Home Loan Servicing Solutions, Ltd. Reports EPS of $0.49 and Net Income of $34.9 Million in the Third Quarter of 2013 and Dec...
October 17 2013 - 7:30AM
Home Loan Servicing Solutions, Ltd. ("HLSS" or the "Company")
(Nasdaq:HLSS) today reported net income of $34.9 million, or $0.49
per ordinary share, for the third quarter of 2013. Additionally,
the Company's Board of Directors today declared monthly dividends
of $0.15 per ordinary share for October, November and December
2013.
"The asset purchase from Ocwen completed on July 1, 2013 fully
deployed the proceeds from our June term loan and equity issuances
and nearly doubled the unpaid principal balance of our portfolio,"
said President and CEO John Van Vlack. "The earnings from this
accretive acquisition fueled growth in EPS despite the somewhat
higher prepayment rate on assets recently boarded on Ocwen's
platform which resulted in an overall annualized prepayment rate of
13.7% in the third quarter. Loss mitigation activities on new
portfolios often result in higher initial prepayment speeds but
ultimately will result in lower default related prepayments."
"Our capital structure continues to focus on committed fixed
rate match funded term notes without exposure to repo or
mark-to-market risk" said Chairman William Erbey. "The conservative
way we finance our business complements our limited asset valuation
exposure and highlights the attractiveness of HLSS' earnings and
dividend yield."
Third quarter business performance highlights:
- On July 1, 2013, used the proceeds from the second quarter
issuance of ordinary shares and senior secured term note facility
to purchase mortgage servicing assets related to non-agency
mortgage loans with UPB of $83.3 billion from Ocwen;
- On August 8, completed the issuance of $200 million one-year
and $200 million three-year term notes. Issuance of these notes
allowed us to reduce the borrowings on all classes of our variable
funding notes;
- On August 30, renewed our variable funding notes at improved
terms;
- On September 18, completed the issuance of $350 million
one-year term notes. Issuance of these notes allowed us to reduce
borrowings on all classes of our variable funding notes;
- On September 26, placed a new money market note at a reduced
interest rate and amended the related draw note to reduce the
interest rate; and
- There was no change in servicing asset valuation during the
quarter.
For more information on prior releases and SEC
Filings, please refer to the "Shareholders" section of our website
at www.hlss.com.
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 25 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 ("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.
We believe the presentation of these non-GAAP performance
measures may provide additional meaningful comparisons between
current results and results in prior periods. 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
September 30, 2013: |
Condensed Consolidated
Results (GAAP) |
Adjustments |
Management Reporting
(Non-GAAP) |
|
|
|
|
Revenue |
|
|
|
|
|
|
|
Servicing fee revenue |
$ — |
$ 200,838 |
$ 200,838 |
Interest income - notes
receivable – Rights to MSRs |
74,204 |
(74,204) |
— |
Interest income – other |
697 |
— |
697 |
Related party revenue (1) |
491 |
— |
491 |
Total revenue |
75,392 |
126,634 |
202,026 |
|
|
|
|
Operating expenses |
|
|
|
Compensation and benefits |
2,109 |
— |
2,109 |
Servicing expense |
— |
102,040 |
102,040 |
Amortization of MSRs |
— |
24,594 |
24,594 |
Related party expenses (2) |
228 |
— |
228 |
General and administrative
expenses |
1,275 |
— |
1,275 |
Total operating expenses |
3,612 |
126,634 |
130,246 |
Income from operations |
$ 71,780 |
$ — |
$ 71,780 |
|
(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 |
Nine
months |
For the periods ended September
30, |
2013 |
2012 |
2013 |
2012 |
Revenue |
|
|
|
|
Interest income – notes
receivable – Rights to MSRs |
$ 74,204 |
$ 14,017 |
$ 168,626 |
$ 27,542 |
Interest income –
other |
697 |
146 |
896 |
283 |
Total interest
income |
74,901 |
14,163 |
169,522 |
27,825 |
Related party
revenue |
491 |
669 |
1,458 |
1,664 |
Total revenue |
75,392 |
14,832 |
170,980 |
29,489 |
|
|
|
|
|
Operating expenses |
|
|
|
|
Compensation and
benefits |
2,109 |
1,152 |
4,877 |
2,442 |
Related party
expenses |
228 |
227 |
680 |
525 |
General and administrative
expenses |
1,275 |
557 |
2,654 |
1,340 |
Total operating
expenses |
3,612 |
1,936 |
8,211 |
4,307 |
|
|
|
|
|
Income from operations |
71,780 |
12,896 |
162,769 |
25,182 |
|
|
|
|
|
Other expense |
|
|
|
|
Interest expense |
36,080 |
6,252 |
74,356 |
12,507 |
Total other expense |
36,080 |
6,252 |
74,356 |
12,507 |
|
|
|
|
|
Income before income taxes |
35,700 |
6,644 |
88,413 |
12,675 |
Income tax expense |
777 |
72 |
816 |
149 |
Net
income |
$ 34,923 |
$ 6,572 |
$ 87,597 |
$ 12,526 |
|
|
|
|
|
Earnings per
share |
|
|
|
|
Basic |
$ 0.49 |
$ 0.37 |
$ 1.42 |
$ 1.04 |
Diluted |
$ 0.49 |
$ 0.37 |
$ 1.42 |
$ 1.04 |
|
|
|
|
|
Weighted average ordinary shares
outstanding |
|
|
|
|
Basic |
71,016,771 |
17,581,593 |
61,812,369 |
12,008,394 |
Diluted |
71,016,771 |
17,581,593 |
61,812,369 |
12,008,394 |
|
|
|
|
|
Dividends declared per
share |
$ 0.45 |
$ 0.30 |
$ 1.25 |
$ 0.68 |
|
|
HOME LOAN SERVICING
SOLUTIONS, LTD. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(Dollars in thousands,
except share data) |
(UNAUDITED) |
|
|
September 30,
2013 |
December 31, 2012 |
Assets |
|
|
Cash and cash equivalents |
$ 76,832 |
$ 76,048 |
Match funded advances |
5,925,128 |
3,098,198 |
Notes receivable – Rights to
MSRs |
643,595 |
303,705 |
Related party receivables |
10,110 |
28,271 |
Other assets |
157,690 |
79,091 |
Total assets |
$ 6,813,355 |
$ 3,585,313 |
|
|
|
Liabilities and Equity |
|
|
Liabilities |
|
|
Match funded liabilities |
$ 5,187,427 |
$ 2,690,821 |
Other borrowings |
344,072 |
— |
Dividends payable |
10,653 |
6,706 |
Income taxes payable |
367 |
46 |
Deferred tax liabilities |
1,019 |
— |
Related party payables |
32,607 |
2,874 |
Other liabilities |
12,127 |
4,233 |
Total liabilities |
5,588,272 |
2,704,680 |
|
|
|
|
|
|
Equity |
|
|
Equity – Ordinary shares, $.01
par value; 200,000,000 shares authorized; 71,016,771 and 55,884,718
shares issued and outstanding at September 30, 2013 and December
31, 2012, respectively |
710 |
559 |
Additional paid-in capital |
1,210,042 |
876,657 |
Retained earnings |
12,665 |
4,493 |
Accumulated other comprehensive
income (loss), net of tax |
1,666 |
(1,076) |
Total equity |
1,225,083 |
880,633 |
Total liabilities and
equity |
$ 6,813,355 |
$ 3,585,313 |
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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