Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — Q1 2020 Earnings Presentation
26 slides from Onity's earnings presentation, May 8, 2020
Slide 1: Investor Presentation First Quarter 2020
Investor Presentation First Quarter 2020 May 8, 2020 © 2020 Ocwen Financial Corporation. All rights reserved.
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains 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. These forward-looking statements may be identified by a reference to a fut
Slide 3: Agenda
Agenda 1 Executive Summary 2 Business Update 3 Financial Updates 4 Wrap Up 5 Appendix Ocwen Financial Corporation 3
Slide 4: Strong execution on key initiatives is driving improved business and financial performance
Strong execution on key initiatives is driving improved business and financial performance Q1’20 Financial and Business Highlights Annualized Pre-tax Earnings Excluding Notables ($ millions) (b) Q2'18 Q1'20 • Net loss of $25 million(a) $8 • Pre-tax income excluding notables of $2 million(b) • Shareh
Slide 5: Navigating the current landscape created by the COVID-19 pandemic
We are navigating the current landscape created by the COVID-19 pandemic with commitment and focus COVID-19 Operational Response As of April 30 th granted approximately 115,000 active forbearance plans(a) – consistent with forecast • Transitioned to remote work environment to safeguard 35,000 employ
Slide 6: Expect to maintain sufficient liquidity to meet higher servicing advances
We expect to maintain sufficient liquidity to meet higher servicing advances, fund the business and make targeted investments Liquidity Sources $150 million of servicing • $264 million in unrestricted cash (a) advances(b) • Balance sheet efficiency initiatives - $42 million completed in April - $113
Slide 7: Good momentum in flow and retail channels
Good momentum in our flow and retail channels and we are continuing to expand our capabilities for sustainable originations Total MSR Originations – Excluding Bulk Acquisitions Q1 Highlights $11 billion of annualized • Recapture funded volume of $196 volume in March million for the quarter with gros
Slide 8: Market environment favors strong mortgage operators with comprehensive capabilities
The shift in market environment favors strong mortgage operators like Ocwen with comprehensive capabilities Ocwen continues to be one of the best servicers for non-performing loans, with decades of experience that will help us assist homeowners in the current situation • Built a strong core competen
Slide 9: Expected 2020 financial performance with positive and adverse COVID-19 impacts
We expect our financial performance for the balance of 2020 will see both positive and adverse impacts resulting from the COVID-19 environment Servicing Impact Originations Impact Servicing Revenues Volume Operating Expenses Margins Cash Flows Cash Consumption Advance Financing Costs Production Cost
Slide 10: Financial Updates
FINANCIAL UPDATES Ocwen Financial Corporation 10
Slide 11: Quarter impacted by COVID-19 pandemic and market disruptions
Quarter impacted by COVID-19 pandemic and market disruptions ($ millions, except Diluted Loss per Share) Q4’19 Q1’20 VPQ$(a) Key Results Revenues $262 $254 $(8) Servicing 233 214 (19) • Net loss includes $62 income tax benefit Originations 25 38 13 • Pre-tax loss impacted by COVID-19 and Corpo
Slide 12: Servicing and subservicing growth outpaces runoff
Servicing and subservicing growth outpaces runoff Key Metrics Highlights ($ millions, except UPB) 8,300 • Recorded $56 pre-tax loss vs $59 pre-tax 5,900 income prior quarter $233 $214 - Interest rate and assumption driven net $59 fair value changes $89 unfavorable this quarter compared to $31 favora
Slide 13: Solid progress in growth of originations platform
Solid progress in growth of originations platform Business and Financial Performance Forward ($ millions) Q4’19 Q1’20 VPQ$(a) • Recapture gain on sale of $11, $2 higher than prior quarter Recapture 167 196 29 Correspondent 398 515 117 • $189 higher fall out adjusted lock volume in the quarter
Slide 14: Liquidity and Leverage Update
Liquidity and Leverage Update Cash and Equivalents Corporate Debt(a) ($ millions, except w here otherw ise noted) 1.2x Corp Debt/Equity(a) $428 $639 $513 $264 Q4'19 Q1'20 Q4'19 Q1'20 • $(134) paydown of debt (including SSTL) • $491 SSTL and Senior Secured Notes combined • $(59) MSR financing margin
Slide 15: Near-term impact of forbearance plans on servicing revenues and expenses
Near-term impact of forbearance plans expected to result in lower servicing revenues and higher interest and servicing operating expense Revenue Impact No impact over life of loan, however a deferral in the near term while a loan is on an active forbearance plan Loans in Successful Successful Revenu
Slide 16: Actions taken have positioned Ocwen well to navigate the current environment
The actions we have taken and the resulting performance have positioned Ocwen well to navigate the current environment • Generated pre-tax income excluding notables of $2 million (a) Business • Grew book value per share to $3.32 Performance • Realized adjusted annualized run rate cost savings of $39
Slide 17: Shareholder Relations Information
Shareholder Relations Information About Ocwen Ocwen Financial Corporation (NYSE: OCN) is a leading non-bank mortgage Exchange: New York Stock Exchange (NYSE) servicer and originator providing solutions through its primary brands, PHH Ticker: OCN Mortgage and Liberty Reverse Mortgage. PHH Mortgage is
Slide 18: Appendix
APPENDIX Ocwen Financial Corporation 18
Slide 19: Appendix: Q1 2020 Financials
Appendix: Q1 2020 Financials • Expenses excluding MSR Valuation Adjustments, net and Expense Notables • Income Statement Notables • Total Other (Income) Expense, Net • Servicing Product Overview • MSR Valuation Assumptions • P&L Impact of Fair Value Changes • Debt Facilities Overview Ocwen Financi
Slide 20: Note Regarding Adjustments to GAAP Expenses and Pre-tax Income (Loss)
Note Regarding Adjustments to GAAP Expenses and Pre-tax Income (Loss) In the follow ing slides, w e present supplemental information (including reconciliations) relating to certain illustrative adjustments to GAA P expenses, and pre-tax income (loss). We believe this information is instructive as an
Slide 21: Expenses excluding MSR Valuation Adjustments, net and Expense Notables
Expenses excluding MSR Valuation Adjustments, net and Expense Notables ($ in millions) Q2'18 Q1'20 OCN + PHH OCN OCN (Annualized) (Annualized) I Expenses (as reported)(a) 1,107 (b) II Reclassifications 5 III Deduction of MSR valuation adjustments, net (132) IV Operating Expenses (Expenses excluding
Slide 22: Income Statement Notables
Income Statement Notables ($ in millions) Q2'18 Q1'20 OCN + OCN OCN PHH (Annualized) (a) I Reported Pre-Tax Income / (Loss) (253) (87) (349) Adjustments for Notables Expenses Notables (from prior slide) 7 Non-Agency MSR FV Change (b) (10) (b) Agency MSR FV Change, net of macro hedge 133 NRZ MSR Liab
Slide 23: Total Other (Income) Expense, Net
Total Other (Income) Expense, Net ($ millions) Q4’19 Q1’20 VPQ$ Comments Interest Income $(4.6) $(5.4) $(0.8) Senior Notes 6.8 6.7 (0.1) Advance Match Funded Liabilities 6.0 5.7 (0.4) Senior Secured Term Loan 6.7 6.8 0.1 MSR Financing 3.3 4.7 1.4 Agency, Ginnie Mae and PLS MSR Financing Warehouse Fa
Slide 24: Servicing Product Overview
Servicing Product Overview ($ millions, except UPB) UPB by Source (a) Retained Servicing Revenue Q1’20(b) % of Total $229 $217 $212 $209 Servicing $55 46 Subservicing (c) 5 4 $122 $117 $119 $114 NRZ Retained Fees 29 24 $27 $23 $17 $18 Total Retained Servicing and Subservicing Fees $90 74% $80
Slide 25: MSR Valuation Assumptions
MSR Valuation Assumptions Retained NRZ Sold ($ in millions) FNMA / Non- FNMA / FHLMC FHA / VA Agency Total FHLMC Non-GSE Total (d) UPB 29,623 15,283 24,837 69,743 386 70,526 70,913 Loan Count (000s) 202 116 150 468 0 528 528 Fair Value 217 80 161 458 2 590 592 Fair Value (% of UPB) 0.73% 0.52% 0.65%
Slide 26: P&L Impact of Fair Value Changes
P&L Impact of Fair Value Changes ($ in millions) Q4'19 Q1'20 VPQ$ Non-Agency MSR Fair Value Change 0 - Portfolio change (Run-off) $ (26.3) $ (25.8) $ 0.4 1 - Assumption Changes 0.1 10.4 10.3 2 Total Non-Agency MSR Fair Value Change (26.2) (15.4) 10.7 Agency MSR Fair Value Change 3 - Portfolio change