Onity Group Inc. · NYSE:ONIT
Onity — Q1 2023 Earnings Presentation
30 slides from Onity's earnings presentation, May 4, 2023
Slide 1: Business Update First Quarter 2023
Business Update First Quarter 2023 May 4, 2023 © 2023 Ocwen Financial Corporation. All rights reserved.
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
FORWARD-LOOKING STATEMENTS achieving our growth objectives; the adequacy of our financial NON-GAAP FINANCIAL MEASURES This press release contains forward-looking statements within the resources, including our sources of liquidity and ability to sell, fund and This presentation contains references to
Slide 3: Executive Summary
Executive Summary Adjusted pre-tax income improvement driven 1 by servicing and cost actions Adjusted Pre-tax Income(a) $6M $2M vs Q4’22 GAAP net income reflects interest rate driven Net Loss $(40)M 50% 2 MSR fair value change vs Q4’22 MSR Valuation $(39)M 42% Servicing portfolio growing with a focu
Slide 4: Solid foundation to create value in current market environment
Solid foundation to create value in current market environment Favorable Servicing Environment Challenging Originations Market • Profitability continues to improve; record low prepayment speeds; • FNMA industry origination volume forecast(a) for 2023 $1.66T down increasing custodial income; stable d
Slide 5: Balanced and diversified business
1 Balanced and diversified business GAAP Net Income Reflects Servicing Driving Growth in Diversified Servicing Portfolio Unrealized MSR Fair Value Change Adjusted Pre-tax Income(a) % of Servicing UPB end of Q1’23 0.82% Servicing Subserviced Owned Originations ~54% MSR ~46% 73 58 ($M) (0.06%) 30 GSE
Slide 6: Prudent growth adapted for the environment
2 Prudent growth adapted for the environment Robust Servicing Servicing Growth Driven by Origination Increasing Mix of Additions Capital-light Subservicing Higher Margin Products Servicing Additions UPB Servicing UPB at Quarter End GNMA CL, Best Efforts, Non-Delegated, CD, Reverse as a % of Owned MS
Slide 7: Industry-leading servicing operating cost structure
3 Industry-leading servicing operating cost structure Exceeded Enterprise-wide Cost Reduction Servicing Cost Structure Portfolio Growth Leverages Cost Target and Built a Cost Advantage Improving Structure to Enhance Profitability Total Operating Expenses as % of Avg Servicing UPB(a) Servicing Operat
Slide 8: Top-tier operational performance and unmatched breadth of capabilities
4 Top-tier operational performance and unmatched breadth of capabilities Recognized Servicing Excellence Broad Servicing Originations Capabilities Profitability Drivers Delivering Results for Clients Proven Leadership in Special Improving Returns for Reverse Sierra Pacific has realized significant g
Slide 9: Capital partner relationships to support growth objectives
5 Capital partner relationships to support growth objectives Expand MAV Capacity MSR-X Process Maturing • Since the upsize in mid Q4’22, MAV has • MSR-X: “flow” MSR sales remains important purchased $17B UPB to date at attractive part of capital, supporting new originations pricing levels • Closed t
Slide 10: Adjusted pre-tax income profitability driven by strength in Servicing
Adjusted pre-tax income profitability driven by strength in Servicing Q1’23 Financial Highlights Adjusted Pre-tax Income (Loss)(d) ($M, except per share metrics) Bridge Q4’22 to Q1’23 Q1’22 Q4’22 Q1’23 ($M) (9) GAAP Net Income (Loss) 58 (80) (40) (11) 11 EPS $6.30 ($10.48) ($5.34) Diluted $6.01 ($10
Slide 11: Forward MSR value movements in Q1'23 exclusively driven by declines in interest rates
Forward MSR value movements in Q1’23 exclusively driven by declines in interest rates Forward Owned MSR Fair Value Changes • Forward MSR fair value in Q1 declined $(47)M, of that $(49)M Due to changes in rates, other inputs 200 0.82% 0.81% due to rates, offset by $2M due to assumptions and assumptio
Slide 12: Servicing exhibited strong growth in profitability
Servicing exhibited strong growth in profitability – improved in both forward and reverse Business Update Servicing Profitability Drivers Adjusted Pre-tax Income(a) Subservicing UPB up 7% YoY Subserviced • Improvement in Forward Servicing PTI due to: $(2) $25 $30 Reverse UPB at qtr end Forward - Hig
Slide 13: Originations seeing continued client growth and expansion in higher margin products
Originations seeing continued client growth and expansion in higher margin Best Efforts and GNMA products to mitigate slightly higher QoQ loss in total business Business Update Originations Profitability Drivers Adjusted Pre-tax Income(a) Revenue Margins(b) • Adjusted PTI down ~ $(2)M QoQ due primar
Slide 14: Share price not reflective of the strength of our business
We believe our share price is not reflective of the strength of our business, especially with a positive adjusted pre-tax income 150 OCN Share Price Peer Group(a) Russell 2000 Index 140 130 120 • Stock outperforming peers, 21% more growth from year-end 2020 to 110 April 2023 100 90 80 • 11% more gro
Slide 15: Wrap-Up
Wrap-Up As we continue to execute our business strategy, we believe we are well-positioned to navigate the market environment ahead and deliver long-term value for our shareholders Balanced and diversified Prudent growth adapted for the business environment Top-tier operational performance Industry-
Slide 16: Appendix
Appendix • Ocwen: Who We Are • Consolidated Balance Sheets (GAAP) • Condensed Balance Sheet Breakdown • Consolidated Statement of Operations (GAAP Income Statement) • Notes Regarding Non-GAAP Financial Measures • Expense Notables • Income Statement Notables • GAAP ROE Calculation • After-tax ROE Bef
Slide 17: Ocwen: Who We Are
Ocwen is a mortgage originator and servicer focused on creating positive outcomes for clients, homeowners, investors and communities Balanced and Diversified Business Competitive Advantages Diversified originations sources to balance Four pillar servicing portfolio optimizes risks earnings and drive
Slide 18: Consolidated Balance Sheets (GAAP)
Consolidated Balance Sheets (GAAP) Assets March 31, December 31, March 31, (Dollars in millions) 2022 2022 2023 Cash and cash equivalents 269 208 217 Restricted cash 76 66 39 Mortgage servicing rights, at fair value 2,323 2,665 2,581 Advances, net 730 719 657 Loans held for sale 725 623 849 Loans he
Slide 19: Condensed Balance Sheet Breakdown
Condensed Balance Sheet Breakdown Balance sheet breakdown Total in $M, at 3/31/23 Rithm & GNMA All GAAP HECM MAV EBO others Cash 217 217 Loans 8,518 7,471 1,047 MSRs 2,581 883 1,698 Advances 657 657 Other assets 654 258 396 Total Assets 12,627 883 7,471 258 4,015 HMBS borrowings 7,471 7,471 Loan war
Slide 20: Consolidated Statement of Operations (GAAP Income Statement)
Consolidated Statement of Operations (GAAP Income Statement) 3 Months Ended 3 Months Ended 3 Months Ended (Dollars in millions) Mar 31, 2022 Dec 31, 2022 Mar 31, 2023 Revenue Servicing and subservicing fees 213 219 232 Gain on reverse loans held for investment and HMBS-related borrowings, net 13 19
Slide 21: Note Regarding Non-GAAP Financial Measures
Note Regarding Non-GAAP Financial Measures In the following slides, we present supplemental information (including reconciliations) relating to certain illustrative adjustments to GAAP expenses, and pre-tax income (loss). We believe these non-GAAP financial measures provide a useful supplement to di
Slide 22: Expense Notables
Expense Notables In $M Q1’22 Q4’22 Q1’23 I Operating Expenses (as reported) 127 120 114 Adjustments for Notables(a) Significant legal and regulatory settlement 5 (1) (2) expenses Expense recoveries 4 (0) 0 Severance and retention(b) (1) (6) (4) LTIP stock price changes(c) 11 (6) 2 Office facilities
Slide 23: Income Statement Notables
Income Statement Notables In $M Q1’22 Q4’22 Q1’23 a) Certain previously presented notable categories with nil numbers for each quarter shown have been omitted; prior periods have been adjusted to conform with current period information I Reported Pre-Tax Income (Loss) 61 (79) (38) b) MSR Valuation A
Slide 24: GAAP ROE Calculation
GAAP ROE Calculation In $M Q1’22 Q4’22 Q1’23 I Reported Net Income (Loss) 58 (80) (40) II Annualized Net Income (Loss) [I * 4] 232 (319) (161) Equity A Beginning Period Equity 477 546 457 B Ending Period Equity 534 457 416 III Average Equity [(A + B) / 2] 505 501 436 IV GAAP ROE [II / III] 46% (64%)
Slide 25: After-tax ROE Before Notable Items Calculation
After-tax ROE Before Notable Items Calculation In $M Q1’22 Q4’22 Q1’23 I Reported Net Income (Loss) 58 (80) (40) II Notable Items 90 (83) (44) III Estimated Tax Impact of Notables 6 (4) (0) IV Annualized Net Income ex-Notables (102) (3) 16 [(I – II + III) * 4] Equity A Beginning Period Equity 477 54
Slide 26: Adjusted Pre-tax Income (Loss) and Weighted Average Shares Outstanding
Adjusted Pre-tax Income (Loss)(a) and Weighted Average Shares Outstanding In $M (share counts in M) Q1’22 Q4’22 Q1’23 I Reported Net Income (Loss) 58 (80) (40) II Notable Items 90 (83) (44) III Income Tax Benefit (Expense) (3) (1) (2) IV Adjusted Pre-tax Income (Loss)(a) (I – II – III) (28) 4 6 Weig
Slide 27: Fully Diluted Share and Equity Data
Fully Diluted Share and Equity Data(a) As of 3/31/23 Equity in $M Shares I. Basic Equity and Outstanding Shares $416.3 7,638,611 II. Awards & Options $0.4 498,320 III. Diluted Equity and Shares [ I + II ] $416.7 8,136,931 IV. Warrants(b) $38.1 1,446,016 V. Fully Diluted Equity and Shares [ III + IV
Slide 28: MSR Valuation Assumptions – Forward Owned MSRs
MSR Valuation Assumptions – Forward Owned MSRs As of 12/31/2022 As of 3/31/2023 ($ in M) FN/ FH FHA/ VA Non-Agency Total Retained FN/ FH FHA/ VA Non-Agency Total Retained UPB 98,376 12,944 14,869 126,189 99,239 13,881 14,478 127,598 Loan Count (000s) 387 86 94 567 391 88 92 571 Fair Value 1,395 190
Slide 29: End Notes
End Notes SLIDE 3 SLIDE 10 SLIDE 11 a) Adjusted pre-tax income (loss); see slides 21-26 for discussion of non- a) See slide 24 for calculation a) Cumulative forward owned MSR fair value changes due to rates and GAAP measures including notable items b) MSR Valuation Adjustments due to rates and assum
Slide 30: End Notes
End Notes SLIDE 22 SLIDE 23 continued a) Certain previously presented notable categories with nil numbers for e) Beginning with the three months ended March 31, 2023, for purposes of each quarter shown have been omitted; prior periods have been calculating Income Statement Notables and Adjusted Pre-