Mr. cooper group reports second quarter 2019 financial results
Dallas--(business wire)--mr. cooper group inc. (nasdaq: coop) (the "company"), which principally operates under the mr. cooper® and xome® brands, reported a second quarter net loss of $(87) million, $(0.96) per diluted share, driven predominately by a net fair value mark-to-market on the msr portfolio of $(231) million. excluding the mark-to-market and other items, the company reported pretax operating income of $118 million. items excluded from operating income were $(231) million in mark-to-market, net of the add back of $26 million in fair value amortization that is included in the mark-to-market, $17 million in merger related costs, and $13 million in intangible amortization. chairman and ceo jay bray commented, “the originations segment made a major contribution this quarter, posting record pretax profits of $118 million on record funding of $10 billion. this strong performance is the result of several years of operational focus and technology investments, as well as the pacific union acquisition. the originations segment now acts as a much stronger macro hedge for our servicing operation, and we believe it will play a major role in helping us achieve our profitability and shareholder return targets.” chris marshall, vice chairman and cfo added, “in addition to strong originations results, xome produced a significant increase in profits, reflecting the successful migration of the assurant back-office, strong refinance-driven results in title & close, and third-party client wins in the auction exchange. we believe xome has the potential to contribute significantly to the company’s returns over time.” servicing the servicing segment is focused on providing a best-in-class home loan experience for our 3.8 million customers while simultaneously strengthening asset performance for investors. in the second quarter, servicing recorded pretax loss of $(135) million primarily driven by a net fair value mark-to-market on the msr portfolio of $(231) million. during the quarter the total servicing portfolio grew 2% quarter-over-quarter to $644 billion upb. servicing earned pretax operating income excluding the mark-to-market of $96 million, equivalent to a servicing margin of 6.0 bps. at quarter end, the carrying value of the msr was $3.5 billion, equivalent to 111 bps of msr upb, and the original cost basis was 85 bps. quarter ended ($ in millions) q1'19 q2'19 $ bps $ bps operational revenue $ 324 22.5 $ 314 19.6 amortization, net of accretion (23 ) (1.6 ) (56 ) (3.5 ) mark-to-market (293 ) (20.3 ) (231 ) (14.4 ) total revenues 8 0.6 27 1.7 expenses (195 ) (13.6 ) (189 ) (11.8 ) total other income (expenses), net 1 0.1 27 1.7 loss before taxes (186 ) (12.9 ) (135 ) (8.4 ) mark-to-market 293 20.3 231 14.4 accounting items (9 ) (0.6 ) — — pretax operating income excluding mark-to-market and accounting items $ 98 6.8 $ 96 6.0 quarter ended q1'19 q2'19 ending upb ($b) $ 632 $ 644 average upb ($b) $ 576 $ 639 60+ day delinquency rate 2.4 % 2.3 % annualized cpr 8.2 % 13.0 % modifications and workouts 9,590 12,108 originations the originations segment focuses on creating servicing assets at attractive margins through existing customer relationships, correspondent, and wholesale originations. originations earned record pretax income of $118 million, up from $45 million in the prior quarter. mr. cooper funded 42,933 loans in the second quarter, totaling approximately $10.0 billion upb comprised of $3.5 billion in direct-to-consumer, $5.8 billion in correspondent, and $0.7 billion in wholesale. funded volume increased 76% quarter-over-quarter. quarter ended ($ in millions) q1'19 q2'19 income before taxes $ 45 $ 118 quarter ended ($ in millions) q1'19 q2'19 total pull through adjusted volume $ 5,960 $ 11,197 funded volume $ 5,716 $ 9,996 refinance recapture percentage 52 % 44 % recapture percentage 28 % 23 % purchase volume as a percentage of funded volume 52 % 53 % xome xome provides real estate solutions including property disposition, asset management, title, close, valuation, and field services for mr. cooper and third-party clients. the xome segment recorded pretax income of $7 million, or pretax operating income excluding intangible amortization of $10 million in the second quarter. quarter ended ($ in millions) q1'19 q2'19 income before taxes $ 8 $ 7 accounting items (11 ) — intangible amortization 3 3 pretax operating income excluding intangible amortization and accounting items $ — $ 10 quarter ended q1'19 q2'19 exchange property listings sold 2,421 2,645 average exchange property listings 6,275 6,693 services orders completed 379,585 417,510 percentage of revenue earned from third-party customers 53 % 53 % conference call webcast and investor presentation the company will host a conference call on august 1, 2019 at 9:00 a.m. eastern time. the conference call may be accessed by dialing 855-874-2685, or 720-634-2923 internationally. please use the participant passcode 3194207 to access the conference call. a simultaneous audio webcast of the conference call will be available in the investor section of www.mrcoopergroup.com. a replay will also be available approximately two hours after the conclusion of the conference call by dialing 855-859-2056, or 404-537-3406 internationally. please use the passcode 3194207 to access the replay. the replay will be accessible through august 15, 2019 at 12:00 p.m. eastern time. non-gaap financial measures the company utilizes non-gaap financial measures as the measures provide additional information to assist investors in understanding and assessing the company’s and our business segments’ ongoing performance and financial results, as well as assessing our prospects for future performance. the adjusted operating financial measures facilitate a meaningful analysis and allow more accurate comparisons of our ongoing business operations because they exclude items that may not be indicative of or are unrelated to the company’s and our business segments’ core operating performance, and are better measures for assessing trends in our underlying businesses. these notable items are consistent with how management views our businesses. management uses these non-gaap financial measures in making financial, operational and planning decisions and evaluating the company’s and our business segment’s ongoing performance. pretax operating income (loss) in the company and servicing segment eliminates the effects of mark-to-markets in fair value measurements of msrs and their related financing liabilities for which a fair value accounting election was made. these adjustments, which can be highly volatile and material due to changes in credit markets, are not necessarily reflective of the gains and losses that will ultimately be realized by the company. pretax operating income (loss) in each segment also eliminates, as applicable, transition and integration costs, gains (losses) on sales of fixed assets, intangible amortization, and other adjustments based on the facts and circumstances that would provide investors a supplemental means for evaluating the company’s core operating performance. forward looking statements any statements in this release that are not historical or current facts are forward looking statements, including statements regarding originations' role in achieving profitability and shareholder return targets and xome's significant contributions to returns. forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. results for any specified quarter are not necessarily indicative of the results that may be expected for the full year or any future period. certain of these risks and uncertainties are described in the "risk factors" section of mr. cooper group's most recent annual reports and other required documents as filed with the sec which are available at the sec’s website at http://www.sec.gov. mr. cooper undertakes no obligation to publicly update or revise any forward-looking statement or any other financial information contained herein, and the statements made in this press release are current as of the date of this release only. financial tables mr. cooper group inc. and subsidiaries unaudited consolidated statements of operations (millions of dollars, except for earnings per share data) three months ended march 31, 2019 three months ended june 30, 2019 revenues: service related, net $ 377 $ 368 mark-to-market (293 ) (231 ) net gain on mortgage loans held for sale 166 262 total revenues 250 399 total expenses 443 492 other income (expense): interest income 134 162 interest expense (189 ) (187 ) other income (expenses) 15 1 total other income (expenses), net (40 ) (24 ) income before income tax benefit (233 ) (117 ) income tax benefit (47 ) (29 ) net loss (186 ) (88 ) net loss attributable to non-controlling interest — (1 ) net loss attributable to mr. cooper group $ (186 ) $ (87 ) loss per share attributable to common stockholders: basic $ (2.05 ) $ (0.96 ) diluted $ (2.05 ) $ (0.96 ) weighted average shares of common stock outstanding (in thousands): basic 90,828 91,054 diluted 90,828 91,054 mr. cooper group inc. and subsidiaries unaudited consolidated balance sheets (millions of dollars) march 31, 2019 june 30, 2019 assets cash and cash equivalents $ 181 $ 245 restricted cash 339 304 mortgage servicing rights 3,488 3,511 advances and other receivables, net 1,147 1,000 reverse mortgage interests, net 7,489 7,110 mortgage loans held for sale at fair value 2,170 3,422 mortgage loans held for investment at fair value 118 114 property and equipment, net 112 115 deferred tax asset 1,024 1,055 other assets 1,578 1,529 total assets $ 17,646 $ 18,405 liabilities and stockholders' equity unsecured senior notes, net $ 2,461 $ 2,462 advance facilities, net 578 567 warehouse facilities, net 3,050 4,045 payables and accrued liabilities 1,975 2,116 msr related liabilities - nonrecourse at fair value 1,343 1,472 mortgage servicing liabilities 90 80 other nonrecourse debt, net 6,388 5,985 total liabilities 15,885 16,727 total stockholders' equity 1,761 1,678 total liabilities and stockholders' equity $ 17,646 $ 18,405 unaudited segment statement of operations & earnings reconciliation (millions of dollars, except for earnings per share data) three months ended for march 31, 2019 servicing originations xome corporate and other elimination/ reclassification⁽¹⁾ consolidated service related, net $ 8 $ 15 $ 96 $ — $ (35 ) $ 84 net gain on mortgage loans held for sale — 131 — — 35 166 total revenues 8 146 96 — — 250 total expenses 195 104 99 45 — 443 other income (expense): interest income 115 17 — 2 — 134 interest expense (114 ) (18 ) — (57 ) — (189 ) other expense — 4 11 — — 15 total other income (expense) 1 3 11 (55 ) — (40 ) pretax (loss) income $ (186 ) $ 45 $ 8 $ (100 ) $ — $ (233 ) income tax benefit (47 ) net loss attributable to common stockholders of mr. cooper group $ (186 ) loss per share basic $ (2.05 ) diluted $ (2.05 ) non-gaap reconciliation: pretax (loss) income $ (186 ) $ 45 $ 8 $ (100 ) $ — $ (233 ) mark-to-market 293 — — — — 293 accounting items (9 ) — (11 ) — — (20 ) merger related costs — — — 20 — 20 intangible amortization — — 3 10 — 13 pretax income (loss), net of notable items $ 98 $ 45 $ — $ (70 ) $ — $ 73 fair value amortization⁽²⁾ (25 ) — — — — (25 ) pretax operating income (loss) $ 73 $ 45 $ — $ (70 ) $ — $ 48 income tax expense (12 ) operating income $ 36 rotce 8.7 % ⁽¹⁾ for servicing segment results purposes, all revenue is attributable to servicing the portfolio. therefore, $35 of net gain on mortgage loans is moved to service related, net for the three months ended march 31, 2019. for consolidated results purposes, these amounts were reclassed to net gain on mortgage loans held for sale. ⁽²⁾ amount represents additional amortization required under the fair value amortization method over the cost amortization method. unaudited segment statement of operations & earnings reconciliation (millions of dollars, except for earnings per share data) three months ended for june 30, 2019 servicing originations xome corporate and other elimination/ reclassification⁽¹⁾ consolidated service related, net $ 27 $ 20 $ 108 $ — $ (18 ) $ 137 net gain on mortgage loans held for sale — 244 — — 18 262 total revenues 27 264 108 — — 399 total expenses 189 145 101 57 — 492 other income (expense): interest income 136 23 — 3 — 162 interest expense (109 ) (25 ) — (53 ) — (187 ) other expense — 1 — — — 1 total other income (expense) 27 (1 ) — (50 ) — (24 ) pretax (loss) income $ (135 ) $ 118 $ 7 $ (107 ) $ — $ (117 ) income tax benefit (29 ) net loss $ (88 ) net loss attributable to noncontrolling interests (1 ) net loss attributable to common stockholders of mr. cooper group $ (87 ) loss per share basic $ (0.96 ) diluted $ (0.96 ) non-gaap reconciliation: pretax income (loss) $ (135 ) $ 118 $ 7 $ (107 ) $ — $ (117 ) mark-to-market 231 — — — — 231 merger related costs — — — 17 — 17 intangible amortization — — 3 10 — 13 pretax income (loss), net of notable items $ 96 $ 118 $ 10 $ (80 ) $ — $ 144 fair value amortization⁽²⁾ (26 ) — — — — (26 ) pretax operating income (loss) $ 70 $ 118 $ 10 $ (80 ) $ — $ 118 income tax expense (29 ) operating income $ 89 rotce 23.8 % ⁽¹⁾ for servicing segment results purposes, all revenue is attributable to servicing the portfolio. therefore, $18 of net gain on mortgage loans is moved to service related, net for the three months ended june 30, 2019. for consolidated results purposes, these amounts were reclassed to net gain on mortgage loans held for sale. ⁽²⁾ amount represents additional amortization required under the fair value amortization method over the cost amortization method.
