Home Loan Servicing Solutions, Ltd. Reports EPS of $0.44 and Net Income of $14.3 Million in the Fourth Quarter of 2012 and Decl
February 07 2013 - 7:30AM
Home Loan Servicing Solutions, Ltd. ("HLSS" or the "Company")
(Nasdaq:HLSS) today reported net income of $14.3 million, or $0.44
per ordinary share, for the fourth quarter of 2012.
Fourth quarter business performance highlights:
- Earned $14.3 million, or $0.44 per ordinary share.
- Declared October dividend of $0.11 per ordinary share and
November and December dividends of $0.12 per ordinary share
totaling $13.7 million for the quarter.
- Completed in October the issuance of $250 million one-year and
$450 million three-year term notes secured by servicing advance
receivables at a weighted average interest spread over LIBOR of
1.55%. The proceeds were used to repay $600 million in term notes
and to reduce borrowing on variable funding notes with a weighted
average interest spread of 2.93%.
- Received gross proceeds of $480.7 million from the December 24
follow-on offering of 25,300,000 ordinary shares at $19.00 per
share. Proceeds from the offering and two new variable funding
notes with a total commitment of $1.6 billion were used to acquire
non-agency mortgage servicing assets from Ocwen representing
mortgages with an unpaid principle balance of $34.6 billion.
- Earnings include a $0.03 per share benefit from lower than
expected amortization resulting from the 13.3% annualized
prepayment rate for the fourth quarter versus the benchmark rate of
15%. There was no change in servicing asset valuations during the
fourth quarter.
Subsequent to the end of the fourth quarter of 2012:
- On January 15, the Company's Board of Directors declared a
monthly dividend of $0.12 per ordinary share for the month of
January 2013.
- On January 22, the underwriters exercised a portion of their
over-allotment option from the December 24 offering of ordinary
shares in the amount of 970,578 shares for which the Company
received net proceeds of $17.6 million.
- On January 22, completed the issuance of $650 million one-year,
$350 million three-year and $150 million five-year term notes
secured by servicing advance receivables at a weighted average
interest spread over LIBOR of 0.94%. Total proceeds of $1.15
billion were used to reduce borrowings on variable funding notes
with a weighted average interest rate of one-month LIBOR plus
2.32%. The aggregate commitments on our variable funding notes were
reduced from $2 billion to $1 billion.
- On February 7, the Company's Board of Directors declared a
monthly dividend of $0.13 per ordinary share for February and March
2013.
"Reflecting on our first year of operations, I believe that we
have delivered on our plan to provide our shareholders with
earnings and dividends that are particularly attractive given the
stability and low risk of our assets which the ABS markets are
starting to reward," said Chairman William Erbey. "I am pleased
with the continued support of our equity and debt investors and
look forward to further growth in 2013."
"Our results in the fourth quarter exceeded our
revised guidance as lower than expected prepayments reduced
amortization expense," said President John Van Vlack. "We are
pleased that the variations from our guidance in 2012 have all been
positive. Additionally, strong executions in the ABS term note
market are continuing to reduce our borrowing costs relative to our
expectations."
For more information on prior releases and SEC Filings, please
refer to the "Shareholders" section of our website at
www.hlss.com.
Home Loan Servicing Solutions (HLSS) is an internally-managed
owner of non-agency mortgage servicing assets with historically
stable valuations and cash flows. HLSS' assets are predominately
mortgage servicing advances that, along with the related servicing
rights, are over-collateralized 23 times by residential real
estate. HLSS' objective is to generate stable, recurring fee-based
earnings and dividends throughout the economic cycle. For more
information, visit www.hlss.com.
This news release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. 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. 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 following: general
economic and market conditions, prevailing interest rates,
governmental regulations and policies, availability of adequate and
timely sources of liquidity, our ability to maintain our PFIC
status, real estate market conditions and other risks detailed in
HLSS' reports and filings with the Securities and Exchange
Commission. The forward looking statements speak only as of the
date they are made and should not be relied upon. HLSS' undertakes
no obligation to update or revise the forward-looking
statements.
The following table presents our condensed consolidated results
of operations in accordance with U.S. GAAP reconciled to our
internally reported financial results. Accordingly,
adjustments are made to reflect Servicing fee revenue, Servicing
expense and Amortization expense on a gross rather than a net
basis.
Our income from operations as presented in our Management
Reporting shown below should be considered in addition to, and not
as a substitute for, income from operations determined in
accordance with GAAP.
|
|
|
|
For the three months ended
December 31, 2012: |
Condensed Consolidated
Results (GAAP) |
Adjustments |
Management Reporting
(Non-GAAP) |
Revenue |
|
|
|
Servicing fee revenue |
$ — |
$60,599 |
$60,599 |
Interest income - notes receivable –
Rights to MSRs |
27,157 |
(27,157) |
— |
Interest income – other |
(173) |
— |
(173) |
Related party revenue(1) |
652 |
— |
652 |
Total revenue |
27,636 |
33,442 |
61,078 |
|
|
|
|
Operating expenses |
|
|
|
Compensation and benefits |
1,069 |
— |
1,069 |
Servicing expense |
— |
27,080 |
27,080 |
Amortization of MSRs |
— |
6,362 |
6,362 |
Related party expenses (2) |
277 |
— |
277 |
General and administrative
expenses |
497 |
— |
497 |
Total operating expenses |
1,843 |
33,442 |
35,285 |
Income from operations |
$25,793 |
$ — |
$25,793 |
|
|
|
|
(1) Revenue earned as part of our
Professional Services Agreement with Ocwen. |
(2) Expenses incurred as part of
our Professional Services Agreement and Administrative Agreement
with Ocwen and Altisource, respectively. |
|
|
|
|
|
HOME LOAN SERVICING
SOLUTIONS, LTD. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(Dollars in thousands,
except share data) |
(UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
|
Three
months |
Twelve
months |
For the periods ended December
31, |
2012 |
2011 |
2012 |
2011 |
Revenue |
|
|
|
|
Interest income – notes receivable –
Rights to MSRs |
$27,157 |
$ — |
$54,699 |
$ — |
Interest income – other |
(173) |
— |
109 |
— |
Total interest income |
26,984 |
— |
54,808 |
— |
Related party revenue |
652 |
— |
2,316 |
— |
Total revenue |
27,636 |
— |
57,124 |
— |
|
|
|
|
|
Operating expenses |
|
|
|
|
Compensation and benefits |
1,069 |
— |
3,751 |
— |
Related party expenses |
277 |
— |
755 |
— |
General and administrative
expenses |
497 |
191 |
1,644 |
273 |
Total operating expenses |
1,843 |
191 |
6,150 |
273 |
Income (loss) from
operations |
25,793 |
(191) |
50,974 |
(273) |
|
|
|
|
|
Other expense |
|
|
|
|
Interest expense |
11,550 |
— |
24,057 |
— |
Total other expense |
11,550 |
— |
24,057 |
— |
|
|
|
|
|
Income (loss) before income taxes |
14,243 |
(191) |
26,917 |
(273) |
Income tax benefit/(expense) |
103 |
— |
(46) |
— |
Net income (loss) |
$14,346 |
$(191) |
$26,871 |
$(273) |
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share |
|
|
|
|
Basic |
$0.44 |
$(9.55) |
$1.56 |
$(13.66) |
Diluted |
$0.44 |
$(9.55) |
$1.56 |
$(13.66) |
|
|
|
|
|
Weighted average ordinary shares
outstanding |
|
|
|
|
Basic |
32,784,718 |
20,000 |
17,230,858 |
20,000 |
Diluted |
32,784,718 |
20,000 |
17,230,858 |
20,000 |
|
|
|
|
|
Dividends declared per
share |
$0.42 |
$0.00 |
$1.45 |
$0.00 |
|
HOME LOAN SERVICING
SOLUTIONS, LTD. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(Dollars in thousands,
except share data) |
(UNAUDITED) |
|
|
December 31,
2012 |
December 31,
2011 |
Assets |
|
|
Cash and cash equivalents |
$ 76,048 |
$ 283 |
Match funded advances |
3,098,198 |
— |
Notes receivable – Rights to MSRs |
303,705 |
— |
Related party receivables |
28,271 |
— |
Other assets |
79,091 |
2,860 |
Total assets |
$ 3,585,313 |
$ 3,143 |
|
|
|
Liabilities and Equity |
|
|
Liabilities |
|
|
Match funded liabilities |
$ 2,690,821 |
$ — |
Dividends payable |
6,706 |
— |
Income taxes payable |
46 |
— |
Related party payables |
2,874 |
1,487 |
Other liabilities |
4,233 |
1,647 |
Total liabilities |
2,704,680 |
3,134 |
|
|
|
|
|
|
Equity |
|
|
Equity – Ordinary shares, $.01 par value;
200,000,000 and 5,000,000 shares authorized; 55,884,718 and 20,000
shares issued and outstanding at December 31, 2012 and December 31,
2011, respectively |
$ 559 |
$ — |
Additional paid-in capital |
876,657 |
300 |
Retained earnings (accumulated
deficit) |
4,493 |
(291) |
Accumulated other comprehensive income
(loss) |
(1,076) |
— |
Total equity |
880,633 |
9 |
Total liabilities and equity |
$ 3,585,313 |
$ 3,143 |
CONTACT: FOR FURTHER INFORMATION CONTACT:
James E. Lauter
Senior Vice President & Chief Financial Officer
T: (561) 682-7561
E: James.Lauter@hlss.com
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