ALTISOURCE PORTFOLIO SOLUTIONS S.A.
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, 2021 filed with the Securities and Exchange Commission
("SEC") on March 3, 2022 . We determined that as of June 30, 2021 , Altisource
qualifies as a smaller reporting company ("SRC") pursuant to Regulation S-K
promulgated by the SEC ("Reg. S-K") since its public float (as defined by Reg.
S-K) was less than $250 million as of such date. We have elected to file as an
SRC. Altisource remains an accelerated filer for SEC filing purposes based on
its annual revenue.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements within the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
statements may 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
comparable 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 and affect anticipated expense reductions in response to lower revenue due to COVID-19, or other factors;
•assumptions about the variable nature of our cost structure that would allow us to realign our cost structure in line with revenue;
•assumptions regarding the impact of seasonality;
•assumptions regarding the impacts of the COVID-19 pandemic and the timeliness and effectiveness of actions taken in response thereto;
•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 the Risk Factors section of our Form 10-K for the year endedDecember 31, 2021 including: •the timing of the anticipated increase in default related referrals following the expiration of foreclosure and eviction moratoriums, forbearance programs and temporary governmental loss mitigation requirements, the timing of the expiration of such moratoriums, programs and requirements, and any other delays occasioned by government, investor or servicer actions;
•our ability to retain Ocwen Financial Corporation (together with its subsidiaries, "Ocwen") as a customer or our ability to receive the anticipated volume of referrals from Ocwen;
•our ability to retain New Residential Investment Corp. (individually, together with one or more of its subsidiaries, or one or more of its subsidiaries individually, "NRZ") as a customer or our ability to receive the anticipated volume of referrals from NRZ; •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, which may cause a termination event or event of default under certain of our agreements;
•our ability to execute on our strategic plan;
•our ability to retain our existing customers, expand relationships and attract new customers;
•our ability to comply with governmental regulations and policies and any changes in such regulations and policies;
•our ability to develop, launch and gain market acceptance of new solutions or recoup our investments in developing such new solutions;
•the level of loan delinquencies and charge-offs;
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•the level of origination volume;
•technology incidents, data breaches and cybersecurity risks;
•significant changes in tax regulations and interpretations in the countries, states and local jurisdictions in which we operate; and
•the risks and uncertainties related to pandemics, epidemics or other force majeure events, including the COVID-19 pandemic, and associated impacts on the economy, supply chain, transportation, movement of people, availability of vendors and demand for our products or services as well as increased costs, recommendations or restrictions imposed by governmental entities, changes in relevant business practices undertaken or imposed by our clients, vendors or regulators, impacts on contracts and client relationships and potential litigation exposure. 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 "
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. EffectiveJanuary 1, 2022 , our reportable segments changed as a result of a change in the way our Chief Executive Officer (our chief operating decision maker) manages our businesses, allocates resources and evaluates performance, and the related changes in our internal organization. We now report our operations through two new reportable segments: Servicer and Real Estate and Origination. In addition, we report Corporate and Others separately. Prior to theJanuary 1, 2022 change in reportable segments, the Company operated with one reportable segment (total Company). Prior year comparable period segment disclosures have been restated to conform to the current year presentation. The Servicer and Real Estate segment provides loan servicers and real estate investors with solutions and technologies that span the mortgage and real estate lifecycle. Within the Servicer and Real Estate segment we provide:
Solutions
Our Solutions business includes property preservation and inspection services, title insurance (as an agent) and settlement services, real estate valuation services, foreclosure trustee services, and residential and commercial construction inspection and risk mitigation services.
Marketplace
Our Marketplace business includes the Hubzu® online real estate auction platform and real estate auction, real estate brokerage and asset management services.
Technology and software-as-a-service ("SaaS") Products
Our Technology and SaaS Products business includes Equator® (a SaaS-based
technology to manage real estate owned ("REO"), short sales, foreclosure,
bankruptcy and eviction processes), Vendorly Invoice (a vendor invoicing and
payment system), RentRange® (a single family rental data, analytics and
rent-based valuation solution), and REALSynergy® (a commercial loan servicing
platform).
The Origination segment provides originators with solutions and technologies
that span the mortgage origination lifecycle. Within the Origination segment we
provide:
Solutions
Our Solutions business includes title insurance (as an agent) and settlement
services, real estate valuation services, and loan fulfillment, certification
and certification insurance services.
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Lenders One
Our Lenders One business includes management services provided to the Best
Partners Mortgage Cooperative, Inc., doing business as Lenders One® ("Lenders
One"), and certain loan manufacturing and capital markets services provided to
the members of the Lenders One cooperative.
Technology and SaaS Products
Our Technology and SaaS Products business includes Vendorly Monitor (a vendor
management platform), Lenders One Loan Automation ("LOLA") (a solution designed
to automate the entire loan manufacturing process), TrelixAITM (technology to
manage the workflow and automate components of the loan fulfillment, pre and
post-close quality control and service transfer processes), ADMS (a document
management and data analytics delivery platform), and automated valuation
technology.
Corporate and Others includes
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, byAltisource . The Lenders One members' earnings are included in revenue and reduced from net income to arrive at net income attributable toAltisource .
Strategy and Core Businesses
We are focused on becoming the premier provider of mortgage and real estate marketplaces and related technology enabled solutions to a broad and diversified customer base of residential real estate and loan investors, servicers, and originators. The real estate and mortgage marketplaces represent very large markets, and we believe our scale and suite of offerings provide us with competitive advantages that could support our growth. As we navigate the COVID-19 pandemic and its impacts on our business, we continue to evaluate our strategy and core businesses and seek to position our businesses to provide long term value to our customers and shareholders.
Each of our business segments provides
Servicer and Real Estate:
Through our offerings that support residential real estate and loan investors
and servicers, we provide a suite of solutions and technologies intended to meet
their growing and evolving needs. We are focused on growing referrals from our
existing customer base and attracting new customers to our offerings. We have a
customer base that includes government-sponsored enterprises ("GSEs"), asset
managers, and several large bank and non-bank servicers including Ocwen and NRZ.
We believe we are one of only a few providers with a broad suite of servicer
solutions, nationwide coverage and scalability. Further, we believe we are well
positioned to gain market share from existing and new customers as they
consolidate to larger, full-service providers or outsource services that have
historically been performed in-house.
Origination:
Through our offerings that support mortgage loan originators (or other similar
mortgage market participants), we provide a suite of solutions and technologies
to meet the evolving and growing needs of lenders, mortgage purchasers and
securitizers. We are focused on growing business from our existing customer
base, attracting new customers to our offerings and developing new offerings. We
have a customer base that includes the Lenders One cooperative members, which
includes independent mortgage bankers, credit unions, and banks, as well as bank
and non-bank loan originators. We believe our suite of services, technologies
and unique access to the members of the Lenders One mortgage cooperative
position us to grow our relationships with our existing customer base by growing
membership of Lenders One, increasing member adoption of existing solutions and
developing and cross-selling new offerings. Further, we believe we are well
positioned to gain market share from existing and new customers as customers and
prospects look to Lenders One to help them improve their profitability and
better compete.
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Corporate and Others includes Pointillist, a majority owned subsidiary of
Altisource . We developed the Pointillist business through our consumer analytics
capabilities. On December 1, 2021 , the shareholders of Pointillist sold all of
the equity interests in Pointillist to Genesys Cloud Services, Inc. for $150.0
million . On a fully diluted basis, we owned approximately 69% of the equity of
Pointillist. After working capital and other applicable adjustments, we received
approximately $106.0 million from the sale of its Pointillist equity and the
collection of outstanding receivables, with $102.2 million received at closing,
approximately $0.3 million deposited into the Working Capital Escrow and
approximately $3.5 million deposited into the Indemnification Escrow.
COVID-19 Pandemic Impacts
In response to the COVID-19 pandemic, various governmental entities and servicers implemented unprecedented foreclosure and eviction moratoriums, forbearance programs and loss mitigation measures to help mitigate the impact to borrowers and renters. As a result of these measures and other related actions, industry wide foreclosure initiations were 91% lower for the three months endedMarch 31, 2021 , compared to the same period in 2020. The Federal government's foreclosure moratorium expired onJuly 1, 2021 and theConsumer Financial Protection Bureau's ("CFPB's") temporary loss mitigation measures expired onDecember 31, 2021 . As a result, industry-wide foreclosure initiations were 458% for the three months endedMarch 31, 2022 compared to the same period in 2021, although still 20% lower than the same period in 2020 as the foreclosure market begins to normalize. The decline in foreclosure initiations throughout the pandemic resulted in significantly lower REO referrals toAltisource and negatively impacted virtually all ofAltisource's default related services performed on delinquent loans, loans in foreclosure and REO. At the same time, beginning inMarch 2020 theFederal Reserve lowered the target for the federal funds rate to 0% to 0.25% and bought billions of dollars of mortgage backed securities on the secondary market to reduce interest rates. As a result of the lower interest rate environment, mortgage originations were 82% higher for the three months endedMarch 31, 2021 compared to the same period in 2020 (according to theMortgage Bankers Association ) driving higher demand for origination related services. In November of 2021, theFederal Reserve began reducing the volume of mortgage backed securities it was purchasing and ended its monthly purchases inMarch 2022 . Additionally, theFederal Reserve increased the target for the federal funds rate to 0.25% to 0.50% inMarch 2022 . As a result of the higher interest rate environment, mortgage originations were 37% lower for the three months endedMarch 31, 2022 compared to the same period in 2021 (according to theMortgage Bankers Association ). We cannot predict the duration of the pandemic and future governmental measures. Based on the expirations of the Federal government's foreclosure and eviction moratoriums and theCFPB's rules on temporary loss mitigation measures, we believe the demand for our Default business will grow in 2022 and stabilize during 2023 when we anticipate foreclosures commenced after the expiration of the foreclosure moratoriums, forbearance plans and temporary loss mitigation rules become REO and are sold. We further anticipate that despite the forecasted decline in origination volumes in 2022 compared to 2021 and increase in the target federal funds rate, our Origination business will be roughly flat for the full year compared to 2021 from new customer wins, and cross selling existing and new offerings to customers. During 2021 and 2022, 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 andCFPB's rules on temporary loss mitigation measures, (3) grow Lenders One membership, launch new solutions and grew customer adoption of our solutions to accelerate the growth of our origination business, and (4) generate cash.
Share Repurchase Program
OnMay 15, 2018 , our shareholders approved the renewal and replacement of the share repurchase program previously approved by the shareholders onMay 17, 2017 . Under the program, we are authorized to purchase up to 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 ofMarch 31, 2022 , approximately 2.4 million shares of common stock remain available for repurchase under the program. There were no purchases of shares of common stock during the three months endedMarch 31, 2022 and 2021. Luxembourg law limits share repurchases to the balance ofAltisource Portfolio Solutions S.A. (unconsolidated parent company) retained earnings, less the value of shares repurchased. As ofMarch 31, 2022 , we can repurchase up to approximately$74 million of our common stock under Luxembourg law. Our senior secured term loan agreement also limits the amount we can spend on share repurchases, which limit was approximately$420 million as ofMarch 31, 2022 , and may prevent repurchases in certain circumstances, including if our leverage ratio exceeds 3.50 to 1.00. 28 -------------------------------------------------------------------------------- Table of Contents Ocwen Related Matters During the three months endedMarch 31, 2022 , Ocwen was our largest customer, accounting for 35% of our total revenue for the three months endedMarch 31, 2022 . Additionally, 6% of our revenue for the three months endedMarch 31, 2022 was earned on the loan portfolios serviced by Ocwen, when a party other than Ocwen or the mortgage servicing rights ("MSRs") owner selectedAltisource as the service provider. Ocwen has disclosed that it is subject to a number of ongoing federal and state regulatory examinations, consent orders, inquiries, subpoenas, civil investigative demands, requests for information and other actions and is subject to pending and threatened legal proceedings, some of which include claims against Ocwen for substantial monetary damages. Previous regulatory actions against Ocwen have subjected Ocwen to independent oversight of its operations and placed certain restrictions on its ability to acquire servicing rights. Existing or future similar matters could result in adverse regulatory or other actions against Ocwen. In addition to the above, Ocwen may become subject to future adverse regulatory or other actions. Ocwen has disclosed that NRZ is its largest client. As ofDecember 31, 2021 , approximately 21% of loans serviced and subserviced by Ocwen (measured in unpaid principal balance) were related to NRZ MSRs or rights to MSRs. The existence or outcome of Ocwen regulatory matters or the termination of the NRZ sub-servicing agreement with Ocwen may have significant adverse effects on Ocwen's business and/or our continuing relationship with Ocwen. For example, Ocwen may be required to alter the way it conducts business, including the parties it contracts with for services, it may be required to seek changes to its existing pricing structure with us, it may lose its non-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 and others could result in our eventual loss of Ocwen as a customer or a reduction in the number and/or volume of services they purchase from us or the loss of other customers.
If any of the following events occurred,
•Altisource loses Ocwen as a customer or there is a significant reduction in the volume of services they purchase from us
•Ocwen loses, sells or transfers a significant portion of its GSE orFederal Housing Administration servicing rights or subservicing arrangements or remaining other servicing rights or subservicing arrangements andAltisource fails to be retained as a service provider •The contractual relationship between Ocwen and NRZ changes significantly, including Ocwen's sub-servicing arrangement with NRZ expiring without renewal, and this change results in a change in our status as a provider of services related to the NRZ MSRs or rights to MSRs
•Ocwen loses state servicing licenses in states with a significant number of loans in Ocwen's servicing portfolio
•The contractual relationship between Ocwen andAltisource 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 whether any of these events will occur or the amount of any impact they may have onAltisource . However, we are focused on diversifying and growing our revenue and customer base and we have a sales and marketing strategy to support these efforts. Moreover, in the event one or more of these events materially negatively impactAltisource , we believe the variable nature of our cost structure would allow us to realign our cost structure to address some of the impact to revenue and that current liquidity would be sufficient to meet our working capital, capital expenditures, debt service and other cash needs. There can be no assurance that our plans will be successful or our operations will be profitable. 29 -------------------------------------------------------------------------------- Table of Contents Factors Affecting Comparability
The following items impact the comparability of our results:
•Industrywide foreclosure initiations were 458% higher for the three months endedMarch 31, 2022 compared to the same period in 2021 as a result of the Federal government's foreclosure moratorium expiration onJuly 1, 2021 and theCFPB's temporary loss mitigation measures expiration onDecember 31, 2021 ; however, industry wide foreclosure initiations were still 20% lower for the three months endedMarch 31, 2022 compared to the same period in 2020 despite similar delinquency levels as the foreclosure market begins to normalize •Industrywide mortgage originations were 37% lower for the three months endedMarch 31, 2022 compared to the same period in 2021 and 23% lower compared to the fourth quarter of 2021 resulting from a higher interest rate environment •OnDecember 1, 2021 the shareholders of Pointillist, a majority owned subsidiary ofAltisource , sold all of the equity interests in Pointillist. For the three months ended 2021, service revenue from Pointillist was$0.6 million and loss before income taxes and non-controlling interest was$2.1 million (no comparative amounts for the three months endedMarch 31, 2022 ). •The Company recognized an income tax provision of$0.9 million and$0.8 million for the three months endedMarch 31, 2022 and 2021, respectively. The income tax provision for the three months endedMarch 31, 2022 was driven by income tax on transfer pricing income fromIndia , no tax benefit on the pretax loss from our Luxembourg operating company and uncertain tax positions. 30 -------------------------------------------------------------------------------- Table of Contents CONSOLIDATED RESULTS OF OPERATIONS
Summary Results
The following is a discussion of our consolidated results of operations for the periods indicated. For a more detailed discussion of the factors that affected the results of our business segments in these periods, see "Segment Results of Operations" below.
The following table sets forth information on our consolidated results of
operations for the three months ended
(in thousands, except per share data) 2022 2021 % Increase (decrease) Service revenue Servicer and Real Estate$ 27,157 $ 30,676 (11) Origination 10,606 16,847 (37) Corporate and Others - 557 (100) Total service revenue 37,763 48,080 (21) Reimbursable expenses 1,592 2,013 (21) Non-controlling interests 161 372 (57) Total revenue 39,516 50,465 (22) Cost of revenue 33,869 50,158 (32) Gross profit 5,647 307 N/M Operating expenses: Selling, general and administrative expenses 13,974 18,886 (26) Loss from operations (8,327) (18,579) 55 Other income (expense), net Interest expense (3,556) (3,442) 3 Other income, net 740 949 (22) Total other income (expense), net (2,816) (2,493)
13
Loss before income taxes and non-controlling interests (11,143) (21,072) 47 Income tax provision (886) (843) 5 Net loss (12,029) (21,915) 45 Net income attributable to non-controlling interests (161) (87)
(85)
Net loss attributable to Altisource$ (12,190) $ (22,002)
45
Margins:
Gross profit/service revenue 15 % 1 % Loss from operations/service revenue (22) % (39) % Loss per share: Basic$ (0.76) $ (1.40) 45 Diluted$ (0.76) $ (1.40) 45 Weighted average shares outstanding: Basic 15,956 15,717 2 Diluted 15,956 15,717 2
_____________________________________
N/M - not meaningful.
Revenue
We recognized service revenue of
The decrease in service revenue in the Servicer and Real Estate segment is primarily from lower revenue in our Solutions business, partially offset by higher revenue in our Marketplace business. The decline in our Solutions business is primarily
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driven by fewer preservation referrals per property in the Field Services business, partially offset by higher revenue in the other Solutions businesses. Revenue in the other Solutions businesses and Marketplace are grew as the default market began to recover following the expiration of the pandemic related borrower relief measures. The decrease in service revenue in the Origination segment was primarily driven by the overall market decline in mortgage originations. The decline in Lenders One revenue was lower than the overall market decline due to member adoption of our newer product launches. The decline in the Solutions business revenue was greater than the overall market decline as customers brought certain services in-house to retain their employees.
The decrease in service revenue in Corporate and Other is from the
We recognized reimbursable expense revenue of$1.6 million for the three months endedMarch 31, 2022 , a 21% decrease compared to the three months endedMarch 31, 2021 . The decrease in reimbursable expenses for the three months endedMarch 31, 2022 was consistent with the decline in service revenue discussed above. Certain of our revenues can be impacted by seasonality. More specifically, revenues from property sales, loan originations and certain property preservation services in Field Services typically tend to be at their lowest level during the fall and winter months and at their highest level during the spring and summer months. However, as a result of the pandemic and related measures, the seasonal impact to revenue may not follow historical patterns.
Cost of Revenue and Gross Profit
Cost of revenue principally includes payroll and employee benefits associated with personnel employed in customer service, operations and technology roles, fees paid to external providers related to the provision of services, reimbursable expenses, technology and telecommunications costs and depreciation and amortization of operating assets.
Cost of revenue consists of the following:
Three months ended March
31,
(in thousands) 2022 2021 % Increase (decrease)
Compensation and benefits $ 13,521 $ 22,035 (39)
Outside fees and services 12,903 18,723 (31)
Technology and telecommunications 5,232 6,587 (21)
Reimbursable expenses 1,592 2,013 (21)
Depreciation and amortization 621 800 (22)
Cost of revenue $ 33,869 $ 50,158 (32)
We recognized cost of revenue of $33.9 million for the three months ended
March 31, 2022 , a 32% decrease compared to the three months ended March 31,
2021 . The decreases in outside fees and services were primarily driven by lower
service revenue in the field services business within the Solutions business of
the Servicer and Real Estate segment, discussed in the revenue section above.
Compensation and benefits for the three months ended March 31, 2022 decreased
primarily due to cash cost savings measures taken in 2021. In addition, the
decreases in reimbursable expenses were consistent with the changes in
reimbursable expense revenue discussed in the revenue section above.
Gross profit increased to $5.6 million , representing 15% of service revenue, for
the three months ended March 31, 2022 compared to $0.3 million , representing 1%
of service revenue, for the three months ended March 31, 2021 . Gross profit as a
percentage of service revenue for the three months ended March 31, 2022
increased compared to the three months ended March 31, 2021 primarily due to
revenue mix with higher revenue from the higher margin businesses in Servicer
and Real Estate, the December 1, 2021 , Pointillist sale and our COVID-19 cash
cost savings measures and lower revenue and gross profit margin in the
Origination business.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses includes payroll for
personnel employed in executive, sales and marketing, finance, technology, law,
compliance, human resources, vendor management, facilities and risk management
roles. This category also includes professional services fees, occupancy costs,
marketing costs, depreciation and amortization of non-operating assets and other
expenses.
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SG&A expenses consist of the following:
Three months ended March
31,
(in thousands) 2022 2021 % Increase (decrease)
Compensation and benefits $ 5,409 $ 7,852 (31)
Occupancy related costs 1,624 3,180 (49)
Amortization of intangible assets 1,284 2,599 (51)
Professional services 2,749 3,218 (15)
Marketing costs 887 474 87
Depreciation and amortization 337 384 (12)
Other 1,684 1,179 43
Selling, general and administrative expenses $ 13,974 $ 18,886 (26)
SG&A expenses for the three months ended March 31, 2022 of $14.0 million
decreased by 26% compared to the three months ended March 31, 2021 . The
decreases were primarily driven by lower compensation and benefits, occupancy
related costs and amortization of intangible assets. Compensation and benefits
for the three months ended March 31, 2022 decreased primarily due to cash cost
savings measures taken in 2021. The decrease in occupancy related costs
primarily resulted from facility consolidation initiatives. For the three months
ended March 31, 2022 , the decrease in amortization of intangible assets was
driven by the completion of the amortization period of certain intangible assets
during 2021.
Loss from Operations
Loss from operations for the three months ended March 31, 2022 was $(8.3)
million , representing (22)% of service revenue, compared to $(18.6) million ,
representing (39)% of service revenue, for the three months ended March 31,
2021 . Loss from operations as a percentage of service revenue improved for the
three months ended March 31, 2022 compared to the three months ended March 31,
2021 , primarily as a result of higher gross profit margins and reductions in
SG&A expenses in excess of the change in revenue, discussed above.
Other Income (Expense), net
Other income (expense), net principally includes interest expense and other non-operating gains and losses.
Other income (expense), net was$(2.8) million for the three months endedMarch 31, 2022 compared to$(2.5) million for the three months endedMarch 31, 2021 . The change was primarily driven by a$0.2 million decrease in other income from interest recognized in 2021 from a short-term receivable related to the second installment from theAugust 2018 sale of the rental property management business toFront Yard Residential Corporation ("RESI") and an increase of$0.1 million in interest expense driven by higher amortization of debt issuance costs and interest expense of our Credit Facility.
Income Tax Provision
We recognized an income tax provision of$0.9 million and$0.8 million for the three months endedMarch 31, 2022 and 2021, respectively. The income tax provision for the three months endedMarch 31, 2022 was driven by income tax on transfer pricing income fromIndia , no tax benefit on the pretax loss from our Luxembourg operating company and uncertain tax positions. 33
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