DALLAS--(BUSINESS WIRE)--April 30, 2020--Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), which principally operates under the Mr. Cooper® and Xome® brands, reported a first quarter net loss of $171 million or $1.84 per diluted share. Net loss included a negative $383 million in mark-to-market. Excluding the mark-to-market and other items, the Company reported pretax operating income of $127 million. Items excluded from operating income were negative $383 million in mark-to-market, net of the add back of $30 million in fair value amortization that is included in the full mark-to-market, $4 million in severance charges related to corporate actions, and $9 million of intangible amortization.
Chairman and CEO Jay Bray commented, “I am very proud of how all our team members rose to the challenge, helping over 194,000 customers initiate pandemic forbearance plans, while at the same time generating very strong operating results for the company.”
Chris Marshall, vice chairman and CFO added, “2020 will be a much different year than the one we planned for, but we’ve executed our contingency plans and positioned our balance sheet and bank facilities appropriately; as a result we expect our business to continue to produce excellent results throughout the year.”
Servicing
The Servicing segment is focused on providing a best-in-class home loan experience for our 3.7 million customers while simultaneously strengthening asset performance for investors. In the first quarter, Servicing recorded pretax loss of $325 million, reflecting a negative $383 million in mark-to-market. The total servicing portfolio ended the quarter at $629 billion UPB. Servicing earned pretax operating income excluding the full mark and severance charges related to corporate actions of $62 million, equivalent to a servicing margin of 3.9 bps. At quarter end, the carrying value of the MSR was $3,115 million, of which $3,109 million was at fair value equivalent to 107 bps of MSR UPB and original cost basis of 86 bps.
| Quarter Ended |
($ in millions) | Q4'19 | | Q1'20 |
| $ | | BPS | | $ | | BPS |
Operational revenue | $ | 316 | | | 20.1 | | | $ | 313 | | | 19.7 | |
Amortization, net of accretion | (84 | ) | | (5.3 | ) | | (76 | ) | | (4.8 | ) |
Mark-to-market | 102 | | | 6.4 | | | (383 | ) | | (24.1 | ) |
Total revenues | 334 | | | 21.2 | | | (146 | ) | | (9.2 | ) |
Total expenses | (135 | ) | | (8.6 | ) | | (149 | ) | | (9.3 | ) |
Total other income (expenses), net | (10 | ) | | (0.6 | ) | | (30 | ) | | (1.9 | ) |
Income before taxes | 189 | | | 12.0 | | | (325 | ) | | (20.4 | ) |
Mark-to-market | (102 | ) | | (6.5 | ) | | 383 | | | 24.1 | |
Accounting items | — | | | — | | | 4 | | | 0.2 | |
Pretax operating income excluding mark-to-market | $ | 87 | | | 5.5 | | | $ | 62 | | | 3.9 | |
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| Quarter Ended |
| Q4'19 | | Q1'20 |
Ending UPB ($B) | $ | 643 | | | $ | 629 | |
Average UPB ($B) | $ | 630 | | | $ | 636 | |
60+ day delinquency rate at period end | 2.0 | % | | 1.9 | % |
Annualized CPR | 19.1 | % | | 19.2 | % |
Modifications and workouts | 9,873 | | | 8,709 | |
Originations
The Originations segment focuses on creating servicing assets at attractive margins through existing customer relationships, correspondent, and wholesale originations. Originations earned pretax income of $158 million.
Mr. Cooper funded 50,369 loans in the first quarter, totaling approximately $12.4 billion UPB comprised of $6.4 billion in direct-to-consumer, $5.5 billion in correspondent, and $0.5 billion in wholesale. Funded volume decreased 2% quarter-over-quarter.
| Quarter Ended |
($ in millions) | Q4'19 | | Q1'20 |
| | | |
Income before taxes | $ | 138 | | | $ | 158 | |
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| Quarter Ended |
($ in millions) | Q4'19 | | Q1'20 |
Total pull through adjusted volume | $ | 12,537 | | | $ | 12,677 | |
Funded volume | $ | 12,559 | | | $ | 12,359 | |
Refinance recapture percentage | 39 | % | | 38 | % |
Recapture percentage | 29 | % | | 30 | % |
Purchase volume as a percentage of funded volume | 32 | % | | 26 | % |
Xome
Xome provides real estate solutions including property disposition, asset management, title, close, valuation, and field services for Mr. Cooper and third-party clients. The Xome segment recorded pretax income of $11 million and pretax operating income of $13 million in the first quarter, which excluded intangible amortization.
| Quarter Ended |
($ in millions) | Q4'19 | | Q1'20 |
Income before taxes | $ | 9 | | | $ | 11 | |
Accounting items / other | 3 | | | — | |
Intangible amortization | 2 | | | 2 | |
Pretax operating income excluding intangible amortization and accounting items | $ | 14 | | | $ | 13 | |
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| Quarter Ended |
| Q4'19 | | Q1'20 |
Exchange properties sold | 2,332 | | | 2,114 | |
Average Exchange properties under management | 11,917 | | | 17,777 | |
Services completed orders | 403,779 | | | 408,734 | |
Percentage of revenue earned from third-party customers | 51 | % | | 55 | % |
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Conference Call Webcast and Investor Presentation
The Company will host a conference call on April 30, 2020 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 3079677 to access the conference call. A simultaneous audio webcast of the conference call will be available in the Investor section of www.mrcoopergroup.com. A replay will also be available approximately two hours after the conclusion of the conference call by dialing 855-859-2056, or 404-537-3406 internationally. Please use the passcode 3079677 to access the replay. The replay will be accessible through May 15, 2020 at 12:00 P.M. Eastern Time.
Non-GAAP Financial Measures
The Company utilizes non-GAAP 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 operating 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 notable items 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. Pretax operating 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. Pretax operating 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, intangible amortization, 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. 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, including the severity and duration of the COVID-19 pandemic; the pandemic’s impact on the U.S. and global economies; federal, state, and local governmental responses to the pandemic; borrower forbearance rates and availability of financing. 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 “Risk Factors” section of Mr. Cooper Group’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.
MR. COOPER GROUP INC. AND SUBSIDIARIES |
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS |
(millions of dollars, except for earnings per share data) |
| |
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| |
| | Three Months Ended December 31, 2019 | | Three Months Ended March 31, 2020 |
Revenues: | | | | |
Service related, net, excluding mark-to-market | | $ | 328 | | | $ | 330 | |
Mark-to-market | | 102 | | | (383 | ) |
Net gain on mortgage loans held for sale | | 310 | | | 331 | |
Total revenues | | 740 | | | 278 | |
Total expenses | | 438 | | | 444 | |
Other income (expense): | | | | |
Interest income | | 146 | | | 118 | |
Interest expense | | (207 | ) | | (192 | ) |
Other expense, net | | (1 | ) | | 1 | |
Total other income (expenses), net | | (62 | ) | | (73 | ) |
Income (loss) before income tax benefit | | 240 | | | (239 | ) |
Income tax benefit | | (221 | ) | | (68 | ) |
Net income (loss) | | 461 | | | (171 | ) |
Net loss attributable to non-controlling interest | | (2 | ) | | (3 | ) |
Net income (loss) attributable to Mr. Cooper Group | | 463 | | | (168 | ) |
Undistributed earnings attributable to participating stockholders | | 4 | | | — | |
Net income (loss) attributable to common stockholders | | $ | 459 | | | $ | (168 | ) |
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Net income (loss) per share attributable to common stockholders: | | | | |
Basic | | $ | 5.03 | | | $ | (1.84 | ) |
Diluted | | $ | 4.95 | | | $ | (1.84 | ) |
Weighted average shares of common stock outstanding (in thousands): | | | | |
Basic | | 91,105 | | | 91,385 | |
Diluted | | 92,599 | | | 91,385 | |
MR. COOPER GROUP INC. AND SUBSIDIARIES |
UNAUDITED CONSOLIDATED BALANCE SHEETS |
(millions of dollars) |
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| |
| | December 31, 2019 | | March 31, 2020 |
Assets | | | | |
Cash and cash equivalents | | $ | 329 | | | $ | 579 | |
Restricted cash | | 283 | | | 266 | |
Mortgage servicing rights | | 3,502 | | | 3,115 | |
Advances and other receivables, net | | 988 | | | 685 | |
Reverse mortgage interests, net | | 6,279 | | | 5,955 | |
Mortgage loans held for sale at fair value | | 4,077 | | | 3,922 | |
Property and equipment, net | | 112 | | | 111 | |
Deferred tax asset, net | | 1,345 | | | 1,411 | |
Other assets | | 1,390 | | | 1,569 | |
Total assets | | $ | 18,305 | | | $ | 17,613 | |
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Liabilities and Stockholders’ Equity | | | | |
Unsecured senior notes, net | | $ | 2,366 | | | $ | 2,259 | |
Advance facilities, net | | 422 | | | 489 | |
Warehouse facilities, net | | 4,575 | | | 4,551 | |
Payables and other liabilities | | 2,016 | | | 1,965 | |
MSR related liabilities - nonrecourse at fair value | | 1,348 | | | 1,285 | |
Mortgage servicing liabilities | | 61 | | | 53 | |
Other nonrecourse debt, net | | 5,286 | | | 4,945 | |
Total liabilities | | 16,074 | | | 15,547 | |
Total stockholders’ equity | | 2,231 | | | 2,066 | |
Total liabilities and stockholders’ equity | | $ | 18,305 | | | $ | 17,613 | |
UNAUDITED SEGMENT STATEMENT OF |
OPERATIONS & EARNINGS RECONCILIATION |
(millions of dollars, except for earnings per share data) |
| | |
| | Three Months Ended December 31, 2019 |
| | Servicing | | Originations | | Xome | | Corporate/ Other | | Elimination | | Consolidated |
| | | | | | | | | | | | |
Service related, net | | $ | 300 | | | $ | 23 | | | $ | 106 | | | $ | 2 | | | $ | (1 | ) | | $ | 430 | |
Net gain on mortgage loans held for sale | | 34 | | | 276 | | | — | | | — | | | — | | | 310 | |
Total revenues | | 334 | | | 299 | | | 106 | | | 2 | | | (1 | ) | | 740 | |
Total expenses | | 135 | | | 164 | | | 97 | | | 43 | | | (1 | ) | | 438 | |
Other income (expense): | | | | | | | | | | | | |
Interest income | | 112 | | | 34 | | | — | | | — | | | — | | | 146 | |
Interest expense | | (126 | ) | | (31 | ) | | — | | | (50 | ) | | — | | | (207 | ) |
Other income (expense), net | | 4 | | | — | | | — | | | (5 | ) | | — | | | (1 | ) |
Total other income (expense), net | | (10 | ) | | 3 | | | — | | | (55 | ) | | — | | | (62 | ) |
Pretax income (loss) | | $ | 189 | | | $ | 138 | | | $ | 9 | | | $ | (96 | ) | | $ | — | | | $ | 240 | |
Income tax benefit | | | | | | | | | | | | (221 | ) |
Net income | | | | | | | | | | | | $ | 461 | |
Net loss attributable to noncontrolling interests | | | | | | | | | | | | (2 | ) |
Net income attributable to Mr. Cooper Group | | | | | | | | | | | | $ | 463 | |
Undistributed earnings attributable to participating stockholders | | | | | | | | | | | | 4 | |
Net income attributable to common stockholders | | | | | | | | | | | | $ | 459 | |
Net income per share | | | | | | | | | | | | |
Basic | | | | | | | | | | | | $ | 5.03 | |
Diluted | | | | | | | | | | | | $ | 4.95 | |
| | | | | | | | | | | | |
Non-GAAP Reconciliation: | | | | | | | | | | | | |
Pretax income (loss) | | $ | 189 | | | $ | 138 | | | $ | 9 | | | $ | (96 | ) | | $ | — | | | $ | 240 | |
Mark-to-market | | (102 | ) | | — | | | — | | | — | | | — | | | (102 | ) |
Accounting items / other | | — | | | — | | | 3 | | | 3 | | | — | | | 6 | |
Intangible amortization | | — | | | — | | | 2 | | | 10 | | | — | | | 12 | |
Pretax income (loss), net of notable items | | $ | 87 | | | $ | 138 | | | $ | 14 | | | $ | (83 | ) | | $ | — | | | $ | 156 | |
Fair value amortization(1) | | (31 | ) | | — | | | — | | | — | | | — | | | (31 | ) |
Pretax operating income (loss) | | $ | 56 | | | $ | 138 | | | $ | 14 | | | $ | (83 | ) | | $ | — | | | $ | 125 | |
Income tax expense | | | | | | | | | | | | (30 | ) |
Operating income | | | | | | | | | | | | $ | 95 | |
ROTCE | | | | | | | | | | | | 21.1 | % |
⁽¹⁾ Amount represents additional amortization required under the fair value amortization method over the cost amortization method. |
UNAUDITED SEGMENT STATEMENT OF |
OPERATIONS & EARNINGS RECONCILIATION |
(millions of dollars, except for earnings per share data) |
| | |
| | Three Months Ended March 31, 2020 |
| | Servicing | | Originations | | Xome | | Corporate/ Other | | Elimination | | Consolidated |
| | | | | | | | | | | | |
Service related, net | | $ | (180 | ) | | $ | 20 | | | $ | 106 | | | $ | 2 | | | $ | (1 | ) | | $ | (53 | ) |
Net gain on mortgage loans held for sale | | 34 | | | 297 | | | — | | | — | | | — | | | 331 | |
Total revenues | | (146 | ) | | 317 | | | 106 | | | 2 | | | (1 | ) | | 278 | |
Total expenses | | 149 | | | 166 | | | 96 | | | 34 | | | (1 | ) | | 444 | |
Other income (expense): | | | | | | | | | | | | |
Interest income | | 83 | | | 34 | | | — | | | 1 | | | — | | | 118 | |
Interest expense | | (113 | ) | | (27 | ) | | — | | | (52 | ) | | — | | | (192 | ) |
Other income, net | | — | | | — | | | 1 | | | — | | | — | | | 1 | |
Total other income (expense), net | | (30 | ) | | 7 | | | 1 | | | (51 | ) | | — | | | (73 | ) |
Pretax (loss) income | | $ | (325 | ) | | $ | 158 | | | $ | 11 | | | $ | (83 | ) | | $ | — | | | $ | (239 | ) |
Income tax benefit | | | | | | | | | | | | (68 | ) |
Net loss | | | | | | | | | | | | $ | (171 | ) |
Net loss attributable to noncontrolling interests | | | | | | | | | | | | (3 | ) |
Net loss attributable to Mr. Cooper Group | | | | | | | | | | | | $ | (168 | ) |
Undistributed earnings attributable to participating stockholders | | | | | | | | | | | | — | |
Net loss attributable to common stockholders | | | | | | | | | | | | $ | (168 | ) |
Net loss per share | | | | | | | | | | | | |
Basic | | | | | | | | | | | | $ | (1.84 | ) |
Diluted | | | | | | | | | | | | $ | (1.84 | ) |
| | | | | | | | | | | | |
Non-GAAP Reconciliation: | | | | | | | | | | | | |
Pretax (loss) income | | $ | (325 | ) | | $ | 158 | | | $ | 11 | | | $ | (83 | ) | | $ | — | | | $ | (239 | ) |
Mark-to-market | | 383 | | | — | | | — | | | — | | | — | | | 383 | |
Accounting items / other | | 4 | | | — | | | �� | | | — | | | — | | | 4 | |
Intangible amortization | | — | | | — | | | 2 | | | 7 | | | — | | | 9 | |
Pretax income (loss), net of notable items | | $ | 62 | | | $ | 158 | | | $ | 13 | | | $ | (76 | ) | | $ | — | | | $ | 157 | |
Fair value amortization(1) | | (30 | ) | | — | | | — | | | — | | | — | | | (30 | ) |
Pretax operating income (loss) | | $ | 32 | | | $ | 158 | | | $ | 13 | | | $ | (76 | ) | | $ | — | | | $ | 127 | |
Income tax expense | | | | | | | | | | | | (31 | ) |
Operating income | | | | | | | | | | | | $ | 96 | |
ROTCE | | | | | | | | | | | | 19.6 | % |
⁽1⁾ Amount represents additional amortization required under the fair value amortization method over the cost amortization method. |
