Onity Group Inc. · NYSE:ONIT
Onity — JPMorgan Leveraged Finance Conference (February 2025)
39 slides from Onity's conference presentation, Feb 24, 2025
Slide 1: JPMorgan Leveraged Finance Conference
JPMorgan Leveraged Finance Conference Sean O’Neil Chief Financial Officer, Onity Group February 24, 2025 © 2025 Onity Group Inc. All rights reserved.
Slide 2: Disclaimer
Disclaimer FORWARD-LOOKING STATEMENTS NON-GAAP FINANCIAL MEASURES This presentation contains forward-looking statements within the under any repurchase programs, the timing of such repurchases, and This presentation contains references to adjusted pre-tax income (loss) meaning of Section 27A of the
Slide 3: Onity: attractive industry, leading position and substantial upside
Onity: attractive industry, leading position and substantial upside Onity is a leader in the rapidly growing nonbank mortgage sector with a 30+ year history in originations and servicing Onity completed a dramatic transformation in recent years across operational, financial and cultural dimensions W
Slide 4: Nonbank mortgage companies represent majority share of U.S. mortgage industry
Nonbank mortgage companies represent majority share of U.S. mortgage industry Onity / PHH is a Top 10 Nonbank Servicer Forward Residential Mortgages as of Q4’24 UPB Market Rank Servicer in $B Share * “Over the last 15 years, nonbanks have 1 Mr. Cooper 1,515 10.6% significantly increased their share
Slide 5: Total addressable market for forward residential mortgages projected to grow
Total addressable market for forward residential mortgages projected to grow Mortgage originations market forecasted Mortgage servicing market continues steady to rise 14% FY’25 vs FY’24 growth, up $357B Q4’24 vs Q4’23 Estimated UPB in $B Subservicing is ~30% of total market 2,293 1,971 1,735 704 55
Slide 6: Key Financial Highlights
© 2 0 2 4 Key Financial Highlights O n i t y Delivering profitable growth Strong capital management G Full-Year 2024 Year-End 2024 r o FY’24 FY’24 u p I Adjusted Corporate & n c Pre-tax $90M 84% MSR Debt to 2.96:1 24% . Income(a) vs FY’23 Equity(e) vs YE’23 A l l r i Corporate g h GAAP Net Income(b)
Slide 7: 2025+ operating priorities aligned with our strategy to create value
2025+ operating priorities aligned with our strategy to create value Strategy Balance and Diversification | Prudent Capital-Light Growth | Industry-Leading Cost Structure Top-Tier Operating Performance and Capabilities | Dynamic Asset Management Operating Priorities Accelerate Organic Differentiate
Slide 8: Onity Investment Highlights
Onity Investment Highlights © 2025 Onity Group Inc. All rights reserved. 8
Slide 9: Key Investment Highlights
© 2 0 2 4 Key Investment Highlights O n i t y ❖ Top 10 mortgage nonbank servicer and correspondent G Leading originator and servicer with scale lender(a) r o across market segments ❖ Servicing UPB has increased 1.6x since year-end ’20(b) u p I n ❖ Balanced and diversified business c All-weather busi
Slide 10: We are a leading nonbank servicer and originator across market segments
We are a leading nonbank servicer and originator across market segments Servicing Originations YE’24, $B UPB Volume Rank(a) FY’24, $B UPB Volume Rank(a) Total Servicing $301.7 #8 Total Originations(b) $29.7 #19 Subservicing $159.0 #6 Correspondent $16.1 #7 Owned Servicing $142.7 #11 Co-Issue $11.9 N
Slide 11: Balanced and diversified business performing through the interest rate cycle
Balanced and diversified business performing through the interest rate cycle Total business delivering increased profitability Diverse capabilities create multiple Adjusted Pre-tax Income(a) growth opportunities 200 Origination & Servicing & 31 Replenishment Asset Management 145 Correspondent & Owne
Slide 12: Growing servicing portfolio consistent with capital-light strategy
Growing servicing portfolio consistent with capital-light strategy Servicing additions up 70% year-over-year Growing total servicing portfolio Servicing Additions, net Servicing Avg 300 of internal sales(a) 86 UPB 282 199 167 47 152 50 120 5 24 43 3 38 125 109 75 7 ($B) ($B) FY'23 FY'24 FY'20 FY'22
Slide 13: Improved recapture performance more than doubled Consumer Direct volume
Improved recapture performance more than doubled Consumer Direct volume Consumer Direct Volume up 2.5x YoY How we are driving results ✓ Investing in technology 905 • Enabling efficiency, timeliness and cost savings • Enhancing the digital experience for borrowers 357 ($M) FY'23 FY'24 ✓ Leveraging po
Slide 14: Servicing replenishment and growth mainly through Correspondent and Co-Issue
© 2 0 2 4 O Servicing replenishment and growth mainly through Correspondent and Co-Issue n i t y Funded Volume & Adjusted Revenue(a) Margin by Channel(b) G r o 29.6B 29.7B Forward Correspondent Lending & Co-Issue u p Primarily origination channel drives servicing I n portfolio growth though MSR purc
Slide 15: Highly attractive servicing portfolio drives robust cash flow
© 2 0 2 4 Highly attractive servicing portfolio drives robust cash flow O n i t y G r o u p $302B total servicing UPB at year-end ‘24 Adjusted servicing revenue(a) I n c . Advancing requirements are highly ($M) 205 201 A Subservicing 53% limited with advances in some cases 185 186 189 192 188 l carr
Slide 16: Delivering top-tier operating performance while improving customer experience
Delivering top-tier operating performance while improving customer experience Recognized Top-Tier Performance Competitive Cost Structure FY’23 fully-loaded cost per loan(a) Awarded for 4 Onity Servicing vs Large vs Large Consecutive Years Nonbanks Banks Cost Per Loan Awarded for 2020-2022 and in 202
Slide 17: Investing in multiple AI applications to enhance capabilities and performance
Investing in multiple AI applications to enhance capabilities and performance Artificial Intelligence Natural Language Robotics Vision Machine Learning (Digital Workers) (Optical Character Recognition) Processing (Predictive Analytics, Gen AI) (Chatbots, Voice bots) ✓ Digital bots ✓ OCR/IDP document
Slide 18: Reached 11-year high for full-year GAAP Net Income
Reached 11-year high for full-year GAAP Net Income with Adjusted Pre-tax Income at highest point since 2018 PHH acquisition FY’24 Highlights Trend vs FY’23 GAAP Net GAAP $33M Income* 8% ROE(b) Diluted Book Value $4.13 EPS $56 Per Share(c) Adjusted Adjusted $90M PTI(a) 20% ROE(d) Servicing Servicing
Slide 19: Successfully executed strategic transactions to significantly strengthen balance sheet
Successfully executed strategic transactions to significantly strengthen balance sheet while maintaining liquidity • Issued new $500M 5-year high-yield debt Debt to Equity 24% Ratio(a) 2.96:1 vs YE’23 • Extinguished intermediate-term more expensive corporate debt at parent company YE’24 • Reduced an
Slide 20: Strong and improving financial performance
Strong and improving financial performance Adjusted Pre-Tax Income(a) Total Equity(b) Ninth consecutive quarter of positive Adjusted pre-tax income 493 457 402 Profitability 32 31 23 15 10 11 11 4 6 ($M) (7) ($M) Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 Q4'24 YE 2022 YE 2023 YE 2024 Cor
Slide 21: Looking ahead to 2025, we expect successful execution of our strategy to generate increasing returns
Looking ahead to 2025, we expect successful execution of our strategy to generate increasing returns Strategy Financial Objectives Full-Year 2025 Guidance(b) ❖ Balance and diversification ❖ Sustain Adjusted Pre-tax ➢ Adjusted ROE(c) of 16-18% Income(a) performance ❖ Prudent capital-light growth ➢ In
Slide 22: Well-positioned to grow earnings in 2025 and beyond
Well-positioned to grow earnings in 2025 and beyond Balanced and diversified model performs through interest rate cycles Capital-light strategy fuels growth Customer-first focus supported by innovative technology solutions Cost-effective, technology enabled, global servicing platform Experienced lea
Slide 23: Appendix | Mortgage Basics
Appendix | Mortgage Basics © 2025 Onity Group Inc. All rights reserved. 23
Slide 24: Residential mortgage loans can be categorized by structure, product and investors
Residential mortgage loans can be categorized by structure, product and investors Residential Loan Type Forward Agency Forward Reverse only will securitize if Non-Agency Mortgage structured to conforms to their private label, assist seniors using standards don’t qualify for agency their home equity
Slide 25: Residential mortgage loans are categorized by delinquency status
Residential mortgage loans are categorized by delinquency status Delinquency Status Performing NPL RPL BK REO loan is current Non-Performing Re-Performing Bankruptcy Real Estate Owned <60 days past due 60+ days past due (2 or was NPL, now cured or loans in BK can be NPL property is transferred more
Slide 26: Mortgage Servicing Right (MSR) is the present value of future income streams
Mortgage Servicing Right (MSR) is the present value of future income streams MSR Fundamentals • MSR value is future cash flow of all revenue earned and expenses incurred servicing a loan, discounted at market rate. • Revenues are earned through an interest only (IO) strip when borrowers make payment
Slide 27: Nonbank residential mortgage business is a virtuous revenue cycle
Nonbank residential mortgage business is a virtuous revenue cycle Retain Loan Payoff Subservicing Sell MSR Customer Attrition Release Loan Loan Sale Servicing Origination to Agencies Customer Retention Securitization Creates mortgage Retain servicing rights (MSR)(a) Retain MSR Servicing Revenue Stre
Slide 28: Originations and Servicing provide balanced earnings through interest rate cycles
Originations and Servicing provide balanced earnings through interest rate cycles Adjusted Pre-tax Income(a) Low Interest Rate High Interest Rate 200 Environment Environment Originations Servicing 31 147 (0) 169 147 Originations More Less ($M) originations originations 30 8 23 FY'22 FY'23 FY'24 30yr
Slide 29: Value proposition for integrated Reverse originator, servicer and subservicer platform
Value proposition for integrated Reverse originator, servicer and subservicer platform Strong contributor to profitability ✓ Delivers robust and consistent profitability Adjusted Pre-Tax Income(a) ($M) FY’22 FY’23 FY’24 ✓ Creates upside potential on originations market if rates decline Servicing 11
Slide 30: Appendix | Results & Reconciliations
Appendix | Results & Reconciliations © 2025 Onity Group Inc. All rights reserved. 30
Slide 31: Scale and diligent cost management improving operating efficiency
Scale and diligent cost management improving operating efficiency Originations Servicing(a) 50 94% 250 40 200 49% 66% 68% 30 150 56% 52% 52% 20 100 30% 31% 28% 28% 26% 10 50 0 0 ($M) Q2'22 Q4'23 Q1'24 Q2'24 Q3'24 Q4'24 ($M) Q2'22 Q4'23 Q1'24 Q2'24 Q3'24 Q4'24 Efficiency Ratio = Adjusted Operating Ex
Slide 32: Condensed Consolidated Balance Sheets (unaudited)
Condensed Consolidated Balance Sheets (unaudited) Assets December 31, September 30, December 31, (Dollars in millions) 2023 2024 2024 Cash and cash equivalents 202 202 185 Restricted cash 54 78 81 Mortgage servicing rights (MSRs), at fair value 2,272 2,224 2,466 Advances, net 679 523 577 Loans held
Slide 33: Condensed Balance Sheet Breakdown
Condensed Balance Sheet Breakdown Assets December 31, Rithm, MAV & other Reverse GNMA All (Dollars in millions) 2024 pledged MSR mortgages EBO others Cash and cash equivalents 185 185 Restricted cash 81 81 Mortgage servicing rights (MSRs), at fair value 2,466 584 1,883 Advances, net 577 577 Loans he
Slide 34: Condensed Consolidated Statement of Operations (unaudited)
Condensed Consolidated Statement of Operations (unaudited) Year Ending Year Ending Year Ending (Dollars in millions) December 31, 2022 December 31, 2023 December 31, 2024 Revenue Servicing and subservicing fees 863 947 832 Gain on reverse loans held for investment and HMBS-related borrowings, net 36
Slide 35: 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) and GAAP pre-tax return on equity. We believe these non-GAAP financial measures provide a use
Slide 36: Notables and Adjusted Pre-tax Income (Loss) Calculation
Notables and Adjusted Pre-tax Income (Loss) Calculation (Dollars in millions) Q4’23 Q1’24 Q2’24 Q3’24 Q4’24 FY’21 FY’22 FY’23 FY’24 I Reported net income (loss) (47) 30 11 21 (28) 18 26 (64) 34 A Income tax benefit (expense) (2) (2) (3) (6) 6 22 1 (6) (5) II Reported pre-tax income (loss) [ I – A ]
Slide 37: ROE Calculations
ROE Calculations (Dollars in millions) Q4’23 Q1’24 Q2’24 Q3’24 Q4’24 FY’21 FY’22 FY’23 FY’24 I Reported net income (loss) (47) 30 11 21 (28) 18 26 (64) 34 A Preferred stock dividend - - - - (1) - - - (1) II Reported net income (loss) attributable to (47) 30 11 21 (29) 18 26 (64) 33 common stockholde
Slide 38: Q4'24 P&L GAAP to Adjusted Bridge
Q4’24 P&L GAAP to Adjusted Bridge Rithm, MAV & MSR FV Servicing Segment Reverse Other Inter-Segment GAAP Other Pledged Reclass Adjustments Notables Reclass Adjusted (Dollars in millions) MSR Reclass Notables Revenue 194 (30) 8 28 (13) 188 MSR Valuation Adjustments, net (26) 0 (4) (12) (42) Operating
Slide 39: End Notes
End Notes SLIDE 36 SLIDE 36 cont. a) MSR valuation adjustments that are due to changes in market interest i) Certain previously presented notable categories with nil numbers for rates, valuation inputs or other assumptions, net of overall fair value each period shown have been omitted gains / (losse
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