1 million ~~right-of-use~~of right-to-use assets in premises and equipment, net, $45.5 million of lease obligation 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 ~~Company’s~~accompanying condensed consolidated balance ~~sheet as~~sheets.

Future Adoption of ~~March 31, 2018. The Company will continue to analyze the impact of this guidance and refine the estimated impact on its results of operations and financial position.~~New Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This standard will simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Current guidance requires 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 standard will require 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. This standard will be effective for annual periods beginning after December 15, 2019, including interim periods within that reporting period, and will be applied prospectively. Early adoption of this standard is permitted. The Company is currently evaluating the impact this guidance may have on its condensed consolidated financial statements; however, adoption of this standard as of March 31, 2019 would not have had any impact on the Company’s condensed consolidated financial statements.

In August ~~2017,~~2018, the FASB issued ASU No. ~~2017-12,~~2018-13, ~~Derivatives and Hedging~~Fair Value Measurement (Topic ~~815)~~820): ~~Targeted Improvements~~Disclosure Framework—Changes to ~~Accounting~~the Disclosure Requirements for ~~Hedging Activities~~Fair Value Measurement. ~~The amendments in this~~This standard ~~better align an entity’s risk management activities and financial reporting~~modifies certain disclosure requirements such as the valuation processes for ~~hedging relationships through changes~~Level 3 fair value measurements. This standard also requires new disclosures such as the disclosure of certain assumptions used to ~~both the designation and measurement guidance~~develop significant unobservable inputs for ~~qualifying hedging relationships and the presentation of hedging results.~~Level 3 fair value measurements. This standard will be effective for annual periods beginning after December 15, ~~2018,~~2019, including interim periods within that reporting period. Early ~~application~~adoption of either the entire standard or only the provisions that eliminate or modify requirements is permitted. The Company currently does not expect the adoption of this guidance to have ~~a material effect~~an impact on its ~~results~~condensed consolidated financial statements.

In August 2018, 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 ~~operations and financial position.~~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

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Notes to Condensed Consolidated Financial Statements (Continued)

and the project stage during which they are incurred and establishes additional disclosure requirements. This standard will be effective for annual periods beginning after December 15, 2019, including interim periods within that reporting period. Early adoption of this standard is permitted. The Company currently plans to adopt the standard prospectively and is currently evaluating the impact this guidance may have on its condensed consolidated financial statements.

NOTE 2 — CUSTOMER CONCENTRATION

~~During the three months ended March 31, 2018,~~ Ocwen

Ocwen ~~was our largest customer, accounting for 52% of our total revenue. Ocwen~~Financial Corporation (“Ocwen”) is a residential mortgage loan servicer of mortgage servicing rights (“MSRs”) it owns, including those MSRs in which others have an economic interest, and a subservicer of MSRs owned by others.

During the three months ended March 31, 2019, Ocwen was our largest customer, accounting for 58% of our total revenue. Ocwen purchases certain mortgage services and technology services from us under the terms of ~~master~~ services agreements and amendments thereto (collectively, the “Ocwen Services Agreements”) with terms extending through August 2025. Certain of the Ocwen ~~Service~~Services Agreements contain a “most favored nation” provision and also grant the parties the right to renegotiate pricing, among other things. Certain of the Ocwen Service Agreements also prohibit Ocwen from establishing fee-based businesses that would directly or indirectly compete with Altisource’s services with respect to the Homeward Residential, Inc. and Residential Capital, LLC loan portfolios acquired by Ocwen in December 2012 and February 2013, respectively. Ocwen also purchases certain origination services from Altisource under an agreement that continues until January 2019, but which is subject to a 90 day termination right by Ocwen.

Revenue from Ocwen primarily consists of revenue earned from the loan portfolios serviced and subserviced by Ocwen when Ocwen ~~designates~~engages us as the service provider, and revenue earned directly from ~~Ocwen.~~Ocwen, pursuant to the Ocwen Services Agreements. For the three months ended March 31, 2019 and 2018, ~~and 2017,~~ we ~~generated~~recognized revenue from Ocwen of ~~$102.0~~$98.3 million and ~~$141.4~~$102.0 million, respectively. Revenue from Ocwen as a percentage of ~~segment and~~ consolidated revenue was ~~as follows~~58% and 52% for the three months ended March ~~31:~~

2018 2017

Mortgage Market 60 % 68 %
Real Estate Market 1 % 1 %
Other Businesses, Corporate and Eliminations 9 % 14 %
Consolidated revenue 52 % 59 %
31, 2019 and 2018, respectively.

We earn additional revenue related to the ~~loan~~ portfolios serviced and subserviced by Ocwen when a party other than Ocwen or the MSR owner selects Altisource as the service provider. For the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, we recognized revenue of ~~$15.2~~$11.1 million and ~~$41.7~~$15.2 million, respectively, related to the ~~loan~~ portfolios serviced by Ocwen when a party other than Ocwen or the MSR owner selected Altisource as the service provider. These amounts are not included in deriving revenue from Ocwen and revenue from Ocwen as a percentage of revenue ~~in the table~~ above.

As of March 31, ~~2018,~~2019, accounts receivable from Ocwen totaled ~~$18.4~~$13.3 million, ~~$13.4~~$9.9 million of which was billed and ~~$5.0~~$3.4 million of which was unbilled. As of December 31, ~~2017,~~2018, accounts receivable from Ocwen totaled ~~$18.9~~$15.2 million, ~~$13.6~~$11.6 million of which was billed and ~~$5.3~~$3.6 million of which was unbilled.

As of ~~June 30, 2017,~~February 22, 2019, Altisource and Ocwen entered into agreements that, among other things, facilitate 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, permit Ocwen to use service providers other than Altisource for up to 10% of referrals from certain portfolios (determined on a service-by-service basis), subject to certain restrictions, and affirms Altisource’s role as a strategic service provider to Ocwen through August 2025. We do not anticipate that a servicing technology transition would materially impact the other services we ~~estimate that~~ provide to Ocwen. For the three months ended March 31, 2019 and 2018, service revenue from REALServicing and related technologies was $8.2 million and $9.6 million, respectively.

NRZ

New Residential Investment Corp. (individually, together with one or more of its subsidiaries or one or more of its subsidiaries individually, “NRZ”) is a residential investment trust that invests in and manages residential mortgage related assets in the United States including MSRs and excess MSRs.

Ocwen has disclosed that NRZ is its largest client. As of December 31, 2018, NRZ owned ~~certain economic~~MSRs or rights ~~in, but not legal title~~to MSRs relating to approximately ~~78%~~57% of ~~Ocwen’s non-government-sponsored enterprise~~loans serviced and subserviced by Ocwen (measured in unpaid principal balances (“~~non-GSE”~~UPB”) ~~MSRs~~) (the “Subject MSRs”). ~~As previously disclosed, in~~In July 2017 and January 2018, Ocwen and NRZ entered into a series of agreements pursuant to ~~convert NRZ’s economic rights~~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 ~~into fully-owned MSRs in exchange for payments from NRZ to~~and under which Ocwen ~~when such Subject MSRs were transferred. The transfers are subject to certain third party consents. Ocwen disclosed that under these agreements, Ocwen would~~will subservice mortgage loans underlying the ~~transferred~~ Subject MSRs for an initial term of five ~~years, and the agreements provided for the conversion of the existing arrangements into a more traditional subservicing arrangement.~~

In January 2018, Ocwen disclosed that it and NRZ entered into new agreements to accelerate the implementation of certain parts of their July 2017 arrangement in order to achieve the intent of the July 2017 agreements sooner while Ocwen continues the process of obtaining the third party consents necessary to transfer the Subject MSRs to NRZ.years.

On August 28, 2017, Altisource, through its licensed subsidiaries, entered into a Cooperative Brokerage Agreement, as amended, and related letter agreement (collectively, the “Brokerage Agreement”) with NRZ which extends through August 2025. Under this agreement and related amendments, Altisource remains the exclusive provider of brokerage services for REO associated with the Subject MSRs when Ocwen transfers such MSRs to NRZ or when NRZ acquires both an additional economic interest in such Subject MSRs and the right to designate the broker for REO properties in such portfolios. The Brokerage Agreement provides that Altisource is the exclusive provider of brokerage services for REOreal estate owned (“REO”) associated with the Subject MSRs, irrespective of the ~~sub-servicer.~~subservicer, subject to certain limitations. NRZ’s brokerage subsidiary ~~will receive~~receives a cooperative brokerage commission on the sale of ~~certain~~ REO properties from these portfolios subject to certain exceptions.

For the three months ended March 31, 2018, we earned revenue from NRZ of $10.3 million following the transfer of certain of the Subject MSRs from Ocwen to NRZ (the “Transferred MSRs”) (no comparative amount in 2017). For the three months ended

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Notes to Condensed Consolidated Financial Statements (Continued)

~~March 31, 2018, we earned additional revenue of $16.1 million relating to the Transferred MSRs when a party other than NRZ selects Altisource as the service provider (no comparative amount in 2017).~~

On August 28, 2017, Altisource and NRZ also entered into a non-binding Letter of Intent, as amended, to enter into a Services Agreement (the “Services LOI”), setting forth the terms pursuant to which Altisource would remain the exclusive service provider of fee-based services for the Subject MSRs through August 2025. The Services LOI was amended to continue through April 30, 2018 with a further automatic extension through May 15, 2018 provided that the parties continue to negotiate the Services Agreement in good faith.

The Brokerage Agreement can, at Altisource’s discretion, be terminated by Altisource if ~~the Services Agreement~~a services agreement is not signed by Altisource and ~~NRZ during the term of the Services LOI, as extended.~~NRZ. The Brokerage Agreement may otherwise only be terminated upon the occurrence of certain specified events. Termination events include, but are not limited to, a breach of the terms of the Brokerage Agreement (including, without limitation, the failure to meet performance standards and non-compliance with law in a material respect), the failure to maintain licenses which failure materially prevents performance of the contract, regulatory allegations of non-compliance resulting in an adversarial proceeding against NRZ, voluntary or involuntary bankruptcy, appointment of a receiver, disclosure in a Form 10-K or Form 10-Q that there is significant uncertainty about Altisource’s ability to continue as a going concern, failure to maintain a specified level of cash and an unapproved change of control.

We anticipate that revenue from NRZ will increase over time and revenue from Ocwen will decrease. As Subject MSRs continue to transfer from Ocwen to NRZ and following the anticipated execution of the Services Agreement, we expect that NRZ will become our largest customer. Had all of the Subject MSRs been transferred to NRZ and the Brokerage Agreement and the Services Agreement with NRZ been in place as of January 1, 2018, we estimate that approximately 48% of our revenue forFor the three months ended March 31, 2019 and 2018, ~~would have been related to NRZ. There can be no assurance that~~we recognized revenue from NRZ of $4.0 million and $10.3 million, respectively, under the ~~parties will reach an agreement with respect~~Brokerage Agreement. For the three months ended March 31, 2019 and 2018, we recognized additional revenue of $17.7 million and $16.1 million, respectively, relating to the ~~terms of~~Subject MSRs when a party other than NRZ selects Altisource as the ~~Services Agreement or that a Services Agreement will be entered into on a timely basis or at all.~~service provider.

NOTE 3 — SALE OF BUSINESSES AND ASSETS AND LIABILITIES HELD FOR SALE

Rental Property Management Business

In August 2018, Altisource entered into an amendment to its agreements with Front Yard Residential Corporation (“RESI”) to sell Altisource’s rental property management business to RESI and permit RESI to internalize certain services that had been provided by Altisource. These services were historically provided under an agreement between RESI and Altisource, in which Altisource was the sole provider of rental property management services to RESI through December 2027, subject to certain exceptions. 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 will be received on the earlier of a RESI change of control or on August 8, 2023. The second installment was recorded as a long-term receivable in other assets in the accompanying condensed consolidated balance sheets and has a discounted value of $2.3 million and $2.2 million as of March 31, 2019 and December 31, 2018, respectively.

Financial Services Business

On March 28, 2019, Altisource entered into a definitive agreement to sell its Financial Services business, consisting of its post-charge-off consumer debt collection services and customer relationship management services (the “Financial Services Business”) to Transworld Systems Inc. (“TSI”) for $44.0 million, consisting of an up-front payment of $40.0 million, subject to a working capital adjustment upon closing of the sale, and an additional $4.0 million to be paid on the one year anniversary of the sale closing. In connection with the transaction, the parties will also enter into a transition services agreement that will provide for the management and transition of certain services and technologies to TSI after the sale closes.

Altisource currently estimates it will recognize a pretax gain of more than $20.0 million from the sale, which is anticipated to close before the end of the third quarter 2019, and intends to use the $40.0 million up-front payment, subject to a working capital adjustment, to repay a portion of its senior secured term loan. The sale is subject to closing conditions including the receipt of regulatory consents.

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Notes to Condensed Consolidated Financial Statements (Continued)

As a result of entering into a definitive agreement to sell the Financial Services Business, as of March 31, 2019, the assets and liabilities of the Financial Services Business are reported as assets held for sale and liabilities held for sale in the accompanying condensed consolidated balance sheets, and consist of the following:



(in thousands)	March 31, 2019

Accounts receivable, net	$	6,586
Prepaid expenses and other current assets	2,209
Premises and equipment, net	4,073
Goodwill	2,378
Intangible assets, net	10,846
Other assets	465
Total assets held for sale	$	26,557

Accounts payable and accrued expenses	$	4,680
Other current liabilities	1,661
Other non-current liabilities	2,395
Total liabilities held for sale	$	8,736

NOTE 4 — INVESTMENT IN EQUITY SECURITIES

During 2016, we purchased 4.1 million shares of RESI common ~~stock for $48.2 million.~~stock. This investment is reflected in the accompanying condensed consolidated balance sheets at afair value and changes in fair value are included in other income (expense), net in the accompanying condensed consolidated statements of operations and comprehensive loss. As of March 31, 2019 and December 31, 2018, the fair value of ~~$41.7~~our investment was $38.4 million ~~as of March 31, 2018~~ and ~~$49.2~~$36.2 million, ~~as of December 31, 2017.~~respectively. During the three months ended March 31, 2019 and 2018, we recognized an unrealized ~~loss of $7.5 million on our investment~~gain (loss) from the change in ~~RESI as a result of a decline in the market~~fair value of ~~RESI common shares in the condensed consolidated statements of operations~~$2.2 million and ~~comprehensive income.~~$(7.5) million, respectively. During the three months ended March 31, ~~2017, an unrealized gain on our investment in RESI of $12.7 million, net of income tax expense, was reflected in other comprehensive income in the condensed consolidated statements of operations~~2019 and ~~comprehensive income (See Note 1 for additional information on the adoption of the new accounting standard on investments in equity securities). During the three months ended March 31,~~ 2018, ~~and 2017,~~ we earned dividends of $0.6 million in each period related to this investment.

Pursuant to the agreement between Altisource and RESI to sell the rental property management business to RESI (see Note 3 for additional information), Altisource is subject to a lock-up period with respect to the sale or transfer of the shares of common stock of RESI owned by Altisource (the “Shares”). During each quarter of 2019, Altisource is permitted to sell or transfer no more than 25% of the Shares, provided that any Shares not sold in the applicable quarter will increase the amount that may be sold in the subsequent quarters by 50% of the unsold permitted amount. Thereafter, all transfer restrictions will expire and any remaining Shares will be freely transferable. Notwithstanding these restrictions, Altisource retains the right to sell or transfer the Shares at any time: (i) where Altisource has a good faith belief that its or its affiliates’ liquidity should be increased and the sale is necessary to achieve such an increase; (ii) where the proceeds of sales will be used to finance a strategic acquisition transaction; (iii) in privately negotiated block transactions with unrelated third parties or a similar transaction; or (iv) where RESI is the subject of a tender offer that is reasonably likely to result in a change of control or where RESI undergoes a change of control. Altisource did not sell or transfer any of the Shares during the three months ended March 31, 2019.

NOTE 45 — ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consists of the following:


(in thousands)	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018

Billed	$	42,509		$	40,787		$	27,968		$	35,590
Unbilled	19,231			22,532			10,780			11,759
	61,740			63,319			38,748			47,349
Less: Allowance for doubtful accounts	(10,901		)	(10,579		)	(10,114		)	(10,883		)

Total	$	50,839		$	52,740		$	28,634		$	36,466

Unbilled accounts receivable consist primarily of certain real estate asset management, REO sales, title and ~~sales~~closing services for which we generally recognize revenue when the service is provided but collect upon closing of the sale, and foreclosure trustee

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Notes to Condensed Consolidated Financial Statements (Continued)

services, for which we generally recognize revenues over the service delivery period but bill following completion of the service. We also include amounts in unbilled accounts receivable that are earned during a month and billed in the following month.

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

NOTE 56 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:


(in thousands)	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018

Short-term investments in real estate	$	39,320	$	29,405
Maintenance agreements, current portion	6,362		8,014		$	3,939	$	5,600
Income taxes receivable	9,702		9,227		11,880		7,940
Prepaid expenses	7,748		7,898		6,903		7,484
Other current assets	10,823		10,198		6,570		9,696

Total	$	73,955	$	64,742	$	29,292	$	30,720

NOTE 7 — DISCONTINUATION OF THE BUY-RENOVATE-LEASE-SELL BUSINESS

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 focuses on buying, renovating, leasing and selling single-family homes to real estate investors. The BRS business is not material in relation to the Company’s results of operations or financial position. In anticipation of receiving the majority of the proceeds from the sale of the BRS Inventory in 2019, the Company repaid $49.9 million of its debt in the fourth quarter of 2018.

NOTE 68 — PREMISES AND EQUIPMENT, NET

Premises and equipment, net consists of the following:


(in thousands)	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018

Computer hardware and software	$	180,488		$	179,567		$	177,868		$	182,215
Office equipment and other							5,264			7,384
Furniture and fixtures							12,222			13,313
Leasehold improvements	33,202			33,417			26,925			29,781
Furniture and fixtures	14,015			14,092
Office equipment and other	9,574			9,388
	237,279			236,464			222,279			232,693
Less: Accumulated depreciation and amortization	(171,694		)	(163,191		)	(182,882		)	(187,062		)
Net							39,397			45,631

Total	$	65,585		$	73,273
Right-to-use assets under operating leases							39,046			—
Less: Accumulated depreciation and amortization							(3,452		)	—
Net right-to-use assets							35,594			—

Total premises and equipment, net							$	74,991		$	45,631

Depreciation and amortization expense totaled ~~$8.7~~$9.4 million and ~~$10.0~~$8.7 million for the three months ended March 31, ~~2018~~2019 and ~~2017,~~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 accompanying condensed consolidated statements of operations and comprehensive ~~income.~~

~~NOTE 7 — GOODWILL AND INTANGIBLE ASSETS, NET~~

~~Goodwill~~

~~The following is a summary of goodwill by segment:~~

(in thousands) Mortgage Market Real Estate Market Other Businesses, Corporate and Eliminations Total

Balance as of March 31, 2018 and December 31, 2017 $ 73,259
$ 10,056
$ 2,968
$ 86,283
loss.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

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



(in thousands)	March 31, 2019		December 31, 2018

United States	$	34,817	$	25,693
India	20,405		3,154
Luxembourg	15,874		14,975
Philippines	3,551		1,754
Other	344		55

Total	$	74,991	$	45,631

NOTE 9 — GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

The change in goodwill during thethree months ended March 31, 2019 is as follows:



(in thousands)	Total

Balance as of December 31, 2018	$	81,387
Reclassification to net assets held for sale (Note 3)	(2,378		)
Balance as of March 31, 2019	$	79,009

Intangible Assets, net

Intangible assets, net consist of the following:


	Weighted average estimated useful life (in years)		Gross carrying amount								Accumulated amortization								Net book value							Weighted average estimated useful life (in years)		Gross carrying amount								Accumulated amortization								Net book value
(in thousands)		March 31, 2018				December 31, 2017				March 31, 2018				December 31, 2017				March 31, 2018				December 31, 2017					March 31, 2019				December 31, 2018				March 31, 2019				December 31, 2018				March 31, 2019				December 31, 2018

Definite lived intangible assets:
Customer related intangible assets		10		$	277,828			$	277,828			$	(194,470	)		$	(188,258	)		$	83,358			$	89,570		8		$	219,797			$	273,172			$	(172,892	)		$	(207,639	)		$	46,905			$	65,533
Operating agreement	20		35,000				35,000				(14,307		)		(13,865		)		20,693				21,135			20		35,000				35,000				(16,064		)		(15,632		)		18,936				19,368
Trademarks and trade names	13		15,354				15,354				(9,080		)		(8,881		)		6,274				6,473			15		11,349				11,349				(6,412		)		(6,244		)		4,937				5,105
Non-compete agreements	4		1,560				1,560				(995		)		(897		)		565				663			4		1,230				1,230				(1,103		)		(1,026		)		127				204
Intellectual property	10		300				300				(123		)		(115		)		177				185			10		300				300				(145		)		(145		)		155				155
Other intangible assets	5		3,745				3,745				(1,894		)		(1,706		)		1,851				2,039			5		3,745				3,745				(2,645		)		(2,457		)		1,100				1,288

Total			$	333,787			$	333,787			$	(220,869	)		$	(213,722	)		$	112,918			$	120,065				$	271,421			$	324,796			$	(199,261	)		$	(233,143	)		$	72,160			$	91,653

Amortization expense for definite lived intangible assets was $8.6 million and $7.1 million ~~and $9.1 million~~ for ~~the~~ three months ended March 31, 2019 and 2018, ~~and 2017, respectively. Anticipated~~respectively. Expected annual definite lived intangible asset amortization expense for ~~2018~~2019 through ~~2022~~2023 is ~~$26.4~~$19.6 million, ~~$21.8~~$13.3 million, ~~$18.2~~$10.6 million, ~~$11.4~~$5.3 million and ~~$7.3~~$5.3 million, respectively.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 810 — OTHER ASSETS

Other assets consist of the following:


(in thousands)	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018

Security deposits	$	5,150	$	5,304	$	3,575	$	3,972
Restricted cash	4,135		3,837		3,915		5,752
Maintenance agreements, non-current portion	189		362
Other	538		692		2,704		2,682

Total	$	10,012	$	10,195	$	10,194	$	12,406

NOTE 911 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accounts payable and accrued expenses consist of the following:


(in thousands)	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018

Accounts payable	$	11,324	$	15,682	$	20,908	$	27,853
Accrued expenses - general	30,628		27,268		24,442		27,866
Accrued salaries and benefits	24,523		41,363		19,156		31,356
Income taxes payable	—		87		32		165

Total	$	66,475	$	84,400	$	64,538	$	87,240

Other current liabilities consist of the following:



(in thousands)	March 31, 2019		December 31, 2018

Unfunded cash account balances	$	3,906	$	4,932
Lease obligation liabilities	15,098		—
Other	1,739		2,098

Total	$	20,743	$	7,030

NOTE 12 — LONG-TERM DEBT

Long-term debt consists of the following:



(in thousands)	March 31, 2019			December 31, 2018

Senior secured term loans	$	338,822		$	338,822
Less: Debt issuance costs, net	(3,685		)	(3,855		)
Less: Unamortized discount, net	(3,338		)	(3,491		)
Net long-term debt	331,799			331,476
Less: Current portion	(9,222		)	—

Long-term debt, less current portion	$	322,577		$	331,476

On April 3, 2018, Altisource Portfolio Solutions S.A. and its wholly-owned subsidiary, Altisource S.à r.l. entered into a credit agreement (the “Credit Agreement”) with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and certain lenders. Under the Credit Agreement, Altisource borrowed $412.0 million in the form of Term B Loans and obtained a $15.0 million revolving credit facility. The Term B Loans mature in April 2024 and the revolving credit facility matures in April 2023. Altisource Portfolio Solutions S.A. and certain subsidiaries are guarantors of the term loan and the revolving credit facility (collectively, the “Guarantors”).

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Notes to Condensed Consolidated Financial Statements (Continued)

~~Other current liabilities consist of the following:~~

(in thousands) March 31,
2018 December 31,
2017

Unfunded cash account balances $ 3,597
$ 5,900
Other 3,054
3,514

Total $ 6,651
$ 9,414

~~NOTE 10 — LONG-TERM DEBT~~

~~Long-term debt consists of the following:~~

(in thousands) March 31,
2018 December 31,
2017

Senior secured term loan $ 412,095
$ 413,581
Less: Debt issuance costs, net (3,381 ) (3,158 )
Less: Unamortized discount, net (1,053 ) (1,142 )
Net long-term debt 407,661
409,281
Less: Current portion (5,945 ) (5,945 )

Long-term debt, less current portion $ 401,716
$ 403,336

On November 27, 2012, Altisource Solutions S.à r.l., a wholly-owned subsidiary of Altisource Portfolio Solutions S.A., entered into a senior secured term loan agreement with Bank of America, N.A., as administrative agent, and certain lenders. Altisource Portfolio Solutions S.A. and certain subsidiaries were guarantors of the senior secured term loan (collectively, the “Guarantors”). We subsequently entered into four amendments to the senior secured term loan agreement to, among other changes, increase the principal amount of the senior secured term loan, re-establish the $200.0 million incremental senior secured term loan facility accordion, lower the interest rate, extend the maturity date by approximately one year, increase the maximum amount of Restricted Junior Payments (as defined in the senior secured term loan agreement; other capitalized terms, unless defined herein, are defined in the senior secured term loan agreement) and certain other changes including to facilitate an internal restructuring of the Company’s subsidiaries. On April 3, 2018, Altisource Portfolio Solutions S.A. and Altisource S.à r.l. entered into a credit agreement with Morgan Stanley Senior Funding, Inc. as administrative agent and collateral agent and the other lender parties thereto, pursuant to which the lenders have agreed to extend credit to Altisource S.à r.l. in the form of (i) Term B Loans (as defined in the credit agreement) in an aggregate principal amount equal to $412.0 million and (ii) a $15.0 million revolving credit facility. The proceeds ofProceeds from the Term B Loans were used to ~~refinance Altisource S.à r.l.’s senior secured term loan. See Note 21 for additional information on~~repay the ~~April 3, 2018 Term B Loans and revolving credit facility.~~

~~The~~Company’s prior senior secured term loan, ~~was required~~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.

There are no mandatory repayments of the Term B Loans due until March 2020, when $9.2 million is due to be repaid. Thereafter, the Term B Loans must be repaid in ~~equal~~ consecutive quarterly principal installments of ~~$1.5~~$3.1 million, with the balance due at maturity. All amounts outstanding under the ~~senior secured term loan agreement would have been~~Term B Loans will become due on the earlier of (i) ~~December 9, 2020~~April 3, 2024, and (ii) the date on which the loans are declared to be due and owing by the administrative agent at the request (or with the consent) of the Required Lenders (as defined in the Credit Agreement; other capitalized terms, unless defined herein, are defined in the Credit Agreement) or as otherwise provided in the ~~senior secured term loan agreement~~Credit Agreement upon the occurrence of any event of ~~default under the senior secured term loan agreement.~~default.

In addition to the scheduled principal payments, subject to certain exceptions, the ~~senior secured term loan was~~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 the leverage ratio is greater than 3.00 to 1.00, as calculated in accordance with the provisions of the ~~senior secured term loan agreement~~Credit Agreement (the percentage increases if the leverage ratio exceeds 3.50 to 1.00). NoCertain mandatory prepayments ~~were owed for~~reduce future contractual amortization payments in direct order of maturity by an amount equal to the ~~three months ended March 31, 2018.~~mandatory prepayment.

The ~~senior secured term loan bore~~Term B Loans bear interest at rates based upon, at our option, the Adjusted Eurodollar Rate or the Base Rate. Adjusted Eurodollar Rate term loans ~~bore~~bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Adjusted Eurodollar Rate for ~~the applicable~~a three month interest period and (y) 1.00% plus (ii) ~~a 3.50% margin.~~4.00%. Base Rate term loans ~~bore~~bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Base Rate and (y) 2.00% plus (ii) ~~a 2.50% margin.~~3.00%. The interest rate atas of March 31, ~~2018~~2019 was ~~5.38%~~6.60%.

~~Table~~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 ~~Content~~(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%. There were no borrowings outstanding under the revolving credit facility as of March 31, 2019.

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

~~Senior secured term loan payments were~~The payment of all amounts owing by Altisource under the Credit Agreement is guaranteed by the Guarantors and ~~were~~is secured by a pledge of all equity interests of certain subsidiaries of Altisource, as well as a lien on substantially all of the assets of Altisource S.à r.l. and the Guarantors, subject to certain exceptions.

The ~~senior secured term loan agreement included~~Credit Agreement includes covenants that ~~restricted~~restrict or ~~limited,~~limit, among other things, our ability, subject to ~~create~~certain exceptions and baskets, to incur indebtedness; incur liens ~~and encumbrances; incur additional indebtedness;~~on our assets; sell, transfer or dispose of assets; make Restricted Junior Payments including share repurchases, dividends and repayment of junior indebtedness; ~~change lines~~make investments; dispose of ~~business;~~equity interests of any Material Subsidiaries; engage in a line of business substantially different than existing businesses and businesses reasonably related, complimentary or ancillary thereto; amend material debt agreements or other material contracts; engage in certain transactions with affiliates; enter into sale/leaseback transactions; grant negative pledges or agree to such other restrictions relating to subsidiary dividends and distributions; make changes to our fiscal year; and engage in mergers and ~~consolidations.~~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”).

The ~~senior secured term loan agreement contained~~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 ~~senior secured term loan agreement~~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) 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, ~~(v)~~(vi) default on any other debt that equals or exceeds $40.0 million that ~~caused,~~causes, or ~~gave~~gives the holder or holders of such debt the ability to cause, an acceleration of such debt, ~~(vi)~~(vii) occurrence of a Change of Control, ~~(vii)~~(viii) bankruptcy and insolvency events, ~~(viii)~~(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, ~~(ix)~~(x) the occurrence of certain ERISA events and ~~(x)~~(xi) the failure of certain Loan Documents to be in full force and effect. If any event of default ~~occurred~~occurs and ~~was~~is not cured within applicable grace periods set forth in the ~~senior secured term loan agreement~~Credit Agreement or waived, all loans and other obligations could ~~have~~ become due and immediately payable and the facility could ~~have been~~be terminated.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

As of March 31, 2019, debt issuance costs were $3.7 million, net of $0.9 million of accumulated amortization. As of December 31, 2018, debt issuance costs were ~~$3.4~~$3.9 million, net of ~~$7.4 million of accumulated amortization. At December 31, 2017, debt issuance costs were $3.2 million, net of $7.1~~$0.7 million of accumulated amortization.

NOTE 1113 — OTHER NON-CURRENT LIABILITIES

Other non-current liabilities consist of the following:


(in thousands)	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018

Lease obligation liabilities					$	23,202	$	—
Income tax liabilities	$	5,825	$	5,955	7,109		7,069
Deferred revenue	5,529		2,101		52		19
Other non-current liabilities	4,061		4,226		404		2,090

Total	$	15,415	$	12,282	$	30,767	$	9,178

NOTE 1214 — FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

The following table presents the carrying amount and estimated fair value of financial instruments and certain liabilities measured at fair value as of March 31, ~~2018~~2019 and December 31, ~~2017.~~2018. The following fair values are estimated using market information and what the Company believes to be appropriate valuation methodologies under GAAP:

March 31, 2018 December 31, 2017
(in thousands) Carrying amount Fair value Carrying amount Fair value
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents $ 84,850
$ 84,850
$ —
$ —
$ 105,006
$ 105,006
$ —
$ —
Restricted cash 4,135
4,135
—
—
3,837
3,837
—
—
Investment in equity securities 41,652
41,652
—
—
49,153
49,153
—
—

Liabilities:
Long-term debt 412,095
—
412,095
—
413,581
—
407,377
—

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)



	March 31, 2019								December 31, 2018
(in thousands)	Carrying amount		Fair value						Carrying amount		Fair value
			Level 1		Level 2		Level 3				Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	51,509	$	51,509	$	—	$	—	$	58,294	$	58,294	$	—	$	—
Restricted cash	3,915		3,915		—		—		5,752		5,752		—		—
Investment in equity securities	38,419		38,419		—		—		36,181		36,181		—		—
Long-term receivable (Note 3)	2,258		—		—		2,258		2,221		—		—		2,221

Liabilities:
Senior secured term loan	338,822		—		328,657		—		338,822		—		330,351		—

Fair Value Measurements on a Recurring Basis

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

Investment in equity securities is carried at fair value and ~~consists~~consist of 4.1 million shares of RESI common stock. The investment in equity securities is measured using Level 1 inputs as ~~this security has a~~these securities have quoted ~~price~~prices in an active ~~market.~~markets.

The fair value of our ~~long-term debt~~senior secured term loan is based on quoted market prices. Based on the frequency of trading, we do not believe that there is an active market for our debt. Therefore, the quoted prices are considered Level 2 inputs.

In connection with the sale of the rental property management business in August 2018, Altisource will receive $3.0 million on the earlier of a RESI change of control or on August 8, 2023 (see Note 3 for additional information). We measure long-term receivables without a stated interest rate based on the present value of the future payments.

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

Concentrations of Credit Risk

Financial instruments that subject us to concentrations of credit risk primarily consist of cash and cash equivalents and accounts receivable. Our policy is to deposit our cash and cash equivalents with larger, highly rated financial institutions. The Company derives ~~the largest portion~~over 50% of its revenues from Ocwen (see Note 2 for additional information on Ocwen revenues and accounts receivable

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

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

NOTE 1315 — SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

Share Repurchase Program

On May ~~17, 2017,~~15, 2018, our shareholders approved the renewal and replacement of the share repurchase program previously approved by the shareholders on May ~~18, 2016, which replaced~~17, 2017. Under the ~~previous share repurchase program. We~~program, we are authorized to purchase up to ~~4.6~~4.3 million shares of our common stock, based on a limit of 25% of the outstanding shares of common stock on the date of approval, at a minimum price of $1.00 per share and a maximum price of $500.00 per share, for a period of five years from the date of approval. As of March 31, ~~2018,~~2019, approximately ~~3.1~~3.4 million shares of common stock remain available for repurchase under the program. There were no purchases of shares of common stock during the three months ended March 31, 2019. We purchased 0.4 million shares ~~of common stock~~ at an average price of $27.67 per share during the three months ended March 31, ~~2018 and 0.4 million shares at an average price of $25.10 per share during the three months ended March 31, 2017.~~2018. Luxembourg law limits share repurchases to the balance of Altisource Portfolio Solutions S.A. (unconsolidated parent company) retained earnings, less the value of shares repurchased. As of March 31, ~~2018,~~2019, we can repurchase up to approximately ~~$141~~$107 million of our common stock under Luxembourg law. Our ~~senior secured term loan limited~~Credit Agreement also limits the amount we ~~could have spent~~can spend on share repurchases, which was approximately ~~$464~~$459 million as of March 31, ~~2018,~~2019, and may ~~have prevented~~prevent repurchases in certain circumstances. ~~The new credit agreement retains this amount available for share repurchases and other restricted payments. See Note 21 for additional information on the new credit agreement.~~

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 ~~$2.2~~$2.6 million and ~~$0.7~~$2.2 million for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively. As of March 31, ~~2018,~~2019, estimated unrecognized compensation costs related to share-based awards amounted to ~~$16.9~~$17.3 million, which we expect to recognize over a weighted average remaining requisite service period of approximately ~~2.28~~1.87 years.

~~In connection with the January 1, 2017 adoption of ASU No. 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~, the Company made an accounting policy election to account for forfeitures in compensation expense as they occur, rather than continuing to apply the Company’s previous policy of estimating forfeitures. Prior to this accounting change, share-based compensation expense for stock options and restricted shares was recognized net of estimated forfeiture rates ranging from 0% to 40%. This policy election resulted in a cumulative effect adjustment of $0.9 million to retained earnings and additional paid-in capital as of January 1, 2017 using the modified retrospective transition method.

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

Stock Options

Stock option grants are composed of a combination of service-based, market-based and performance-based options.

Service-Based Options. These options generally vest over three or four years with equal annual vesting and expire on the earlier of ten years after the date of grant or following termination of service. A total of ~~611~~497 thousand service-based awards were outstanding as of March 31, ~~2018.~~2019.

Market-Based Options. These option grants generally have two components, each of which vests only upon the achievement of certain criteria. The first component, which we refer to as “ordinary performance” grants, generally consists of two-thirds of the market-based grant and begins to vest if the stock price is at least double the exercise price, as long as the stock price realizes a compounded annual gain of at least 20% over the exercise price. The remaining third of the market-based options, which we refer to as “extraordinary performance” grants, generally begins to vest if the stock price is at least triple the exercise price, as long as the stock price realizes a compounded annual gain of at least 25% over the exercise price. Market-based awards vest in three or four year installments with the first installment vesting upon the achievement of the criteria and the remaining installments vesting thereafter in equal annual installments. Market-based 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 or in the final three years of the option term, in which case vesting will generally continue in accordance with the provisions of the award agreement. A total of ~~707~~638 thousand market-based awards were outstanding as of March 31, ~~2018.~~2019.

Performance-Based Options.These option grants generally begin to vest upon the achievement of certain specific financial measures. Generally, the awards begin vesting if the performance criteria are achieved; one-fourth ~~vest~~vests on each anniversary of the grant date. For certain other financial measures, awards cliff-vest upon the achievement of the specific performance during the period from ~~2018~~2019 through 2021. The award of performance-based options is adjusted based on the level of achievement specified in the award agreements. If the performance criteria achieved is above threshold performance levels, participants have the opportunity to vest in 50% to 200% of the option grants, depending upon performance achieved. If the performance criteria achieved is below a certain threshold, the award is canceled. The options expire on the earlier of ten years after the date of grant or following termination of service. There were ~~306~~506 thousand performance-based awards outstanding as of March 31, ~~2018.~~2019.

~~The Company~~ There were no stock option grants during the three months ended March 31, 2019. 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

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Notes to Condensed Consolidated Financial Statements (Continued)

granted in 2018. During the three months ended March 31, 2018, 261 thousand stock options (at a weighted average exercise price of $24.95 per share) ~~during the three months ended March 31, 2018. There~~ were ~~no stock option grants during the three months ended March 31, 2017.~~granted.

The fair values of the service-based options and performance-based options ~~were~~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:



	Three months ended March 31, 2018
	Black-Scholes	Binomial

Risk-free interest rate (%)	2.66 – 2.70	1.65 – 2.77
Expected stock price volatility (%)	70.31 – 71.81	71.81
Expected dividend yield	—	—
Expected option life (in years)	6.00 – 6.25	2.56 – 4.32
Fair value	$16.17 – $17.15	$15.58 – $18.28

We determined the expected option life of all service-based stock option grants using the simplified method. We use the simplified method because we believe that our historical data does not provide a reasonable basis upon which to estimate expected option life.

The following table summarizes the weighted average grant date fair value of stock options granted per share, the total intrinsic value of stock options exercised and the grant date fair value of stock options that vested during the ~~period~~periods presented:

Three months ended March 31,
(in thousands, except per share amounts) 2018 2017

Weighted average grant date fair value of stock options granted per share $ 16.20
$ —
Intrinsic value of options exercised 4,320
868
Grant date fair value of stock options that vested 23
89

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)



	Three months ended March 31,
(in thousands, except per share amounts)	2019		2018

Weighted average grant date fair value of stock options granted per share	$	—	$	16.20
Intrinsic value of options exercised	10		4,320
Grant date fair value of stock options that vested	2,182		23

The following table summarizes the activity related to our stock options:

Number of options Weighted average exercise price
Weighted average contractual term
(in years)

Aggregate intrinsic value
(in thousands)

Outstanding at December 31, 2017 1,745,906
$ 28.20
4.96 $ 10,202
Granted 260,697
24.95

Exercised (286,252 ) 9.14

Forfeited (96,734 ) 36.35

Outstanding at March 31, 2018 1,623,617
30.55
6.09 3,999

Exercisable at March 31, 2018 841,472
27.81
3.95 2,817



	Number of options		Weighted average exercise price		Weighted average contractual term (in years)	Aggregate intrinsic value (in thousands)

Outstanding as of December 31, 2018	1,440,566		$	30.78	5.04	$	945
Performance criteria achieved	227,849		24.98
Exercised	(1,500	)	18.79
Forfeited	(25,583	)	61.40

Outstanding as of March 31, 2019	1,641,332		29.51		5.14	1,339

Exercisable as of March 31, 2019	1,007,222		27.10		3.41	1,270

Other Share-Based Awards

The Company’s other share-based and similar types of awards are composed of restricted shares and, beginning in 2018, restricted share units. The restricted shares and restricted share units are composed of a combination of service-based awards and performance-based awards.

Service-Based Awards. These awards generally vest over one to four years with (a) vesting in equal annual installments, (b) vesting of all of the restricted shares and restricted share units at the end of the vesting period or (c) vesting beginning after two years of service. A total of ~~565~~631 thousand service-based awards were outstanding as of March 31, ~~2018.~~2019.

Performance-Based Awards.These awards generally begin to vest upon the achievement of certain specific financial measures. Generally, the awards begin vesting if the performance criteria are achieved; one-third ~~vest~~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 will be based on the level of achievement, as specified in the award agreements. If the performance

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

criteria achieved is above ~~threshold~~certain financial performance levels and Altisource’s share performance is above certain established criteria, participants have the opportunity to vest in ~~80%~~up to ~~150%~~225% of the restricted share unit award for certain awards, depending on performance ~~level~~ achieved. If the performance criteria achieved is below a certain threshold, the award is canceled. A total of ~~two~~140 thousand performance-based awards were outstanding as of March 31, ~~2018.~~2019.

The Company granted ~~255~~359 thousand ~~restricted shares and~~ restricted share units (at a weighted average grant date fair value of ~~$24.54~~$25.02 per share) during ~~the~~ three months ended March 31, ~~2018.~~2019.

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



	Number of restricted shares and restricted share units

Outstanding atas of December 31, ~~2017~~2018	~~356,509~~485,806
Granted	~~254,619~~358,978
Issued	(31,025	)
Forfeited/canceled	(~~43,697~~43,231	)

Outstanding atas of March 31, ~~2018~~2019	~~567,431~~770,528

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

NOTE 1416 — REVENUE

~~Revenue includes~~We classify revenue in three categories: 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. Reimbursable expenses and non-controlling interests are pass-through items for which we earn no margin. Reimbursable expenses consist of amounts we incur on behalf of our customers in performing our fee-based services that we pass directly on to our customers without a markup. Non-controlling interests represent the earnings of Lenders One, a consolidated entity that is a mortgage cooperative managed, but not owned, by Altisource. Lenders One is included in revenue and reduced from net income to arrive at net income attributable to Altisource (see Note 1). Our services are primarily provided to customers located in the United States. The components of revenue were as follows for the three months ended March 31:

(in thousands) 2018 2017

Service revenue $ 188,766
$ 229,839
Reimbursable expenses 8,147
10,029
Non-controlling interests 525
615

Total $ 197,438
$ 240,483

~~As discussed in Note 1, the Company adopted Topic 606 effective January 1, 2018 using the cumulative effect method.~~



(in thousands)	2019		2018

Service revenue	$	164,999	$	188,766
Reimbursable expenses	4,496		8,147
Non-controlling interests	440		525

Total	$	169,935	$	197,438

Disaggregation of Revenue

Disaggregation of total revenues by ~~segment and~~ major source is as ~~follows for the three months ended March 31, 2018:~~follows:

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

Mortgage Market
Servicer Solutions $ 129,536
$ 18,273
$ 7,602
$ 155,411
Origination Solutions 9,185
2,686
56
11,927
Total Mortgage Market 138,721
20,959
7,658
167,338

Real Estate Market
Consumer Real Estate Solutions 1,405
—
2
1,407
Real Estate Investor Solutions 13,398
—
475
13,873
Total Real Estate Market 14,803
—
477
15,280

Other Businesses, Corporate and Eliminations 13,432
1,376
12
14,820
Total revenue $ 166,956
$ 22,335
$ 8,147
$ 197,438



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

Three months ended March 31, 2019	$	147,755	$	17,684	$	4,496	$	169,935
Three months ended March 31, 2018	166,956		22,335		8,147		197,438

Contract Balances

Our contract assets consist of unbilled accounts receivable (see Note 4)5). Our contract liabilities consist of current deferred revenue as reported on the accompanying condensed consolidated balance sheets and non-current deferred revenue (see Note ~~11)~~13). Revenue recognized that was included in the contract liability at the beginning of the period, including amounts added to the contract liability as part of the cumulative effect of ~~the~~ adopting Topic 606, was $4.9 million and $5.9 million for the three months ended March 31, ~~2018.~~2019 and 2018, respectively.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

NOTE 1517 — 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. The components of cost of revenue were as follows for the three months ended March 31:


(in thousands)	2018		2017		2019		2018

Compensation and benefits	$	54,866	$	63,092	$	41,368	$	54,866
Outside fees and services	65,098		80,959		62,581		65,098
Cost of real estate sold	3,179		4,935		2,094		3,179
Technology and telecommunications	9,451		11,351		8,509		9,451
Reimbursable expenses	8,147		10,029		4,496		8,147
Depreciation and amortization	6,453		7,587		5,056		6,453

Total	$	147,194	$	177,953	$	124,104	$	147,194

NOTE 1618 — SELLING, GENERAL AND ADMINISTRATIVE EXPENSES AND OTHER OPERATING EXPENSES

Selling, general and administrative expenses include payroll and employee benefits associated with personnel employed in executive, finance, law, compliance, human resources, vendor management, facilities, risk management, sales and marketing roles. This category also includes professional services fees, occupancy costs, marketing costs, depreciation and amortization of non-operating assets and other expenses. The components of selling, general and administrative expenses were as follows for ~~the~~ three months ended March 31:


(in thousands)	2018		2017		2019		2018

Compensation and benefits	$	13,569	$	12,506	$	11,353	$	13,569
Amortization of intangible assets					8,647		7,147
Occupancy related costs	8,434		10,273		3,908		8,434
Amortization of intangible assets	7,147		9,146
Marketing costs	3,607		4,269		2,932		3,607
Professional services	3,226		3,730		5,476		3,226
Depreciation and amortization	2,268		2,421		4,313		2,268
Other	4,873		5,356		4,611		4,873

Total	$	43,124	$	47,701	$	41,240	$	43,124

NOTE 1719 — OTHER INCOME (EXPENSE), NET

Other income (expense), net consists of the following for the three months ended March 31:


(in thousands)	2018		2017		2019		2018

Interest income	$	131	$	98	$	151	$	131
Other, net	1,141		617		223		1,141

Total	$	1,272	$	715	$	374	$	1,272

NOTE 1820 — EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the assumed conversion of all dilutive securities using the treasury stock method.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

Basic and diluted EPS are calculated as follows for the three months ended March 31:


(in thousands, except per share data)	2018			2017		2019			2018

Net (loss) income attributable to Altisource	$	(4,132	)	$	6,545
Net loss attributable to Altisource						$	(3,184	)	$	(4,132	)

Weighted average common shares outstanding, basic	17,378			18,662		16,292			17,378
Dilutive effect of stock options and restricted shares	—			642

Weighted average common shares outstanding, diluted	17,378			19,304		16,292			17,378

(Loss) earnings per share:
Loss per share:
Basic	$	(0.24	)	$	0.35	$	(0.20	)	$	(0.24	)
Diluted	$	(0.24	)	$	0.34	$	(0.20	)	$	(0.24	)

For the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, 0.3 million options in each period were anti-dilutive and ~~0.4 million options, respectively, were~~have been excluded from the computation of diluted EPS because ~~they were anti-dilutive since~~ their exercise price was greater than the average market price of our common stock. Also excluded from the computation of diluted EPS are 0.8 million options, restricted share units and restricted shares for the three months ended March 31, 2019 and 0.6 million options for the three months ended March 31, 2018, ~~and 2017 were 0.6 million options, restricted shares and restricted share units and 0.2 million options, respectively,~~ 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. Furthermore, as a result of the net loss attributable to Altisource for the three months ended March 31, 2019 and 2018, 0.3 million and 0.5 million, respectively, of total options, ~~restricted shares and~~ restricted share units and restricted shares were excluded from the computation of diluted EPS, ~~for the three months ended March 31, 2018,~~ as their impact was anti-dilutive.

NOTE 1921 — RESTRUCTURING CHARGES

In August 2018, Altisource initiated Project Catalyst, a project intended to optimize our operations and reduce costs to better align our cost structure with our anticipated revenues and improve our operating margins. During the three months ended March 31, 2019, we incurred $4.4 million of severance costs and professional services fees related to the reorganization plan (no comparative amount for the three months ended March 31, 2018). We expect to incur additional severance and related costs through 2019 in connection with this internal reorganization and will expense those costs as incurred. Based on our analysis, we currently anticipate the future costs relating to the internal reorganization plan to be in the range of approximately $13 million to $17 million.

NOTE 22 — COMMITMENTS, CONTINGENCIES AND REGULATORY MATTERS

We record a liability for contingencies if an unfavorable outcome is probable and the amount of loss can be reasonably estimated, including expected insurance coverage. For proceedings where the reasonable estimate of loss is a range, we record a best estimate of loss within the range.

Litigation

We are currently involved in legal actions in the course of our business, some of which seek monetary damages. We do not believe that the outcome of these proceedings, both individually and in the aggregate, will have a material impact on our financial condition, results of operations or cash flows.

Regulatory Matters

Periodically, we are subject to audits, examinations and investigations by federal, state and local governmental authorities and receive subpoenas, civil investigative demands or other requests for information from such governmental authorities in connection with their regulatory or investigative authority. We are currently responding to such inquiries from governmental authorities relating to certain aspects of our business. We believe it is premature to predict the potential outcome or to estimate any potential financial impact in connection with these inquiries.

~~As previously disclosed,~~Sales Taxes

On June 21, 2018, the ~~Company received~~United States Supreme Court rendered a ~~Notice~~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 ~~Opportunity to Respond~~remit sales tax on goods and Advise (“NORA”) letter on November 10, 2016 from the Consumer Financial Protection Bureau (“CFPB”) indicating that the CFPB was considering a potential enforcement action against Altisource relating to an alleged violation of federal law focused on the REALServicing^® ~~platform and certain other technology~~ services provided to ~~Ocwen, including claims related to~~purchasers in the ~~features, functioning and support of such technology. The NORA process provides~~state, overturning certain existing court precedent. During the recipient an opportunity to present its positions to the CFPB before an enforcement action is recommended or commenced. On December 5, 2016, we provided a written response to the NORA letter setting forth the legal, policy and factual reasons why we believe an enforcement action is not warranted. By letter dated April 3, 2018, the CFPB informedthree months ended March 31, 2019, the Company ~~that~~completed the ~~investigation~~analysis of its services for potential exposure to sales tax in various jurisdictions in the United States. The Company ~~has been completed and~~recognized a $2.1 million loss for the ~~staff of~~three months ended March 31, 2019 (no comparative amount for the CFPB’s Office of Enforcement currently does not intend to recommend that the CFPB take enforcement action, and further that the Company is relieved of the document-retention obligations pursuant to the civil investigative process.three

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

months ended March 31, 2018) in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive loss, in addition to the $6.2 million loss recorded in 2018. The Company began invoicing, collecting and remitting sales tax in applicable jurisdictions in 2019. The Company is also in the process of seeking reimbursement for sales tax payments from clients; however, there can be no assurance that the Company will be successful in collecting some or all of such reimbursements. Future changes in our estimated sales tax exposure could result in a material adjustment to our condensed consolidated financial statements which would impact our financial condition and results of operations.

Ocwen Related Matters

As discussed in Note 2, during the three months ended March 31, ~~2018,~~2019, Ocwen was our largest customer, accounting for ~~52%~~58% of our total revenue. Additionally, 8%7% of our revenue for the three months ended March 31, ~~2018~~2019 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.

Ocwen has disclosed that it is subject to a number of ongoing federal and state regulatory examinations, cease and desist orders, consent orders, inquiries, subpoenas, civil investigative ~~demand,~~demands, requests for information and other actions and is subject to pending legal proceedings, some of which include claims against Ocwen for substantial monetary damages. For example, on May 15, 2017, Ocwen disclosed that on April 20, 2017, the ~~CFPB~~Consumer Financial Protection Bureau and the State of Florida filed separate complaints in the United States District Court for the Southern District of Florida against Ocwen alleging violations of Federal consumer financial law and, in the case of Florida, Florida statutes. As another example, on May 15, 2017, Ocwen also disclosed that on April 28, 2017, the Commonwealth of Massachusetts filed a lawsuit against Ocwen in the Superior Court for the Commonwealth of Massachusetts alleging violations of state consumer financial laws relating to Ocwen’s servicing business, including lender-placed insurance and property preservation fees. Ocwen disclosed that the complaints seek to obtain permanent injunctive relief, consumer redress, refunds, restitution, disgorgement, damages, civil penalties, costs and fees and other relief. The ~~forgoing~~foregoing or other matters could result in, and in some cases, have resulted in, adverse regulatory or other actions against Ocwen. Previous regulatory actions against Ocwen resulted in subjecting Ocwen to independent oversight of its operations and placing certain restrictions on its ability to acquire servicing rights.

In addition to the above, Ocwen may become subject to future federal and state regulatory investigations, cease and desist orders, consent orders, inquiries, subpoenas, civil investigative demands, requests for information, other matters or legal proceedings, any of which could also result in adverse regulatory or other actions against Ocwen.

Ocwen has disclosed that NRZ is its largest client. As of December 31, 2018, NRZ owned MSRs or rights to MSRs relating to approximately 57% of loans serviced and subserviced by Ocwen (measured in UPB). 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 Subject MSRs for an initial term of five years. NRZ can terminate its sub-servicing agreement with Ocwen in exchange for the payment of a termination fee.

The foregoing may have significant adverse effects on Ocwen’s business and/or our continuing relationship with Ocwen. For example, Ocwen may be required to alter the way it conducts business, including the parties it contracts with for services (including IT and software services), it may be required to seek changes to its existing pricing structure with us, it may lose its ~~non-GSE~~non-government-sponsored enterprise (“GSE”) servicing rights or subservicing arrangements or may lose one or more of its state servicing or origination licenses. Additional regulatory actions or adverse financial developments may impose additional restrictions on or require changes in Ocwen’s business that could require it to sell assets or change its business operations. Any or all of these effects could result in our eventual loss of Ocwen as a customer or a reduction in the number and/or volume of services they purchase from us or the loss of other customers.

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

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

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

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

The contractual relationship between Ocwen and Altisource changes significantly or there are significant changes to our pricing to Ocwen for services from which we generate material revenue

Altisource otherwise fails to be retained as a service provider

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

cost structure would allow us to realign our cost structure in line with remaining revenue. Furthermore, in the event of a significant reduction in the volume of services purchased or loan portfolios serviced by Ocwen (such as a transfer of Ocwen’s remaining servicing rights to a successor servicer), we believe the impact to Altisource could occur over an extended period of time. During this period, we believe that we will continue to generate revenue from all or a portion of Ocwen’s loan portfolios.

~~Our Servicer Solutions, Origination Solutions, Consumer Real Estate Solutions and Real Estate Investor Solutions businesses~~We are focused on diversifying and growing our revenue and customer base and we have a sales and marketing strategy to support ~~these~~our businesses. Management believes our plans, together with current liquidity and cash flows from operations, would be sufficient to meet our working capital, capital expenditures, debt service and other cash needs. However, there can be no assurance that our plans will be successful or our operations will be profitable.

~~Additionally, Ocwen has notified us, disclosed~~Leases

We lease certain premises and equipment, primarily consisting of office space and information technology equipment. Effective January 1, 2019, we adopted the provisions of Topic 842, resulting in ~~its filings~~recognition of $42.1 million of right-to-use assets in premises and ~~stated~~equipment, net and $45.5 million of lease obligation liabilities (see Note 1). Certain of our leases include options to renew at our discretion or terminate leases early, and these options are considered in ~~connection with resolving several state administrative actions discussed above, that it plans~~our determination of the expected lease term. Certain of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. We sublease certain office space to ~~transition from REALServicing~~third parties. Sublease income was $0.4 million and $0.5 million for the three months ended March 31, 2019 and 2018, respectively. The depreciable life of right-to-use assets are generally limited by the expected lease term. Our leases generally have expected lease terms at adoption of one to ~~another mortgage servicing software platform. Furthermore, Ocwen disclosed in its filings that its pending acquisition~~six years.

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



	As of March 31, 2019

Weighted average remaining lease term (in years)	3.36
Weighted average discount rate	7.25	%

Our lease activity during the period is as follows:



(in thousands)	Three months ended March 31, 2019

Operating lease costs:
Selling, general and administrative expense	$	2,880
Cost of revenue	858

Cash used in operating activities for amounts included in the measurement of lease liabilities	4,737
Short-term (less than one year) lease costs	1,157

Maturities of ~~PHH Corporation is expected to accelerate its transition~~our lease liabilities as of March 31, 2019 are as follows:



(in thousands)	Operating lease liabilities

2019	$	13,130
2020	14,583
2021	9,593
2022	5,694
2023	3,465
Thereafter	1,330
Total lease payments	47,795
Less interest	(5,596		)
Present value of lease liabilities	$	42,199

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements (Continued)

to a new servicing platform. Altisource is supporting Ocwen through this transition. We do not anticipate that a servicing technology transition would impact the other services we provide to Ocwen. For the three months ended March 31, 2018 and 2017, service revenue from REALServicing was $6.5 million and $7.0 million, respectively.

In addition to the above, as of June 30, 2017, we estimate that NRZ owned certain economic rights in, but not legal title to, approximately 78% of the Subject MSRs. As previously disclosed, in July 2017, Ocwen and NRZ entered into agreements to convert NRZ’s economic rights to the Subject MSRs into fully-owned MSRs in exchange for payments from NRZ to Ocwen when such Subject MSRs were transferred. The transfers are subject to certain third party consents. Ocwen disclosed that under these agreements, Ocwen would subservice the transferred Subject MSRs for an initial term of five years, and the agreements provided for the conversion of the existing arrangements into a more traditional subservicing arrangement.

On August 28, 2017, Altisource, through its licensed subsidiaries, entered into the Brokerage Agreement with NRZ which extends through August 2025. Under this agreement and related amendments, Altisource remains the exclusive provider of brokerage services for REO associated with the Subject MSRs when Ocwen transfers such MSRs to NRZ or when NRZ acquires both an additional economic interest in such Subject MSRs and the right to designate the broker for REO properties in such portfolios. The Brokerage Agreement provides that Altisource is the exclusive provider of brokerage services for REO associated with the Subject MSRs, irrespective of the sub-servicer. NRZ’s brokerage subsidiary will receive a cooperative brokerage commission on the sale of certain REO properties from these portfolios subject to certain exceptions.

On August 28, 2017, Altisource and NRZ also entered into the Services LOI, setting forth the terms pursuant to which Altisource would remain the exclusive service provider of fee-based services for the Subject MSRs through August 2025. The Services LOI was amended to continue through April 30, 2018 with a further automatic extension through May 15, 2018 provided that the parties continue to negotiate the Services Agreement in good faith.

The Brokerage Agreement can be terminated by Altisource if the Services Agreement is not signed by Altisource and NRZ during the term of the Services LOI, as extended. The Brokerage Agreement may otherwise only be terminated upon the occurrence of certain specified events. Termination events include, but are not limited to, a breach of the terms of the Brokerage Agreement (including, without limitation, the failure to meet performance standards and non-compliance with law in a material respect), the failure to maintain licenses which failure materially prevents performance of the contract, regulatory allegations of non-compliance resulting in an adversarial proceeding against NRZ, voluntary or involuntary bankruptcy, appointment of a receiver, disclosure in a Form 10-K or Form 10-Q that there is significant uncertainty about Altisource’s ability to continue as a going concern, failure to maintain a specified level of cash and an unapproved change of control.

Escrow and Trust Balances

We hold customers’ assets in escrow and trust accounts at various financial institutions pending completion of certain real estate activities. We also hold cash in trust accounts at various financial institutions where contractual obligations mandate maintaining dedicated bank accounts for our asset recovery management business’s collections. These amounts are held in escrow and trust accounts for limited periods of time and are not included in the accompanying condensed consolidated balance sheets. Amounts held in escrow and trust accounts were ~~$24.6~~$25.0 million and ~~$35.1~~$23.6 million atas of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

~~NOTE 20 — SEGMENT REPORTING~~

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

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~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

~~We report our operations through two reportable segments:~~ ~~Mortgage Market~~ ~~and~~ ~~Real Estate Market. In addition, we report~~ ~~Other Businesses, Corporate and Eliminations~~ ~~separately. The~~ ~~Mortgage Market~~ ~~segment provides loan servicers and originators with marketplaces, services and technologies that span the mortgage lifecycle. The~~ ~~Real Estate Market~~ ~~segment provides real estate consumers and rental property investors with marketplaces and services that span the real estate lifecycle. In addition, the~~ ~~Other Businesses, Corporate and Eliminations~~ segment includes businesses that provide post-charge-off consumer debt collection services primarily to debt originators (e.g., credit card, auto lending and retail credit), customer relationship management services primarily to the utility, insurance and hotel industries and IT infrastructure management services. ~~Other Businesses, Corporate and Eliminations~~ also includes interest expense and costs related to corporate support functions including executive, finance, law, compliance, human resources, vendor management, facilities, risk management, and sales and marketing costs not allocated to the business units as well as eliminations between the reportable segments.

~~Financial information for our segments is as follows:~~

Three months ended March 31, 2018
(in thousands) Mortgage Market Real Estate Market Other Businesses, Corporate and Eliminations Consolidated Altisource

Revenue $ 167,338
$ 15,280
$ 14,820
$ 197,438
Cost of revenue 111,073
18,554
17,567
147,194
Gross profit (loss) 56,265
(3,274 ) (2,747 ) 50,244
Selling, general and administrative expenses 23,374
4,118
15,632
43,124
Income (loss) from operations 32,891
(7,392 ) (18,379 ) 7,120
Total other income (expense), net 16
2
(12,110 ) (12,092 )

Income (loss) before income taxes and
non-controlling interests $ 32,907
$ (7,390 ) $ (30,489 ) $ (4,972 )

Three months ended March 31, 2017
(in thousands) Mortgage Market Real Estate Market Other Businesses, Corporate and Eliminations Consolidated Altisource

Revenue $ 204,723
$ 20,063
$ 15,697
$ 240,483
Cost of revenue 140,150
22,143
15,660
177,953
Gross profit (loss) 64,573
(2,080 ) 37
62,530
Selling, general and administrative expenses 28,682
4,325
14,694
47,701
Income (loss) from operations 35,891
(6,405 ) (14,657 ) 14,829
Total other income (expense), net 10
—
(5,093 ) (5,083 )

Income (loss) before income taxes and
non-controlling interests $ 35,901
$ (6,405 ) $ (19,750 ) $ 9,746

(in thousands) Mortgage Market Real Estate Market Other Businesses, Corporate and Eliminations Consolidated Altisource

Total assets:

March 31, 2018 $ 285,989
$ 82,574
$ 463,210
$ 831,773
December 31, 2017 304,346
64,624
496,194
865,164

~~Table of Content~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

~~Our services are primarily provided to customers located in the United States. Premises and equipment, net consist of the following, by country:~~

(in thousands) March 31,
2018 December 31,
2017

United States $ 40,068
$ 46,268
Luxembourg 16,686
16,688
India 6,797
8,136
Philippines 1,916
2,038
Uruguay 118
143

Total $ 65,585
$ 73,273

~~NOTE 21 — SUBSEQUENT EVENT~~

On April 3, 2018, Altisource Portfolio Solutions S.A. and its wholly-owned subsidiary, Altisource S.à r.l., entered into a credit agreement (the “Credit Agreement”) with Morgan Stanley Senior Funding, Inc. as administrative agent and collateral agent and the other lender parties thereto, pursuant to which the lenders have agreed to extend credit to Altisource S.à r.l. in the form of (i) Term B Loans (as defined in the Credit Agreement) in an aggregate principal amount equal to $412.0 million and (ii) a $15.0 million revolving credit facility, with Altisource Portfolio Solutions S.A. and certain wholly-owned subsidiaries of Altisource S.à r.l. acting as guarantors.

The proceeds of the Term B Loans were used to refinance Altisource S.à r.l.’s prior term loans under the credit agreement dated as of November 27, 2012 (see Note 10). When drawn, the proceeds from the revolving credit facility may be used for general corporate purposes and other uses permitted under the Credit Agreement.

~~As further summarized below, the Credit Agreement contains several changes from the prior credit agreement and retains certain other provisions. These include the following:~~

~~The Term B Loans mature in April 2024 while the term loans under the prior credit agreement would have matured in December 2020.~~

The Credit Agreement includes a revolving credit facility with a maintenance covenant that will apply to Altisource S.à r.l. only if funds are drawn on the revolving credit facility as of the last day of a fiscal quarter.

~~The new Term B Loans have no financial maintenance covenants and are similar to Altisource S.à r.l.’s term loans under the prior credit agreement.~~

The net debt definition in the Credit Agreement permits Altisource S.à r.l. to reduce net debt by up to $75 million in marketable securities while the prior credit agreement did not reduce net debt by marketable securities.

The Available Amount accumulated under the prior credit agreement is being carried over to the Credit Agreement. The Available Amount can be used to make certain restricted payments, investments and payments, subject to certain conditions set forth in the Credit Agreement.

Altisource S.à r.l. 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 million (compared to $200 million in the prior credit agreement), subject to certain conditions set forth in the Credit Agreement, including a sublimit of $80 million with respect to incremental revolving credit commitments. The lenders have no obligation to provide any incremental indebtedness.

The new Term B Loans amortize $41.2 million in year 1, $41.2 million in year 2 and $12.4 million per year in each of the subsequent years. Amortization under the prior credit agreement was equal to $5.9 million per year.

The new Term B Loans bear interest at rates based upon, at Altisource S.à r.l.’s option, the Adjusted Eurodollar Rate or the Base Rate. Eurodollar Rate Term Loans will bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Adjusted Eurodollar Rate for a three month interest period and (y) 1.00% plus (ii) 4.00%. Eurodollar Rate Loans under the revolving credit facility will bear interest at a rate per annum of the Adjusted Eurodollar Rate for a three month interest period plus 4.00%. Base Rate Term Loans will bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Base Rate and (y) 2.00% plus (ii) 3.00%. Base Rate loans under the revolving credit facility will bear interest at a rate per annum of the Base Rate plus 3.00%. Interest under the prior credit agreement was based upon, at Altisource S.à r.l.’s option, the Adjusted Eurodollar Rate or the Base Rate. Adjusted Eurodollar Rate loans bore interest at a rate per annum equal to the sum of (i) the greater of (x) the Adjusted Eurodollar Rate for the applicable interest period and (y) 1.00% plus (ii) a 3.50% margin. Base Rate loans bore interest at a rate per annum equal to the sum of (i) the greater of (x) the Base Rate and (y) 2.00% plus (ii) 2.50%.

~~Table of Content~~

~~ALTISOURCE PORTFOLIO SOLUTIONS S.A.~~

~~Notes to Condensed Consolidated Financial Statements (Continued~~)

Mandatory repayments of the new Term B Loans from asset sales that exceed $25 million in a given calendar year and from proceeds from the sale RESI shares held on April 3, 2018 are applied against contractual amortization of the Term B Loans.

Similar to the prior credit agreement, the Credit Agreement contains representations, warranties, covenants, terms and conditions customary for transactions of this type. These include covenants limiting Altisource Portfolio Solutions S.A.’s, Altisource S.à r.l.’s and each Restricted Subsidiary’s ability, subject to certain exceptions and baskets, to (i) incur indebtedness, (ii) incur liens on its assets, (iii) agree to any additional negative pledges, (iv) pay dividends and make other Restricted Junior Payments, (v) limit the ability of its subsidiaries to pay dividends or distribute assets, (vi) make investments, (vii) enter into any transaction of merger or consolidation, liquidate, wind-up or dissolve, or convey any part of its business, assets or property, or acquire the business, property or assets of another person, subject to certain exceptions, (viii) dispose of the equity interests of any Material Subsidiaries, whether through a sale of the capital stock, dissolution, merger or sale of all or substantially all of the assets of such Material Subsidiary, (ix) enter into sale and leaseback transactions, (x) enter into certain transactions with affiliates, (xi) engage in a line of business substantially different than existing business and businesses reasonably related, complimentary or ancillary thereto, (xii) modify the terms of indebtedness junior to the loans contemplated by the Credit Agreement, (xiii) modify the terms of its organizational documents in any material respect, (xiv) change its fiscal year, (xv) permit Altisource Portfolio Solutions S.A. to hold material assets, have material liabilities, or engage in certain activities, in each case, except as contemplated by the Credit Agreement, (xvi) use the proceeds of the loans for certain purposes, and (xvii) 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 (such covenant, the “Springing Revolving Financial Covenant”). The Springing Revolving Financial Covenant is for the benefit of Lenders having Revolving Credit Loans only and is subject to a customary cure provision.

The Company filed a Current Report on Form 8-K on April 4, 2018 that describes certain of the provisions of the Credit Agreement and also contains the Credit Agreement as an exhibit, which is incorporated in this Form 10-Q by reference. This description of the Credit Agreement is not complete and is qualified in its entirety by reference to the entire Credit Agreement.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is a supplement to the accompanying interim condensed consolidated financial statements and is intended to provide a reader of our financial statements with a narrative from the perspective of management on our businesses, current developments, financial condition, results of operations and liquidity. Our MD&A should be read in conjunction with our Form 10-K for the year ended December 31, ~~2017~~2018 filed with the Securities and Exchange Commission (“SEC”) on February ~~22, 2018.~~26, 2019.

FORWARD-LOOKING STATEMENTS

~~Certain statements in this~~This Form 10-Q ~~regarding anticipated financial outcomes, business and market conditions, outlook and other similar~~contains forward-looking statements ~~related to Altisource’s future financial and operational performance are “forward-looking statements” made pursuant to~~within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These ~~forward-looking~~ statements may ~~be identified by the use of terminology~~relate to, among other things, future events or our future performance or financial condition. Words such as “anticipate,” “intend,” “expect,” “may,” “could,” “should,” “would,” “plan,” “estimate,” “believe,” “predict,” “potential” or “continue” or the negative of these terms and other comparable ~~terminology. Forward-looking~~terminology are intended to identify such forward-looking statements. Such statements are based on expectations as to the future and are not statements of historical fact. Furthermore, forward-looking statements are not guarantees of future performance and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. The following are examples of such items and are not intended to be all inclusive:

assumptions related to sources of liquidity and the adequacy of financial resources;

assumptions about our ability to grow our business, including executing on our strategic initiatives;

assumptions about our ability to improve ~~margins;~~margins and anticipated expense reductions as a result of Project Catalyst;

assumptions regarding the impact of seasonality;

estimates regarding our effective tax rate; and

estimates regarding our reserves and valuations.

Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the risks discussed in Part II, Item 1A, Risk Factors of this Form 10-Q and the ~~“Risk Factors”~~Risk Factors section of our Form 10-K for the year ended December 31, ~~2017~~2018 and ~~include~~including, but not limited to, the following:

our ability to retain Ocwen Financial Corporation (“Ocwen”) as a customer or our ability to receive the anticipated volume of referrals from Ocwen;

our ability to ~~reach agreement with~~retain New Residential Investment Corp. (individually, together with one or more of its subsidiaries, or one or more of its subsidiaries individually, “NRZ”) onas a customer or our ability to receive the anticipated volume of referrals from NRZ;

our ability to close the Financial Services ~~Agreement~~business disposition transaction with Transworld Systems Inc. (“TSI”), including the timing and satisfaction of closing conditions and delays in obtaining regulatory consents in connection with the transaction;

our ability to comply with material agreements if a change of control is deemed to have occurred including, among other things, through the formation of a shareholder group, this may cause a termination event or ~~the termination~~event of ~~the Cooperative Brokerage Agreement, as amended, and related letter agreement (collectively, the “Brokerage Agreement”);~~default under certain of our agreements;

our ability to execute on our strategic businesses;

our ability to retain our existing customers, expand relationships and attract new customers;

the level of loan delinquencies and charge-offs;

the level of origination volume;

technology failures;

the outsourcing trends;

our ability to raise debt;

our ability to retain our directors, executive officers and key personnel;

our ability to integrate acquired businesses;

our ability to comply with, and burdens imposed by, governmental regulations and policies and any changes in such regulations and policies; and

significant changes in tax regulations and interpretations in the ~~Luxembourg tax regime or interpretations of the Luxembourg tax regime.~~countries, states and local jurisdictions in which we operate.

We caution the reader not to place undue reliance on these forward-looking statements as they reflect our view only as of the date

of this report. We are under no obligation (and expressly disclaim any obligation) to update or alter any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

OVERVIEW

Our Business

When we refer to “Altisource,” the “Company,” “we,” “us” or “our” we mean Altisource Portfolio Solutions S.A., a Luxembourg société anonyme, or public limited liability company, and its subsidiaries.

We are an integrated service provider and marketplace for the real estate and mortgage industries. Combining operational excellence with a suite of innovative services and technologies, Altisource helps solve the demands of the ever-changing markets we serve.

~~Our~~Effective January 1, 2019, the Company reorganized its internal reporting structure in connection with Project Catalyst, a project initiated in August 2018 to optimize our operations and reduce costs to better align our cost structure with our anticipated revenues and improve our operating margins. The internal reorganization included, among other changes, the replacement of segment presidents with a chief operating officer, who is responsible for products, services and operations for the Company’s Mortgage Market and Real Estate Market businesses, reporting to our Chief Executive Officer (our chief operating decision maker) who manages our businesses, regularly reviews operating results and profitability, allocates resources and evaluates performance on a consolidated basis. Prior to January 1, 2019, the Company reported our operations through two reportable ~~segments are as follows:~~

segments: Mortgage ~~Market:~~ Market~~Provides~~ and Real Estate Market. In addition, we reported Other Businesses, Corporate and Eliminations separately. The prior year presentation has been reclassified to conform to the current year presentation.

We provide loan servicers and originators with marketplaces, services and technologies that span the mortgage lifecycle. ~~Within the Mortgage Market segment, we provide:~~

~~Servicer Solutions~~ ~~- the solutions, services and technologies typically used or licensed primarily by residential loan servicers.~~



~~• Property preservation and inspection services~~ ~~• Real estate brokerage and auction services~~ ~~• Title insurance (agent and related services) and settlement services~~ ~~• Appraisal management services and broker and non-broker valuation services~~ ~~• Foreclosure trustee services~~ ~~• Residential and commercial loan servicing technologies~~		~~• Vendor management, marketplace transaction management and payment management technologies~~ ~~• Document management platform~~ ~~• Default services (real estate owned (“REO”), foreclosure, bankruptcy, eviction) technologies~~ ~~• Mortgage charge-off collections~~ ~~• Residential and commercial loan disbursement processing, risk mitigation and construction inspection services~~

~~Origination Solutions~~ ~~- the solutions, services and technologies typically used or licensed by loan originators (or other similar mortgage market participants) in originating, buying and selling residential mortgages.~~



~~• Title insurance (agent and related services) and settlement services~~ ~~• Appraisal management services and broker and non-broker valuation services~~ ~~• Fulfillment services~~ ~~• Loan origination system~~		~~• Document management platform~~ ~~• Certified loan insurance and certification~~ ~~• Vendor management oversight platform~~ ~~• Mortgage banker cooperative management~~ ~~• Mortgage trading platform~~

~~Real Estate Market:~~ ~~Provides~~We provide real estate consumers ~~and rental property investors~~ with marketplaces and services that span the real estate lifecycle. ~~Within the Real Estate Market segment, we provide:~~Our offerings include:

~~Consumer Real Estate Solutions~~ ~~- the solutions,~~Field Services

Property preservation and inspection services, including vendor management, marketplace transaction management, payment management technologies and ~~technologies typically used by home buyers and sellers to handle key aspects of buying and selling~~ a ~~residence.~~vendor management oversight software-as-a-service (“Saas”) platform

Marketplace



•	~~• Real~~Hubzu^® online real estate auction, real estate brokerage and asset management


•	Equator^®, a SaaS based technology to manage real estate owned (“REO”), short sales, foreclosure, bankruptcy and eviction processes

Professional Services

Mortgage origination loan fulfillment, certification and certification insurance services and technologies

Title insurance (as an agent), settlement and valuation services

Residential and commercial construction inspection and risk mitigation services


•	Management of Best Partners Mortgage Cooperative, Inc., doing business as ~~Owners.com~~Lenders One^® ~~• Title insurance (agent and related services) and settlement services~~		~~• Mortgage brokerage~~ ~~• Homeowners insurance~~ (“Lenders One”) mortgage banking cooperative

Foreclosure trustee services

~~Real Estate Investor Solutions~~ ~~- the solutions, services and technologies used by buyers and sellers of single-family investment homes.~~Earlier Stage Businesses



•	~~• Property preservation and inspection services~~ ~~• Real~~Owners.com^®technology-enabled real estate brokerage and ~~auction~~provider of related mortgage brokerage and title services ~~• Data solutions~~ ~~• Title insurance (agent and related services) and settlement services~~	~~• Buy-renovate-lease-sell~~ ~~• Renovation services~~ ~~• Property management services~~ ~~• Appraisal management services and broker and non-broker valuation services~~

~~Other Businesses, Corporate and Eliminations~~: Includes certain ancillary businesses, interest expense and unallocated costs related to corporate support functions. The businesses in this segment include post-charge-off consumer debt collection services, customer relationship management services and information technology (“IT”) infrastructure management services. Interest expense relates to the Company’s senior secured term loan and corporate support functions include executive, finance, law, compliance, human

resources, vendor management, facilities, risk management and sales and marketing costs not allocated to the business units. This segment also includes eliminations of transactions between the reportable segments.


•	Pointillist^® customer journey analytics platform

We classify revenue in three categories: service revenue, revenue from reimbursable expenses and non-controlling interests. In evaluating our performance, we focus on service revenue. Service revenue consists of amounts attributable to our fee-based services and sales of short-term investments in real estate. Reimbursable expenses and non-controlling interests are pass-through items for which we earn no margin. Reimbursable expenses consist of amounts we incur on behalf of our customers in performing our fee-based services that we pass directly on to our customers without a markup. Non-controlling interests represent the earnings of ~~Best Partners Mortgage Cooperative, Inc., doing business as~~ Lenders ~~One~~^® ~~(“Lenders One”).~~One. Lenders One is a mortgage cooperative managed, but not owned, by Altisource. Lenders One is included in revenue and reduced from net income to arrive at net income attributable to Altisource.

Strategy and Growth Businesses

We are focused on becoming one of the premier providers of mortgage and real estate marketplaces and related services to a broad and diversified customer base. ~~Within the mortgage and real estate market segments,~~Through our suite of offerings described above, we facilitate transactions and provide products,

solutions and services related to home sales, home purchases, home ~~rentals, home~~ maintenance, mortgage originations and mortgage servicing.

~~Each~~ Our suite of ~~our strategic businesses provides~~offerings provide Altisource the potential to grow and diversify our customer and revenue base. We believe ~~these businesses~~we operate in very large markets and directly leverage our core competencies and distinct competitive advantages. ~~A further description of our four strategic businesses follows.~~

~~Servicer Solutions:~~

Through ~~this business,~~our offerings that support residential loan servicers, we provide a suite of services and technologies intended to meet ~~the~~their growing and evolving ~~and growing needs of loan servicers.~~needs. We are focused on growing referrals from our existing ~~customer base, expanding the service and proprietary technology offerings to our~~ customer base and attracting new customers to our offerings. We have a customer base that includes Ocwen, a government-sponsored enterprise (“GSE”), NRZ, several large bank and non-bank servicers and asset managers. We believe we are one of only a few providers with a broad suite of servicer solutions, nationwide coverage and demonstrated scalability. Further, we believe we are well positioned to gain market share as delinquency rates rise and as existing customers and prospects consolidate to larger, full-service providers and outsource services that have historically been performed in-house.

~~Origination Solutions:~~

~~Through this business, we~~We also provide services to loan originators (or other similar mortgage market participants) in originating, buying and selling residential mortgages. We provide a suite of services and technologies to meet the evolving and growing needs of ~~loan originators~~lenders, mortgage purchasers and ~~correspondents.~~securitizers. We are focused on ~~growing~~attempting to grow referrals from our existing customer base ~~expanding the service~~ and ~~proprietary technology offerings to our customer base, and attracting~~attract new customers to our offerings. We have a customer base that includes the Lenders One cooperative mortgage bankers ~~the Mortgage Builder~~^® ~~loan origination system customers~~ and mid-size and larger bank and non-bank loan originators. We believe our suite of services and technologies positions us to grow our relationships with our existing customer base by providing additional products, services and solutions to these customers. Further, we believe we are well positioned to attract new customers as prospects consolidate to larger, full-service providers and outsource services that have historically been performed in-house.

~~Consumer Real Estate Solutions:~~

We are also continuing to develop our earlier stage businesses, including Owners.com and Pointillist. Through ~~this business,~~our Owners.com brokerage, we provide real estate buyers and sellers with a ~~technology enabled~~technology-enabled real estate brokerage and the integrated services to support them in buying and selling a home. Our offerings include local real estate agent services, ~~and~~ loan brokerage, ~~as well as~~and closing and title services. Pointillist, which was developed by Altisource through our consumer analytics capabilities, is a potentially disruptive SaaS-based platform that provides unique customer journey analytics at scale and enables customers to engage through our intelligent platform. We are focused on continuing to develop ~~this business~~these businesses by capitalizing on Altisource’s experience in online real estate marketing, ~~and~~ loan origination services ~~as well as on recently developed agile execution competencies.~~

~~Real Estate Investor Solutions:~~

~~Through this business, we provide a suite of services~~ and technologies to support buyers and sellers of single-family investment homes, including our purchase, renovation, leasing and sale of short-term investments in real estate. We are focused on growing referrals from our existing customer base, expanding the service and proprietary technology offerings to our customer base, and attracting new customers to our offerings. We have a customer base that includes Front Yard Residential Corporation (“RESI”) and other institutional and smaller single-family rental investors. The single-family rental market is large, geographically distributed and has fragmented ownership. We believe our acquisition, renovation, property management, leasing and disposition platform provides a strong value proposition for institutional and retail investors and positions us well for growth.

~~There can be no assurance that growth from some or all of our strategic businesses will be successful or our operations will be profitable.~~analytics.

Share Repurchase Program

On May ~~17, 2017,~~15, 2018, our shareholders approved the renewal and replacement of the share repurchase program previously approved by the shareholders on May ~~18, 2016, which replaced~~17, 2017. Under the ~~previous share repurchase program. We~~program, we are authorized to purchase up to ~~4.6~~4.3 million shares of our common stock, based on a limit of 25% of the outstanding shares of common stock on the date of approval, at a minimum price of $1.00 per share and a maximum price of $500.00 per share, for a period of five years from the date of approval. As of March 31, ~~2018,~~2019, approximately ~~3.1~~3.4 million shares of common stock remain available for repurchase under the program. There were no purchases of shares of common stock during the three months ended March 31, 2019. We purchased 0.4 million shares ~~of common stock~~ at an average price of $27.67 per share during the three months ended March 31, ~~2018 and 0.4 million shares at an average price of $25.10 per share during the three months ended March 31, 2017.~~2018. Luxembourg law limits share repurchases to the balance of Altisource Portfolio Solutions S.A. (unconsolidated parent company) retained earnings, less the value of shares repurchased. As of March 31, ~~2018,~~2019, we can repurchase up to approximately ~~$141~~$107 million of our common stock under Luxembourg law. Our ~~senior secured term loan limited~~Credit Agreement also limits the amount we ~~could have spent~~can spend on share repurchases, which was approximately ~~$464~~$459 million as of March 31, ~~2018,~~2019, and may ~~have prevented~~prevent repurchases in certain circumstances. The new credit agreement retains this amount available for share repurchases and other restricted payments. See Note 21 to the condensed consolidated financial statements for additional information on the new credit agreement.

Ocwen Related Matters

During the three months ended March 31, ~~2018,~~2019, Ocwen was our largest customer, accounting for ~~52%~~58% of our total revenue. Additionally, 8%7% of our revenue for the three months ended March 31, ~~2018~~2019 was earned on the loan portfolios serviced by Ocwen, when a party other than Ocwen or the mortgage servicing rights (“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, cease and desist orders, consent orders, inquiries, subpoenas, civil investigative ~~demand,~~demands, requests for information and other actions and is subject to pending legal proceedings, some of which include claims against Ocwen for substantial monetary damages. For example, on May 15, 2017, Ocwen disclosed that on April 20, 2017, the Consumer Financial Protection Bureau ~~(“CFPB”)~~ and the State of Florida filed separate complaints in the United States District Court for the Southern District of Florida against Ocwen alleging violations of Federal consumer financial law and, in the case of Florida, Florida statutes. As another example, on May 15, 2017, Ocwen also disclosed that on April 28, 2017, the Commonwealth of Massachusetts filed a lawsuit against Ocwen in the Superior Court for the Commonwealth of Massachusetts alleging violations of state consumer financial laws relating to Ocwen’s servicing business, including lender-placed insurance and property preservation fees. Ocwen disclosed that the complaints seek to obtain permanent injunctive relief, consumer redress, refunds, restitution, disgorgement, damages, civil penalties, costs and fees and other relief. The ~~forgoing~~foregoing or other matters could result in, and in some cases, have resulted in, adverse regulatory or other actions against Ocwen. Previous regulatory actions against Ocwen resulted in subjecting Ocwen to independent oversight of its operations and placing certain restrictions on its ability to acquire servicing rights.

Ocwen has disclosed that NRZ is its largest client. As of December 31, 2018, NRZ owned MSRs or rights to MSRs relating to approximately 57% of loans serviced and subserviced by Ocwen (measured in unpaid principal balances) (the “Subject 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 Subject MSRs for an initial term of five years. NRZ can terminate its sub-servicing agreement with Ocwen in exchange for the payment of a termination fee.

The foregoing may have significant adverse effects on Ocwen’s business and/or our continuing relationship with Ocwen. For example, Ocwen may be required to alter the way it conducts business, including the parties it contracts with for services (including IT and software services), it may be required to seek changes to its existing pricing structure with us, it may lose its non-GSE servicing rights or subservicing arrangements or may lose one or more of its state servicing or origination licenses. Additional regulatory actions or adverse financial developments may impose additional restrictions on or require changes in Ocwen’s business that could require it to sell assets or change its business operations. Any or all of these effects could result in our eventual loss of Ocwen as a customer or a reduction in the number and/or volume of services they purchase from us or the loss of other customers.

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

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

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

The contractual relationship between Ocwen and Altisource changes significantly or there are significant changes to our pricing to Ocwen for services from which we generate material revenue

Altisource otherwise fails to be retained as a service provider

Management cannot predict ~~the outcome~~whether any of these ~~matters~~events will occur or the amount of any impact they may have on Altisource. However, in the event one or more of these ~~matters~~events materially negatively impact Altisource, we believe the variable nature of our cost structure would allow us to realign our cost structure in line with remaining revenue. Furthermore, in the event of a significant reduction in the volume of services purchased or loan portfolios serviced by Ocwen (such as a transfer of Ocwen’s remaining servicing rights to a successor servicer), we believe the impact to Altisource could occur over an extended period of time. During this period, we believe that we will continue to generate revenue from all or a portion of Ocwen’s loan portfolios.

Additionally, Ocwen has notified us, disclosed in its filings and stated in connection with resolving several state administrative actions discussed above, that it plans to transition from REALServicing to another mortgage servicing software platform. Furthermore, Ocwen disclosed in its filings that its pending acquisition of PHH Corporation is expected to accelerate its transition to a new servicing platform. Altisource is supporting Ocwen through this transition. We do not anticipate that a servicing technology transition would impact the other services we provide to Ocwen. For the three months ended March 31, 2018 and 2017, service revenue from REALServicing was $6.5 million and $7.0 million, respectively.

In addition to the above, as of June 30, 2017, we estimate that NRZ owned certain economic rights in, but not legal title to, approximately 78% of Ocwen’s non-GSE MSRs (the “Subject MSRs”). As previously disclosed, in July 2017, Ocwen and NRZ entered into agreements to convert NRZ’s economic rights to the Subject MSRs into fully-owned MSRs in exchange for payments from NRZ to Ocwen when such Subject MSRs were transferred. The transfers are subject to certain third party consents. Ocwen disclosed that under these agreements, Ocwen would subservice the transferred Subject MSRs for an initial term of five years, and the agreements provided for the conversion of the existing arrangements into a more traditional subservicing arrangement.

become our largest customer. Had all of the Subject MSRs been transferred to NRZ and the Brokerage Agreement and the Services Agreement with NRZ were in place as of January 1, 2018, we estimate that approximately 48% of our revenue for the three months ended March 31, 2018 would have been related to NRZ. There can be no assurance that the parties will reach an agreement with respect to the terms of the Services Agreement or that a Services Agreement will be entered into on a timely basis or at all.

Factors Affecting Comparability

The following items may impact the comparability of our results:

On March 28, 2019, the Company entered into a definitive agreement to sell its 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 upon closing of the sale, and an additional $4.0 million to be paid on the one year anniversary of the sale closing. The ~~average number~~sale is subject to closing conditions, including the receipt of ~~loans serviced by Ocwen~~regulatory consents. As a result of this pending sale, assets and liabilities subject to the sale have been reported as assets and liabilities held for sale on ~~REALServicing (including those MSRs owned by NRZ~~the accompanying condensed consolidated balance sheets. The Company currently estimates it will recognize a pretax gain of more than $20.0 million from the sale, which is anticipated to close before the end of the third quarter 2019, and ~~subserviced by Ocwen) was approximately 1.2~~intends to use the $40.0 million ~~for the three months ended March 31, 2018 compared~~up-front payment, subject to ~~1.3 million for the three months ended March 31, 2017,~~ a ~~decrease~~working capital adjustment, to repay a portion of 13%. The average number of delinquent non-GSE loans serviced by Ocwen on REALServicing was approximately 171 thousand for the three months ended March 31, 2018 compared to 191 thousand for the three months ended March 31, 2017, a decrease of 10%.its senior secured term loan.

Effective January 1, ~~2018,~~2019, the Company ~~adopted Accounting Standards Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition~~implemented a new accounting standard on leases, which required the recognition of operating leases by companies as lease obligation liabilities on their balance sheets and ~~Measurement~~also required the recognition of ~~Financial Assets~~right-of-use assets, resulting in higher depreciation and ~~Financial Liabilities~~, which requires certain equity investments to be measured at fair value with changes in fair value recognized in net income. Previously, changes in the fair value of the Company’s available for sale securities were included in comprehensive income. During the three months ended March 31, 2018, net loss included an unrealized loss from our investment in RESI common shares of $5.6 million, net of a $1.9 million income tax benefit. During the three months ended March 31, 2017, comprehensive income included an unrealized gain from our investment in RESI common shares of $12.7 million, net of a $4.7 million income tax provision. See Noteamortization expense and interest expense and lower occupancy related costs (see Notes 1 and 22 to the condensed consolidated financial statements for additional information regarding this accounting change). Adoption of this new standard resulted in the recognition of $42.1 million of right-to-use assets in premises and equipment, net, $45.5 million of lease obligation 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 liabilities and other non-current liabilities on the ~~adoption~~accompanying condensed consolidated balance sheets. Consequently, occupancy related costs were lower by $4.3 million for the three months ended March 31, 2019 and depreciation and amortization expense and interest expense increased by $3.7 million and $0.8 million, respectively.

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. During the three months ended March 31, 2019, Altisource incurred $4.4 million of severance costs and professional services fees related to the ~~new accounting standard~~reorganization plan (no comparative amount for the three months ended March 31, 2018). Altisource expects to incur additional severance and related costs through 2019 in connection with this internal reorganization and will expense those costs as incurred. Based on ~~investments~~the Company’s analysis, it currently anticipates the future costs relating to the internal reorganization plan to be in ~~equity securities.~~the range of approximately $13 million to $17 million.

During the three months ended March 31, 2019 and 2018, the Company recognized an unrealized gain of $2.2 million and an unrealized loss of $(7.5) million, respectively, on its investment in Front Yard Residential Corporation (“RESI”) common shares in other income (expense), net in the accompanying condensed consolidated statements of operations and comprehensive loss from a change in the market value of RESI common shares.

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 certain existing court precedent. During the three months ended March 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 $2.1 million loss for the three months ended March 31, 2019 (no comparative amount for the three months ended March 31, 2018) in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive loss, in addition to the $6.2 million loss recorded in 2018. The Company began invoicing, collecting and remitting sales tax in applicable jurisdictions in 2019. The Company is also in the process of seeking reimbursement for sales tax payments from clients; however, there can be no assurance that the Company will be successful in collecting some or all of such reimbursements. Future changes in our estimated sales tax exposure could result in a material adjustment to our condensed consolidated financial statements which would impact our financial condition and results of operations.

On April 3, 2018, Altisource and its wholly-owned subsidiary, Altisource S.à r.l. entered into the Credit Agreement, pursuant to which, among other things, Altisource borrowed $412.0 million in the form of Term B Loans. Proceeds from the Term B Loans were used to repay the Company’s prior senior secured term loan. The comparative average interest rates under the Credit Agreement for the Term B Loans and the prior credit agreement were 6.8% and 5.1% for the three months ended March 31, 2019 and 2018, respectively. The increase in interest expense from the higher average interest rate was partially offset by a lower average outstanding principal debt balance for the three months ended March 31, 2019 as a result of debt principal repayments of $74.8 million during 2018.

~~CONSOLIDATED~~ RESULTS OF OPERATIONS

Summary ~~Consolidated~~ Results

The following is a discussion of our ~~consolidated~~ results of operations for the periods indicated. ~~For a more detailed discussion of the factors that affected the results of our business segments in these periods, see “Segment Results of Operations” below.~~

The following table sets forth information regarding our consolidated results of operations for the three months ended March 31:


(in thousands, except per share data)	2018			2017			% Increase (decrease)		2019			2018			% Increase (decrease)

Service revenue									$	164,999		$	188,766		(13	)
Mortgage Market	$	159,155		$	194,973		(18	)
Real Estate Market	14,803			19,189			(23	)
Other Businesses, Corporate and Eliminations	14,808			15,677			(6	)
Total service revenue	188,766			229,839			(18	)
Reimbursable expenses	8,147			10,029			(19	)	4,496			8,147			(45	)
Non-controlling interests	525			615			(15	)	440			525			(16	)
Total revenue	197,438			240,483			(18	)	169,935			197,438			(14	)
Cost of revenue	147,194			177,953			(17	)	124,104			147,194			(16	)
Gross profit	50,244			62,530			(20	)	45,831			50,244			(9	)
Operating expenses:
Selling, general and administrative expenses	43,124			47,701			(10	)	41,240			43,124			(4	)
Restructuring charges									4,420			—			N/M
Income from operations	7,120			14,829			(52	)	171			7,120			(98	)
Other income (expense), net:
Other income (expense), net
Interest expense	(5,863		)	(5,798		)	1		(6,749		)	(5,863		)	15
Unrealized loss on investments in equity securities	(7,501		)	—			N/M
Unrealized gain (loss) on investment in equity securities									2,238			(7,501		)	130
Other income (expense), net	1,272			715			78		374			1,272			(71	)
Total other income (expense), net	(12,092		)	(5,083		)	138		(4,137		)	(12,092		)	(66	)

(Loss) income before income taxes and non-controlling interests	(4,972		)	9,746			(151	)
Income tax benefit (provision)	1,365			(2,586		)	(153	)
Loss before income taxes and non-controlling interests									(3,966		)	(4,972		)	(20	)
Income tax benefit									1,222			1,365			(10	)

Net (loss) income	(3,607		)	7,160			(150	)
Net loss									(2,744		)	(3,607		)	(24	)
Net income attributable to non-controlling interests	(525		)	(615		)	(15	)	(440		)	(525		)	(16	)

Net (loss) income attributable to Altisource	$	(4,132	)	$	6,545		(163	)
Net loss attributable to Altisource									$	(3,184	)	$	(4,132	)	(23	)

Margins:
Gross profit/service revenue	27		%	27		%			28		%	27		%
Income from operations/service revenue	4		%	6		%			—		%	4		%

(Loss) earnings per share:
Loss per share:
Basic	$	(0.24	)	$	0.35		(169	)	$	(0.20	)	$	(0.24	)	(17	)
Diluted	$	(0.24	)	$	0.34		(171	)	$	(0.20	)	$	(0.24	)	(17	)

Weighted average shares outstanding:
Basic									16,292			17,378			(6	)
Diluted									16,292			17,378			(6	)

N/M — not meaningful.

Revenue

Revenue by line of business was as follows for the three months ended March 31:



(in thousands)	2019		2018		% Increase (decrease)

Service revenue:
Field Services	$	70,094	$	67,246	4
Marketplace	36,967		50,251		(26	)
Professional Services	26,413		31,930		(17	)
Earlier Stage Businesses	1,867		1,478		26
Other	29,658		37,861		(22	)
Total service revenue	164,999		188,766		(13	)

Reimbursable expenses:
Field Services	2,596		5,677		(54	)
Marketplace	691		1,146		(40	)
Professional Services	1,036		1,310		(21	)
Other	173		14		N/M
Total reimbursable expenses	4,496		8,147		(45	)

Non-controlling interests:
Professional Services	440		525		(16	)

Total revenue	$	169,935	$	197,438	(14	)

N/M — not meaningful.

We recognized service revenue of ~~$188.8~~$165.0 million for the three months ended March 31, ~~2018, an 18%~~2019, a 13% decrease compared to the three months ended March 31, ~~2017.~~2018. Field Services, Marketplace and Professional Services were negatively impacted by the reduction in the size of Ocwen’s portfolio and number of delinquent loans, RESI’s smaller portfolio of non-performing loans and REO, as RESI continued to sell off its portfolio and focus on directly acquiring, renovating and managing rental homes, and higher brokerage commission earned from the NRZ portfolio during the three months ended March 31, 2018 related to REO properties that transferred to NRZ from Ocwen that were already listed on Hubzu. This transitional service revenue ended in 2018. These decreases in service revenue were partially offset by service revenue growth in Field Services driven by growth in referrals of certain higher fee property preservation services. In addition, service revenue growth from Earlier Stage Businesses was driven by increases in transaction volumes at Owners.com and customer wins at Pointillist. Service revenue in Other decreased from lower rental property management service revenue from the sale of this business to RESI in August 2018, lower construction management transactions with RESI and lower revenue in the buy-renovate-lease-sell business from fewer home sales, partially offset by service revenue growth from our Financial Services businesses.

We recognized reimbursable expense revenue of $4.5 million for the three months ended March 31, 2019, a 45% decrease compared to the three months ended March 31, 2018. The decrease in ~~service~~reimbursable expense revenue ~~in the Mortgage Market segment~~ was primarily a result of ~~the~~a reduction in the size of Ocwen’s portfolio and number of delinquent loans in its portfolio resulting from loan repayments, loan modifications, short sales, REO sales and other forms of ~~resolution. The decrease~~resolution, as discussed in service revenue in the Real Estate Market segment was primarily from RESI’s smaller portfolio of non-performing loans and REO, partially offset by service revenue growth in the non-Ocwen property preservation and inspection, Hubzu, renovation management and Consumer Real Estate Solutions businesses.above.

Certain of our revenues are impacted by seasonality. More specifically, revenues from property sales, loan originations and certain ~~property preservation services~~Field Services typically tend to be at their lowest level during the fall and winter months and at their highest level

during the spring and summer months. In addition, revenue in the asset recovery management business typically tends to be higher in the first quarter, as borrowers may utilize tax refunds and bonuses to pay debts, and generally declines throughout the rest of the year.

Cost of Revenue and Gross Profit

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 and depreciation and amortization of operating assets.

Cost of revenue consisted of the following for the three months ended March 31:


(in thousands)	2018		2017		% Increase (decrease)		2019		2018		% Increase (decrease)

Compensation and benefits	$	54,866	$	63,092	(13	)	$	41,368	$	54,866	(25	)
Outside fees and services	65,098		80,959		(20	)	62,581		65,098		(4	)
Cost of real estate sold	3,179		4,935		(36	)	2,094		3,179		(34	)
Technology and telecommunications	9,451		11,351		(17	)	8,509		9,451		(10	)
Reimbursable expenses	8,147		10,029		(19	)	4,496		8,147		(45	)
Depreciation and amortization	6,453		7,587		(15	)	5,056		6,453		(22	)

Cost of revenue	$	147,194	$	177,953	(17	)	$	124,104	$	147,194	(16	)

~~Cost~~We recognized cost of revenue of $124.1 million for the three months ended March 31, 2019, a 16% decrease compared to the three months ended March 31, 2018. The decrease was primarily driven by cost reduction initiatives and benefits of Project Catalyst and lower outside fees and services as a result of a reduction in the size of Ocwen’s portfolio, as discussed in the revenue section above. The decline in compensation and benefits in certain of our businesses also resulted from lowering headcount consistent with the revenue decline from the Ocwen and RESI portfolios. The decrease in reimbursable expenses was consistent with the decrease in reimbursable expense revenue discussed in the revenue section above.

Gross profit decreased to $45.8 million, representing 28% of service revenue, for the three months ended March 31, ~~2018 of $147.2 million decreased 17%~~2019 compared to the three months ended March 31, 2017. The decrease in cost of revenue was primarily driven by lower outside fees and services, consistent with the decrease in Mortgage Market and Real Estate Market service revenue discussed in the revenue section above. Compensation and benefits declined in certain of our businesses as we reduced headcount in anticipation of the revenue decline from the Ocwen and RESI portfolios and from the implementation of efficiency initiatives.

~~Gross profit decreased~~ to $50.2 million, representing 27% of service revenue, for the three months ended March 31, ~~2018 compared to $62.5 million, representing 27% of service revenue, for the three months ended March 31, 2017.~~2018. Gross profit as a percentage of service revenue for the three months ended March 31, ~~2018 was flat~~2019 increased compared to the three months ended March 31, ~~2017,~~2018, as ~~the~~a result of our Project Catalyst cost reduction initiatives. The increase in gross margin as a percentage of service revenue ~~declines were largely~~was partially offset by revenue mix changes with a higher percentage of service revenue from our lower ~~cost of revenue, as discussed above.~~margin Field Services business.

Selling, General and Administrative Expenses

Selling, general and administration expenses (“SG&A”) include payroll for personnel employed in executive, finance, law, compliance, human resources, vendor management, facilities, risk management, sales and marketing roles. This category also includes professional services fees, occupancy costs, marketing costs, depreciation and amortization of non-operating assets and other expenses.

SG&A expenses consisted of the following for the three months ended March 31:


(in thousands)	2018		2017		% Increase (decrease)		2019		2018		% Increase (decrease)

Compensation and benefits	$	13,569	$	12,506	8		$	11,353	$	13,569	(16	)
Amortization of intangible assets							8,647		7,147		21
Occupancy related costs	8,434		10,273		(18	)	3,908		8,434		(54	)
Amortization of intangible assets	7,147		9,146		(22	)
Marketing costs	3,607		4,269		(16	)	2,932		3,607		(19	)
Professional services	3,226		3,730		(14	)	5,476		3,226		70
Depreciation and amortization	2,268		2,421		(6	)	4,313		2,268		90
Other	4,873		5,356		(9	)	4,611		4,873		(5	)

Selling, general and administrative expenses	$	43,124	$	47,701	(10	)	$	41,240	$	43,124	(4	)

SG&A for the three months ended March 31, ~~2018~~2019 of ~~$43.1~~$41.2 million decreased ~~10%~~by 4% compared to the three months ended March 31, ~~2017.~~2018. The decrease ~~in SG&A~~ was primarily ~~due~~driven by lower compensation and benefits as we reduced headcount as a result of our Project Catalyst cost reduction initiatives. Occupancy related costs were lower primarily as a result of the January 1, 2019 implementation of a new accounting standard on operating leases. The new standard required the recognition of operating leases by companies as lease obligation liabilities on their balance sheet and also required the recognition of right-of-use assets, resulting in higher depreciation and amortization expense and interest expense and lower occupancy related costs. Consequently, depreciation and amortization expense related to ~~lower~~the right-to-use assets increased for the three months ended March 31, 2019 (see Notes 1 and 22 to the condensed consolidated financial statements for additional information regarding this accounting change). These decreases were partially offset by an increase in professional services, from increased legal and professional services costs in connection with certain legal and regulatory matters and an increase in amortization of intangible assets ~~driven by lower revenue generated by~~based on changes in the ~~Homeward Residential, Inc. (“Homeward”) and Residential Capital, LLC (“ResCap”) portfolios (revenue-based amortization)~~estimated remaining lives of certain intangible assets.

Other Operating Expenses - Restructuring Charges

In August 2018, Altisource initiated Project Catalyst, a project intended to optimize our operations and reduce costs to better align our cost structure with our anticipated revenues and improve our operating margins. During the three months ended March 31, 2019, we incurred $4.4 million of severance costs and professional services fees related to the reorganization plan. We expect to incur additional severance and related costs through 2019 in connection with this internal reorganization and will expense those costs as incurred. Based on our analysis, we currently anticipate the future costs relating to the internal reorganization plan to be in the ~~Mortgage Market segment, consistent with the reduction in the size~~range of Ocwen’s portfolio discussed in the revenue section above. In addition, lower occupancy costs were driven by the subleasing of certain office facilities in Other Businesses, Corporate and Eliminations.approximately $13 million to $17 million.

Income from Operations

Income from operations decreased to $0.2 million, representing less than 1% of service revenue, for the three months ended March 31, 2019, compared to $7.1 million, representing 4% of service revenue, for the three months ended March 31, ~~2018 compared to $14.8 million, representing 6% of service revenue, for the three months ended March 31, 2017. Operating income~~2018. Income from operations as a percentage of service revenue decreased ~~because~~in 2019 compared to 2018, as SG&A ~~costs declined~~and other operating expenses did not decrease at ~~a lower~~the same rate ~~than~~as service revenue ~~based on~~and from the ~~less variable nature of certain of these costs.~~restructuring costs incurred during 2019, as discussed above.

Other Income (Expense), net

Other income (expense), net principally includes interest expense, unrealized gain (loss) on our investment in RESI common shares and other non-operating gains and losses. ~~Effective January 1, 2018, other income (expense), net includes unrealized losses on our investment in RESI (see Factors Affecting Comparability above).~~

Other ~~income (expense),~~expense, net for the three months ended March 31, ~~2018~~2019 of $(4.1) million decreased by 66% compared to $(12.1) million ~~increased 138% compared to~~for the three months ended March 31, ~~2017,~~2018. The decrease in other expense in 2019 was primarily driven by ana $2.2 million unrealized ~~loss of $7.5 million~~gain on our investment in ~~RESI.~~RESI common shares compared to a $(7.5) million loss in 2018. The decrease was partially offset by an increase in interest expense due to higher average interest rates on the Credit Agreement and from imputed interest expense on leases related to the implementation of a new accounting standard effective January 1, 2019, as discussed in SG&A above. The comparative average interest rates under the Credit Agreement for the Term B Loans and the prior credit agreement were 6.8% and 5.1% for the three months ended March 31, 2019 and 2018, respectively. The increase in interest expense from the higher average interest rate was partially offset by a lower average outstanding principal debt balance for the three months ended March 31, 2019 as a result of debt principal repayments of $74.8 million during 2018.

Income Tax ~~Benefit (Provision)~~Provision

We recognized an income tax benefit of $1.2 million and $1.4 million for the years ended March 31, 2019 and 2018, respectively, and our effective income tax rates for the three months ended March 31, 2019 and 2018 ~~compared to an~~were 30.8% and 27.5%, respectively. The Company’s effective income ~~tax provision of $2.6 million for the three months ended March 31, 2017. Our effective tax rate was 27.5% and 26.5% for the three months ended March 31, 2018 and 2017, respectively. Our effective~~ tax rates differ from the Luxembourg statutory income tax rate of 26.0% ~~and 27.1% in 2018 and 2017, respectively, primarily~~ due to the mix of income and losses with varying tax rates in multiple taxing jurisdictions and, for the three months ended March 31, 2017, the effect of certain deductions in Luxembourg. Our effective income tax rate can vary due to changes in the mix of taxable income across the jurisdictions in which we operate.

~~SEGMENT RESULTS OF OPERATIONS~~

The following section provides a discussion of pretax results of operations of our business segments. Transactions between segments are accounted for as third party arrangements for purposes of presenting segment results of operations.

~~Financial information for our segments was as follows:~~

Three months ended March 31, 2018
(in thousands) Mortgage Market Real Estate Market Other Businesses, Corporate and Eliminations Consolidated Altisource

Revenue

Service revenue $ 159,155
$ 14,803
$ 14,808
$ 188,766
Reimbursable expenses 7,658
477
12
8,147
Non-controlling interests 525
—
—
525
167,338
15,280
14,820
197,438
Cost of revenue 111,073
18,554
17,567
147,194
Gross profit (loss) 56,265
(3,274 ) (2,747 ) 50,244
Selling, general and administrative expenses 23,374
4,118
15,632
43,124
Income (loss) from operations 32,891
(7,392 ) (18,379 ) 7,120
Total other income (expense), net 16
2
(12,110 ) (12,092 )

Income (loss) before income taxes and
non-controlling interests $ 32,907
$ (7,390 ) $ (30,489 ) $ (4,972 )

Margins:

Gross profit (loss)/service revenue 35 % (22 )% (19 )% 27 %
Income (loss) from operations/service revenue 21 % (50 )% (124 )% 4 %

Three months ended March 31, 2017
(in thousands) Mortgage Market Real Estate Market Other Businesses, Corporate and Eliminations Consolidated Altisource

Revenue

Service revenue $ 194,973
$ 19,189
$ 15,677
$ 229,839
Reimbursable expenses 9,135
874
20
10,029
Non-controlling interests 615
—
—
615
204,723
20,063
15,697
240,483
Cost of revenue 140,150
22,143
15,660
177,953
Gross profit (loss) 64,573
(2,080 ) 37
62,530
Selling, general and administrative expenses 28,682
4,325
14,694
47,701
Income (loss) from operations 35,891
(6,405 ) (14,657 ) 14,829
Total other income (expense), net 10
—
(5,093 ) (5,083 )

Income (loss) before income taxes and
non-controlling interests $ 35,901
$ (6,405 ) $ (19,750 ) $ 9,746

Margins:

Gross profit (loss)/service revenue 33 % (11 )% — % 27 %
Income (loss) from operations/service revenue 18 % (33 )% (93 )% 6 %

~~Mortgage Market~~

~~Revenue~~

~~Revenue by business unit was as follows for the three months ended March 31:~~

(in thousands) 2018 2017 % Increase (decrease)

Service revenue:

Servicer Solutions $ 147,809
$ 183,433
(19 )
Origination Solutions 11,346
11,540
(2 )
Total service revenue 159,155
194,973
(18 )

Reimbursable expenses:
Servicer Solutions 7,602
9,036
(16 )
Origination Solutions 56
99
(43 )
Total reimbursable expenses 7,658
9,135
(16 )

Non-controlling interests 525
615
(15 )

Total revenue $ 167,338
$ 204,723
(18 )

We recognized service revenue of $159.2 million for the three months ended March 31, 2018, an 18% decrease compared to the three months ended March 31, 2017. We also recognized reimbursable expense revenue of $7.7 million for the three months ended March 31, 2018, a 16% decrease compared to the three months ended March 31, 2017. The decreases in service revenue and reimbursable expenses revenue were primarily a result of the reduction in the size of Ocwen’s portfolio and number of delinquent loans in its portfolio resulting from loan repayments, loan modifications, short sales, REO sales and other forms of resolution in the Servicer Solutions business. These decreases were partially offset by growth in the non-Ocwen property preservation and inspection and Hubzu^® ~~businesses.~~

Certain of our Mortgage Market businesses are impacted by seasonality. Revenues from property sales, loan originations and certain property preservation services are generally lowest during the fall and winter months and highest during the spring and summer months.

~~Cost of Revenue and Gross Profit~~

~~Cost of revenue consisted of the following for the three months ended March 31:~~

(in thousands) 2018 2017 % Increase (decrease)

Compensation and benefits $ 34,966
$ 42,755
(18 )
Outside fees and services 57,561
75,370
(24 )
Reimbursable expenses 7,658
9,135
(16 )
Technology and telecommunications 6,346
8,172
(22 )
Depreciation and amortization 4,542
4,718
(4 )

Cost of revenue $ 111,073
$ 140,150
(21 )

Cost of revenue for the three months ended March 31, 2018 of $111.1 million decreased by 21% compared to the three months ended March 31, 2017. The decrease in cost of revenue was primarily driven by lower outside fees and services, consistent with the decrease in Servicer Solutions service revenue discussed in the revenue section above. Compensation and benefits declined in certain of the Servicer Solutions businesses as we reduced headcount in anticipation of the revenue decline from Ocwen’s portfolio discussed in the revenue section above, the implementation of efficiency initiatives and the redeployment of certain technology resources to our Other Businesses, Corporate and Eliminations for the development of enterprise-wide technology initiatives. The decrease in reimbursable expenses was consistent with the decrease in reimbursable expenses revenue discussed in the revenue section above.

Gross profit decreased to $56.3 million, representing 35% of service revenue, for the three months ended March 31, 2018 compared to $64.6 million, representing 33% of service revenue, for the three months ended March 31, 2017. Gross profit as a percentage of service revenue increased primarily due to service revenue mix from fewer lower margin property preservation referrals. Our margins can vary substantially depending upon service revenue mix.

~~Selling, General and Administrative Expenses~~

~~SG&A expenses consisted of the following for the three months ended March 31:~~

(in thousands) 2018 2017 % Increase (decrease)

Compensation and benefits $ 4,857
$ 5,154
(6 )
Occupancy related costs 5,254
5,216
1
Amortization of intangible assets 6,519
8,435
(23 )
Professional services 1,446
2,230
(35 )
Marketing costs 1,728
2,472
(30 )
Depreciation and amortization 896
863
4
Other 2,674
4,312
(38 )

Selling, general and administrative expenses $ 23,374
$ 28,682
(19 )

SG&A for the three months ended March 31, 2018 of $23.4 million decreased by 19% compared to the three months ended March 31, 2017. The decrease in SG&A was primarily due to lower amortization of intangible assets, driven by lower revenue generated by the Homeward and ResCap portfolios (revenue-based amortization), consistent with the reduction in the size of Ocwen’s portfolio discussed in the revenue section above, and a decrease in other due to lower bad debt expense in the current year. In addition, legal costs in professional services decreased in connection with the resolution of, and reduction in activities related to, litigation and regulatory matters, and marketing costs decreased due to a reduction in Hubzu spending in the current year.

~~Income from Operations~~

Income from operations decreased to $32.9 million, representing 21% of service revenue, for the three months ended March 31, 2018 compared to $35.9 million, representing 18% of service revenue, for the three months ended March 31, 2017. The increase in operating income as a percentage of service revenue was primarily the result of higher gross profit margins, as discussed above.

~~Real Estate Market~~

~~Revenue~~

~~Revenue by business unit was as follows for the three months ended March 31:~~

(in thousands) 2018 2017 % Increase (decrease)

Service revenue:

Consumer Real Estate Solutions $ 1,405
$ 709
98
Real Estate Investor Solutions 13,398
18,480
(28 )
Total service revenue 14,803
19,189
(23 )

Reimbursable expenses:
Consumer Real Estate Solutions 2
—
N/M
Real Estate Investor Solutions 475
874
(46 )
Total reimbursable expenses 477
874
(45 )

Total revenue $ 15,280
$ 20,063
(24 )

~~N/M — not meaningful.~~

We recognized service revenue of $14.8 million for the three months ended March 31, 2018, a 23% decrease compared to the three months ended March 31, 2017. The decrease in service revenue was primarily driven by a decline in revenues in the Real Estate

Investor Solutions business from RESI’s smaller portfolio of non-performing loans and REO, as RESI continues to sell its portfolio of non-performing loans and REO and focuses on directly acquiring, renovating and managing rental homes. This decrease in the Real Estate Investor Solutions business was also driven by a decrease in our buy-renovate-lease-sell program due to lower transaction volumes. These decreases were partially offset by an increase in the Consumer Real Estate Solutions business from higher transaction volumes for the three months ended March 31, 2018 and growth in the renovation management business in the Real Estate Investor Solutions business.

Certain of our Real Estate Market businesses are impacted by seasonality. Revenues from property sales and certain property preservation services are generally lowest during the fall and winter months and highest during the spring and summer months.

~~Cost of Revenue and Gross Loss~~

~~Cost of revenue consisted of the following for the three months ended March 31:~~

(in thousands) 2018 2017 % Increase (decrease)

Compensation and benefits $ 7,002
$ 9,242
(24 )
Outside fees and services 6,869
4,716
46
Cost of real estate sold 3,179
4,935
(36 )
Reimbursable expenses 477
874
(45 )
Technology and telecommunications 843
1,722
(51 )
Depreciation and amortization 184
654
(72 )

Cost of revenue $ 18,554
$ 22,143
(16 )

Cost of revenue for the three months ended March 31, 2018 of $18.6 million decreased by 16% compared to the three months ended March 31, 2017. The decrease in cost of revenue was primarily driven by lower compensation and benefits, which declined in certain of the Real Estate Investor Solutions businesses as we reduced headcount in anticipation of the revenue from RESI’s portfolio discussed in the revenue section above, and a decrease in the cost of real estate sold in connection with our buy-renovate-lease-sell program due to lower transaction volumes. These decreases were partially offset by higher outside fees and services, principally in the Real Estate Investor Solutions renovation management business and in the Consumer Real Estate Solutions business consistent with the increase in service revenue discussed in the revenue section above.

Gross loss increased to $(3.3) million, representing (22)% of service revenue, for the three months ended March 31, 2018, compared to $(2.1) million, representing (11)% of service revenue, for the three months ended March 31, 2017. Gross loss as a percent of service revenue increased primarily as a result of service revenue mix from fewer higher margin REO sales, partially offset by declines in the lower margin buy-renovate-lease-sell program. Our margins can vary substantially depending upon service revenue mix.

~~Selling, General and Administrative Expenses~~

~~SG&A expenses consisted of the following for the three months ended March 31:~~

(in thousands) 2018 2017 % Increase (decrease)

Compensation and benefits $ 709
$ 599
18
Occupancy related costs 571
672
(15 )
Amortization of intangible assets 211
211
—
Professional services 158
323
(51 )
Marketing costs 1,794
1,724
4
Depreciation and amortization 127
156
(19 )
Other 548
640
(14 )

Selling, general and administrative expenses $ 4,118
$ 4,325
(5 )

SG&A for the three months ended March 31, 2018 of $4.1 million decreased by 5% compared to the three months ended March 31, 2017. The decrease in SG&A was primarily driven by a decrease in legal costs in professional services.

~~Loss from Operations~~

Loss from operations increased to $(7.4) million, representing (50)% of service revenue, for the three months ended March 31, 2018, compared to a loss from operations of $(6.4) million, representing (33)% of service revenue, for the three months ended March 31, 2017. The increase in loss from operations as a percentage of service revenue was primarily the result of lower gross profit margins, as discussed above.

~~Other Businesses, Corporate and Eliminations~~

~~Revenue~~

~~Revenue by business unit was as follows for the three months ended March 31:~~

(in thousands) 2018 2017 % Increase (decrease)

Service revenue:

Customer relationship management $ 6,393
$ 7,357
(13 )
Asset recovery management 7,039
6,077
16
IT infrastructure services 1,376
2,243
(39 )
Total service revenue 14,808
15,677
(6 )

Reimbursable expenses:
Asset recovery management 12
20
(40 )
Total reimbursable expenses 12
20
(40 )

Total revenue $ 14,820
$ 15,697
(6 )

We recognized service revenue of $14.8 million for the three months ended March 31, 2018, a 6% decrease compared to the three months ended March 31, 2017. The decrease in service revenue was primarily due to a decline in customer relationship management services from lower transaction volumes from a customer that expanded its vendor network. In addition, the decline in IT infrastructure services, which are typically billed on a cost plus basis, was driven by the transition of resources supporting Ocwen’s technology infrastructure from Altisource to Ocwen. This transition began in the fourth quarter of 2015 and continued through 2018. These decreases were partially offset by an increase in asset recovery management service revenue from growth in collection referral volumes.

Certain of our other businesses are impacted by seasonality. Revenue in the asset recovery management business tends to be higher in the first quarter, as borrowers may utilize tax refunds and bonuses to pay debts, and generally declines throughout the remainder of the year.

~~Cost of Revenue and Gross Profit (Loss)~~

~~Cost of revenue consisted of the following for the three months ended March 31:~~

(in thousands) 2018 2017 % Increase (decrease)

Compensation and benefits $ 12,898
$ 11,095
16
Outside fees and services 668
873
(23 )
Reimbursable expenses 12
20
(40 )
Technology and telecommunications 2,262
1,457
55
Depreciation and amortization 1,727
2,215
(22 )

Cost of revenue $ 17,567
$ 15,660
12

Cost of revenue for the three months ended March 31, 2018 of $17.6 million increased by 12% compared to the three months ended March 31, 2017. The increase in cost of revenue was primarily due to increases in compensation and benefits and technology and telecommunications costs, driven by the redeployment of certain technology resources from the Mortgage Market segment for the development of enterprise-wide technology initiatives.

Gross profit (loss) decreased to a gross loss of $(2.7) million, representing (19)% of service revenue, for the three months ended March 31, 2018 compared to gross profit of less than $0.1 million, representing less than 1% of service revenue, for the three months ended March 31, 2017. Gross profit as a percentage of service revenue decreased due to the increase in compensation and benefits and technology and telecommunications costs and the decrease in customer relationship management and IT infrastructure revenue, partially offset by increased asset recovery management revenue, as described above.

~~Selling, General and Administrative Expenses~~

SG&A in Other Businesses, Corporate and Eliminations include SG&A expenses of the customer relationship management, asset recovery management and IT infrastructure services businesses. It also includes costs related to corporate support functions not allocated to the Mortgage Market and Real Estate Market segments.

~~Other Businesses, Corporate and Eliminations also include eliminations of transactions between the reportable segments.~~

~~SG&A expenses consisted of the following for the three months ended March 31:~~

(in thousands) 2018 2017 % Increase (decrease)

Compensation and benefits $ 8,003
$ 6,753
19
Occupancy related costs 2,609
4,385
(41 )
Amortization of intangible assets 417
500
(17 )
Professional services 1,622
1,177
38
Marketing costs 85
73
16
Depreciation and amortization 1,245
1,402
(11 )
Other 1,651
404
309

Selling, general and administrative expenses $ 15,632
$ 14,694
6

SG&A for the three months ended March 31, 2018 of $15.6 million increased by 6% compared to the three months ended March 31, 2017. The increase in SG&A was primarily driven by an increase in compensation and benefits from higher share-based compensation and higher other SG&A due to facility closure costs, partially offset by lower occupancy costs due to the subleasing of certain office facilities.

~~Loss from Operations~~

Loss from operations increased to $(18.4) million for the three months ended March 31, 2018 compared to a loss of $(14.7) million for the three months ended March 31, 2017. The increase in operating loss was primarily driven by a decrease in gross profit, as discussed above.

~~Other Expenses, Net~~

Other expenses, net principally includes interest expense and other non-operating gains and losses. Effective January 1, 2018, other income (expense), net includes unrealized losses on our investment in RESI (see Factors Affecting Comparability above). For the three months ended March 31, 2018, other expenses, net of $(12.1) million increased by 138% compared to the three months ended March 31, 2017, driven by an unrealized loss of $7.5 million on our investment in RESI from a decline in the market value of RESI common shares.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our primary source of liquidity is cash flow from ~~operations.~~operations and cash on hand. We seek to deploy cash generated in a disciplined manner. Principally, we intend to use cash to develop and grow complementary services and businesses that we believe will generate attractive margins in line with our core capabilities and strategy. We use cash for ~~scheduled~~ repayments of our ~~senior secured term loan~~long-term debt, capital investments and seek to use cash from time to time to repurchase shares of our common stock and ~~repurchase portions of~~reduce our ~~senior secured term loan.~~debt. In addition, we consider and evaluate business acquisitions ~~that may arise~~and dispositions from time to time that are aligned with our strategy.

~~For the three months ended March 31, 2018, we used $10.0 million to repurchase shares of our common stock.~~

~~Senior Secured Term Loan and~~ Credit Agreement

On ~~November 27, 2012,~~April 3, 2018, Altisource ~~Solutions S.à r.l., a wholly-owned subsidiary of Altisource Portfolio Solutions S.A.,~~ entered into the Credit Agreement pursuant to which Altisource borrowed $412.0 million in the form of Term B Loans and obtained a $15.0 million revolving credit facility. The Term B Loans mature in April 2024 and the revolving credit facility matures in April 2023.

Proceeds from the Term B Loans were used to repay the Company’s prior senior secured term loan, ~~agreement~~which had an outstanding balance of $412.1 million as of April 3, 2018. As of March 31, 2019, $338.8 million of the Term B Loans were outstanding. There were no borrowings outstanding under the revolving credit facility as of March 31, 2019.

There are no mandatory repayments of the Term B Loans due until March 2020, when $9.2 million is due to be repaid. Thereafter, the Term B Loans must be repaid in consecutive quarterly principal installments of $3.1 million, with ~~Bank~~the balance due at maturity. All amounts outstanding under the Term B Loans will become due on the earlier of ~~America, N.A., as~~(i) April 3, 2024, and (ii) the date on which

the loans are declared to be due and owing by the administrative agent ~~and certain lenders. Altisource Portfolio Solutions S.A. and certain subsidiaries were guarantors~~at the request (or with the consent) of the senior secured term loan. We subsequently entered into four amendments to the senior secured term loan agreement to, among other changes, increase the principal amount of the senior secured term loan, re-establish the $200.0 million incremental term loan facility accordion, lower the interest rate, extend the maturity date by approximately one year, increase the maximum amount of Restricted Junior PaymentsRequired Lenders (as defined in the ~~senior secured term loan agreement;~~Credit Agreement; other capitalized terms, unless defined herein, are defined in the ~~senior secured term loan agreement)~~Credit Agreement) or as otherwise provided in the Credit Agreement upon the occurrence of any event of default.

In addition to the scheduled principal payments, subject to certain exceptions, the Term B Loans are subject to mandatory prepayment upon issuances of debt, certain casualty and ~~certain other changes primarily~~condemnation events and sales of assets, as well as from a percentage of Consolidated Excess Cash Flow if the leverage ratio is greater than 3.00 to ~~facilitate an internal restructuring~~1.00, as calculated in accordance with the provisions of the ~~Company’s subsidiaries.~~Credit Agreement (the percentage increases if the leverage ratio exceeds 3.50 to 1.00). Certain mandatory prepayments reduce future contractual amortization payments by an amount equal to the mandatory prepayment.

The interest rate on the Term B Loans as of March 31, 2019 was 6.6%.

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. The lenders ~~of the senior secured term loan, as amended, had~~have no obligation to provide any such additional debt under the accordion provision. As of March 31, 2018, $412.1 million was outstanding under the senior secured term loan agreement, as amended, compared to $413.6 million as of December 31, 2017. No mandatory prepayments were required for the three months ended March 31, 2018. The interest rate for the senior secured term as of March 31, 2018 was 5.38%. On April 3, 2018, Altisource Portfolio Solutions S.A. and Altisource S.à r.l. entered into a credit agreement with Morgan Stanley Senior Funding, Inc. as administrative agent and collateral agent and the other lenders parties thereto, pursuant to which the lenders have agreed to extend credit to Altisource S.à r.l. in the form of (i) Term B Loans (as defined in the credit agreement) in an aggregate principal amount equal to $412.0 million and (ii) a $15.0 million revolving credit facility. The proceeds of the Term B Loans were used to refinance Altisource S.à r.l.’s senior secured term loan. See Note 21 to the condensed consolidated financial statements for additional information on the April 3, 2018 Term B Loans and revolving credit facility.incremental indebtedness.

The ~~debt~~Credit Agreement includes covenants ~~in the new credit agreement~~that restrict or limit, among other things, our ability, subject to certain exceptions and baskets, to incur additional debt, pay dividends and repurchase shares of our common stock. In the event we require additional liquidity, our ability to obtain it may be limited by the ~~new credit agreement.~~Credit Agreement.

Cash Flows

The following table presents our cash flows for the three months ended March 31:


(in thousands)	2018			2017			% Increase (decrease)		2019			2018			% Increase (decrease)

Net (loss) income adjusted for non-cash items	$	21,566		$	30,796		(30	)
Net loss adjusted for non-cash items									$	17,046		$	21,566		(21	)
Changes in operating assets and liabilities	(30,135		)	(49,155		)	39		(23,701		)	(30,135		)	21
Cash flows used in operating activities	(8,569		)	(18,359		)	53
Cash flows used in investing activities	(1,258		)	(1,944		)	35
Cash flows used in financing activities	(10,031		)	(11,893		)	16
Net cash used in operating activities									(6,655		)	(8,569		)	(22	)
Net cash used in investing activities									(790		)	(1,258		)	37
Net cash used in financing activities									(1,177		)	(10,031		)	88
Net decrease in cash, cash equivalents and restricted cash	(19,858		)	(32,196		)	38		(8,622		)	(19,858		)	57
Cash, cash equivalents and restricted cash at the beginning of the period	108,843			153,421			(29	)	64,046			108,843			(41	)

Cash, cash equivalents and restricted cash at the end of the period	$	88,985		$	121,225		(27	)	$	55,424		$	88,985		(38	)

Cash Flows from Operating Activities

Cash flows from operating activities generally consist of the cash effects of transactions and events that enter into the determination of net income. For the three months ended March 31, ~~2018, we~~2019, cash flows used in operating activities were $(6.7) million, or approximately $(0.04) for every dollar of service revenue, compared to cash flows used in operating activities of $(8.6) million, or approximately $(0.05) for every dollar of service revenue, ~~compared to cash flows used in operating activities of $(18.4) million, or approximately $(0.08) for every dollar of service revenue,~~ for the three months ended March 31, ~~2017. The improvement in cash flows from operations for~~2018. During the three months ended March 31, ~~2018,~~2019, the decrease in cash used in operations compared to the three months ended March 31, ~~2017,~~2018 was ~~principally driven by the $28.0~~due to cash used for changes in operating assets and liabilities of $6.4 million, ~~net payment in the prior year period of a previously accrued litigation settlement,~~ partially offset by a ~~$9.9~~$4.5 million ~~increase~~unfavorable change in net loss, adjusted for non-cash items. The decrease in cash used for changes in operating assets and liabilities was driven by lower use of cash for short-term investments in real estate, ~~for~~partially offset by $6.9 million of payments of sales tax accruals during the three months ended March 31, ~~2018, compared to a $2.5 million increase in short-term investments in real estate for~~2019 (no comparative amount during the three months ended March 31, ~~2017~~2018). The decrease in ~~connection with our buy-renovate-lease-sell program. The improvement in cash flows from operations~~net loss, adjusted for non-cash items, was primarily driven by lower gross profit during the three months ended March 31, ~~2018 was also~~2019 from lower service revenue and the Project Catalyst restructuring charges, partially offset by ~~lower net income, adjusted for non-cash items, by $9.2 million,~~decreases in expenses as a ~~decrease~~result of ~~30% compared to~~ the three months ended March 31, 2017. Cash flows from operating activities excluding increases in short-term investments in real estate and the net litigation settlement payment for the three months ended March 31, 2017, would have been $1.3 million, or approximately $0.01 for every dollar of service revenue for the three months ended March 31, 2018 and cash flows from operating activities would have been $12.1 million, or approximately $0.05 for every dollar of service revenue for the three months ended March 31, 2017.

Project Catalyst cost reduction initiatives. Operating cash flows can be negatively impacted because of the nature of some of our services and the mix of services provided. Certain services are performed immediately following or shortly after the referral, but the collection of the receivable does not occur until a specific event occurs (e.g., the foreclosure is complete, the REO asset is sold, etc.). Furthermore, lower margin services generate lower income and cash flows from operations. ~~In addition, annual incentive compensation bonuses are typically paid during the first quarter of each year.~~ Consequently, our cash flows from operations may be negatively impacted when comparing one ~~interim~~ period to another.

Cash Flows from Investing Activities

Cash flows from investing activities for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018 consisted of ~~cash~~additions to premises and equipment. Cash flows used in investing activities were $(0.8) million and $(1.3) million for the three months ended March 31,

2019 and 2018, respectively, for additions to premises and equipment ~~of $1.3 million and $1.9 million, respectively,~~ primarily related to investments in the development of certain software applications, IT infrastructure and facility improvements.

Cash Flows from Financing Activities

Cash flows from financing activities for the three months ended March 31, ~~2018~~2019 and ~~2017 primarily~~2018 included activities associated with repayments of long-term debt, proceeds from stock option exercises, the purchase of treasury shares, ~~debt repayments, stock option exercises and~~ distributions to non-controlling ~~interests.~~interests and payments of tax withholdings on issuance of restricted share units and restricted shares. Cash flows from financing activities were $(1.2) million and $(10.0) million for the three months ended March 31, 2019 and 2018, respectively. During the three months ended March 31, 2019 and 2018, we distributed $0.6 million and ~~2017,~~$0.7 million to non-controlling interests, respectively. In addition, during the three months ended March 31, 2019, we made payments of $0.6 million to satisfy employee tax withholding obligations on the issuance of restricted share units and restricted shares (no comparative amount during the three months ended March 31, 2018). These payments were made to tax authorities, at the employees’ direction, to satisfy the employees’ tax obligations rather than issuing a portion of vested restricted share units and restricted shares to employees. In addition, during the three months ended March 31, 2018, we used $10.0 million ~~and $10.6 million, respectively,~~ to repurchase shares of our common stock (no comparative amount during the three months ended March 31, 2019), received proceeds from stock option exercises of $2.6 million (compared to less than $0.1 million during the three months ended March 31, 2019), made repayments of long-term debt of $1.5 million (no comparative amount during the three months ended March 31, 2019) and ~~$0.8~~incurred debt issuance costs of $0.5 million ~~respectively, and distributed $0.7 million and $0.6 million, respectively, to non-controlling interests.~~(no comparative amount during the three months ended March 31, 2019).

Liquidity Requirements after March 31, ~~2018~~2019

Our primary future liquidity obligations primarily pertain to long-term debt repayments and interest expense under ~~our new credit agreement~~the Credit Agreement (see Liquidity section above), lease payments and distributions to Lenders One ~~members and payments related to a prior acquisition.~~

members. During the next 12 months, we expect to ~~make mandatory repayments of $41.2 million and~~ pay ~~$23.5~~$22.4 million of interest expense (assuming the current interest rate) under the ~~new credit agreement (see Liquidity section above)~~Credit Agreement, make lease payments of $17.2 million and distribute approximately ~~$2.7~~$2.5 million to the Lenders One members representing non-controlling interests.

On July 17, 2015, we acquired CastleLine Holdings, LLC and its subsidiaries. A portion of the purchase consideration totaling $10.5 million is payable to the sellers over approximately three and one-half years from the acquisition date, including $3.8 million to be paid to certain of the sellers that is contingent on future employment. As of March 31, 2018, we have paid $9.2 million of the up to $10.5 million that is payable over four years from the acquisition date, of which $2.5 million of the $3.8 million purchase consideration that is contingent on future employment. The remaining future payments of $1.3 million are payable during the next 12 months.

We believe that our existing cash and cash equivalents balances, ~~and~~ our anticipated cash flows from operations and availability under our revolving credit facility will be sufficient to meet our liquidity needs, including to fund required ~~debt and~~ interest payments and additions to premises and equipment, for the next 12 months.

Contractual Obligations, Commitments and Contingencies

For the three months ended March 31, ~~2018,~~2019, there were no significant changes to our contractual obligations from those identified in our Form 10-K for the fiscal year ended December 31, ~~2017,~~2018 and this Form 10-Q, other than those that occur in the normal course of business. See Note 1922 to the condensed consolidated financial statements.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND RECENT ACCOUNTING PRONOUNCEMENT

We prepare our interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. In applying many of these accounting principles, we need to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses in our condensed consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and judgments, however, are often subjective. Actual results may be negatively affected based on changing circumstances. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known.

~~See Note 1 to the condensed consolidated financial statements for the Company’s critical accounting policy for revenue recognition.~~ Our ~~other~~ critical accounting policies are described in the MD&A section of our Form 10-K for the year ended December 31, ~~2017~~2018 filed with the SEC on February ~~22, 2018. With the exception of the changes to our revenue recognition policy referenced above, there~~26, 2019. There have been no material changes to our critical accounting policies during the three months ended March 31, ~~2018.~~

2019.

Recently Adopted and Future Adoption of New Accounting Pronouncements

See Note 1 to the condensed consolidated financial statements for a discussion of recently issued accounting pronouncements, including pronouncements that were adopted in the current period.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market Risk

Our financial market risk consists primarily of interest rate and foreign currency exchange rate risk.

Interest Rate Risk

As of March 31, ~~2018,~~2019, the interest rate charged on the ~~senior secured term loan~~Term B Loan was ~~5.38%~~6.6%. The interest rate ~~was~~is calculated based on the Adjusted Eurodollar Rate (as defined in the senior secured term loan agreement) with a minimum floor of 1.00% plus ~~3.50%~~4.00%.

Based on the principal amount outstanding atas of March 31, ~~2018,~~2019, a one percentage point increase in the Eurodollar ~~Rate~~rate would ~~have increased~~increase our annual interest expense by approximately ~~$4.1~~$3.4 million, based on the March 31, ~~2018~~2019 Adjusted Eurodollar Rate. There would ~~have been~~be a ~~$3.6~~$3.4 million decrease in our annual interest expense if there was a one percentage point decrease in the Eurodollar Rate.

Currency Exchange Risk

We are exposed to currency risk from potential changes in currency values of our non-United States dollar denominated expenses, assets, liabilities and cash flows. Our most significant currency exposure relates to the Indian rupee. Based on expenses incurred in Indian rupees ~~for~~during the three months ended March 31, ~~2018,~~2019, a one percentage point increase or decrease in value of the Indian rupee in relation to the United States dollar would increase or decrease our annual expenses by approximately ~~$1.0~~$0.7 million.

Item 4. Controls and Procedures


a)	Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of March 31, ~~2018,~~2019, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based on this evaluation, such officers have concluded that our disclosure controls and procedures were effective as of March 31, ~~2018.~~2019.


b)	Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the quarter ended March 31, ~~2018,~~2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Litigation

Regulatory Matters

As previously disclosed, the Company received a Notice and Opportunity to Respond and Advise (“NORA”) letter on November 10, 2016 from the CFPB indicating that the CFPB was considering a potential enforcement action against Altisource relating to an alleged violation of federal law focused on REALServicing and certain other technology services provided to Ocwen, including claims related to the features, functioning and support of such technology. The NORA process provides the recipient an opportunity to present its positions to the CFPB before an enforcement action is recommended or commenced. On December 5, 2016, we provided a written response to the NORA letter setting forth the legal, policy and factual reasons why we believe an enforcement action is not warranted. By letter dated April 3, 2018, the CFPB informed the Company that the investigation of the Company has been completed and the staff of the CFPB’s Office of Enforcement currently does not intend to recommend that the CFPB take enforcement action, and further that the Company is relieved of the document-retention obligations pursuant to the civil investigative process.

Item 1A. Risk Factors

As of the date of this filing, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of our Form 10-K for the year ended December 31, ~~2017~~2018 filed with the SEC on February ~~22, 2018.~~26, 2019, except as follows:

We may not be able to close the Financial Services business disposition transaction with Transworld Systems Inc. (“TSI”), during 2019 or at all because, among other things, we or TSI may not be able to satisfy the closing conditions or there could be a delay in obtaining regulatory and other third party consents in connection with the transaction

On March 28, 2019, Altisource entered into a definitive agreement to sell its 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 upon closing of the sale, and an additional $4.0 million to be paid on the one year anniversary of the sale closing. The sale is subject to closing conditions including the receipt of regulatory consents. We may be unable to satisfy the closing conditions, or the closing may be delayed due to difficulties in obtaining regulatory and other third party consents in connection with the transaction. In addition, we may incur unanticipated expenditures relating to or liabilities arising from delays in closing the transaction or ultimately not being able to close the transaction. An inability to close the transaction in a timely manner or at all could have a material adverse impact on our financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~The following table presents information related to our repurchases~~There were no purchases of ~~our equity securities~~shares of common stock during the three months ended March 31, ~~2018:~~

Period Total number of shares purchased Weighted average price paid per share
Total number of shares purchased as part of publicly announced plans or programs⁽¹⁾

Maximum number of shares that may yet be purchased under the plans or programs⁽¹⁾

Common stock:
January 1 – 31, 2018 177,907
$ 28.07
177,907
3,245,044
February 1 – 28, 2018 35,200
26.90
35,200
3,209,844
March 1 – 31, 2018 147,625
27.38
147,625
3,062,219

360,732
$ 27.67
360,732
3,062,219


⁽¹⁾	On May 17, 2017, our shareholders approved the renewal of the share repurchase program originally approved by the shareholders on May 18, 2016, which replaced the previous share repurchase program and authorizes us to purchase up to 4.6 million shares of our common stock in the open market, subject to certain parameters.

2019. On May 15, 2018, our shareholders approved the renewal and replacement of the share repurchase program originally approved by the shareholders on May 17, 2017, which replaced the previous share repurchase program and authorizes us to purchase up to 4.3 million shares of our common stock in the open market, subject to certain parameters, for a period of five years from the date of approval. The maximum number of shares that may be purchased under the repurchase program is 3.4 million shares of the Company’s common stock. In addition to the share repurchase program, during the three months ended March 31, 2019, 23,969 common shares were withheld from employees to satisfy tax withholding obligations that arose from the vesting of restricted shares.

Item 6. Exhibits



Exhibit Number		Exhibit Description

10.1 * **		~~Third Amendment to the Cooperative Brokerage Agreement,~~Binding Term Sheet dated as of ~~March 23, 2018,~~February 22, 2019 between ~~REALHome Services~~Altisource S.à r.l., Ocwen Financial Corporation and ~~Solutions,~~Ocwen Mortgage Servicing, Inc.~~, REALHome Services and Solutions - CT, Inc. and New Residential Sales Corp.~~

10.2 * †		~~Form~~Amended and Restated Employment Contract of ~~Non-Qualified Stock Option Award Agreement (2018 Performance-Based Stock Options)~~Indefinite Duration dated as of March 22, 2019 between Altisource S.à r.l. and Marcello Mastioni

10.3 * ** †		~~Form~~Separation Agreement and Release dated as of ~~Restricted Share Unit Award Agreement (2018 Time-Based Restricted Share Units)~~March 22, 2019 between Indroneel Chatterjee and Altisource Solutions, Inc.

10.4 * ** †		~~Credit~~Side Letter to Separation Agreement ~~dated April 3, 2018 among Altisource S.à r.l.~~and Release by and between Indroneel Chatterjee and Altisource ~~Portfolio~~ Solutions, ~~S.A., Morgan Stanley Senior Funding,~~ Inc., dated as ~~Administrative Agent~~of March 22, 2019

10.5 * †		Form of Restricted Stock Unit Award Agreement Pursuant to Altisource’s 2009 Equity Incentive Plan and ~~Collateral Agent,~~2019 Long Term Equity Incentive Program

10.6 * †		Form of Restricted Stock Unit Award Agreement Pursuant to Altisource’s 2009 Equity Incentive Plan and ~~the Lenders party thereto (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on April 4, 2018)~~2018 Annual Incentive Plan

31.1 *		Section 302 Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)

31.2 *		Section 302 Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)

32.1 *		Certification by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101 *		Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended March 31, ~~2018~~2019 is formatted in XBRL interactive data files: (i) Condensed Consolidated Balance Sheets atas of March 31, ~~2018~~2019 and December 31, ~~2017;~~2018; (ii) Condensed Consolidated Statements of Operations and Comprehensive ~~Income~~Loss for the three months ended March 31, ~~2018~~2019 and ~~2017;~~2018; (iii) Condensed Consolidated Statements of Equity for the three months ended March 31, ~~2018~~2019 and ~~2017;~~2018; (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2018~~2019 and ~~2017;~~2018; and (v) Notes to Condensed Consolidated Financial Statements.

______________________________________
*		Filed herewith.
**		Portions of this exhibit have been redacted because (a) it is (i) not material and (ii) would be competitively harmful if publicly disclosed or (b) it is personally identifiable information, the disclosure of which would be an unwarranted invasion of personal privacy.
†		Denotes a management contract or compensatory arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		ALTISOURCE PORTFOLIO SOLUTIONS S.A.
		(Registrant)

Date:	April ~~26, 2018~~	~~By:~~	~~/s/ William B. Shepro~~
			~~William B. Shepro~~
			~~Director and Chief Executive Officer~~
			~~(Principal Executive Officer)~~


~~Date:~~	~~April 26, 2018~~25, 2019	By:	/s/ Michelle D. Esterman
			Michelle D. Esterman
			~~Executive Vice President, Finance~~Chief Financial Officer
			(On behalf of the Registrant and as its Principal Financial Officer and Principal Accounting Officer)

4839



	Impact of the adoption of Topic 606
(in thousands)	As reported		Adjustments			Balances without adoption of Topic 606

Accounts receivable, net	$	50,839	$	(28	)	$	50,811
Total current assets	251,296		(28		)	251,268
Total assets	831,773		(28		)	831,745

Other current liabilities	6,651		348			6,999
Deferred revenue	15,489		(6,655		)	8,834
Total current liabilities	94,560		(6,307		)	88,253

Deferred revenue, non-current	5,529		(3,890		)	1,639

Retained earnings	600,253		10,169			610,422
Altisource equity	318,856		10,169			329,025
Total equity	320,082		10,169			330,251
Total liabilities and equity	831,773		(28		)	831,745



	March 31, 2018								December 31, 2017
(in thousands)	Carrying amount		Fair value						Carrying amount		Fair value
			Level 1		Level 2		Level 3				Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	84,850	$	84,850	$	—	$	—	$	105,006	$	105,006	$	—	$	—
Restricted cash	4,135		4,135		—		—		3,837		3,837		—		—
Investment in equity securities	41,652		41,652		—		—		49,153		49,153		—		—

Liabilities:
Long-term debt	412,095		—		412,095		—		413,581		—		407,377		—



	Three months ended March 31, 2017
(in thousands)	Mortgage Market		Real Estate Market			Other Businesses, Corporate and Eliminations			Consolidated Altisource

Revenue	$	204,723	$	20,063		$	15,697		$	240,483
Cost of revenue	140,150		22,143			15,660			177,953
Gross profit (loss)	64,573		(2,080		)	37			62,530
Selling, general and administrative expenses	28,682		4,325			14,694			47,701
Income (loss) from operations	35,891		(6,405		)	(14,657		)	14,829
Total other income (expense), net	10		—			(5,093		)	(5,083		)

Income (loss) before income taxes and non-controlling interests	$	35,901	$	(6,405	)	$	(19,750	)	$	9,746



Period	Total number of shares purchased	Weighted average price paid per share		Total number of shares purchased as part of publicly announced plans or programs⁽¹⁾	Maximum number of shares that may yet be purchased under the plans or programs⁽¹⁾

Common stock:
January 1 – 31, 2018	177,907	$	28.07	177,907	3,245,044
February 1 – 28, 2018	35,200	26.90		35,200	3,209,844
March 1 – 31, 2018	147,625	27.38		147,625	3,062,219

	360,732	$	27.67	360,732	3,062,219