Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — Q3 2022 Earnings Presentation
28 slides from Onity's earnings presentation, Nov 3, 2022
Slide 1: Business Update Third Quarter 2022
Business Update Third Quarter 2022 November 3, 2022 © 2022 Ocwen Financial Corporation. All rights reserved.
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS extent to which acquisitions and our other strategic initiatives will Anyone wishing to understand Ocwen’s business should review our This presentation contains forward-looking statements within the contribute to achieving our growth objectives; the extent to which we SEC
Slide 3: Executive Summary
Executive Summary Q3 Results Focus Going Forward • GAAP Net Income $37M; GAAP ROE(a) 27%; BVPS of $69 • Expanding higher-margin origination products and clients Delivering focused, • Adjusted Pre-tax loss(b) of ($8M) vs ($26M) in Q2 1 prudent growth • Originations profitable; Servicing UPB up 14% Yo
Slide 4: Executing a value creation plan aligned to current market environment
Executing a value creation plan aligned to current market environment Favorable Servicing Environment Challenging Originations Environment • MSR value appreciation and servicing profitability improvement: record • Interest rates continue to increase higher and faster than MBA and low prepayments; in
Slide 5: Leveraging the core strengths of our balanced and diversified business model
1 Leveraging the core strengths of our balanced and diversified business model Balanced and diversified business model Industry-leading operational execution Positioned to navigate current is working as designed driving subservicing growth market environment Forward Servicing GAAP PTI Recognized Ser
Slide 6: Driving prudent growth adapted for the environment
2 Driving prudent growth adapted for the environment Driving capital-efficient servicing growth by managing mix of Subservicing UPB up 46% YoY owned servicing and subservicing Owned Servicing Servicing Subserviced Additions 26 27 Subservicing • $28B adds UPB in $B at in $B qtr end scheduled Bulk nex
Slide 7: Reducing cost structure across the organization
3 Reducing cost structure across the organization All Segments Forward & Reverse Originations • On track to exceed $70M enterprise-wide cost reduction 81 29 target by Q4 66 62 Comp 16 • Rationalizing staffing levels, 16 & Ben vendor and contractor costs • Continued optimization of our ($M) ($M) prop
Slide 8: Optimizing liquidity, diversifying funding sources, and allocating capital
Optimizing liquidity, diversifying funding sources, and allocating capital to 4 deliver value for shareholders MAV Update Expanding a Multi-Investor Partnership Model UPB • MAV upsize completed; adds up to $250M in additional capital; funding up to $60B UPB of additional MAV MSR acquisitions at curr
Slide 9: Cost reductions, margin management and balanced business model offsetting market headwinds
Cost reductions, margin management and balanced business model offsetting market headwinds Q3’22 Financial Highlights Adjusted Pre-tax Income(c) Bridge ($M, except per share metrics) Q2’22 to Q3’22 Q3’21 Q2'22 Q3’22 ($M) GAAP Net Income (Loss) 22 10 37 EPS $2.35 $1.12 $4.33 Diluted $2.29 $1.11 $4.17
Slide 10: Servicing performance drivers continue to improve
Servicing performance drivers continue to improve; Q3 results reflect significant improvement in UPB growth, lower costs in Asset Sales & MTM and expense reduction efforts Business Update Forward Servicing Profitability Drivers Adjusted Pre-tax Income(a) Subservicing UPB up 23% YoY • Forward servici
Slide 11: Strong pre-tax income in Correspondent Lending and cost reductions across Originations
Strong pre-tax income in Correspondent Lending (CL) and cost reductions across Originations help offset lower Consumer Direct (CD) volume Business Update Forward Originations Profitability Drivers Total Originations PTI up QoQ due to: Adjusted Pre-tax Income(a) Revenue Margins(b) $13 ($2) $12 200 51
Slide 12: Reverse originations down on lower volumes; Reverse servicing profitable
Reverse originations down on lower volumes; Reverse servicing profitable but down QoQ on lower fees and one-time expenses; long-term opportunity for both remains attractive Business Update Reverse Originations and Servicing Profitability Drivers Reverse Servicing: Adjusted Pre-tax Income(a) Revenue
Slide 13: GNMA Risk Based Capital Ratio (RBCR) taking effect at the end of 2024
GNMA Risk Based Capital Ratio (RBCR) taking effect at the end of 2024 2+ years to address GNMA Risk-based PHH does not currently pass the GNMA RBCR due to MSR assets Capital Ratio with one of these options exceeding PHH equity (“Excess MSR”) GNMA holdings(a) represent a minority of PHH activity in Q
Slide 14: Strong growth in book value and earnings per share
Strong growth in book value and earnings per share; we believe our recent share price is not reflective of the strength of our business 150 OCN Share Price Russell 2000 Index 140 Indexed to value at 9/30/21 • Book value per share at end of Q3 up 130 ~ $17 (+33%) from year-end 2021, 120 +46% CAGR 110
Slide 15: Clear and actionable roadmap to deliver positive adjusted pre-tax income
Clear and actionable roadmap driven by proven cost management capabilities and subservicing growth to deliver positive adjusted pre-tax income Path to achieve positive adjusted PTI in Q4 ‘22 7-9 In $M 5-7 10-12 (4-6) Productivity & Business Margin Productivity & Servicing & Originations Projected Q2
Slide 16: Wrap-Up
Wrap-Up Leveraging the core strengths of our Reducing enterprise-wide costs to balanced and diversified business model achieve industry cost leadership 1 Well positioned to navigate the current market 3 On track to exceed $70M cost reduction target environment and going forward; maintaining by Q4’22
Slide 17: Appendix
Appendix • Ocwen: Who We Are • Roadmap Metrics • Notes Regarding Non-GAAP Financial Measures • Expense Notables • Income Statement Notables • GAAP ROE Calculation • After-tax ROE Before Notable Items Calculation • Fully Diluted Share and Equity Data • MSR Valuation Assumptions • End Notes Ocwen Fi
Slide 18: Ocwen is a mortgage originator and servicer focused on creating positive outcomes
Ocwen is a mortgage originator and servicer focused on creating positive outcomes for clients, homeowners, investors and communities Balanced and Diversified Business Model Competitive Advantages Diversified originations sources to balance Four pillar servicing portfolio optimizes risks earnings and
Slide 19: Roadmap Metrics
Roadmap Metrics Objectives Originations Servicing Corporate (a) Total originations revenue (GOS, origination fees and 1100+ Industry Refi interest income)/(orig. vol.); ~90% of originations will Qtrly MSR vol ~11% total Prudent vol dropping be on-book, ~10% will go to MAV Correspondent ~$6B at ~54 p
Slide 20: 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 d
Slide 21: Expense Notables
Expense Notables In $M Q3’21 Q2’22 Q3’22 I Operating Expenses (as reported) 145 144 141 Adjustments for Notables(a)(e) Significant legal and regulatory settlement expenses (3) 6 (3) Expense recoveries (1) 0 (0) Severance and retention(b) - (5) (8) LTIP stock price changes(c) - (0) 2 Facilities conso
Slide 22: Income Statement Notables
Income Statement Notables In $M Q3’21 Q2’22 Q3’22 I Reported Pre-Tax Income (Loss) 10 9 33 Adjustments for Notables(a)(g) Expense Notables (from prior slide) 5 (1) 11 MSR FV Change, net of MSR hedge(b)(e) (58) (98) (154) RITM/MAV MSR Liability FV Change(c)(e) 61 40 91 Reverse FV Change(d)(e) 18 25 1
Slide 23: GAAP ROE Calculation
GAAP ROE Calculation Equity In $M Q3’21 Q2’22 Q3’22 I Reported Net Income (Loss) 22 10 37 II Annualized Net Income (Loss) [I * 4] 86 41 148 Equity A Beginning Period Equity 447 534 544 B Ending Period Equity 470 544 546 III Average Equity [(A + B) / 2] 458 539 545 IV GAAP ROE [II / III] 19% 8% 27%
Slide 24: After-tax ROE Before Notable Items Calculation
After-tax ROE Before Notable Items Calculation In $M Q3’21 Q2’22 Q3’22 I Reported Net Income (Loss) 22 10 37 II Notable Items (27) 36 41 III Estimated Tax Impact of Notables (2) (0) (1) IV Annualized Net Income ex-Notables [(I – II + III) * 4] 184 (101) (19) Equity A Beginning Period Equity 447 534
Slide 25: Fully Diluted Share and Equity Data
Fully Diluted Share and Equity Data(a) Q3’22 Equity in $M Shares I. Equity and Outstanding Shares as of 9/30/22 $546.1 7,934,594 II. Awards & Options $0.5 682,957 III. Diluted Equity and Shares [ I + II ] $546.6 8,617,551 IV. Warrants(b) $38.1 1,446,016 V. Fully Diluted Equity and Shares [ III + IV
Slide 26: MSR Valuation Assumptions – Owned MSRs
MSR Valuation Assumptions – Owned MSRs (a) 3rd party broker assumptions (b) Total voluntary payoffs and involuntary defaults; does not include scheduled payments (c) Annual $ per loan; Ancillary includes REO fee income on Non-Agency MSRs (d) Performing represents Current and D30; NPL represents D60+
Slide 27: End Notes
End Notes SLIDE 3 SLIDE 11 SLIDE 19 (cont.) a) See slide 23 for calculation a) See slides 20-24 for discussion of non-GAAP measures g) Assumes we achieve our objectives and there are no adverse changes b) Adjusted pre-tax income (loss); see slides 20-24 for discussion of non- b) Total revenue for th
Slide 28: End Notes
End Notes SLIDE 22 (cont.) c) FV changes of Pledged MSR liabilities associated with RITM (formerly NRZ) and MAV transferred MSR that are due to changes in market interest rates, valuation inputs or other assumptions, net of overall unrealized gains / (losses) on MSR hedge, a component of Pledged MSR