Ditech — Q1 2018 Earnings Presentation
27 slides from Ditech's earnings presentation, Jun 6, 2018
Slide 1: First Quarter 2018 Earnings Presentation
First Quarter 2018 Earnings Presentation June 6, 2018
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain statements in this presentation constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical fact are forwa
Slide 3: Restructuring Overview
Restructuring Overview • Walter Investment Management Corp. emerged from • Significant debt service obligations under our Credit Chapter 11 under the name Ditech Holding Agreement; $52.5 MN of principal payments remaining Corporation on February 9, 2018 in 2018 ($17.5 MN per quarter) • Post-emergenc
Slide 4: Current Market Environment Overview
Current Market Environment Overview Rate Environment (2) • Refinance as a percentage of total mortgage activity continues to decline, hitting 35% at 3/31/2018 (1) • Rising interest rates have driven margin compression and lower than expected volume throughout the industry in Q1 2018 • Delinquencies
Slide 5: Company Snapshot
Company Snapshot (as of and for the 3 months ended March 31, 2018) Servicing • Ditech is the 12th largest servicer (1) in the industry (by UPB) with more than 1.5 MN loans serviced $183.7 BN 8.55% $71.7 MN • 30+ day delinquency rate of 8.55% $202.4 MN Serviced UPB 30+ Day Pre Tax • $730.6 MN owned M
Slide 6: First Quarter 2018 Highlights
First Quarter 2018 Highlights First Quarter Highlights Key Financial Metrics ($ in millions) Q1 2018 Q1 2017 • Consolidated pre-tax income of $467.0 MN Pre-tax income $ 467.0 $ 4.4 ▪ Includes $464.5 MN in net reorganization gain and fresh start 3/31/2018 12/31/2017 accounting impact Cash and cash eq
Slide 7: Fresh Start Accounting Overview
Fresh Start Accounting Overview • Emerged from Chapter 11 Bankruptcy on February 9, 2018 • Recorded net reorganization and fresh start accounting adjustments of $464.5 MN, which included a gain on cancellation of debt of $556.9 MN and fresh start accounting adjustments of $77.2 MN, partially offset
Slide 8: Balance Sheet and Liquidity
Balance Sheet and Liquidity Liquidity & Funding Balance Sheet Snapshot • During the quarter, cash and cash equivalents decreased ($ in millions) 3/31/2018 12/31/2017 by $69.2 MN to $216.8 MN as of March 31, 2018 Cash and cash equivalents $ 216.8 $ 286.0 • $23.2 MN of cash used to fund reverse Ginnie
Slide 9: 2018 Company Initiatives
2018 Company Initiatives • Reduce our cost to service through • Transition from a HARP focused refinance shop • Process re-engineering to an acquisition lender • Implementing technology solutions to • Expand product offerings to provide the improve efficiency solutions consumers want • Rationalizing
Slide 10: Appendix: Supplemental Information and Reconciliations
Appendix: Supplemental Information and Reconciliations 10
Slide 11: Servicing Segment Highlights
Servicing Segment Highlights Overview First Quarter Financial Highlights • Total UPB serviced decreased $36.5 BN to $183.7 BN at Q1 2018 Q4 2017 Q1 2017 March 31, 2018 from prior year quarter resulting in a ($ in thousands) Actual Actual Variance Actual Variance decline of $34.0 MN in servicing reve
Slide 12: Originations Segment Highlights
Originations Segment Highlights Overview First Quarter Financial Highlights • Revenue of $61.3 MN reflected a $19.5 MN Q1 2018 Q4 2017 Q1 2017 ($ in thousands) Actual Actual Variance Actual Variance decline compared to the prior year quarter Revenues $ 61,326 $ 69,748 $ (8,422) $ 80,808 $(19,482) pr
Slide 13: Reverse Segment Highlights
Reverse Segment Highlights Overview First Quarter Financial Highlights • Revenue decreased $4.5 MN from prior year quarter Q1 2018 Q4 2017 Q1 2017 due to valuation adjustments and changes in market ($ in thousands) Actual Actual Variance Actual Variance pricing Revenues $ 18,043 $ 25,750 $ (7,707) $
Slide 14: Other Segment Highlights
Other Segment Highlights Overview First Quarter Financial Highlights • General and administrative expenses decreased by Q1 2018 Q4 2017 Q1 2017 $32.6 MN from the prior quarter due to costs related ($ in thousands) Actual Actual Variance Actual Variance to our debt restructuring in connection with th
Slide 15: GAAP Consolidated Statements of Net Income (Loss)
GAAP Consolidated Statements of Net Income (Loss) Successor Predecessor Predecessor For the Period February For the Period January For the Three Months Variance 10, 2018 through March 1, 2018 through Ended March 31, 2017 31, 2018 February 9, 2018 $ % REVENUES Net servicing revenue and fees $ 48,355
Slide 16: Servicing Segment P&L
Servicing Segment P&L ($ in thousands) Q1 2018 Q4 2017 Variance Q1 2017 Variance Net servicing revenue and fees $ 173,469 $ 72,754 $ 100,715 $ 108,541 $ 64,928 Interest income on loans 3,752 9,912 (6,160) 10,968 (7,216) Intersegment retention revenue 2,211 2,830 (619) 4,389 (2,178) Net gains (losses
Slide 17: Originations Segment P&L
Originations Segment P&L ($ in thousands) Q1 2018 Q4 2017 Variance Q1 2017 Variance Net gains on sales of loans $ 55,551 $ 63,328 $ (7,777) $ 73,704 $ (18,153) Other revenues 5,775 6,420 (645) 7,104 (1,329) Total revenues 61,326 69,748 (8,422) 80,808 (19,482) Salaries and benefits 27,931 27,439 492
Slide 18: Reverse Mortgage Segment P&L
Reverse Mortgage Segment P&L ($ in thousands) Q1 2018 Q4 2017 Variance Q1 2017 Variance Net fair value gains on reverse loans and related HMBS obligations $ 11,465 $ 18,035 $ (6,570) $ 14,702 $ (3,237) Net servicing revenue and fees 5,316 6,523 (1,207) 7,508 (2,192) Other revenues 1,262 1,192 70 283
Slide 19: Reconciliation of Non-GAAP Measures Q1 2018
Reconciliation of Non-GAAP Measures Q1 2018 ($ in thousands) Servicing Originations Reverse Corporate and Total Mortgage Other Consolidated Income (loss) before income taxes $ 71,747 $ (3,805) $ (12,802) $ 411,889 $ 467,029 Adjustments to income (loss) before income taxes Reorganization items and fr
Slide 20: Reconciliation of Non-GAAP Measures Q4 2017
Reconciliation of Non-GAAP Measures Q4 2017 ($ in thousands) Servicing Originations Reverse Corporate and Total Mortgage Other Consolidated Income (loss) before income taxes $ (79,080) $ 2,679 $ (24,896) $ (117,052) $ (218,349) Adjustments to income (loss) before income taxes Reorganization items —
Slide 21: Reconciliation of Non-GAAP Measures Q1 2017
Reconciliation of Non-GAAP Measures Q1 2017 ($ in thousands) Servicing Originations Reverse Corporate and Total Mortgage Other Consolidated Income (loss) before income taxes $ 48,362 $ 16,328 $ (2,016) $ (58,288) $ 4,386 Adjustments to income (loss) before income taxes Gain on sale of business (67,7
Slide 22: Securitized Reverse Mortgages and VIEs
Securitized Reverse Mortgages and VIEs (1) ($ in millions) Reverse Mortgage - Securitized Portfolio Assets $ 8,712.6 Net fair value liability of $(85.5) MN in securitized Reverse Liabilities 8,798.1 Mortgage portfolio $ (85.5) Residual Trusts Assets $ 437.4 $5.9 MN of residual interest in legacy Wal
Slide 23: Use of Non-GAAP Measures and Definitions
Use of Non-GAAP Measures and Definitions We manage our company in three reportable segments: Servicing, Originations and Reverse Mortgage. We evaluate the performance of our business segments through the following measures: income (loss) before income taxes and Adjusted Earnings (Loss). Management c
Slide 24: Forward-Looking Statements
Forward-Looking Statements Certain statements in this presentation constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Statements that are not historical fact are forward-looking statements. Certain of these forward-loo
Slide 25: Forward-Looking Statements
Forward-Looking Statements • our ability to maintain our loan servicing, loan origination or collection agency licenses, or any other licenses necessary to operate our businesses, or changes to, or our ability to comply with, our licensing requirements; • our ability to comply with the terms of the
Slide 26: Forward-Looking Statements
Forward-Looking Statements • local, regional, national and global economic trends and developments in general, and local, regional and national real estate and residential mortgage market trends in particular, including the volume and pricing of home sales and uncertainty regarding the levels of mor
Slide 27: Forward-Looking Statements
Forward-Looking Statements • risks related to our relationship with Walter Energy and uncertainties arising from or relating to its bankruptcy filings and liquidation proceedings, including potential liability for any taxes, interest and/or penalties owed by the Walter Energy consolidated group for