ALTISOURCE PORTFOLIO SOLUTIONS SA

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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. 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. Lenders One is a mortgage cooperative managed, but not owned, by Altisource. The Lenders One members’ earnings are included in revenue and reduced from net income to arrive at net income attributable to Altisource.

Current wording

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. 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. Lenders One is a mortgage cooperative managed, but not owned, by Altisource. The Lenders One members’ earnings are included in revenue and reduced from net loss to arrive at net loss attributable to Altisource.

Previous wording

During 2023 and the six months ended June 30, 2024, to address lower revenue, we worked to (1) reduce our cost structure, (2) maintain the infrastructure to deliver default related services for our customer base and support the anticipated increase in demand following the expiration of the moratoriums and forbearance plans and CFPB’s rules on temporary loss mitigation measures, and (3) add new Lenders One members, launch new solutions and increase customer adoption of our solutions to accelerate the growth of our origination business.

Current wording

During 2023 and the nine months ended September 30, 2024, to address lower revenue, we worked to (1) reduce our cost structure, (2) maintain the infrastructure to deliver default related services for our customer base and support the anticipated increase in demand following the expiration of the moratoriums and forbearance plans and CFPB’s rules on temporary loss mitigation measures, and (3) add new Lenders One members, launch new solutions and increase customer adoption of our solutions to accelerate the growth of our origination business.

Previous wording

On May 16, 2023, our shareholders approved the renewal and amendment of the share repurchase program previously approved by the shareholders on May 15, 2018. Under the program, we are authorized to purchase up to 3.1 million shares of our common stock, based on a limit of 15% 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 $25.00 per share, for a period of five years from the date of approval. As of June 30, 2024, approximately 3.1 million shares of common stock remain available for repurchase under the program. There were no purchases of shares of common stock during the six months ended June 30, 2024 and 2023. 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 June 30, 2024, we can repurchase up to approximately $115 million of our common stock under Luxembourg law. Under the Amended Credit Agreement, we are not permitted to repurchase shares except for limited circumstances.

Current wording

On May 16, 2023, our shareholders approved the renewal and amendment of the share repurchase program previously approved by the shareholders on May 15, 2018. Under the program, we are authorized to purchase up to 3.1 million shares of our common stock, based on a limit of 15% 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 $25.00 per share, for a period of five years from the date of approval. As of September 30, 2024, approximately 3.1 million shares of common stock remain available for repurchase under the program. There were no purchases of shares of common stock during the nine months ended September 30, 2024 and 2023. 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 September 30, 2024, we can repurchase up to approximately $114 million of our common stock under Luxembourg law. Under the Amended Credit Agreement, we are not permitted to repurchase shares except for limited circumstances.

Previous wording

During the three and six months ended June 30, 2024, Onity was our largest customer, accounting for 44% of our total revenue. Additionally, 7% of our revenue for the six months ended June 30, 2024 (6% of our revenue for the second quarter of 2024) was earned on the loan portfolios serviced by Onity, when a party other than Onity or the mortgage servicing rights (“MSRs”) owner selected Altisource as the service provider.

Current wording

During the three and nine months ended September 30, 2024, Onity was our largest customer, accounting for 43% and 44% respectively, of our total revenue. Additionally, 6% of our revenue for the nine months ended September 30, 2024 (6% of our revenue for the third quarter of 2024) was earned on the loan portfolios serviced by Onity, when a party other than Onity or the mortgage servicing rights (“MSRs”) owner selected Altisource as the service provider.

Previous wording

Onity has disclosed that Rithm is one of its largest servicing clients. As of March 31, 2024, Onity reported that approximately 15% of loans serviced and subserviced by Onity (measured in UPB) and approximately 66% of all delinquent loans that Onity services were related to Rithm MSRs or rights to MSRs.

Current wording

Onity has disclosed that Rithm is one of its largest servicing clients. As of June 30, 2024, Onity reported that approximately 14% of loans serviced and subserviced by Onity (measured in UPB) and approximately 64% of all delinquent loans that Onity services were related to Rithm MSRs or rights to MSRs.

Previous wording

•Industrywide foreclosure initiations were 9% lower for the six months ended June 30, 2024 compared to the same period in 2023 (and 37% lower than the same pre-COVID-19 period in 2019)

Current wording

•Industrywide foreclosure initiations were 7% lower for the eight months ended August 31, 2024 compared to the same period in 2023 (and 34% lower than the same pre-COVID-19 period in 2019)

Previous wording

•Industrywide foreclosure sales were 14% lower for the six months ended June 30, 2024 compared to the same period in 2023 (and 53% lower than the same pre-COVID-19 period in 2019)

Current wording

•Industrywide foreclosure sales were 14% lower for the eight months ended August 31, 2024 compared to the same period in 2023 (and 54% lower than the same pre-COVID-19 period in 2019)

Previous wording

•Industrywide mortgage origination volume decreased by 4% for the six months ended June 30, 2024 compared to the same period in 2023

Current wording

•Industrywide mortgage origination volume increased by 1% for the nine months ended September 30, 2024 compared to the same period in 2023

Previous wording

•The interest rate on the Company’s senior secured term loans was 14.18% for the six months ended June 30, 2024 compared to 11.61% for the same period in 2023

Current wording

•The interest rate on the Company’s senior secured term loans was 14.18% for the nine months ended September 30, 2024 compared to 12.44% for the same period in 2023

Previous wording

•On February 14, 2023, Altisource Portfolio Solutions S.A. and its wholly-owned subsidiary, Altisource S.à r.l., entered into Amendment No. 2 to the Credit Agreement. In connection with Amendment No. 2, the Company paid $3.3 million for the six months ended June 30, 2023, to advisors and recorded these payments as other expense in the condensed consolidated statements of operations and comprehensive loss (no comparative amount for the six months ended June 30, 2024)

Current wording

•On February 14, 2023, Altisource Portfolio Solutions S.A. and its wholly-owned subsidiary, Altisource S.à r.l., entered into Amendment No. 2 to the Credit Agreement. In connection with Amendment No. 2, the Company paid $3.4 million for the nine months ended September 30, 2023, to advisors and recorded these payments as other expense in the condensed consolidated statements of operations and comprehensive loss (no comparative amount for the nine months ended September 30, 2024)

Previous wording

•The Company recognized an income tax provision of $1.4 million and $2.2 million for the six months ended June 30, 2024 and 2023, respectively ($0.7 million and $0.6 million for the second quarter of 2024 and 2023, respectively). The income tax provision for the three and six months ended June 30, 2024 was driven primarily by income tax expense on transfer pricing income from India and the United States, no tax benefit on the pretax loss from our Luxembourg operating company, and uncertain tax positions.

Current wording

•The Company recognized an income tax provision of $2.2 million and $2.6 million for the nine months ended September 30, 2024 and 2023, respectively ($0.8 million and $0.4 million for the third quarter of 2024 and 2023, respectively). The income tax provision for the three and nine months ended September 30, 2024 was driven primarily by income tax expense on transfer pricing income from India and the United States, no tax benefit on the pretax loss from our Luxembourg operating company, and uncertain tax positions.

Previous wording

We recognized service revenue of $73.8 million for the six months ended June 30, 2024, a 5% increase compared to the six months ended June 30, 2023 ($36.9 million for the second quarter of 2024, an 11% increase compared to the second quarter of 2023). The increase in service revenue for the three and six months ended June 30, 2024 is primarily driven by higher revenue in the Servicer and Real Estate segment from growth in our foreclosure trustee and field services businesses in the Solutions business, partially offset by $0.8 million of first quarter 2023 non-recurring professional services revenue in the Equator business within the Technology and SaaS Products business.

Current wording

We recognized service revenue of $111.9 million for the nine months ended September 30, 2024, a 7% increase compared to the nine months ended September 30, 2023 ($38.2 million for the third quarter of 2024, a 12% increase compared to the third quarter of 2023). The increase in service revenue for the three and nine months ended September 30, 2024 is primarily driven by higher revenue in both segments. Revenue was higher in the Servicer and Real Estate segment from growth in our field services, foreclosure trustee and property renovation services businesses in the Solutions business, partially offset by $0.8 million of first quarter 2023 non-recurring professional services revenue in the Equator business within the Technology and SaaS Products business and fewer home sales in the Marketplace business. Revenue was higher in the Origination segment from growth of reseller products in the Lenders One business.

Previous wording

We recognized reimbursable expense revenue of $4.8 million for the six months ended June 30, 2024, a 9% increase compared to the six months ended June 30, 2023 ($2.2 million for the second quarter of 2024, an 8% increase compared to the second quarter of 2023). The increase in reimbursable expenses for the six months ended June 30, 2024 was primarily driven by higher-value REO title related expenses in connection the default title business in the Solutions business within the Servicer and Real Estate segment partially offset by a decrease in property preservation services in the Solutions business within the Servicer and Real Estate segment. The increase in reimbursable expenses for the three months ended June 30, 2024 was primarily driven by an increase in property preservation services in the Solutions business within the Servicer and Real Estate segment.

Current wording

We recognized reimbursable expenses revenue of $7.1 million for the nine months ended September 30, 2024, an 11% increase compared to the nine months ended September 30, 2023 ($2.3 million for the third quarter of 2024, a 14% increase compared to the third quarter of 2023). The increase in reimbursable expenses for the nine months ended September 30, 2024 was primarily driven by higher-value REO title related expenses in the Solutions business within the Servicer and Real Estate segment. The increase in reimbursable expenses for the three months ended September 30, 2024 was primarily driven by an increase in property preservation services in the Solutions business within the Servicer and Real Estate segment.

Previous wording

We recognized cost of revenue of $53.6 million for the six months ended June 30, 2024, a 12% decrease compared to the six months ended June 30, 2023 ($26.4 million for the second quarter of 2024, an 11% decrease compared to the second quarter of 2023). Compensation and benefits for the three and six months ended June 30, 2024 decreased primarily due to efficiency initiatives and cost savings measures taken in 2023. Technology and telecommunications for the three and six months ended June 30, 2024 decreased primarily due to lower overall headcount. In addition, changes in reimbursable expenses for the six months ended June 30, 2024 are consistent with the changes in reimbursable expense revenue discussed in the revenue section above.

Current wording

We recognized cost of revenue of $82.0 million for the nine months ended September 30, 2024, a 9% decrease compared to the nine months ended September 30, 2023 ($28.5 million for the third quarter of 2024, a 2% decrease compared to the third quarter of 2023). Compensation and benefits for the three and nine months ended September 30, 2024 decreased primarily due to efficiency initiatives and cost savings measures taken in 2023. Technology and telecommunications for the three and nine months ended September 30, 2024 decreased primarily due to lower overall headcount. Outside fees and services for the three and nine months ended September 30, 2024 increased primarily from higher revenue in the Solutions business within the Servicer and Real Estate segment partially offset by lower outside fees and services in the Origination segment from a change in revenue mix. In addition, changes in reimbursable expenses for the three and nine months ended September 30, 2024 are consistent with the changes in reimbursable expenses revenue discussed in the revenue section above.

Previous wording

Gross profit increased to $25.0 million, representing 34% of service revenue, for the six months ended June 30, 2024 compared to $14.0 million, representing 20% of service revenue, for the six months ended June 30, 2023 (increased to $12.7 million, representing 34% of service revenue, for the second quarter of 2024, compared to $5.5 million, representing 17% of service revenue, for the second quarter of 2023) . Gross profit as a percentage of service revenue for the three and six months ended ended June 30, 2024 increased compared to the three and six months ended ended June 30, 2023 primarily due to margin expansion in both the Servicer and Real Estate segment and the Origination segment from efficiency initiatives and lower corporate costs as a percentage of revenue.

Current wording

Gross profit increased to $37.1 million, representing 33% of service revenue, for the nine months ended September 30, 2024 compared to $21.2 million, representing 20% of service revenue, for the nine months ended September 30, 2023 (increased to $12.1 million, representing 32% of service revenue, for the third quarter of 2024, compared to $7.2 million, representing 21% of service revenue, for the third quarter of 2023). Gross profit as a percentage of service revenue for the three and nine months ended September 30, 2024 increased compared to the three and nine months ended September 30, 2023 primarily due to margin expansion in both the Servicer and Real Estate segment and the Origination segment from efficiency initiatives and lower corporate costs as a percentage of revenue, partially offset by service revenue mix in the Servicer and Real Estate segment.

Previous wording

SG&A expenses for the six months ended June 30, 2024 of $23.5 million decreased by 4% compared to the six months ended June 30, 2023 ($10.6 million for the second quarter of 2024, a 14% decrease compared to the second quarter of 2023). The decrease for the six months ended June 30, 2024 was primarily driven by lower compensation and benefits and occupancy related costs, partially offset by higher professional services. Compensation and benefits and occupancy related costs for the three and six months ended months ended June 30, 2024 decreased from efficiency and cost reductions measures. Professional services for the six months ended June 30, 2024 increased primarily due to accruals for potential settlements of certain legacy indemnity claims and estimated legal matters.

Current wording

SG&A expenses for the nine months ended September 30, 2024 of $34.5 million decreased by 2% compared to the nine months ended September 30, 2023 ($11.0 million for the third quarter of 2024, a 2% increase compared to the third quarter of 2023). The decrease for the nine months ended September 30, 2024 was primarily driven by lower compensation and benefits and occupancy related costs, partially offset by higher professional services. The increase for the three months ended September 30, 2024 was primarily driven by higher professional services, partially offset by lower compensation and benefits and occupancy related costs. Compensation and benefits and occupancy related costs for the three and nine months ended September 30, 2024 decreased from efficiency and cost reductions measures. Professional services for the three and nine months ended September 30, 2024 increased primarily due to accruals for potential settlements of certain legacy indemnity claims and estimated legal matters.

Previous wording

Income (loss) from operations for the six months ended June 30, 2024 was $1.5 million, representing 2% of service revenue, compared to $(10.4) million, representing (15)% of service revenue, for the six months ended June 30, 2023 (increased to $2.1 million, representing 6% of service revenue, for the second quarter of 2024, compared to $(6.8) million representing (21)% of service revenue for the second quarter of 2023). Income (loss) from operations as a percentage of service revenue improved for the three and six months ended June 30, 2024 compared to the three and six months ended ended June 30, 2023, primarily as a result of higher gross profit margins and lower SG&A expenses.

Current wording

Income (loss) from operations for the nine months ended September 30, 2024 was $2.6 million, representing 2% of service revenue, compared to $(13.9) million, representing (13)% of service revenue, for the nine months ended September 30, 2023 ($1.1 million, representing 3% of service revenue, for the third quarter of 2024, compared to $(3.5) million representing (10)% of service revenue for the third quarter of 2023). Income (loss) from operations as a percentage of service revenue improved for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, primarily as a result of higher gross profit margins and lower SG&A expenses as a percentage of service revenue.

Previous wording

Other income (expense), net was $(17.5) million for the six months ended June 30, 2024 compared to $(19.1) million for the six months ended June 30, 2023 ($(9.6) million for the second quarter of 2024 and $(11.4) million for the second quarter of 2023). The change for the three and six months ended June 30, 2024 was primarily driven by lower debt amendment costs and a loss on the change in fair value of the warrant liability for the three and six months ended June 30, 2023 (no comparable amount for the three and six months ended June 30, 2024). The lower costs for the six months ended June 30, 2024 was partially offset by higher interest expense driven by higher interest rates on our amended SSTL.

Current wording

Other income (expense), net was $(27.1) million for the nine months ended September 30, 2024 compared to $(26.5) million for the nine months ended September 30, 2023 ($(9.6) million for the third quarter of 2024 and $(7.3) million for the third quarter of 2023). The change for the nine months ended September 30, 2024 was primarily driven by higher interest expense and a gain on the change in fair value of the warrant liability for the nine months ended September 30, 2023 (no comparable amount for the nine months ended September 30, 2024), partially offset by lower debt amendment costs. The higher interest expense was driven by higher interest rates on our amended SSTL.

Previous wording

We recognized an income tax provision of $1.4 million and $2.2 million for the six months ended June 30, 2024 and 2023, respectively ($0.7 million and $0.6 million for the second quarter of 2024 and 2023, respectively). The income tax provision for the three and six months ended June 30, 2024 was driven primarily by income tax expense on transfer pricing income from India and the United States, no tax benefit on the pretax loss from our Luxembourg operating company, and uncertain tax positions.

Current wording

We recognized an income tax provision of $2.2 million and $2.6 million for the nine months ended September 30, 2024 and 2023, respectively ($0.8 million and $0.4 million for the third quarter of 2024 and 2023, respectively). The income tax provision for the three and nine months ended September 30, 2024 was driven primarily by income tax expense on transfer pricing income from India and the United States, no tax benefit on the pretax loss from our Luxembourg operating company, and uncertain tax positions.

Previous wording

Financial information for our segments was as follows:

Current wording

Financial information for our segments is as follows:

Previous wording

Revenue by line of business was as follows:

Current wording

Revenue by line of business is as follows:

Previous wording

We recognized service revenue of $58.1 million for the six months ended June 30, 2024, a 6% increase compared to the six months ended June 30, 2023 ($29.0 million for the second quarter of 2024, a 16% increase compared to the second quarter of 2023). We also recognized reimbursable expense revenue of $4.5 million for the six months ended June 30, 2024, a 10% increase compared to the six months ended June 30, 2023 ($2.1 million for the second quarter of 2024, a 9% increase compared to the second quarter of 2023) . The increase in service revenue for the three and six months ended June 30, 2024 was driven by growth in our foreclosure trustee and field services businesses in the Solutions business, partially offset by $0.8 million of first quarter 2023 non-recurring professional services revenue in the Equator business within the Technology and SaaS Products business.

Current wording

We recognized service revenue of $88.5 million for the nine months ended September 30, 2024, an 8% increase compared to the nine months ended September 30, 2023 ($30.4 million for the third quarter of 2024, a 13% increase compared to the third quarter of 2023). We also recognized reimbursable expenses revenue of $6.7 million for the nine months ended September 30, 2024, a 13% increase compared to the nine months ended September 30, 2023 ($2.2 million for the third quarter of 2024, a 20% increase compared to the third quarter of 2023). The increase in service revenue for the three and nine months ended September 30, 2024 was driven by growth in our field services, property renovation services and foreclosure trustee businesses in the Solutions business, partially offset by fewer home sales in the Marketplace business. The increase in service revenue for the nine months ended was also partially offset by $0.8 million of first quarter 2023 non-recurring professional services revenue in the Equator business within the Technology and SaaS Products business.

Previous wording

Cost of revenue for the six months ended June 30, 2024 of $37.8 million increased by less than 1% compared to the six months ended June 30, 2023 ($18.7 million for the second quarter of 2024, a 4% increased compared to the second quarter of 2023). The increase in cost of revenue for the three and six months ended June 30, 2024 is primarily driven by higher outside fees and services primarily in the foreclosure trustee business in the Solutions business and higher reimbursable expenses, partially offset by lower compensation and benefits from efficiency initiatives and cost savings measures.

Current wording

Cost of revenue for the nine months ended September 30, 2024 of $58.4 million increased by 4% compared to the nine months ended September 30, 2023 ($20.5 million for the third quarter of 2024, a 12% increase compared to the third quarter of 2023). The increase in cost of revenue for the three and nine months ended September 30, 2024 is primarily driven by higher outside fees and services from higher revenue in the field services, property renovation services and foreclosure trustee businesses in the Solutions business and higher reimbursable expenses, partially offset by lower compensation and benefits from efficiency initiatives and cost savings measures.

Previous wording

Gross profit increased to $24.8 million, representing 43% of service revenue, for the six months ended June 30, 2024 compared to $21.0 million, representing 38% of service revenue, for the six months ended June 30, 2023 (increased to $12.4 million, representing 43% of service revenue, for the second quarter of 2024, compared to $8.8 million, representing 35% of service revenue, for the second quarter of 2023). Gross profit as a percentage of service revenue for the three and six months ended June 30, 2024 increased primarily due to price increases for certain services and efficiency initiatives and cost savings measures. Our margins can vary substantially depending upon the service revenue mix.

Current wording

Gross profit increased to $36.8 million, representing 42% of service revenue, for the nine months ended September 30, 2024 compared to $31.4 million, representing 39% of service revenue, for the nine months ended September 30, 2023 (increased to $12.0 million, representing 40% of service revenue, for the third quarter of 2024, compared to $10.4 million, representing 39% of service revenue, for the third quarter of 2023). Gross profit as a percentage of service revenue for the three and nine months ended September 30, 2024 increased primarily due to price increases for certain services and efficiency initiatives and cost savings measures partially offset by a change in revenue mix from fewer homes sold in our higher margin Hubzu business and growth in the lower margin Field Services and recently launched Renovation businesses. Our margins can vary substantially depending upon the service revenue mix.

Previous wording

SG&A for the six months ended June 30, 2024 of $5.5 million increased by 11% compared to the six months ended June 30, 2023 ($2.4 million for the second quarter of 2024, a 9% decrease compared to the second quarter of 2023). The increase in SG&A for the six months ended June 30, 2024 is primarily due to higher professional services, partially offset by lower compensation and benefits. The decrease in SG&A for the three months ended June 30, 2024 is primarily due to lower compensation and benefits and other expenses, partially offset by higher professional services. Professional services for the three and six months ended June 30, 2024 increased primarily due to accruals for potential settlements of certain legacy indemnity claims. Compensation and benefits for the three and six months ended June 30, 2024 decreased from efficiency and cost reduction measures. Other expenses for the three months ended June 30, 2024 decreased from lower bad debt expense.

Current wording

SG&A for the nine months ended September 30, 2024 of $8.7 million increased by 26% compared to the nine months ended September 30, 2023 ($3.2 million for the third quarter of 2024, a 62% increase compared to the third quarter of 2023). The increase in SG&A for the three and nine months ended September 30, 2024 is primarily due to higher professional services and other expenses, partially offset by lower compensation and benefits. Professional services for the three and nine months ended September 30, 2024 increased primarily due to accruals for potential settlements of certain legacy indemnity claims. Other expenses for the three and nine months ended September 30, 2024 increased from higher bad debt expense. Compensation and benefits for the three and nine months ended September 30, 2024 decreased from efficiency and cost reduction measures.

Previous wording

Income from operations increased to $19.3 million, representing 33% of service revenue, for the six months ended June 30, 2024 compared to $16.1 million, representing 29% of service revenue, for the six months ended June 30, 2023 (increased to $10.0 million, representing 34% of service revenue, for the second quarter of 2024, compared to $6.2 million, representing 25% of service revenue for the second quarter of 2023). The increase in operating income as a percentage of service revenue for the six months ended June 30, 2024 is primarily the result of higher gross profit margins, as discussed above, partially offset by higher SG&A expenses. The increase in operating income as a percentage of service revenue for the three months ended June 30, 2024 is primarily the result of higher gross profit margins and lower SG&A expenses.

Current wording

Income from operations increased to $28.1 million, representing 32% of service revenue, for the nine months ended September 30, 2024 compared to $24.5 million, representing 30% of service revenue, for the nine months ended September 30, 2023 (increased to $8.8 million, representing 29% of service revenue, for the third quarter of 2024, compared to $8.4 million, representing 31% of service revenue for the third quarter of 2023). The increase in operating income as a percentage of service revenue for the nine months ended September 30, 2024 is primarily the result of higher gross profit margins, partially offset by higher SG&A expenses. The decrease in operating income as a percentage of service revenue for the three months ended September 30, 2024 is primarily the result of higher SG&A expenses.

Previous wording

Revenue by business unit was as follows:

Current wording

Revenue by business unit is as follows:

Previous wording

We recognized service revenue of $15.6 million for the six months ended June 30, 2024, a 1% increase compared to the six months ended June 30, 2023 ($7.8 million for the second quarter of 2024, a 5% decrease compared to the second quarter of 2023). We also recognized reimbursable expense revenue of $0.2 million for the six months ended June 30, 2024, a 2% decrease compared to the six months ended June 30, 2023 ($0.1 million for the second quarter of 2024, a 4% increase compared to the second quarter of 2023). The increase in service revenue in the Origination segment for the six months ended June 30, 2024 is primarily driven by Lenders One growth with our new reseller products, partially offset by the 4% market decrease in mortgage origination volume and the decline in the Solutions business revenue driven by a lower volume of outsourced fulfillment services. The decrease in service revenue in the Origination segment for the three months ended June 30, 2024 is primarily driven by the 13% market decrease in mortgage origination volume, partially offset by sales wins from our newer reseller products.

Current wording

We recognized service revenue of $23.4 million for the nine months ended September 30, 2024, a 3% increase compared to the nine months ended September 30, 2023 ($7.8 million for the third quarter of 2024, an 8% increase compared to the third quarter of 2023). We also recognized reimbursable expenses revenue of $0.4 million for the nine months ended September 30, 2024, a 17% decrease compared to the nine months ended September 30, 2023 ($0.2 million for the third quarter of 2024, a 32% decrease compared to the third quarter of 2023). The increase in service revenue in the Origination segment for the three and nine months ended September 30, 2024 is primarily driven by growth of reseller products in the Lenders One business.

Previous wording

Cost of revenue for the six months ended June 30, 2024 of $12.5 million decreased by 19% compared to the six months ended June 30, 2023 ($6.4 million for the second quarter of 2024, a 21% decrease compared to the second quarter of 2023). The decrease in cost of revenue for the three and six months ended June 30, 2024 was primarily driven by the prior year alignment of compensation and benefits with lower origination volume and lower outside fees and services from lower revenue.

Current wording

Cost of revenue for the nine months ended September 30, 2024 of $18.8 million decreased by 17% compared to the nine months ended September 30, 2023 ($6.3 million for the third quarter of 2024, a 12% decrease compared to the third quarter of 2023). The decrease in cost of revenue for the three and nine months ended September 30, 2024 was primarily driven by the prior year alignment of compensation and benefits with lower origination volume and lower outside fees and services from a change in revenue mix.

Previous wording

Gross profit increased to $3.5 million, representing 22% of service revenue, for the six months ended June 30, 2024 compared to $0.4 million, representing 3% of service revenue, for the six months ended June 30, 2023 (increased to $1.6 million, representing 21% of service revenue, for the second quarter of 2024, compared to $0.4 million, representing 4% of service revenue for the second quarter of 2023). Gross profit as a percentage of service revenue for the three and six months ended June 30, 2024 increased from efficiency initiatives and cost savings measures.

Current wording

Gross profit increased to $5.1 million, representing 22% of service revenue, for the nine months ended September 30, 2024 compared to $0.8 million, representing 3% of service revenue, for the nine months ended September 30, 2023 (increased to $1.7 million, representing 22% of service revenue, for the third quarter of 2024, compared to $0.4 million, representing 5% of service revenue for the third quarter of 2023). Gross profit as a percentage of service revenue for the three and nine months ended September 30, 2024 increased from efficiency initiatives, cost savings measures and price increase for certain services.

Previous wording

SG&A for the six months ended June 30, 2024 of $3.7 million decreased by 9% compared to the six months ended June 30, 2023 ($1.7 million for the second quarter of 2024, a 26% decrease compared to the second quarter of 2023). The decrease in SG&A for the three and six months ended June 30, 2024 is primarily due to lower professional services from lower legal-related costs and lower compensation and benefits from efficiency and cost reduction measures. The decrease in SG&A for the six months ended June 30, 2024 is partially offset by higher other expenses from the first quarter 2023 reversal of bad debt expense from collection of aged receivables.

Current wording

SG&A for the nine months ended September 30, 2024 of $5.0 million decreased by 14% compared to the nine months ended September 30, 2023 ($1.3 million for the third quarter of 2024, a 26% decrease compared to the third quarter of 2023). The decrease in SG&A for the three and nine months ended September 30, 2024 is primarily due to lower professional services from lower legal-related costs and lower compensation and benefits from efficiency and cost reduction measures.

Previous wording

Cost of revenue for the six months ended June 30, 2024 of $3.2 million decreased by 56% compared to the six months ended June 30, 2023 ($1.3 million for the second quarter of 2024, a 63% decrease compared to the second quarter of 2023). The decrease in cost of revenue for the three and six months ended June 30, 2024 is primarily driven by lower compensation and benefits and technology and telecommunications due to efficiency initiatives and cost savings initiatives.

Current wording

Cost of revenue for the nine months ended September 30, 2024 of $4.9 million decreased by 56% compared to the nine months ended September 30, 2023 ($1.6 million for the third quarter of 2024, a 54% decrease compared to the third quarter of 2023). The decrease in cost of revenue for the three and nine months ended September 30, 2024 is primarily driven by lower compensation and benefits and technology and telecommunications due to efficiency initiatives and cost savings initiatives.

Previous wording

SG&A for the six months ended June 30, 2024 of $14.3 million decreased by 7% compared to the six months ended June 30, 2023 ($6.5 million for the second quarter of 2024, a 12% decrease compared to the second quarter of 2023). The decrease for the three and six months ended June 30, 2024 is primarily driven by lower compensation and benefits and occupancy related costs driven by efficiency initiatives and cost savings measures. The decrease for the six months ended June 30, 2024 is partially offset by higher professional services primarily due to higher legal-related costs.

Current wording

SG&A for the nine months ended September 30, 2024 of $20.7 million decreased by 7% compared to the nine months ended September 30, 2023 ($6.4 million for the third quarter of 2024, an 8% decrease compared to the third quarter of 2023). The decrease for the three and nine months ended September 30, 2024 is primarily driven by lower occupancy related costs and compensation and benefits driven by efficiency initiatives and cost savings measures.

Previous wording

Other income (expense), net was $(17.5) million for the six months ended June 30, 2024 compared to $(19.1) million for the six months ended June 30, 2023 ($(9.6) million for the second quarter of 2024 and $(11.4) million for the second quarter of 2023). The change for the three and six months ended June 30, 2024 was primarily driven by lower debt amendment costs and a loss on the change in fair value of the warrant liability for the three and six months ended June 30, 2023 (no comparable amount for the three and six months ended June 30, 2024). The lower costs for the six months ended June 30, 2024 was partially offset by higher interest expense driven by higher interest rates on our amended SSTL.

Current wording

Other income (expense), net was $(27.1) million for the nine months ended September 30, 2024 compared to $(26.5) million for the nine months ended September 30, 2023 ($(9.6) million for the third quarter of 2024 and $(7.3) million for the third quarter of 2023). The change for the nine months ended September 30, 2024 was primarily driven by higher interest expense and a gain on the change in fair value of the warrant liability for the nine months ended September 30, 2023 (no comparable amount for the nine months ended September 30, 2024), partially offset by lower debt amendment costs. The higher interest expense was driven by higher interest rates on our amended SSTL.

Previous wording

Our primary source of liquidity has historically been cash flow from operations, cash proceeds from sales of businesses, cash proceeds from the sale of equity securities and cash on hand. However, due to governmental and market responses to the COVID-19 pandemic, revenue has declined significantly compared to pre-pandemic levels. The lower revenue, partially offset by efficiency initiatives and cost savings measures, resulted in negative operating cash flow from operations for the six months ended June 30, 2024 and 2023. We believe our anticipated revenue growth from the return of the default market, on-boarding sales wins, and revenue mix together with our reduced cost structure, should help reduce negative operating cash flow. We seek to deploy cash generated in a disciplined manner. 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 and fund negative operating cash flow. We also use cash for repayments of our long-term debt and capital investments. In addition, from time to time we consider and evaluate business acquisitions, dispositions, closures, sales of equity securities or other similar actions that are aligned with our strategy.

Current wording

Our primary source of liquidity has historically been cash flow from operations, cash proceeds from sales of businesses, cash proceeds from the sale of equity securities and cash on hand. However, due to governmental and market responses to the COVID-19 pandemic, revenue has declined significantly compared to pre-pandemic levels. The lower revenue, partially offset by efficiency initiatives and cost savings measures, resulted in negative operating cash flow from operations for the nine months ended September 30, 2024 and 2023. We believe our anticipated revenue growth from the return of the default market, on-boarding sales wins, and revenue mix together with our reduced cost structure, should help reduce negative operating cash flow. We seek to deploy cash generated in a disciplined manner. 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 and fund negative operating cash flow. We also use cash for repayments of our long-term debt and capital investments. In addition, from time to time we consider and evaluate business acquisitions, dispositions, closures, sales of equity securities or other similar actions that are aligned with our strategy.

Previous wording

Through March 29, 2023, the SSTL’s interest rate was the Adjusted Eurodollar Rate plus 4.00%. Beginning March 30, 2023, the SSTL bears interest at rates based upon, at our option, the Secured Overnight Financing Rate (“SOFR”) or the Base Rate, as defined in the Amended Credit Agreement. SOFR-based term loans bear interest at a rate per annum equal to SOFR plus 5.00% payable in cash plus a payable in kind (“PIK”) component. Base Rate-based term loans bear interest at a rate per annum equal to the Base Rate plus 4.00% payable in cash plus a PIK component. The PIK component of the interest rate was subject to adjustment based on the amount of Aggregate Paydowns. Since Aggregate Paydowns were $20 million in the first quarter of 2023 and an additional $10 million in the third quarter of 2023, the PIK component was 4.50% for the period March 30, 2023 through June 30, 2023 and 3.75% for periods thereafter. The interest rate as of June 30, 2024, including the PIK component, was 14.16%.

Current wording

Through March 29, 2023, the SSTL’s interest rate was the Adjusted Eurodollar Rate plus 4.00%. Beginning March 30, 2023, the SSTL bears interest at rates based upon, at our option, the Secured Overnight Financing Rate (“SOFR”) or the Base Rate, as defined in the Amended Credit Agreement. SOFR-based term loans bear interest at a rate per annum equal to SOFR plus 5.00% payable in cash plus a payable in kind (“PIK”) component. Base Rate-based term loans bear interest at a rate per annum equal to the Base Rate plus 4.00% payable in cash plus a PIK component. The PIK component of the interest rate was subject to adjustment based on the amount of Aggregate Paydowns. Since Aggregate Paydowns were $20 million in the first quarter of 2023 and an additional $10 million in the third quarter of 2023, the PIK component was 4.50% for the period March 30, 2023 through June 30, 2023 and 3.75% for periods thereafter. The interest rate as of September 30, 2024, including the PIK component, was 14.18%.

Previous wording

As of June 30, 2024, the outstanding principal balance of the SSTL was $228.4 million.

Current wording

As of September 30, 2024, the outstanding principal balance of the SSTL was $230.6 million.

Previous wording

As of June 30, 2024, there was no outstanding debt under the Revolving Loan Agreement.

Current wording

As of September 30, 2024, there was $250 thousand outstanding debt under the Revolving Loan Agreement.