Q4 and FY 2012 Earnings Presentation Three Months and Twelve Months Ended December 31, 2012 March 7, 2013 Exhibit 99.2 |
Forward Looking Statements 1 Any statements in this presentation that are not historical or current facts are forward-looking statements. Forward-looking statements include, without limitation, statements concerning plans, objectives, goals, projections, strategies, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts. Forward-looking statements convey Nationstar Mortgage Holdings Inc.’s (“Nationstar”) current expectations or forecasts of future events. When used in this presentation, the words “anticipate,” “appears,” “believe,” “foresee,” “intend,” “should,” “expect,” “estimate,” “target,” “project,” “plan,” “may,” “could,” “will,” “are likely” and similar expressions are intended to identify forward-looking statements. These statements involve predictions of our future financial condition, performance, plans and strategies, and are thus dependent on a number of factors including, without limitation, assumptions and data that may be imprecise or incorrect. Specific factors that may impact performance or other predictions of future actions have, in many but not all cases, been identified in connection with specific forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Nationstar’s actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Certain of these risks and uncertainties are described in the “Risk Factors” section of Nationstar Mortgage LLC’s Form 10-K for the year ended December 31, 2011, Nationstar Mortgage Holdings Inc.’s Form 10-Q for the quarter ended September 30, 2012, and other reports filed with the SEC, which are available at the SEC’s website at http://www.sec.gov. We caution you not to place undue reliance on these forward-looking statements that speak only as of the date they were made. Unless required by law, Nationstar undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date of this presentation. |
2012: Transformative Year for Nationstar 2 IPO on March 7, 2012; top 3 ranked IPO (1) Record EPS for Q4’12 and FY ’12 of $0.71 and $2.40, respectively Significant YoY increases in key metrics Revenue +161% Net Income +882% Servicing portfolio +94% to $208B Record origination volume +132% to $7.9B ($mm) Pre-Tax Income Growth (2) AEBITDA Growth (2,3) ($mm) By share price appreciation; Renaissance Capital - “Global IPO Market: 2012 Annual Review”; Global statistics include IPOs with a deal size of at least $100 million and exclude closed-end funds and SPACs; 203 deals total For Operating segments; excludes Legacy segment Please see Appendix for information on AEBITDA and reconciliations beginning on page 18 1) 2) 3) |
1 Year IPO Anniversary: Significant Value Creation 3 Then (IPO) Now $1.3B $3.7B 52% 80% $14.00 $41.06 0.6M 1.6M +185% +54% +193% +167% Increase Substantial increase in key metrics Share price value up more than 2.9x since IPO; significant value driven by performance and expectations Diversified shareholder base and improved liquidity Strong ROE 40% Market capitalization (1) : Institutional Ownership (2) : Excludes Fortress Share price (1) : Average trading volume (Qtr) : Return on Equity (thru 12/31): 1) As of March 6, 2013 2) As of January 31, 2013 |
4 The Future of Our Business Market dislocation as banks focus on core customers Bulk and flow servicing sales Non-branch origination opportunities Non-core and default servicing Near term Banks assess capital and look for process partners Mortgage services factory with plug-in capability Complete outsourcing Origination/fulfillment Continued servicing transfers Intermediate term Capital returns to the real estate market Investors require best-in- class asset managers Agency, non-agency, whole loan, distressed assets Credit risk management essential Longer term Market trends Services Well-positioned to capitalize on market trends Solutionstar |
Customer-Centric Model 5 Preserve homeownership and increase mortgage affordability Loan Modifications & HARP Originations (units) Cumulative Total Performance-driven culture emphasizes customer service and loan performance Reduced over 60 days delinquency rate by 28% since ‘09 Single point of contact, a cornerstone of our success for 15 years Completed 51,000 total workouts in ’12 (+25%) ~29,000 modifications in ‘12 100,000 modifications since ‘10 18,000+ HARP loans in ‘12 (+232%) Servicing portfolio remains HARP rich Customers helped since 2010 45,000 127,000 0 25,000 50,000 75,000 100,000 125,000 150,000 175,000 2010 2011 2012 80,000 |
6 Focused on growth AND profitability Landmark BofA Transaction Strong Pipeline (1) Cost Reduction Initiatives Jan/Feb: Announced acquisition of BofA MSRs Q1/Q2: PLS third-party approvals & closing Bulk pipeline: $300B Flow servicing target: $25-50B annual Flow agreements in place: $15B annual Total transfer potential: Cost per loan: Automation and strategic sourcing Delinquencies: Reduced Aurora 60+ DQ rate by 250 bps Advances: $300MM GSE advance securitization executed in Jan. Non-agency securitization in Q2 Closed Fannie, Freddie, Ginnie portfolios $2 trillion+ 1) The identified opportunities referenced above are not currently serviced by the Company and there can be no assurance that these potential servicing transactions will ultimately be consummated, or will remain the same size. Notwithstanding the above, it is possible that these potential servicing transactions, if consummated, could result in a partial or total loss of any invested capital. Servicing: Opportunities in ‘13 and Beyond |
Originations: Organic Growth for Servicing in ’13 and Beyond 7 Profitable: complements and enhances servicing segment 1) KB Home FY 2012 10K; Nationstar Mortgage did not originate mortgages for 100% of KB Home’s home sales in 2012 JV with KB Home KB Home sold $1.5B of homes in FY ’12 (1) Improve capture rates; expense sharing Additional ventures with homebuilders Source of purchase money volume Expand volume across channels to organically grow servicing Acquire servicing at attractive returns Source of purchase money volume Highest margin channel; integrated with servicing platform Helps borrowers with lower monthly payments Continued focus on HARP & recapture opportunities to serve customer Recapture Builder Wholesale/Correspondent ’13/’14 Objectives: Increase Capacity, Productivity and Volume |
Solutionstar: Meet Evolving Needs of Mortgage Industry 8 Broad array of services & technology offerings spanning entire mortgage lifecycle Acquired Equifax Settlement Services on 2/7 Appraisal, title and closing Large bank clients Launch HomeSearch.com expected in Q1’13 Real estate marketplace Accelerates sales and improves pricing Evaluate strategic acquisitions Key events in ‘13 Strategy Support originators and servicers Improve customer experience with seamless integration Manage REO property sales Completed 2,000 REO sales since Jan. 1 Future increase with BofA PLS portfolio REO Sales Brokerage Valuation Services Title Closing Recovery Services Bankruptcy Services Foreclosure Services Claims Processing |
Doubled size of servicing book Portfolio of $300B+ as of Feb ’13, including closing of BofA agency MSRs Successful integration of Aurora portfolio Segment pretax income increased 60% YoY to $35MM Servicing Results: Substantial Growth; Building to Full Scale 1) Pro forma balance represents ending Q4’12 UPB balance plus $215B BofA servicing portfolio announced on January 7, 2013. Balances may change prior to closing due to normal portfolio run-off 9 ($bn of UPB) Servicing Growth (1) As portfolio achieves critical mass, earnings potential realized |
Originations Results: Robust Market Conditions 10 Record pretax income for Q4’12 and FY’12 Record Q4 volume of $3.1B; application pipeline growth to $6.6B Gain on sale margin, ex-correspondent, modest decrease (682 bps in Q4 vs 744 bps in Q3), remains elevated Origination Volume ($bn of UPB) Profitably creating servicing assets as we grow volume and channels ($mm) Cash – Points, Fees, Gain on Sale $102 Pipeline Value (1) 56 Subtotal Cash / Near Cash Revenue $158 Servicing Asset (Cash value realized over time) 21 Other (6) Total Originations Revenue $173 Originations Volume $3,081 Excluding Correspondent $2,513 Locked Pipeline $4,992 Application Pipeline $6,643 Q4 ‘12 Economics Cash / near cash is 91% of total revenue 1) Includes mark-to-market on loans held for sale and derivative/hedges 2) As of December 31, 2012 $1.5 $2.8 $3.4 $7.9 $16.0+ 0 2 4 6 8 10 12 14 16 18 2009 2010 2011 2012 2013E (2) (2) |
Financial Highlights: Q4 and FY ‘12 11 Annual Revenue and AEBITDA (1,2) Quarterly Revenue and AEBITDA (1,2) 1) 2) Please see Appendix for information on AEBITDA and reconciliations beginning on page 18 Margin (%) 23% 29% 24% 36% 40% 47% 50% 47% 43% 46% Q4’12 Increase (QoQ) FY ’12 Increase (YoY) $456MM $155MM $205MM $2.40 $64MM $0.71 26% 16% 16% 236% 882% 700% AEBITDA (1) Net Income EPS AEBITDA (1) Net Income EPS ($MM) ($MM) $0 $50 $100 $150 $200 $250 $300 $350 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 AEBITDA Revenue $0 $200 $400 $600 $800 $1,000 $1,200 2008 2009 2010 2011 2012 AEBITDA Revenue $22 $65 $136 $456 $97 $984 $378 $267 $46 $156 2) For Operating segments; excludes Legacy segment $47 $77 $101 $123 $155 $119 $164 $203 $285 $333 |
Q3'12 ($ millions except where noted) Servicing Originations Operating Total (2) Total AEBITDA (1) $66.9 $88.1 $155.0 $153.0 $121.7 margin% 42% 51% 47% Pre-Tax Income $14.9 $81.7 $96.6 $94.4 $79.8 Income Tax Expense ($30.7) ($24.7) Net Income - GAAP $63.8 $55.1 Per Share Data: Pre-Tax Income $1.08 $1.05 $0.89 Net Income - GAAP $0.71 $0.61 AEBITDA (1) $0.74 $0.98 $1.72 $1.70 $1.36 Average shares outstanding (mm) 89.9 89.9 89.9 89.9 89.8 Q4 '12 Consolidated Performance 1) Please see Appendix for information on AEBITDA and reconciliations beginning on page 18 2) Includes Legacy Segment 12 Strong sequential quarter for Company Total GAAP Net Income of $64MM GAAP EPS of $0.71 Operating Segment AEBITDA of $155MM (1) |
Appendix 13 |
Focused on Profitable Growth 1) Revenue, AEBITDA and pre-tax income from operating segments 2) Please see Appendix for information on AEBITDA and reconciliations beginning on page 18 14 Pre-Tax Income Growth ($mm) (1) UPB Growth ($bn) Revenue Growth ($mm) (1) AEBITDA Growth ($mm) (1)(2) Margin (%) 23% 29% 24% 36% 7% 10% 6% 30% 12% 46% |
Balance Sheet Low leverage with Corporate Debt to AEBITA of 1.7x (1) ; net of cash, 1.5x Significant capital levers in place for additional investment Capacity remains for additional corporate debt 1) Corporate Debt to Q4 run-rate AEBITDA 2) Includes receivables from affiliates 3) Includes servicing advance facilities and origination warehouse facilities 4) Includes derivative financial instruments and mortgage servicing liabilities 15 $ millions Q4 '12 Q3 '12 $ millions Q4 '12 Q3 '12 Assets: Liabilities: Cash and cash equivalents $153 $431 Notes payable (3) $3,602 $2,532 Restricted cash 393 259 Senior unsecured notes 1,063 1,062 Accounts receivable (2) 3,056 2,866 Payables and accrued liabilities 628 762 Mortgage loans held for sale 1,481 703 Nonrecourse debt - Legacy assets 101 102 Mortgage loans held for investment - Legacy 239 238 Excess spread financing at fair value 288 255 Mortgage servicing rights - fair value 636 593 Participating interest financing 581 415 Participating interest in reverse mortgages 750 453 Other liabilities (4) 103 120 Mortgage servicing rights - amortized cost 11 8 Total Liabilities $6,365 $5,250 Property and equipment, net 75 49 Other assets 329 341 Shareholders Equity $758 $691 Total Assets $7,123 $5,941 Total Liabilities and Shareholders Equity $7,123 $5,941 |
($ in millions) For the three month period ending Variance Last twelve months Q4'12 Q3'12 Q2'12 Q1'12 Q4'11 QoQ YoY Q4'12 Q3'12 Fee income $158 $146 $100 $94 $83 8% 126% $497 $411 Gain on sale 175 139 102 71 36 26% 363% 487 348 Total revenue $333 $285 $202 $165 $119 17% 204% $984 $759 Expenses and impairments (200) (155) (130) (97) (86) 29% 87% (582) (468) Other income (expense) (38) (50) (23) (15) (18) 105% 291% (126) (94) Pre-tax income 95 80 49 53 15 18% NM 277 197 Income taxes (31) (25) (13) (3) - (71) (41) Net income $64 $55 $36 $50 $15 53% NM $205 156 Adjusted AEBITDA (1) $155 $123 $101 $77 $47 26% 284% $456 $348 EPS (2) $0.71 $0.61 $0.41 $0.67 $0.21 17% NM $2.40 $1.90 Pro forma EPS (2,3) $0.71 $0.64 $0.44 $0.44 $0.21 11% NM $2.23 $1.73 AEBITDA per share (2) $1.72 $1.37 $1.18 $1.04 $0.67 26% 157% $5.31 $4.27 Five-Quarter Income Statement Summary Successfully, consistently scaled the business Increasing profitability with growth Sequential improvement in pro forma EPS and AEBITDA per share 1) Please see page 18 for AEBITDA reconciliations; excludes Legacy segment 2) Calculated using a fully-diluted average share count for Q4’12 Q3 ’12, Q2 ’12 and Q1’12 of 89.9, 89.8, 89.5 and 89.2 million shares, respectively, and 70.0 million shares for 2011 periods 3) Please see Appendix for information on pro forma net income and EPS reconciliation 16 |
Servicing Fee Detail (1) 17 Fee income before fair value adjustment increased by 9% to $175 million MSR fair value adjustments include portfolio run-off and mark-to-market adjustments 1) Servicing segment only ($ in thousands) Q4 '12 Q3 '12 Q4 '11 Total servicing fee income before MSR fair value adjustments 174,645 $ 159,941 $ 80,707 $ Fair value adjustments on excess spread financing (5,633) 2,213 (3,060) Reverse mortgage servicing liability amortization/accretion 1,844 2,652 - MSR changes in fair value: Due to changes in valuation inputs or assumptions (1,169) 8,355 1,304 Other changes in fair value (portfolio run-off) (24,263) (30,785) (9,547) Servicing fee income 145,424 142,376 69,404 Other fee income 14,078 7,190 9,967 Total servicing fee income 159,502 $ 149,566 $ 79,371 $ |
AEBITDA Reconciliation 18 1) Calculated using a fully-diluted average share count of 89.9 million shares For Quarter Ended December 31, 2012 ($ in millions) Servicing Originations Operating Legacy Total Adjusted EBITDA $66.9 $88.1 $155.0 ($1.9) $153.0 Interest expense on corporate notes (20.0) (4.2) (24.2) - (24.2) MSR valuation adjustment (25.4) - (25.4) - (25.4) Excess spread adjustment (5.6) - (5.6) - (5.6) Amortization of mort. serv. obligations 1.8 - 1.8 - 1.8 Depreciation & amortization (2.0) (1.1) (3.1) (0.2) (3.3) Stock-based compensation (1.6) (1.1) (2.7) (0.0) (2.7) Fair value adjustment for derivatives 0.8 - 0.8 (0.1) 0.7 Pre-Tax Income $14.9 $81.7 $96.6 ($2.2) $94.4 Income Tax (30.7) Net Income $63.8 Earnings per share (1) $0.71 AEBITDA per share (1) $0.74 $0.98 $1.72 ($0.02) $1.70 Pre-Tax Income per share (1) $0.17 $0.91 $1.07 ($0.02) $1.05 Average shares outstanding 89.9 89.9 89.9 89.9 89.9 |
AEBITDA Reconciliation 19 1) Calculated using a fully-diluted average share count of 89.8 million shares For Quarter Ended September 30, 2012 ($ in millions) Servicing Originations Operating Legacy Total Adjusted EBITDA $42.1 $80.9 $123.0 ($1.3) $121.7 Interest expense on corporate notes (15.7) (1.9) (17.7) - (17.7) MSR valuation adjustment (22.4) - (22.4) - (22.4) Excess spread adjustment 2.2 - 2.2 - 2.2 Amortization of mort. serv. obligations 2.7 - 2.7 - 2.7 Depreciation & amortization (2.0) (0.8) (2.8) (0.2) (3.0) Stock-based compensation (1.6) (1.1) (2.6) 0.0 (2.6) Fair value adjustment for derivatives 0.2 - 0.2 (1.3) (1.1) Pre-Tax Income $5.5 $77.1 $82.7 ($2.9) $79.8 Income Tax (24.7) Net Income $55.1 Earnings per share (1) $0.61 AEBITDA per share (1) $0.47 $0.90 $1.37 ($0.02) $1.36 Pre-Tax Income per share (1) $0.06 $0.86 $0.92 ($0.03) $0.89 (continued) |
AEBITDA Reconciliation (continued) 20 1) Calculated using a fully-diluted average share count of 70.0 million shares For Quarter Ended December 31, 2011 ($ in millions) Servicing Originations Operating Legacy Total Adjusted EBITDA $35.6 $11.7 $47.3 ($7.6) $39.7 Interest expense on corporate notes (7.8) - (7.8) - (7.8) MSR valuation adjustment (8.2) - (8.2) - (8.2) Excess spread adjustment (3.1) - (3.1) - (3.1) Amortization of mort. serv. obligations - (1.8) (1.8) - (1.8) Depreciation & amortization (0.8) (0.4) (1.2) (0.3) (1.5) Stock-based compensation (2.4) (0.3) (2.6) - (2.6) Fair value adjustment for derivatives 0.3 - 0.3 - 0.3 Pre-Tax Income $13.6 $9.2 $22.8 ($7.9) $14.9 Income Tax - Net Income $14.9 Earnings per share (1) $0.21 AEBITDA per share (1) $0.51 $0.17 $0.68 ($0.11) $0.57 Pre-Tax Income per share (1) $0.19 $0.13 $0.33 ($0.11) $0.21 |
AEBITDA Reconciliations 21 ($ in thousands) Net Income (loss) $ (157,610) $ (80,877) $ (9,914) $ 20,887 $ 63,759 $ 205,287 Adjust for: Net loss from Legacy Portfolio and Other 164,738 97,263 24,806 24,892 2,189 20,483 Interest expense from unsecured senior notes - - 24,628 30,464 24,165 63,879 Depreciation and amortization 1,172 1,542 1,873 3,395 3,107 8,880 Change in fair value of MSRs 11,701 27,915 6,043 39,000 25,432 68,242 Amortization of mortgage servicing obligations - - - - (1,844) (5,120) Fair value changes on excess spread financing - - - 3,060 5,633 10,684 Share-based compensation 1,633 579 8,999 14,764 2,675 14,045 Exit costs - - - 1,836 - - Fair value changes on interest rate swaps - - 9,801 (298) (813) (1,237) Ineffective portion of cash flow hedge - - (930) (2,032) - - Income tax expense - - - - 30,657 71,296 Adjusted EBITDA (1) $ 21,634 $ 46,422 $ 65,306 $ 135,968 $ 154,960 $ 456,439 For Operating Segments; calculated using a fully-diluted average share count of 70.0 million shares for FY 2008 – 2011, 74.6 million shares in Q1 ‘12, 89.5 million shares in Q2 ’12, 89.8 million shares in Q3 ’12, 89.9 million shares in Q4’12 1) FY 2008 FY 2009 FY 2010 FY 2011 Q4 ’12 FY 2012 |
Pro Forma Per Share Reconciliations 22 For Quarters Ending September 30, June 30 and March 31, 2012 ($ in millions) Q3 '12 Q2 '12 Net Income $55.1 $36.3 $50.2 Income Tax 24.7 12.8 3.1 Pre-Tax Income 79.8 49.1 53.3 ResCap and transaction-related expenses 3.9 4.1 - Pro-forma Pre-Tax Income $83.7 $53.2 $53.3 Income Tax - Q3 & Q2 '12 Rate (25.9) (13.9) (13.9) Pro-Forma Income $57.8 $39.3 $39.4 Pro-forma Per Share: $0.64 $0.44 $0.44 Average shares outstanding 89.8 89.5 89.5 Q1 '12 |
Endnotes Pro-forma Earnings Per Share (“Pro-forma EPS”) This disclaimer applies to every usage of pro-forma EPS in this presentation. Pro-forma EPS is a metric that is used by management to exclude certain non-recurring items in an attempt to provide a better earnings per share comparison to prior periods. Pro-forma Q3 ‘12 EPS excludes certain expenses related to ResCap and other transactions. These expenses include the advance hiring of servicing staff, recruiting expenses and travel and licensing expenses. Pro-forma Q2 ‘12 EPS excluded certain expenses incurred in advance of the closing of the Aurora transaction. Pro-forma AEBITDA Per Share This disclaimer applies to every usage of pro-forma AEBITDA per share in this presentation. Pro-forma AEBITDA per share is a metric that is used by management to exclude certain non-recurring items in an attempt to provide a better earnings per share comparison to prior periods. Pro-forma Q3 ‘12 AEBITDA per share excludes certain expenses related to ResCap and other transactions. These expenses include the advance hiring of servicing staff, recruiting expenses and travel and licensing expenses. Pro-forma Q2 ‘12 AEBITDA per share excluded certain expenses incurred in advance of the closing of the Aurora transaction. Adjusted EBITDA (“AEBITDA”) This disclaimer applies to every usage of “Adjusted EBITDA” or “AEBITDA” in this presentation. Adjusted EBITDA is a key performance metric used by management in evaluating the performance of our segments. Adjusted EBITDA represents our Operating Segments' income (loss), and excludes income and expenses that relate to the financing of our senior notes, depreciable (or amortizable) asset base of the business, income taxes (if any), exit costs from our restructuring and certain non-cash items. Adjusted EBITDA also excludes results from our legacy asset portfolio and certain securitization trusts that were consolidated upon adoption of the accounting guidance eliminating the concept of a qualifying special purpose entity ("QSPE“). 23 |