- $(64) million Predecessor quarterly
GAAP loss (for one month ended July 31, 2018), $(0.65) per diluted
share
- $1,011 million Successor quarterly GAAP
income (for two months ended September 30, 2018), $10.99 per
diluted share
- $54 million combined adjusted income
for Predecessor and Successor, $0.58 per diluted share
- 6.5 basis points (bps) combined
adjusted servicing profitability
- $65 million combined Servicing pretax
income, adjusted pretax income of $81 million
- $32 million combined Originations
pretax income, adjusted pretax income of $33 million
- $4 million combined Xome pretax income,
adjusted pretax income of $11 million
- Signed agreement for strategic
acquisition of originator with $25 billion servicing and $10+
billion annual originations
Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), which
principally operates under the Mr. Cooper® and Xome® brands,
reported third quarter GAAP net loss of $(64) million, $(0.65) per
diluted share for the one month ended July 31, 2018 (Predecessor),
and reported GAAP net income of $1,011 million, $10.99 per diluted
share for the two months ended September 30, 2018 (Successor). On
an adjusted basis, the Company reported combined earnings for the
third quarter of $54 million, $0.58 per diluted share.
“This was an extraordinary quarter for our company as we
completed the WMIH Corp. merger and renamed the Company. We've made
strides in all our business segments. Servicing achieved 6.5 basis
points of adjusted profitability, Originations maintained
profitability and Xome increased its third-party revenue to 56%
with the acquisition of Assurant Mortgage Solutions,” said Jay
Bray, Chairman and Chief Executive Officer of Mr. Cooper Group Inc.
“We are continuing to make strategic investments to grow all our
segments, and we are excited to announce our plans to acquire
Pacific Union Financial, LLC. We believe this acquisition is
complementary to our business and significantly increases our
originations volume and capabilities. Subject to regulatory
approvals, the transaction will also allow us to grow our Servicing
portfolio by approximately $25 billion upon closing in early
2019.”
Servicing
The Servicing business is focused on providing a best-in-class
home loan experience for our 3.2 million customers while also
strengthening asset performance for investors. The segment earns
recurring revenues from mortgage servicing rights (MSR) and
subservicing. In the third quarter, Servicing earned $81 million
combined adjusted pretax income or 6.5 basis points of adjusted
profitability. Combined adjusted pretax profitability improved 12%
from the prior quarter. Combined other income (expense) improved by
$9 million primarily due to a decrease in interest expense related
to MSR financing and higher float income.
Mr. Cooper boarded $37 billion UPB in the quarter to close the
third quarter servicing portfolio at $514 billion UPB. The Company
is on track to achieve its previously stated goal of 5% growth for
the year with an expectation to end the year at $535 billion
UPB.
Mr. Cooper remains confident in achieving adjusted servicing
profitability in excess of 6.0 basis points on average for the full
year 2018 which will be propelled by a lower prepayment environment
and continued efficiencies.
Quarter Ended ($ in millions)
Q2'18
Q3'18 Combined $ BPS $ BPS Operational
revenue $ 277 22.3 $ 278 22.2 Amortization, net of accretion (48 )
(3.9 ) (47 ) (3.8 ) Mark-to-market 19 1.5
49 3.9 Total revenues 248 20.0
280 22.4 Expenses (166 ) (13.4 ) (230 ) (18.4 ) Total other income
(expenses), net 6 0.5 15
1.2 Income before taxes 88 7.1 65 5.2 Mark-to-market
(19 ) (1.5 ) (49 ) (3.9 ) Adjustments 3 0.2
65 5.2 Adjusted pretax income $
72 5.8 $ 81 6.5
Quarter Ended Q2'18 Q3'18 Combined
Ending UPB ($B) $ 498 $ 514 Average UPB ($B) $ 497 $ 500 60+ day
delinquency rate 2.8 % 2.5 % Annualized CPR 12.1 % 11.1 %
Annualized CPR, net of recapture 10.5 % 9.6 % Modifications and
workouts 14,715 14,448
Originations
The Originations business focuses on creating servicing assets
at attractive margins through recapture of existing customers, new
customer acquisitions, and correspondent originations. The
Originations segment earned $33 million combined adjusted pretax
income. Originations earnings remained stable and revenue margins
improved slightly primarily due to gain on sale revenue.
Mr. Cooper funded nearly 23,000 loans combined in the third
quarter, totaling approximately $5.1 billion UPB with $2.4 billion
from the consumer direct channel and $2.7 billion from the
correspondent channel. In the consumer direct channel, refinance
recapture increased 8% quarter-over-quarter to 57%. The
correspondent channel has grown over the past year making Mr.
Cooper the 10th largest correspondent lender in the U.S.
The consumer direct channel continues to focus on improving cash
flow for customers and identifying opportunities for customer
recapture. Despite the rise in interest rates, there are
approximately 750,000 current Mr. Cooper customers who could see
value in refinancing their loan to capitalize on home equity for
debt optimization. To help our customers better understand their
options, we are launching our upgraded mobile app, Mr. Cooper with
Home Intelligence, which places the home, rather than the loan, at
the center. The Home Intelligence app provides customers with
valuable insights on how their homes fit into their broader
financial picture. Within the Home Intelligence app, customers can
more easily view the value of their homes, the equity they hold and
personalized ways to use that equity to save money and manage their
debts. The new app is planned to launch next month to all Mr.
Cooper customers.
Given the current interest rate and market environment, Mr.
Cooper is targeting Originations adjusted pretax income of $115
million for the full year 2018.
Quarter Ended ($ in millions)
Q2'18
Q3'18 Combined Income before taxes $ 32 $ 32
Adjustments 1 1 Adjusted pretax income $ 33 $ 33
Quarter Ended ($ in millions)
Q2'18 Q3'18 Combined Total pull through
adjusted volume $ 5,440 $ 5,027 Funded volume $ 5,542 $ 5,147
Refinance recapture percentage 53 % 57 % Recapture percentage 22 %
22 % Purchase volume as a percentage of funded volume 51 % 53 %
Xome
Xome provides real estate solutions including property
disposition, asset management, title, close, valuation, and field
services to Mr. Cooper and third-party businesses. The Xome segment
earned $11 million combined adjusted pretax income.
On August 1, 2018, Xome acquired Assurant Mortgage Solutions
(AMS) to strategically expand revenues and third-party sales. The
AMS acquisition complements Xome and grows its third-party client
portfolio across its valuation, title, and field services
businesses, evidenced by the third-party revenue percentage growing
from 28% in the second quarter to an exit rate of 56% at the end of
the third quarter. Xome made a strategic decision to discontinue
the internal build-out of the field services platform once the AMS
acquisition was imminent. Xome will continue to focus on the AMS
integration and transformation throughout 2019, and expects to
fully ramp up the capture of Mr. Cooper's field services
opportunities by mid-2019.
Quarter Ended ($ in millions)
Q2'18
Q3'18 Combined Income before taxes $ 10 $ 4
Adjustments 3 7 Adjusted pretax income $ 13 $ 11
Quarter Ended Q2'18 Q3'18
Combined Exchange property listings sold 3,720 3,230 Exchange
property listings at period end 7,417 6,917 Services orders
completed 117,093 312,536 Percentage of revenue earned from
third-party customers 28 % 49 %
Conference Call Webcast and Investor
Presentation
The Company will host a conference call on November 8, 2018 at
9:00 A.M. Eastern Time. The conference call may be accessed by
dialing 855-874-2685, or 720-634-2923 internationally. Please use
the participant passcode 2272713 to access the conference call. A
simultaneous audio webcast of the conference call will be available
in the Investors section of www.mrcoopergroup.com. A replay will
also be available by dialing 855-859-2056, or 404-537-3406
internationally. Please use the passcode 2272713 to access the
replay. The replay will be accessible through November 22, 2018 at
12:00 P.M. Eastern Time.
Non-GAAP Financial
Measures
The Company utilizes non-GAAP (or “adjusted”) financial measures
as the measures provide additional information to assist investors
in understanding and assessing the Company’s and our business
segments’ ongoing performance and financial results, as well as
assessing our prospects for future performance. The adjusted
financial measures facilitate a meaningful analysis and allow more
accurate comparisons of our ongoing business operations because
they exclude items that may not be indicative of or are unrelated
to the Company’s and our business segments’ core operating
performance, and are better measures for assessing trends in our
underlying businesses. These adjustments are consistent with how
management views our businesses. Management uses these non-GAAP
financial measures in making financial, operational and planning
decisions and evaluating the Company’s and our business segment’s
ongoing performance. Adjusted pre-tax income (loss) in the
servicing segment eliminates the effects of mark-to-market
adjustments which primarily reflects unrealized gains or losses
based on the changes in fair value measurements of MSRs and their
related financing liabilities for which a fair value accounting
election was made. These adjustments, which can be highly volatile
and material due to changes in credit markets, are not necessarily
reflective of the gains and losses that will ultimately be realized
by the Company. Adjusted pre-tax income (loss) in each segment also
eliminates, as applicable, transition and integration costs, gains
(losses) on sales of fixed assets, certain settlement costs that
are not considered normal operational matters, and other
adjustments based on the facts and circumstances that would provide
investors a supplemental means for evaluating the Company’s core
operating performance.
Forward Looking
Statements
Any statements in this release that are not historical or
current facts are forward looking statements. These forward looking
statements include, but are not limited to, statements regarding
the acquisition of Pacific Union, estimates of Servicing's
profitability and growth, Originations and Xome adjusted pre-tax
income and the integration of Assurant Mortgage Solutions. Forward
looking statements involve known and unknown risks, uncertainties
and other factors that may cause our actual results, performance,
or achievements to be materially different from any future results,
performance or achievements expressed or implied by the forward
looking statements. Results for any specified quarter are not
necessarily indicative of the results that may be expected for the
full year or any future period. Certain of these risks and
uncertainties are described in the “Business” and “Risk Factors”
sections of WMIH Corp.'s and Nationstar's most recent annual
reports and other required documents as filed with the SEC which
are available at the SEC’s website at http://www.sec.gov. Mr.
Cooper undertakes no obligation to publicly update or revise any
forward looking statement or any other financial information
contained herein, and the statements made in this press release are
current as of the date of this release only.
Basis of Presentation
For purpose of Mr. Cooper's financial statement presentation,
Mr. Cooper was determined to be the accounting acquirer in the WMIH
Corp. merger and Nationstar is considered the “Predecessor” and its
assets and liabilities are reflected at fair values as of the
merger date of July 31, 2018. Mr. Cooper's interim Consolidated
Financial Statements for periods following the close of the Merger
are labeled “Successor” and reflect the acquired assets and
liabilities from Nationstar. The presentation discusses the results
of the Company for the three months ended September 30, 2018
compared to the three months ended June 30, 2018. The financial
results for the three months ended June 30, 2018 reflect the
results of the Predecessor entity for that time period. With
respect to the three months ended September 30, 2018, the Company
has separately provided the financial results of the Predecessor
for the period from July 1, 2018 through July 31, 2018 and the
financial results of the Successor for the period from August 1,
2018 through September 30, 2018, where both are presented under
GAAP. The presentation also includes a “Combined” column that
combines the Predecessor and Successor results referenced above
with respect to the three months ended September 30, 2018. Although
the separate financial results of the Predecessor and Successor for
the three months ended September 30, 2018 are presented under GAAP,
the results reported in the “Combined” column reflect non-GAAP
financial measures, as a different basis of accounting was used
with respect to the financial results for the Predecessor as
compared to the financial results of the Successor. The Company
believes that non-GAAP financial measures should be considered in
addition to, and not a substitute for, financial information
prepared in accordance with GAAP. The Company presents non-GAAP
financial measures in reporting its financial results to provide
additional and supplemental disclosure to evaluate operating
results. In particular, the Company believes that providing this
“Combined” information is useful as a supplement to its standard
GAAP financial presentation as it significantly enhances the
period-over-period comparability of the Company’s financial
results. See the Financial Tables for further information.
Financial Tables
MR. COOPER GROUP INC. AND
SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS
(millions of dollars, except for earnings
per share data)
Predecessor Predecessor Successor
Combined
Three MonthsEnded June 30,2018
For the PeriodJuly 1-July 31,2018
For the PeriodAugust 1-September
30,2018
Three MonthsEndedSeptember 30,2018
Revenues: Service related, net $ 298 $
95 $ 235 $ 330 Mark-to-market 19 25 24 49 Net gain on mortgage
loans held for sale 127 44
83 127 Total revenues 444
164 342 506
Total expenses 339 242 275 517
Other
income (expense): Interest income 140 48 90 138 Interest
expense (164 ) (53 ) (122 ) (175 ) Other income (expenses)
(2 ) — 6 6
Total other income (expenses), net (26 ) (5 )
(26 ) (31 ) Income before income tax expense
(benefit) 79 (83 ) 41 (42 ) Income tax expense (benefit) 21
(19 ) (979 ) (998 ) Net
income (loss) attributable to Successor/Predecessor 58
(64 ) 1,020 956
Undistributed earnings attributable to participating
stockholders — — 9
9
Net income attributable to Mr. Cooper
Group $ 58 $ (64 ) $ 1,011 $ 947
Earnings per share attributable to
common stockholders: Basic $ 0.59 $ (0.65 ) $ 11.13
Diluted $ 0.59 $ (0.65 ) $ 10.99
Weighted average shares of common stock outstanding (in thousands):
Basic 98,203 98,164
90,808 Diluted 99,130 98,164
91,992
MR. COOPER GROUP INC. AND
SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE
SHEETS
(millions of dollars)
Predecessor Successor June 30, 2018
September 30, 2018
Assets
Cash and cash equivalents $ 185 $ 198 Restricted cash 310
332 Mortgage servicing rights 3,356 3,500 Advances and other
receivables, net 1,317 1,174 Reverse mortgage interests, net 9,477
8,886 Mortgage loans held for sale at fair value 1,635 1,681
Mortgage loans held for investment 132 122 Property and equipment,
net 123 102 Deferred tax asset — 934 Other assets 655
799 Total assets $ 17,190 $ 17,728
Liabilities and
Stockholders' Equity
Unsecured senior notes, net $ 1,815 $ 2,457 Advance facilities, net
516 596 Warehouse facilities, net 3,086 2,888 Payables and accrued
liabilities 1,297 1,342 MSR related liabilities - nonrecourse at
fair value 1,063 1,123 Mortgage servicing liabilities 27 79 Other
nonrecourse debt, net 7,445 7,165 Total liabilities
15,249 15,650 Total stockholders' equity 1,941 2,078
Total liabilities and stockholders' equity $ 17,190 $ 17,728
UNAUDITED SEGMENT STATEMENT OF
OPERATIONS & EARNINGS
RECONCILIATION
(millions of dollars, except for earnings
per share data)
Predecessor Three Months Ended for June 30, 2018
Servicing Originations Xome Corporate and
Other Elim. Consolidated
REVENUES:
Service related, net $ 248 $ 17 $ 62 $ 1 $ (11 ) $ 317 Net gain on
mortgage loans held for sale — 116
— — 11 127
Total revenues 248 133 62
1
— 444
Total
expenses 166 102 52 19
— 339 Other income (expense):
Interest income 121 17
— 2
— 140 Interest expense
(115 ) (16 ) — (33 ) — (164 ) Other expense —
— — (2 ) — (2 ) Total
other income (expense) 6 1 —
(33 )
— (26 )
Pretax income
(loss) $ 88 $ 32
$ 10 $ (51 ) $ —
$
79 Income tax expense (Benefit) 21 Net income
attributable to common stockholders $ 58 Earnings per share
Basic $ 0.59 Diluted $ 0.59
Adjusted
Earnings: Pretax income (loss) $ 88 $ 32 $ 10 $ (51 ) $
— $ 79 MTM (19 ) — — — — (19 ) Adjustments 3 1
3 2 — 9
Adjusted pretax income (loss) $ 72 $ 33 $ 13 $ (49 )
$ — $ 69 Income tax expense (17 ) Adjusted earnings $
52 Adjusted diluted EPS $ 0.53
UNAUDITED SEGMENT STATEMENT OF
OPERATIONS & EARNINGS
RECONCILIATION
(millions of dollars, except for earnings
per share data)
Combined Three Months Ended for September 30, 2018
Servicing Originations Xome Corporate and
Other Elim. Consolidated
REVENUES:
Service related, net $ 280 $ 14 $ 95 $ — $ (10 ) $ 379 Net gain on
mortgage loans held for sale — 117
— — 10 127
Total revenues 280 131
95 —
— 506
Total expenses 230 100 90 97
— 517 Other income
(expense): Interest income 119 16
— 3
— 138 Interest
expense (109 ) (16 ) (1 ) (49 ) — (175 ) Other expense 5
1 — — —
6 Total other income (expense) 15
1 (1 ) (46 )
—
(31 )
Pretax income (loss) $ 65
$ 32 $ 4 $
(143 ) $ —
$ (42 )
Adjusted Earnings: Pretax income (loss) $ 65 $ 32 $ 4
$ (143 ) $ — $ (42 ) MTM (49 ) — — — — — (49 ) Adjustments
65 — 1 7 75
— 148 Adjusted pretax income (loss) $ 81
$ 33 $ 11 $ (68 ) $ — $ 57
Income tax expense (3 ) Adjusted earnings $ 54
Adjusted diluted EPS $ 0.58
UNAUDITED SEGMENT STATEMENT OF
OPERATIONS & EARNINGS
RECONCILIATION
(millions of dollars, except for earnings
per share data)
Predecessor For the Period July 1-July 31, 2018 Servicing
Originations Xome Corporate and Other
Elim. Consolidated
REVENUES: Service related,
net $ 97 $ 4 $ 22 $ — $ (3 ) $ 120 Net gain on mortgage loans held
for sale — 41 — —
3 44
Total revenues 97
45
22 —
— 164
Total expenses 126 34 19 63
— 242 Other income
(expense): Interest income 41 6
— 1
— 48 Interest
expense (35 ) (6 ) — (12 ) — (53 ) Other expense —
— — — — —
Total other income (expense) 6 —
— (11 )
— (5 )
Pretax
income (loss) $ (23 ) $ 11
$ 3 $ (74 ) $ —
$ (83 ) Income tax expense (benefit)
(19 ) Undistributed earnings attributable to participating
stockholders $ — Net income attributable to common
stockholders $ (64 ) Earnings per share Basic $ (0.65 ) Diluted $
(0.65 )
UNAUDITED SEGMENT STATEMENT OF
OPERATIONS & EARNINGS
RECONCILIATION
(millions of dollars, except for earnings
per share data)
Successor For the Period August 1 - September 30,
2018 Servicing Originations Xome Corporate and
Other Elim. Consolidated
REVENUES:
Service related, net $ 183 $ 10 $ 73 $ — $ (7 ) $ 259 Net gain on
mortgage loans held for sale — 76
— — 7 83
Total revenues 183 86
73 —
— 342
Total expenses 104 66 71 34
— 275 Other income
(expense): Interest income 78 10
— 2
— 90 Interest
expense (74 ) (10 ) (1 ) (37 ) — (122 ) Other expense 5
1 — — —
6 Total other income (expense) 9
1 (1 ) (35 )
—
(26 )
Pretax income (loss) $ 88
$ 21 $ 1 $
(69 ) $ —
$ 41 Income tax
expense (benefit) (979 ) Undistributed earnings attributable to
participating stockholders $ 9 Net income attributable to
common stockholders of Mr. Cooper Group $ 1,011 Earnings per
share Basic $ 11.13 Diluted $ 10.99
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version on businesswire.com: https://www.businesswire.com/news/home/20181108005318/en/
Mr. Cooper Group Inc.Rich Delgado, 214-687-4844
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