Onity Group Inc. · NYSE:ONIT
Onity — Q1 2024 Earnings Presentation
32 slides from Onity's earnings presentation, May 2, 2024
Slide 1: Business Update First Quarter 2024
Business Update First Quarter 2024 May 2, 2024 © 2024 Ocwen Financial Corporation. All rights reserved.
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the future liquidity, net worth and other financial and other requirements of draws on existing loans in our reverse mortgage portfolio; our service meaning of Section 27A of the Securities Act of 1933, as amende
Slide 3: First quarter 2024 delivered growth in profits and book value
First quarter 2024 delivered growth in profits and book value while maintaining commitment to capital-light growth and reducing corporate debt Q1’24 Highlights Trend vs Q1’23 Adjusted Pre-Tax Income(a) driven by servicing segment GAAP Net Income highest in last six quarters $14M $30M 13.8% Adjusted
Slide 4: The execution of our strategy has transformed Ocwen
The execution of our strategy has transformed Ocwen with the capabilities to create positive outcomes for clients, homeowners, and investors Our Strategy Maximize Asset Management 1. Balance and diversification Returns Incremental Pre-tax Income and Liquidity 2. Prudent capital-light growth Clean-Up
Slide 5: Rebranding to Onity Group
Rebranding to Onity Group TM Reflects the evolution of our Reinforces our dedication to culture and Company stakeholders Onity Group Inc. ► Signifies our growth, expansion and ► Onity derived from “on it,” conveys transformation into balanced business NYSE: ONIT dependability and performance ► Indus
Slide 6: Growing adjusted pre-tax income and performing in line with 12%+ adjusted ROE guidance
Growing adjusted pre-tax income and performing in line with 12%+ adjusted ROE guidance Financial Objectives 25 25% 23 Sustain FY’23 adjusted PTI(a) performance • Disciplined MSR investing and targeting 100% hedge 20 20% coverage to reduce earnings volatility • Diligent cost management • Prudent risk
Slide 7: Balance and diversification creates opportunities and mitigates risk
Balance and diversification creates opportunities and mitigates risk Servicing driving sustained Diverse capabilities create Diversified servicing portfolio adjusted pre-tax income(a) unique opportunities mitigates risk % of servicing UPB end of Q1’24 Origination & Servicing & Subservicing(b) Owned
Slide 8: Driving capital-light subservicing growth
Driving capital-light subservicing growth… MSR capital partners(a) Building multiple MSR capital partner Driving subservicing growth contributing to subservicing growth relationships to support growth objectives $108B gross subservicing capital partner sales from owned MSR avg servicing UPB with cap
Slide 9: While dedicated to disciplined MSR investing
… while dedicated to disciplined MSR investing Emphasizing capital-light Increasing mix of higher-margin Managing owned MSRs(b) to growth products(a) targeted investment range total servicing additions UPB % of total originations UPB avg servicing UPB $115-135B target range for owned MSR UPB 23 294
Slide 10: Strong and scalable servicing platform with industry-leading performance
Strong and scalable servicing platform with industry-leading performance Superior special servicing capabilities Cost structure favorable to peers over twice our size Consistently lower delinquency levels Fully loaded cost to service(d) compared to industry(a) Full-year 2022, forward residential Lar
Slide 11: Sixth consecutive quarter of positive and growing adjusted pre-tax income
Sixth consecutive quarter of positive and growing(a) adjusted pre-tax income, highest GAAP net income in six quarters ($M, except per share metrics) Q1’23 Q4’23 Q1’24 Q1’24 QoQ Variance Detail GAAP net income (loss) (40) (47) 30 GAAP net income +$78M driven by MSR FV adjustments Diluted EPS ($5.34)
Slide 12: Significant deleveraging with ~$50M corporate debt retirement in Q1'24
Significant deleveraging with ~$50M corporate debt retirement in Q1’24, positioning us to pursue a cost-effective debt refinance in the next 4 quarters Available Liquidity Board supported additional debt retirement above original authorization to at period end achieve year-end targets • Repurchased
Slide 13: Servicing profitability improves despite impact of seasonal challenges
Servicing profitability improves despite impact of seasonal challenges Servicing Update Servicing Profitability Drivers • Forward Servicing PTI ($1M) QoQ Adjusted Pre-tax Income(b) Subservicing UPB subservicing Reverse Forward avg UPB - Higher servicing fees 37 38 159 162 159 31 8 6 18 - Seasonally
Slide 14: Originations profitability rebounded in Q1'24 across all channels
Originations profitability rebounded in Q1’24 across all channels despite rising rates; agile platform positioned for any rate environment Originations Update Originations Profitability Drivers • Adjusted PTI improved QoQ due to higher margins Adjusted Pre-tax Income(c) Funded Volume & Revenue Margi
Slide 15: Positioned to deliver strong results in 2024 and beyond
Positioned to deliver strong results in 2024 and beyond Broad Origination Capabilities Best-in-Class Servicing Platform Industry top-tier operational Expanded client base(a) performance(e) Industry best practice cost Improved refinance recapture rate(b) Awarded for 3 structure(f) Consecutive Years S
Slide 16: Appendix
Appendix ▪ Ocwen: Who We Are ▪ Condensed Consolidated Balance Sheets (GAAP) ▪ Condensed Balance Sheet Breakdown ▪ Condensed Consolidated Statement of Operations (GAAP Income Statement) ▪ Notes Regarding Non-GAAP Financial Measures ▪ Notables and Adjusted Pre-tax Income (Loss) Calculation ▪ GAAP ROE
Slide 17: Ocwen is a mortgage originator and servicer
Ocwen is a mortgage originator and servicer focused on creating positive outcomes for clients, homeowners, investors and communities Business Model Competitive Advantages Originations Servicing Asset Management ✓ Balanced business built to deliver Balances earnings and drives Generates cash flow Ena
Slide 18: Condensed Consolidated Balance Sheets (GAAP)
Condensed Consolidated Balance Sheets (GAAP) Assets March 31, December 31, March 31, (Dollars in millions) 2023 2023 2024 Cash and cash equivalents 217 202 185 Restricted cash 39 54 66 Mortgage servicing rights (MSRs), at fair value 2,581 2,272 2,375 Advances, net 657 679 603 Loans held for sale 849
Slide 19: Condensed Balance Sheet Breakdown
Condensed Balance Sheet Breakdown Balance sheet breakdown Total in $M, at 3/31/24 Rithm, MAV & GAAP MSR Fair Value GAAP GNMA All other pledged HECM end of period EBO others MSR(a) 2,375 Cash 185 185 Loans 9,159 7,945 1,214 648 MSRs 2,375 648 1,727 Advances 603 603 253 Other assets 769 416 352 Total
Slide 20: Condensed Consolidated Statement of Operations (GAAP Income Statement)
Condensed Consolidated Statement of Operations (GAAP Income Statement) 3 Months Ended 3 Months Ended (Dollars in millions) March 31, 2023 March 31, 2024 Revenue Servicing and subservicing fees 232 205 Gain on reverse loans held for investment and HMBS-related borrowings, net 21 15 Gain on loans held
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 pre-tax income (loss). We believe these non-GAAP financial measures provide a useful supplement to discussions and
Slide 22: Notables and Adjusted Pre-tax Income (Loss) Calculation by Quarter
Notables and Adjusted Pre-tax Income (Loss) Calculation by Quarter (Dollars in millions) Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 I Reported Net Income (Loss) (80) (40) 15 8 (47) 30 A Income Tax Benefit (Expense) (1) (2) (1) (1) (2) (2) II Reported Pre-Tax Income (Loss) [ I – A ] (79) (38) 16 10 (46) 32
Slide 23: Notables and Adjusted Pre-tax Income (Loss) Calculation by Full Year
Notables and Adjusted Pre-tax Income (Loss) Calculation by Full Year (Dollars in millions) FY’21 FY’22 FY’23 I Reported Net Income (Loss) 18 26 (64) A Income Tax Benefit (Expense) 22 1 (6) II Reported Pre-Tax Income (Loss) [ I – A ] (4) 25 (58) Forward MSR Valuation Adjustments due to rates 11 151 (
Slide 24: GAAP ROE Calculation
GAAP ROE Calculation In $M Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 I Reported Net Income (Loss) (80) (40) 15 8 (47) 30 II Annualized Net Income (Loss) [ I * 4 ] (319) (161) 62 34 (190) 120 Equity A Beginning Period Equity 546 457 416 434 445 402 B Ending Period Equity 457 416 434 445 402 432 III Average
Slide 25: Adjusted Pre-Tax Income (Loss) ROE Calculation
Adjusted Pre-Tax Income (Loss) ROE Calculation In $M Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 I Reported Net Income (Loss) (80) (40) 15 8 (47) 30 II Notable Items (83) (44) (6) (0) (56) 18 III Income Tax Benefit (Expense) (1) (2) (1) (1) (2) (2) IV Adjusted Pre-tax Income (Loss) 4 6 23 10 11 14 [ I – II
Slide 26: Adjusted Pre-tax Income (Loss) and Weighted Average Shares Outstanding
Adjusted Pre-tax Income (Loss) and Weighted Average Shares Outstanding In $M Q1’23 Q4’23 Q1’24 I Reported Net Income (Loss) (40) (47) 30 II Notable Items (44) (56) 18 III Income Tax Benefit (Expense) (2) (2) (2) IV Adjusted Pre-tax Income (Loss) [ I – II – III ] 5.8 10.7 14.1 Weighted Average Shares
Slide 27: Fully Diluted Share and Equity Data
Fully Diluted Share and Equity Data(a) as of 3/31/24 Equity in $M Shares I. Basic Equity and Outstanding Shares 432.1 7,784,253 II. Awards & Options 0.3 745,423 III. Diluted Equity and Shares [ I + II ] 432.4 8,529,776 IV. Warrants(b) 38.1 1,446,016 V. Fully Diluted Equity and Shares [ III + IV ] 47
Slide 28: MSR Valuation
MSR(a) Valuation as of 3/31/2023 as of 12/31/2023 as of 3/31/2024 ($ in M) GSE Government (b) Non-Agency Total Retained GSE Government (b) Non-Agency Total Retained GSE Government(b) Non-Agency Total Retained UPB 99,239 13,881 14,478 127,598 90,263 18,778 13,703 122,743 91,288 19,797 13,370 124,455
Slide 29: End Notes
End Notes SLIDE 3 SLIDE 8 SLIDE 11 cont’d a) See slides 21-26 for discussion of non-GAAP measures including a) MSR capital partners are third parties to which we sell MSR or ESS, d) See slides 21-26 for discussion of non-GAAP measures including notable items and we continue to service the loans in s
Slide 30: End Notes
End Notes SLIDE 14 cont’d SLIDE 22 SLIDE 23 b) Source: Reverse Market Insight, Top 100 HECM Lenders, 4/4/2024 a) MSR Valuation Adjustments that are due to changes in market interest a) MSR Valuation Adjustments that are due to changes in market interest c) See slides 21-26 for discussion of non-GAAP
Slide 31: End Notes
End Notes SLIDE 27 a) Where applicable, data is end of period; fully diluted share and equity data assumes cash exercise of all dilutive stock options and warrants and vesting of all equity-settled restricted stock units, assuming target performance where applicable b) Warrants assume an all-cash ex
Slide 32: Abbreviations
Abbreviations • Adj: Adjusted (GAAP, net of notables) • GN(MA): Government National Mortgage Association • Orig: Mortgage Originations Business Segment • B2B: Business-to-Business (incl CL and Co-Issue) • GoS: Gain on Sale • Perf: Performing Loan • bps: Basis Points (1/100th of a percent) • GSE: Gov