Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Nationstar Mortgage LLC | d353475d8k.htm |
| EX-99.2 - TRANSCRIPT OF THE EARNINGS CALL OF NATIONSTAR MORTGAGE HOLDINGS INC. - Nationstar Mortgage LLC | d353475dex992.htm |
| EX-99.1 - TEXT OF PRESS RELEASE OF NATIONSTAR MORTGAGE HOLDINGS, INC. - Nationstar Mortgage LLC | d353475dex991.htm |
 Q1 2012
Earnings Presentation Three Months Ended March 31, 2012
May 15, 2012
Exhibit 99.3 |
 Forward
Looking Statements 1
Any statements in this presentation that are not historical or current facts are
forward-looking statements. Forward-looking statements include,
without limitation, statements concerning plans, objectives, goals, projections,
strategies, future events or performance, and underlying assumptions and other
statements, which are not statements of historical facts. Forward-looking statements convey the Company’s current expectations or
forecasts of future events. When used in this presentation, the words
“anticipate,” “appears,” “foresee,” “intend,” “should,” “expect,” “estimate,”
“target,” “project,” “plan,” “may,”
“could,” “will,” “are likely” and similar expressions are intended to identify forward-looking statements. These
statements involve predictions of our future financial condition, performance, plans
and strategies, and are thus dependent on a number of factors including, without
limitation, assumptions and data that may be imprecise or incorrect. Specific factors that may impact performance or other
predictions of future actions have, in many but not all cases, been identified in
connection with specific forward-looking statements. Forward-looking
statements involve known and unknown risks, uncertainties and other factors that may
cause the Company’s actual results, performance or achievements to be
materially different from any future results, performances or achievements expressed or implied by the forward-looking
statements. Certain of these risks and uncertainties are described in the “Risk
Factors” section of Nationstar Mortgage LLC’s Annual Report on Form
10-K for the year ended December 31, 2011, and other required reports, as filed with the SEC, which are available at the SEC’s website at
http://www.sec.gov. We caution you not to place undue reliance on these
forward-looking statements that speak only as of the date they were made.
Unless required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect
circumstances or events after the date of this presentation. |
 $22
$46
$65
$136
Q1
$77
$300
0
50
100
150
200
250
300
350
2008
2009
2010
2011
2012
Estimate
Q1 2012 Highlights
AEBITDA up 63% to $77 million; Net Income up 237% to $50 million
Servicing
book
grew
by
nearly
$60
billion
of
UPB
–
committed
to
purchase
Aurora
Bank
(1)
Strongest
quarter
for
loan
originations
in
history
–
originated
$1.2
billion
of
loans
$516 million raised through IPO and post-Q1 debt offering provides ample liquidity
for growth 1)
Pro forma for Aurora acquisition expected to close in May’12
2)
Please see endnotes for AEBITDA reconciliation
$21
$34
$64
$107
$166
0
40
80
120
160
200
2008
2009
2010
2011
Q1 2012
Pro-Forma
2
Servicing Growth
(1)
($bn of UPB)
AEBITDA Growth
(2)
Strong first quarter as a public company –
momentum going forward
($mm) |
 Fee-Based Business Model with Strong Cash Flow
1)
Pro forma for Aurora acquisition assuming $63 billion of UPB
3
$166 billion of UPB
(1)
GSEs / Government
Financial Institutions
Private Investors
Service +1 million customers
Majority are current (85%+)
Borrowers
Mortgage Owners
Originations
Servicing
Adjacent Svcs.
Earn stable contractual fee for servicing residential customers
Make money based on volume and effectiveness
Originate
or
refinance
loans
–
predominantly
based
on
existing
relationships
Addressable Market:
$10+ trillion in servicing UPB
60 million customers |
 Servicing: Performance Drives Earnings
Primary
driver
of
profitability
is
servicing
performance
–
ability
to
drive
down
defaults
and
delinquencies
Best-in-class in delinquencies and roll rates
Our heritage is servicing credit-challenged loans and preserving home
ownership Track record of making loans affordable
1)
Loan
Performance,
Subprime,
2004-
2007
origination
years.
Data
as
of
4/25/12
4
Delinquency Rate
(1)
Positive Roll Rates
(1)
(60+ DQ as % of UPB)
(% of delinquent UPB that improve) |
 Announced
March
6
th
agreement
to
purchase
$63
billion
(1)
in
servicing
assets
from
Aurora
Bank
Total equity investment of $286 million from Nationstar with an internally projected
IRR of 20%+ Expect the transaction to close in the second quarter
Proceeding with all regulatory approvals and integration plan
Capacity additions to ensure portfolio continuity
Aurora Transaction
5
Summary of Aurora Transaction
Servicing Locations
1)
Estimated Q2 2012 balances; 75% non-agency, 25% agency
Receive base servicing
fees + 35% interest in
Excess MSRs
Purchase 65% interest
in Excess MSRs
Nationstar
Aurora
$63 billion of servicing assets
284,625 loans
25% Agency & 75% Non-Agency |
 ResCap
Transaction 6
Announced
May
14
th
agreement
to
purchase
$374
billion
in
servicing
assets
through
363
(“stalking
horse”)
bid
$201 billion in primary servicing rights
$173 billion in sub-servicing contracts
Pro
forma
$550
billion
UPB
–
would
make
Nationstar
largest
non-bank
mortgage
servicer
Anticipate closing in late 2012, subject to auction process as well as court and
other regulatory approvals Entitled to breakup fee of $72 million and up to $10
million of expense reimbursement $374 billion of servicing assets
2.4 million customers
68% Agency & 32% Non-Agency
Summary of Rescap Transaction
Receive base servicing
fees + 35% interest in
Excess MSRs
Purchase up to 65%
interest in Excess
MSRs alongside
Fortress affiliates
Servicing Locations
ResCap
Nationstar
Aurora |
 Approximately
$350
billion
has
transferred
from
banks
to
non-banks
over
the
past
2
years
(1)
Limited number of qualified buyers / subservicers
High barriers to entry
Must have strong agency relationships
Transformational shift
Basel III capital requirements
Regulatory and headline risk
Focus on core customer wallet share
Servicing: Strong Pipeline of Growth Opportunities
1)
Bank transactions June 2010 through April 2012. Ocwen 8-K, September 2010; National
Mortgage News, November 2010; Bloomberg, June 2011; Bloomberg, October 2011; SEC S-4/A Filing, filed by Nationstar Mortgage LLC,
June 2011; Wall Street Journal, August 2011; Nationstar, 2011; National Mortgage News,
November 2011; Reverse Mortgage Daily, December 2011; 8-K Filing, filed by Nationstar Mortgage LLC, March 2012
7
Favorable Supply -
Demand Dynamics |
 28%
33%
36%
38%
20%
25%
30%
35%
40%
Q2 '11
Q3 '11
Q4 '11
Q1 '12
$1.5
$2.8
$3.4
$4.8
$-
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
2009
2010
2011
Q1 '12 Ann.
Originations: Enhances Core Servicing Platform
8
Origination Volume
Recapture Rate
($bn of UPB)
Originations supplements core servicing operations
Most cost effective way to create servicing
Extends life of servicing cash flows
Enables refinancing as loss mitigation tool
Cash flow positive and profitable |
 $60
million in total cash / near-cash revenue Originations: Cash-Driven
Economics 1)
Includes mark to market on loans held for sale and derivative/hedges
2)
As of 4-30-12.
($mm)
Cash
–
Points,
Fees,
Gain
on
Sale
$43.9
Pipeline
Value
(1)
(Converts to cash in 90 days)
16.5
Subtotal Cash / Near Cash Revenue
$60.4
Servicing Asset
(Cash value realized over time)
13.0
Other
(2.9)
Total Originations Revenue
$70.5
Originations Volume
$1,190
Application
Pipeline
(2)
$1,937
Q1 2012 Unit Economics
9
Cash / near cash is
86% of total revenue |
 Originations: Creating New Customer Relationships with KB
10
1)
Source: Housing Zone
2)
Source: February 2012 KB Home Investor Presentation
On
March
12
th
,
KB
Home
named
Nationstar
as
its
preferred
mortgage
lender
KB Home is the 5
largest homebuilder in US
(1)
Nearly
$1.6
billion
in
home
sales
in
2011
(1)
Less interest rate-sensitive profile
Loan originations expected to begin this month (May’12)
$125 million application pipeline expected
Hired approximately 150 dedicated employees
KB Home Geographic Footprint
KB Home Buyer Mix
(2)
(2)
th |
 Consolidated Performance
1)
Adjusted
EBITDA,
refer
to
Endnotes
disclaimer
and
reconciliation
to
net
income
slide
2)
Includes Legacy Segment
11
Operating Segment Revenue of $161.6 million and Operating Segment
AEBITDA of $77.2 million Total GAAP Net Income of $50.2 million
Operating Segment AEBITDA per share of $1.04 and Total GAAP EPS of $0.67
Q4'11
($ millions except where noted)
Servicing
Originations
Operating
Total
(2)
Total
Revenue
$91.1
$70.5
$161.6
$161.7
$119.4
Expense
$59.2
$28.5
$87.7
$96.6
$86.5
AEBITDA
(1)
$34.8
$42.4
$69.8
$39.7
margin%
38%
60%
48%
Pre-Tax Income
$61.4
$53.3
$14.9
Net Income -
GAAP
$50.2
$14.9
Per Share Data:
AEBITDA
$0.47
$0.57
$0.94
$0.57
Pre-Tax Income
$0.83
$0.72
$0.21
Net Income -
GAAP
$0.67
$0.21
Q1 '12
$1.04
$77.2 |
 Balance
Sheet 12
Significant cash for investment with the proceeds from the IPO
Strong operating cash flow for the quarter
1)
Includes receivables from affiliates
2)
Includes mortgage loans for sale and mortgage loans held for investment subject to
nonrecourse debt (legacy assets) 3)
Notes payable includes servicing advance facilities and origination warehouse
facilities $ millions
Q1 '12
Q4 '11
$ millions
Q1 '12
Q4 '11
Assets:
Liabilities:
Cash and cash equivalents
$356
$62
Notes payable
(3)
$768
$873
Restricted cash
109
71
Senior unsecured notes
281
280
Accounts receivable
(1)
535
567
Payables and accrued liabilities
241
184
Mortgage loans held for sale
(2)
620
702
Nonrecourse debt -
Legacy assets
110
112
Mortgage servicing rights -
fair value
266
251
Excess spread financing at fair value
47
45
Property and equipment, net
25
24
Participating interest financing
114
-
Other assets
268
111
Other liabilities
25
13
Total Liabilities
$1,586
$1,507
Shareholders Equity
$593
$281
Total Assets
$2,179
$1,788
Total Liabilities and Shareholders Equity
$2,179
$1,788 |
 Appendix
13 |
 AEBITDA
Reconciliation 14
For Quarter Ended March 31, 2012
For Quarter Ended December 31, 2011
$ Millions
Servicing
Originations
Operating
Legacy
Total
Adjusted EBITDA
$34.8
$42.4
$77.2
($7.5)
$69.8
Interest expense on corporate notes
(8.5)
-
(8.5)
-
(8.5)
MSR valuation adjustment
0.5
-
0.5
-
0.5
Excess spread adjustment
(4.9)
-
(4.9)
-
(4.9)
Amortization of mort. serv. obligations
0.6
-
0.6
-
0.6
Depreciation & amortization
(0.9)
(0.4)
(1.2)
(0.3)
(1.5)
Stock-based compensation
(2.2)
(0.2)
(2.4)
-
(2.4)
Fair value adjustment for derivatives
0.0
-
0.0
(0.3)
(0.3)
Pre-Tax Income
$19.6
$41.8
$61.4
($8.0)
$53.3
Income taxes
(3.1)
Net Income
$50.2
AEBITDA per Share
(1)
$0.47
$0.57
$1.04
($0.10)
$0.94
$ Millions
Servicing
Originations
Operating
Legacy
Total
Adjusted EBITDA
$35.6
$11.7
$47.3
($7.6)
$39.7
Interest expense on corporate notes
(7.8)
-
(7.8)
-
(7.8)
MSR valuation adjustment
(8.2)
-
(8.2)
-
(8.2)
Excess spread adjustment
(3.1)
-
(3.1)
-
(3.1)
Amortization of mort. serv. obligations
-
-
-
-
-
Depreciation & amortization
(0.8)
(0.4)
(1.2)
(0.3)
(1.5)
Restructuring charges
-
(1.8)
(1.8)
-
(1.8)
Stock-based compensation
(2.4)
(0.3)
(2.7)
-
(2.7)
Fair value adjustment for derivatives
0.3
-
0.3
-
0.3
Net Income
$13.6
$9.2
$22.8
($7.9)
$14.9
AEBITDA per Share
(2)
$0.51
$0.17
$0.68
($0.11)
$0.57
1)
Calculated using a fully diluted average share count of 74.561 million shares
2)
Calculated using a fully diluted average share count of 70.000 million shares
|
 AEBITDA
Reconciliation (continued) 15
For Quarter Ended March 31, 2011
1)
Calculated using a fully diluted average share count of 70.000 million shares
$ Millions
Servicing
Originations
Operating
Legacy
Total
Adjusted EBITDA
$23.7
$4.3
$28.0
($4.1)
$23.8
Interest expense on corporate notes
(7.5)
(0.1)
(7.5)
-
(7.5)
MSR valuation adjustment
(3.8)
-
(3.8)
-
(3.8)
Excess spread adjustment
-
-
-
-
-
Amortization of mort. serv. obligations
-
-
-
-
-
Depreciation & amortization
(0.4)
(0.3)
(0.6)
(0.1)
(0.8)
Stock-based compensation
(4.7)
(0.5)
(5.2)
(0.0)
(5.3)
Fair value adjustment for derivatives
0.9
-
0.9
-
0.9
Net Income
$8.2
$3.4
$11.6
($4.3)
$7.4
AEBITDA per Share
(1)
$0.34
$0.06
$0.40
($0.06)
$0.34 |
 AEBITDA
Reconciliation (continued) 16
1)
Calculated using a fully diluted average share count of 70.000 million shares
FY 2008
FY 2009
FY 2010
FY 2011
Net income (loss)
(157,610)
$
(80,877)
$
(9,914)
$
20,887
$
Adjust for:
Net loss from Legacy Portfolio and Other
164,738
97,263
24,806
24,892
Interest expense from unsecured senior notes
–
–
24,628
30,464
Depreciation and amortization
1,172
1,542
1,873
3,395
Change in fair value of MSRs
11,701
27,915
6,043
39,000
Fair
value
changes
on
excess
spread
financing
–
–
–
3,060
Share-based compensation
1,633
579
8,999
14,764
Exit costs
–
–
–
1,836
Fair value changes on interest rate swaps
–
–
9,801
(298)
Ineffective portion of cash flow hedge
–
–
(930)
(2,032)
Adjusted EBITDA
(1)
21,634
$
46,422
$
65,306
$
135,968
$ |
 Endnote
Adjusted EBITDA (“AEBITDA”)
17
This disclaimer applies to
every usage of “Adjusted EBITDA” or “AEBITDA” in this presentation. Adjusted EBITDA
is a key performance metric used by management in evaluating the performance of our
segments. Adjusted EBITDA represents our Operating Segments' income
(loss), and excludes income and expenses that relate to the financing of our senior notes, depreciable (or amortizable) asset base of
the business, income taxes (if any), exit costs from our restructuring and certain
non-cash items. Adjusted EBITDA also excludes results from our legacy asset
portfolio and certain securitization trusts that were consolidated upon adoption of the new accounting guidance eliminating the concept of a
qualifying special purpose entity ("QSPE“).
|