Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Nationstar Mortgage Holdings Inc. | d482571d8k.htm |
 Investor
Presentation February 2013
Financial data as of September 30, 2012
Exhibit 99.1 |
 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 Nationstar Mortgage
Holdings Inc.’s (“Nationstar”) current expectations or forecasts of
future events. When used in this presentation, the words “anticipate,”
“appears,”
“believe,”
“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 Nationstar’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
Form
10-K
for
the
year
ended
December
31,
2011,
Nationstar
Mortgage Holdings Inc.’s Form 10-Q for the quarter ended September 30, 2012,
and other reports 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, Nationstar undertakes no obligation to
publicly update or revise any forward-looking statements to reflect
circumstances or events after the date of this presentation. |
 Our
Business 1)
Proforma UPB and customers include Q3 ‘12 end of period UPB, $13B UPB BofA
acquisition closed in Q4 ’12, and ~$215B UPB acquired portfolio. Acquired portfolio transfers to occur as investor and
other third-party approvals are received
2)
Annual origination run-rate based on Q3’12 annualized
3) As of February 8, 2013
$425B of UPB
(1)
Service 2.5MM+ customers
(1)
Focused on asset performance
and credit risk management
Servicing
Originations
2
A leading services provider to the residential mortgage market
Economics across mortgage
lifecycle
Settlement
Processing
Asset management
Solutionstar
Corporate Highlights:
Established in 1994 as a division of Centex Homes
Sold to funds managed by Fortress Investment Group in 2006
Publicly traded (NYSE: NSM) with market
capitalization of over $3.3B
(3)
Over 4,900 total employees
$7.2B annual production
(2)
Agency and government
Servicing substantially retained |
 Nationstar: Residential Services Provider
Focus on core customers
Shedding non-core assets
Capital constraints and pressures
Legal, regulatory, headline risk
Need for regulatory solutions
3
…Creating a Need for a Strategic Service Partner
Financial Institutions Re-evaluating Their Mortgage Business Models…
Complete outsourcing
Credit risk management
Origination/fulfillment
Default servicing
Core/non-core servicing
Solutionstar
Multiple Fee-Based Revenue Streams
Long-term partner of choice to financial institutions |
 Nationstar: Residential Services Provider
Highly dependent on economic cycle
Capital intensive
Credit exposure
Single source of income
Transaction focus
4
Nationstar model designed to outperform in all markets…
…Traditional mortgage banking model
Fee-based income in all environments
Capital-light growth model
Minimal credit risk; loans sold into secondary market
Debt facilities not linked to mark-to-market swings
Broad array of services to consumers, credit investors, financial institutions
Customer focus
Diverse revenue streams, strong cash flows, sustainable platform leads to higher
valuation Versus |
 BofA
Portfolio
Acquisition
–
Landmark
Acquisition
5
5
1)
Balances as of Nov. 30, 2012; balances may change prior to closing due to normal
portfolio run-off 2)
Proforma UPB includes Q3 ‘12 end of period UPB, $13B UPB BofA acquisition closed in
Q4 ’12, and ~$215B UPB acquired portfolio. Acquired portfolio transfers to occur as investor and other third-party approvals are
received
3)
Please refer to Endnotes for information regarding 2013E and 2014E Net Income; CAGR and
bar chart amounts for 2013E and 2014E represent midpoint of ranges for proforma combined Company
Acquiring $215B
(1)
servicing book; proforma UPB of $425B
(2)
; 1.3MM new customers
Capture multiple revenue streams driving profitability over entire economic cycle
Significant earnings accretion expected
Net Income Growth
(3)
$ in millions
Deal Summary
$ in millions
$ UPB
$215,000
MSRs
$1,345
Servicing Advances
$5,800
Total Assets
$7,145
MSR Price (bps)
63
Average Servicing Fee (bps)
33
MSR Purchase Multiple
1.9x
$21
$220
$335 -
$395
$510 -
$590
0
100
200
300
400
500
600
2011
Q3'12 RR
2013E
2014E |
 Earnings
Estimates 1)
Assumes 90.7 million shares outstanding
2)
Please refer to Endnotes for information regarding 2013E and 2014E AEBITDA, Net Income
and EPS 6
Acquisition highly accretive
2013 estimates reflect year-one portfolio ramp and integration
2014 estimates reflect fully ramped earnings power of the Company
AEBITDA per share
(1)(2)
Earnings per share
(1)(2)
2013E
2014E
Acquired Portfolio
Total Company Estimate
Acquired Portfolio
Total Company Estimate
$2.20 -
$2.55
$9.50 -
$11.05
$4.65 -
$5.40
$12.30 -
$14.30
$0.70 -
$0.80
$3.70 -
$4.35
$2.30 -
$2.70
$5.60 -
$6.50 |
 Future
Growth
Opportunities
(1)
Servicing
Originations
Bulk Servicing
(2)
Flow Servicing
Channel Development
MSRs and subservicing
Multiple lenders
Already executed
agreements ~ $10B for
‘13
KB Home/Builder
Wholesale
Correspondent
Potential Opportunity Size:
Macro-thesis of secular shift remains intact; legal, regulatory and headline risk
for banks persists Growth of customer base presents opportunity for expansion of
Solutionstar Solutionstar
2.5 million customers in
servicing portfolio
(3)
Multiple fee-based opportunities
7
1)
The identified opportunities referenced above are not currently serviced by the Company
and there can be no assurance that these potential servicing transactions will ultimately be
consummated, or will remain the same size. Notwithstanding the above, it is possible
that these potential servicing transactions, if consummated, could result in a partial or total loss of any
invested capital
2)
All pipeline deals are under a signed non-disclosure agreement between Nationstar
and the counter-party
3)
Proforma UPB and customers include Q3 ‘12 end of period UPB, $13B BofA acquisition
closed in Q4 ’12, and ~$215B acquired portfolio. Acquired portfolio transfers to occur as investor and
other third-party approvals are received Pipeline of
opportunities remains elevated for the foreseeable future $300 billion+
$25-50 billion annually
$425 billion portfolio
(3) |
 Servicing
Profitability Ramp 8
Expense Reduction (bps)
EPS
Impact
$0.30 EPS per 1 bps
improvement in servicing
expenses
1)
Notes to replace $300 million in existing Agency servicing advance facilities that
carried a weighted average floating rate of Libor plus 2.86%, or 3.10% in total, resulting in a reduction in rate of 1.65% as of Jan. 24, 2013
2)
For illustrative purposes only. This illustration uses assumptions that affect
results shown, including assumptions that are based on factors that are beyond NSM’s control. Actual results could differ from this illustration. Assumes 90.7
million shares outstanding; marginal tax rate of 35%
Illustrative Cost Reduction Example
(2)
Targeting 8 bps servicing expense reduction by Q3 ‘14
Assumptions
$2.50
8
$0.00
$0.50
$1.00
$1.50
$2.00
$3.00
$3.50
1
2
3
4
5
6
7
9
10
Multiple
initiatives
underway:
Cost
per
loan:
Strategic
sourcing
of
non-customer
facing
functions
Portfolio
performance:
Reduced
Aurora
60+
DQ
rate
by
250
bps
since
boarding
Reduce
advance
costs:
$300MM
GSE
advance
securitization
(reducing
funding
cost
by
>1.65%)
(1)
Opportunity
for
non-agency
securitizations
(significant
potential
savings)
Servicing portfolio:
$425B
Targeted Improvement:
8
bps |
 Advance
Securitization: Significant Earnings Catalyst 9
1)
Notes to replace $300 million in existing Agency servicing advance facilities that
carried a weighted average floating rate of Libor plus 2.86%, or 3.10% in total, resulting in a reduction in rate of 1.65% as of Jan. 24, 2013
2)
For illustrative purposes only. This illustration uses assumptions that affect
results shown, including assumptions that are based on factors that are beyond NSM’s control. Actual results could differ from this illustration. Assumes 90.7
million shares outstanding; marginal tax rate of 35%
Attractive asset class from a credit and cash flow perspective
$300 million agency advance securitization executed in January ‘13
Blended
average
rate
of
1.46%;
reduction
of
funding
cost
by
1.65%
(1)
Fixed rate at historic lows; high investor demand with deal
over-subscribed Approximately $7.5 billion of advance receivables after BofA
closings Emerging asset class drives reduction in interest expense
Advances
(as
of
9/30)
Advance Balances post BofA
Balances:
WA Rate:
Rate Type:
Est.
Annual
Expense:
Balances:
$1.9B
Potential
Savings
(2)
:
Potential EPS
Benefit
(2)
:
1.00%
$7.5B
$0.54
Floating
Rate Type:
Fixed
3.65%
~$70MM |
 Originations: Enhances Core Servicing Platform
10
($bn of UPB)
Capitalize on market dislocation; wide margins & limited supply
1)
2012 data as of September 30, 2012
Origination
Volume
$1.5
$2.8
$3.4
$7.2
$16.0+
0
5
10
15
20
2009
2010
2011
Q3 '12 Ann.
2013E
Primary Strategy:
Recapture
of refinanced Nationstar loans
Cash flow-positive, cost-effective creation of servicing assets
2013/2014 Objectives:
HARP:
Exhaust portfolio of HARP/recapture opportunities to capitalize on margin
premium Build Out Channels:
Wholesale, correspondent, direct-to-consumer
Builder:
Execute additional ventures with homebuilders; set stage for return of purchase
money (1) |
 Solutionstar
2013 Expectations:
$200 million in revenue
15%
of
revenue
from
3
party
customers
11
Processing
Real Estate
Settlement
Opportunity to capture economics across the entire mortgage lifecycle
Acquired Equifax Settlement Services on 2/7/13
Leading provider of appraisal, title insurance and
settlement services
Broad array of blue chip clients; largest financial
institutions in the country
rd
Claims Processing
FCL Processing
BK Processing
Recovery Services
Closing Services
Title Services
Valuation Services
Field Services
Brokerage
REO and SPO Auctions
Traditional REO |
 Illustrative Example: Solutionstar Earnings Lever
12
Technology-based solutions generate significant earnings opportunities
Large-scale
REO
activity
with
nearly
16,000
properties
in
portfolio
(1)
Attractive, capital-light, fee-based earnings stream linked to UPB growth
Similar business models generate 20%+ pre-tax margins
# of REO Sales
EPS
Impact
$0.01 EPS per 1% improvement in net fee
$0.06 EPS per 1,000 increase in unit sales
Illustrative
REO
Example
Sample
Economics
–
REO
Dispositions
(2)
$0.30
1)
As of September 30, 2012
2)
For illustrative
purposes
only.
This
illustration
uses
assumptions
that
affect
results
shown,
including
assumptions
that
are
based
on
factors
that
are
beyond
NSM’s
control.
Actual
results
could differ
from
this
illustration.
Assumes
90.7
million
shares
outstanding;
marginal
tax
rate
of
35%
$0.00
$0.10
$0.20
$0.40
$0.50
$0.60
REO sales:
5,000
Avg. balance:
$200,000
Net
fees:
4%
$40MM
(1) |
 At
Current Levels, NSM Represents Value Proposition 13
‘14E P/E
Multiple
1)
Fee-based service peer group of Fidelity National, Old Republic, Lender Processing
Services, Corelogic, First American Financial. Average of ‘14 P/E multiples based on share prices as of February 8, 2013
2)
Sterne Agee Industry Report, January 10, 2013
3)
Peer group consists of OCN and WAC. Average for ‘14 P/E multiple based on
share prices as of February 8, 2013 4)
Based on February 8, 2013 closing price of $37.36 and mid-point of ’14E EPS
guidance of $6.05 NSM Discount
-
32%
Average
for
fee-based
service
providers
12–14x
(1)
Historical average P/E ratio for mortgage companies
has
been
8-10x
(2)
Peers trading at discount to historical multiples for
originators/servicers and fee-based providers
6x
7x
8x
9x
10x
12x
14x
8.2x
6.2x
Fee-Based Service
Providers
NSM trading at significant discount to peers, historical valuations
Peer
Average
(3)
Nationstar
(4)
Mortgage Cos. –
Historical Average |
 Key
Focus 14
Maximize
shareholder
value via…
Strong cash flow generation….
Balanced platform generating diverse fee income in all environments
Grow segments that have commanded higher valuations
Increased profitability….
Reduce cost per loan and delinquencies, strategic outsourcing
Increase originations productivity; reduce time to fund
High ROE investment opportunities….
BofA
servicing
portfolio
>
20%
IRR
(1)
Equifax
Settlement
Services
>
20%
IRR
(1)
Capital optimization….
Drive down cost of debt financing
Lock-in low cost fixed rate financing for advances
1)
Return expectations based on acquisition underwriting. Acquisition
underwriting uses assumptions that affect results shown, including assumptions that are based on factors that are beyond NSM’s control. Actual results could differ
from the initial underwriting |
 Appendix
7 |
 $22
$46
$65
$136
$301
0
50
100
150
200
250
300
350
400
450
2008
2009
2010
2011
2012
Estimate
$400+
$21
$34
$64
$107
$198
0
40
80
120
160
200
2008
2009
2010
2011
Q3 '12
$7
$16
$15
$46
$331
0
50
100
150
200
250
300
350
2008
2009
2010
2011
Q3 '12 RR
$97
$156
$267
$ 379
$1,108
0
200
400
600
800
1,000
1,200
2008
2009
2010
2011
Q3 '12 RR
Focused on Profitable Growth
Pre-Tax Income Growth ($mm)
(1)
UPB Growth ($bn)
Revenue Growth ($mm)
(1)
AEBITDA Growth ($mm)
(1)(2)
Margin (%)
22%
30%
24%
36%
7%
11%
6%
30%
12%
9M
16
1) Revenue, AEBITDA and pre-tax income from operating
segments 2) Please see
Endnotes for information on AEBITDA and reconciliations on page 17 |
 AEBITDA
Reconciliation 17
1)
For operating segments
($ in thousands)
Nine Months
Ended
FY 2008
FY 2009
FY 2010
FY 2011
Q3 ’12
9/30/12
Net Income (loss)
$ (157,610)
$ (80,877)
$ (9,914)
$ 20,887
$ 55,067
$ 141,528
Adjust for:
Net loss from Legacy Portfolio and Other
164,738
97,263
24,806
24,892
2,874
18,294
Interest expense from unsecured senior notes
-
-
24,628
30,464
17,656
39,714
Depreciation and amortization
1,172
1,542
1,873
3,395
2,772
5,773
Change in fair value of MSRs
11,701
27,915
6,043
39,000
22,430
42,810
Amortization of mortgage servicing obligations
-
-
-
-
(2,652)
(3,276)
Fair value changes on excess spread financing
-
-
-
3,060
(2,213)
5,050
Share-based compensation
1,633
579
8,999
14,764
2,623
11,371
Exit costs
-
-
-
1,836
-
-
Fair value changes on interest rate swaps
-
-
9,801
(298)
(236)
(424)
Ineffective portion of cash flow hedge
-
-
(930)
(2,032)
-
-
Income tax expense
-
-
-
-
24,714
40,639
Adjusted EBITDA
(1)
$ 21,634
$ 46,422
$ 65,306
$ 135,968
$ 123,035
$ 301,479 |
 Endnotes
Pro-forma
Earnings
Per
Share
(“Pro-forma
EPS”)
This
disclaimer
applies
to
every
usage
of
pro-forma
EPS
in
this
presentation.
Pro-forma
EPS
is
a
metric
that
is
used
by
management to exclude certain non-recurring items in an attempt to provide a better
earnings per share comparison to prior periods. Pro-forma Q3 ‘12 EPS excludes certain expenses
related
to
ResCap
and
other
transactions.
These
expenses
include
the
advance
hiring
of
servicing
staff,
recruiting
expenses
and
travel
and
licensing
expenses.
Pro-forma
Q2
‘12
EPS
excluded certain expenses incurred in advance of the closing of the Aurora transaction.
Pro-forma
AEBITDA
Per
Share
This
disclaimer
applies
to
every
usage
of
pro-forma
AEBITDA
per
share
in
this
presentation.
Pro-forma
AEBITDA
per
share
is
a
metric
that
is
used
by management to exclude certain non-recurring items in an attempt to provide a
better earnings per share comparison to prior periods. Pro-forma Q3 ‘12 AEBITDA per share
excludes certain expenses related to ResCap and other transactions. These
expenses include the advance hiring of servicing staff, recruiting expenses and travel and licensing expenses.
Pro-forma Q2 ‘12 AEBITDA per share excluded certain expenses incurred in
advance of the closing of the Aurora transaction. 2013
Estimate
Net
Income
2013
Estimate
Net
Income
is
based
on
our
expectations
of
continued
growth,
current
market
conditions
and
increased
operating
efficiencies
in
our
business in addition to our financial targets for 2013. Our actual Net Income for 2013
on an annualized basis may differ from our 2013(E) Net Income. 2014
Estimate
Net
Income
2014
Estimate
Net
Income
is
based
on
our
expectations
of
continued
growth,
current
market
conditions
and
increased
operating
efficiencies
in
our
business in addition to our financial targets for 2014. Our actual Net Income for 2014
on an annualized basis may differ from our 2014(E) Net Income. Adjusted
EBITDA
(“AEBITDA”)
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
accounting
guidance
eliminating
the
concept
of a qualifying special purpose entity ("QSPE“).
2013
Estimate
AEBITDA
2013
Estimate
AEBITDA
is
based
on
our
expectations
of
continued
growth,
current
market
conditions
and
increased
operating
efficiencies
in
our
business
in addition to our financial targets for 2013. Target for all non-GAAP
figures excludes the same items as we excluded in our 2011/2012 non-GAAP reconciliation, as follows: income
and expenses that relate to the financing of the senior notes, depreciable (or
amortizable) asset base and several other relevant items. Our actual AEBITDA for 2013 on an annualized
basis may differ from our 2013(E) AEBITDA.
2014
Estimate
AEBITDA
2014
Estimate
AEBITDA
is
based
on
our
expectations
of
continued
growth,
current
market
conditions
and
increased
operating
efficiencies
in
our
business
in addition to our financial targets for 2014. Target for all non-GAAP
figures excludes the same items as we excluded in our 2011/2012 non-GAAP reconciliation, as follows: income
and expenses that relate to the financing of the senior notes, depreciable (or
amortizable) asset base and several other relevant items. Our actual AEBITDA for 2014 on an annualized
basis may differ from our 2014(E) AEBITDA.
NOTE: 2013 and 2014 Estimate Net Income and 2013 and 2014 Estimate AEBITDA are
forward-looking and subject to significant business, economic, regulatory and competitive
uncertainties, many of which are beyond the control of Nationstar and its management,
and are based upon assumptions with respect to future decisions, which are subject to change.
Actual results will vary and those variations may be material. Nothing in this
presentation should be regarded as a representation by any person that this target will be achieved and
Nationstar undertakes no duty to update this target.
18 |