Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - DITECH HOLDING Corp | d920374d8k.htm |
| EX-99.1 - EX-99.1 - DITECH HOLDING Corp | d920374dex991.htm |
 First
Quarter 2015 Earnings Presentation May 7, 2015
Exhibit 99.2 |
 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-looking
statements
can
be
identified
by
the
use
of
words
such
as
“believes,”
“anticipates,”
“expects,”
“intends,”
“plans,”
“projects,”
“estimates,”
“assumes,”
“may,”
“should,”
“will,”
or other similar expressions. Such forward-looking statements involve
known and unknown risks, uncertainties and other important factors, and our actual
results, performance or achievements could differ materially from future
results, performance or achievements expressed in these forward-looking statements. These forward-looking
statements are based on our current beliefs, intentions and expectations. These
statements are not guarantees or indicative of future performance. Important
assumptions and other important factors that could cause actual results to differ materially from those
forward-looking statements include, but are not limited to, those factors,
risks and uncertainties described in the appendix and in more detail in our
Annual Report on Form 10-K for the year ended December 31, 2014, under the caption "Risk Factors," in Part II, Item 1A
of our Quarterly Report on Form 10-Q for the period ended March 31, 2015 and in
our other filings with the SEC. 2 |
 •
Diversified capabilities position business for
sustainable growth in changing sector
•
Significant alignment of interest exists between the
servicer, the regulators, our clients and our
consumers as we pursue a best-in-class culture of
compliance and enhanced consumer experience
•
Continued focus on enhancing differentiated
platform to drive profitable growth and deliver
value to our shareholders
•
Top 10 national Servicer with serviced UPB of $255 BN
•
Top 20 national Originator focused on retention
opportunity and growing the Retail and Consumer
Direct channels
•
Reverse Mortgage business a leading issuer and
servicer in sector
•
Investment Management business capitalizing on
Walter's depth and scale in mortgage sector and
leveraging our relationship with WCO as a capital
partner
Diversified Mortgage Banking Operations
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
3
Walter Investment Overview
Designated 5-STAR servicer for 2014 by FNMA |
 Q1 2015
Review and Recent Developments Q1 2015 Results
•
$162.7 MN of AEBITDA; $38.3 MN of Adjusted Earnings after taxes or $1.02 per
share •
GAAP net loss of ($31.0 MN) or ($0.82) per share reflects the after tax impact of
fair value charges of $44.5 MN or $1.18 per share
•
Completed sale of strategic investment resulting in ~$30 MN of cash proceeds and $14
MN of income •
Efficiency improvements of ~$8 MN in Q1; on track to achieve $60
MN cost savings in 2015
•
Continued low interest rate environment drove strong performance
in the Originations business
•
Servicing platform received 5-STAR designation for 2014 from FNMA
•
Closed sale of residual interest in 7 of the Residual Trusts generating cash proceeds
of ~$190 MN •
Added MSRs from bulk acquisitions of ~$15 BN UPB expected to close during Q2
2015 Includes $5.6 BN in UPB currently under sub-servicing contract
•
Strong originations volumes continued through April
•
Board of Directors authorized a share repurchase program of up to $50 MN through May
31, 2016 •
On-going efforts to identify additional long-term operating
efficiencies Recent Developments
4
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures. |
 Business Presentation Changes
•
New reportable segment structure simplifies financial reporting and aligns with
changes in how we manage the business
•
Reorganization of reportable segments from 7 to 4
The ARM, Insurance and Loans & Residuals segments are now reflected within the
results of the Servicing segment
•
Refined the composition of indirect costs allocated to the business segments
•
As of January 1, 2015 the Originations segment began incurring a
charge for loan originations generated from the
Servicing segment's MSR portfolio
•
As a result of the above changes, Q1 2014 pre-tax results were recast in our
financial information and impacted as follows:
Servicing income before taxes increased $5.2 million
Originations income before taxes decreased by $(6.0) million
Reverse loss before taxes decreased by $0.7 million and
Other non-reportable segment loss before taxes decreased $0.1 million
5
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures. |
 Servicing
•
Servicing margin of 17 bps for Q1 2015 within the previously provided target range
of 14 - 18 bps
•
Net impact of the business presentation changes on servicing margin were:
Q1 2015: 1 bp increase
Q4 2014: no change
Q1 2014: 2 bps increase
(1)
Adjusted Average UPB Serviced and AEBITDA include adjustments related to servicing
fee economics to reflect MSR acquisitions closed during certain
quarters
as
though
they
were
closed
at
the
beginning
of
the
quarter
as
economics
(cash
flows)
were
actually
recorded
for
the
full
quarter.
Q1 2015
Q4 2014
Q1 2014
AEBITDA
Adjusted
Earnings
AEBITDA
Adjusted
Earnings
AEBITDA
Adjusted
Earnings
Servicing (MN)
$
103
$
40
$
74
$
24
$
145
$
111
Servicing margin (in bps)
17
7
12
4
24
19
Adjusted Average UPB Serviced
(BN)
(1)
$
239
$
239
$
239
$
239
$
238
$
238
•
$103.1 MN of AEBITDA; $40.1 MN of Adjusted Earnings
•
Disappearance rate of 13.8% net of recapture
•
AEBITDA margin of 17 bps of Adjusted Average UPB
•
Established 11 new co-issue relationships
•
Recently executed agreements to purchase $9.6 BN of Freddie Mac MSRs from Ocwen and
$5.6 BN of GNMA MSRs, currently under sub-servicing contract, from
EverBank Q1 2015 Results
Servicing Margin Summary
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
6 |
 Originations
Q1 2015 Margin Detail
Q1 2015 Actuals
(bps)
Gross
Margin &
Fee
Income
Direct
Cost
(2)
Direct
Margin
Funded
Volume
(in BNs)
Consumer Lending
486
(290)
196
$
1.8
Retention
507
(230)
277
$
1.6
Retail
344
(697)
(353)
$
0.1
Consumer Direct
353
(933)
(580)
$
0.1
Correspondent Lending
65
(37)
28
$
3.7
Q1 2015 Actuals
Consumer
Lending
Correspondent
Lending
Total
Funded Volume ($MNs)
$
1,816.8
$
3,650.7
Direct Expenses (bps)
(290)
(37)
Direct Expenses ($MNs)
$
52.7
$
13.5
$
66.2
Indirect expenses
(3)
19.1
Total expenses (excluding depreciation and amortization)
$
85.3
•
$46.7 MN of AEBITDA; $44.3 MN of Adjusted Earnings
•
Funded $5.5 BN of UPB; combined direct margin in all channels of
69 bps
•
Originated approximately 10,700 HARP loans; recapture rate of 29% for Q1 2015
•
As
of
March
31,
2015
retention
opportunity
of
approximately
480,000
“in
the
money”
(1)
accounts
Q1 2015 Results
Q1 2015 Expense Detail
(1)
"In the money" refers to those accounts which would receive a reduction in
monthly mortgage payment amount of at least $70 should they take advantage
of a mortgage refinance opportunity. (2)
Includes intersegment retention expense, interest expense, direct compensation,
direct benefits and direct general and administrative expenses. (3)
Includes support functions and corporate overhead allocations.
•
Retail and Consumer Direct Margin Profiles
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
7
•
Long-term plan assumes direct costs in the Retail and Consumer
Direct
channels
range
from
250
-
300
bps
•
~450,000 “in the money”
accounts eligible for HARP or conventional refinancing
•
~30,000 accounts eligible only for HARP |
 Reverse
•
Breakeven AEBITDA; ($1.3 MN) of Adjusted Loss
•
Issued $413.0 MN of securitizations, ranking #1 for HMBS issuance by UPB
(1)
•
Blended cash margin of 403 bps
•
Originated approximately $309.9 MN of UPB
•
Early experience with tail draw volumes below market expectations
•
Retail margins remain robust
•
Pricing for correspondent product remains competitive
Q1 2015 Results
Serviced UPB Summary
(1)
Source:
New
View
Advisors
HMBS
Issuer
Rankings
2015Q1
published
April
15,
2015.
8
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures. |
 2015
Select Targets (1)
•
Growth in UPB serviced of 10%+
•
14 –
18 bps AEBITDA margin
•
2015 UPB growth includes a blend of bulk MSR purchases and sub-servicing to be
acquired with capital partner •
$5
–
$10
BN
UPB
from
Consumer
Lending
channel
at
80
–
120
bps
direct
margin
•
$15
–
$18
BN
UPB
from
Correspondent
Lending
channel
at
10
–
20
bps
direct
margin
•
Continued growth of retail and consumer direct channels
•
Average servicing UPB of ~$20 BN
•
Funded
origination
volume
of
$1
–
$1.5
BN
excluding
tails
•
Securitized
blended
cash
margin
including
tail
securitizations
of
300
-
500
bps
•
Continued focus on growth of retail channel
•
Realization of earnings from tail draws; at 12/31/2014 ~$475 MN of new IDL product to
become eligible for draw during 2015 (1)
These are select targets we have used to develop our 2015 business plan.
These targets do not represent all of the factors affecting the results of
operations, including expenses, fair value adjustments, legal and regulatory
matters, etc. These are not projections, are forward-looking statements,
and actual results may differ materially from these targets.
•
Positive impacts of operational enhancements
•
Effects of flexibility provided by Balance Sheet initiatives
•
Potential upside to new business additions through sub-servicing
opportunities Servicing
Originations
Reverse
Other Factors
9
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
Low interest rate environment and strong Q1 performance drives consumer lending
margin expectations to higher end of range
Volumes may be impacted by continued pricing pressure in the correspondent
channel Early
experience
with
tail
draw
activity
in
Q1
2015
below
market
expectations |
 10
Key Investment Highlights
3
4
5
2
•
Strengthen balance sheet and drive operating efficiencies
•
Deploy capital opportunistically
•
Significant embedded retention opportunity of ~ 480,000 "in the money"
accounts eligible for non-HARP refinancing •
Potential to scale retail and consumer direct channels
•
Diversified correspondent lending channel
•
Solid strategic client relationships
•
Track record of performance
•
Significant supply in markets
1
Maintain focus on increasing mix to sub-servicing model with WCO as the
catalyst •
Non-agency originations
•
Private label securitization returns
•
Consolidation of sub-scale participants
Regulatory oversight driving an environment of consistency and stability with a
focus on improved consumer experience
6
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
10
Strategic plan designed to provide sustainable growth and achieve strong investment
returns Platform well positioned to take advantage of sector
opportunities Scaled Originations business
Potential future sector opportunities as new mortgage market landscape
develops |
 Appendix:
Supplemental Information & Reconciliations |
 Use of
Non-GAAP Measures and Definitions 12
Adjusted Earnings (Loss)
Adjusted EBITDA
Funds Generated in Period
Generally Accepted Accounting Principles ("GAAP") is the term used to refer to the standard
framework of guidelines for financial accounting. GAAP includes the standards, conventions, and rules
accountants follow in recording and summarizing transactions and in the preparation of financial
statements. In addition to reporting financial results in accordance with GAAP, the Company has
provided the following non-GAAP financial measures in this presentation: Adjusted Earnings,
Adjusted EBITDA and Funds Generated in Period. See the definitions below for a description of how
these items are presented and see the Non-GAAP Reconciliations for a reconciliation of these
measures to the most directly comparable GAAP financial measures.
Management considers Adjusted Earnings (Loss), Adjusted EBITDA and Funds Generated in Period, each of
which is a non-GAAP financial measure, to be important in the evaluation of our business
segments and of the Company as a whole, as well as for allocating capital resources to our segments. Adjusted Earnings, Adjusted EBITDA and Funds Generated in Period are utilized to
assess the underlying operational performance of the continuing operations of the business. In
addition, analysts, investors, and creditors may use these measures when analyzing our operating
performance. Adjusted Earnings (Loss), Adjusted EBITDA and Funds Generated in Period are not
presentations made in accordance with GAAP and our use of these terms may vary from other
companies in our industry. These non-GAAP financial measures should not be considered as
alternatives to (1) net income (loss) or any other performance measures determined in accordance
with GAAP or (2) operating cash flows determined in accordance with GAAP. These measures have
important limitations as analytical tools, and should not be considered in isolation or as
substitutes for analysis of the Company’s results as reported under GAAP. We compensate for these
limitations by relying primarily on our GAAP results and using Adjusted Earnings (Loss) and
Adjusted EBITDA only as supplements. Users of our financial statements are cautioned not to
place undue reliance on Adjusted Earnings (Loss) and Adjusted EBITDA,
is a supplemental metric used by management to evaluate our Company’s underlying key drivers and
operating performance of the business. Adjusted Earnings (Loss) is defined as income (loss)
before income taxes plus fair value changes due to changes in valuation inputs and other assumptions, estimated settlements and costs for certain legal and regulatory
matters, goodwill impairment (if any), certain depreciation and amortization costs related to the
increased basis in assets (including servicing rights and sub-servicing contracts) acquired within
business combination transactions (or step-up depreciation and amortization), transaction and
integration costs, share-based compensation expense, non-cash interest expense, the net impact of
the Non-Residual Trusts, fair value to cash adjustments for reverse loans, and certain other cash
and non-cash adjustments, primarily including certain non-recurring costs. Adjusted Earnings (Loss)
excludes unrealized changes in fair value of MSRs that are based on projections of expected future
cash flows and prepayments. Adjusted Earnings (Loss) includes both cash and non-cash gains
from mortgage loan origination activities. Non-cash gains are net of non-cash charges or
reserves provided. Adjusted Earnings (Loss) includes cash generated from reverse mortgage origination
activities. Adjusted Earnings (Loss) may from time to time also include other adjustments, as
applicable based upon facts and circumstances, consistent with the intent of providing investors with a
supplemental means of evaluating our operating performance.
eliminates the effects of financing, income taxes and depreciation and amortization. Adjusted EBITDA
is defined as income (loss) before income taxes, depreciation and amortization, interest
expense on corporate debt, amortization of servicing rights and other fair value adjustments, estimated settlements and costs for certain legal and regulatory matters, goodwill
impairment (if any), fair value to cash adjustment for reverse loans, non-cash interest income,
share-based compensation expense, servicing fee economics, Residual Trusts cash flows, transaction
and integration related costs, the net impact of the Non-Residual Trusts and certain other cash
and non-cash adjustments primarily including the net provision for the repurchase of loans sold,
provision for loan losses and certain non-recurring costs. Adjusted EBITDA includes both cash and
non-cash gains from mortgage loan origination activities. Adjusted EBITDA excludes the impact
of fair value option accounting on certain assets and liabilities and includes cash generated from
reverse mortgage origination activities. Adjusted EBITDA may also include other adjustments, as
applicable based upon facts and circumstances, consistent with the intent of providing investors a
supplemental means of evaluating our operating performance. is calculated as Adjusted EBITDA, as described above, less capital expenditures, cash paid for
corporate debt interest expense and income taxes. Management believes Funds Generated in
Period is useful as a supplemental indicator of the cash capable of being generated by the business during the relevant period and for that purpose considers the
values of the OMSRs created during the period as equivalent to cash on the assumption that such OMSRs
could have been sold during the period for cash equivalent to their fair value reflected in our
books. There can be no assurance that the OMSRs could have been sold during the period for cash equivalent to their fair value reflected in our books. Funds Generated in Period does not
represent cash flow or cash available for investment.
Amounts or metrics that relate to future earnings projections are forward-looking and subject to
significant business, economic, regulatory and competitive uncertainties, many of which are beyond
the control of Walter Investment 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 any target will be achieved and the Company undertakes no duty to update any target.
Please refer to the introductory slides of this presentation, as well as additional disclosures in
this Appendix and in our Annual Report on Form 10-K for the year ended December 31, 2014, our
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015 and our other filings
with the SEC, for important information regarding forward looking statements and the use and
limitations of Non-GAAP Financial Measures. Because we do not predict special items that might
occur in the future, and our outlook is developed at a level of detail different than that used to
prepare GAAP financial measures, we are not providing a reconciliation to GAAP of any
forward-looking financial measures presented herein. |
 13
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-looking statements can be identified by the use of
words such as “believes,” “anticipates,” “expects,” “intends,”
“plans,” “projects,” “estimates,” “assumes,” “may,” “should,” “will,” or other similar expressions. Such
forward-looking statements involve known and unknown risks, uncertainties and other important
factors, and our actual results, performance or achievements could differ materially from
future results, performance or achievements expressed in these forward-looking statements. These forward-looking statements are
based on our current beliefs, intentions and expectations. These statements are not guarantees or
indicative of future performance. Important assumptions and other important factors that could
cause actual results to differ materially from those forward-looking statements include, but are not limited to, those factors, risks
and uncertainties described below and in more detail in our Annual Report on Form 10-K for the
year ended December 31, 2014, under the caption “Risk Factors,” in Part II, Item 1A.
of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015 and in our other filings with the SEC.
In particular (but not by way of limitation), the following important factors, risks and uncertainties
could affect our future results, performance and achievements and could cause actual results,
performance and achievements to differ materially from those expressed in the forward-looking statements:
•
our ability to operate our business in compliance with existing and future rules and regulations
affecting our business, including those relating to the origination and servicing of
residential loans, the management of third-party assets and the insurance industry (including lender-placed insurance), and
changes to, and/or more stringent enforcement of, such rules and regulations; •
increased scrutiny and potential enforcement actions by federal and state agencies; •
the substantial resources (including senior management time and attention) we devote to, and the
significant compliance costs we incur in connection with, regulatory compliance and regulatory
examinations and inquiries, and any consumer redress, fines, penalties or similar payments we make in connection
with resolving such matters;
•
uncertainties relating to interest curtailment obligations and any related financial and litigation
exposure (including exposure relating to false claims or relating to a pending investigation by
the Department of Justice and the HUD Office of Inspector General);
•
potential costs and uncertainties associated with and arising from litigation, regulatory
investigations and other legal proceedings;
•
our dependence on U.S. government-sponsored entities (especially Fannie Mae) and agencies and
their residential loan programs and our ability to maintain relationships with, and remain
qualified to participate in programs sponsored by, such entities, our ability to satisfy various GSE, agency and other capital
requirements applicable to our business, and our ability to remain qualified as a GSE approved seller,
servicer or component servicer, including the ability to continue to comply with the GSEs’
respective residential loan and selling and servicing guides;
•
uncertainties relating to the status and future role of GSEs, and the effects of any changes to the
origination and/or servicing requirements of the GSEs or various regulatory authorities or the
servicing compensation structure for mortgage servicers pursuant to programs of GSEs or various regulatory authorities;
•
our ability to maintain our loan servicing, loan origination, insurance agency 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 servicing standards required by the National Mortgage Settlement; •
our ability to comply with the terms of the stipulated order resolving allegations arising from an FTC
and CFPB investigation of Green Tree Servicing;
•
operational risks inherent in the mortgage servicing business, including reputational risk; •
risks related to our substantial levels of indebtedness, including our ability to comply with
covenants contained in our debt agreements, generate sufficient cash to service such
indebtedness and refinance such indebtedness on favorable terms, as well as our ability to incur substantially more debt;
•
our ability to renew advance facilities or warehouse facilities and maintain borrowing capacity under
such facilities; |
 14
Forward-Looking Statements
•
our ability to maintain or grow our servicing business and our residential loan
originations business; •
our ability to achieve our strategic initiatives;
•
changes in prepayment rates and delinquency rates on the loans we service or
sub-service; •
the ability of our clients and credit owners to transfer or otherwise terminate our
servicing or sub-servicing rights; •
a downgrade in our servicer ratings or credit ratings;
•
our
ability
to
collect
reimbursements
for
servicing
advances
and
earn
and
timely
receive
incentive
payments
and
ancillary
fees
on
our
servicing
portfolio;
•
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
mortgage originations and prepayments; •
uncertainty as to the volume of originations activity we will benefit from
following the expiration of HARP, which is scheduled to occur on December 31, 2015;
•
risks
associated
with
the
origination,
securitization
and
servicing
of
reverse
mortgages,
including
changes
to
reverse
mortgage
programs
operated
by
FHA,
HUD
or
Ginnie
Mae,
our
ability
to
accurately
estimate
interest
curtailment
liabilities,
continued
demand
for
HECM
loans
and
other
reverse
mortgages,
our
ability
to
fund
HECM
repurchase
obligations,
our
ability
to
fund
principal additions on our HECM loans, and our ability to securitize our HECM loans
and tails; •
our ability to implement strategic initiatives, particularly as they relate to our
ability to raise capital, make arrangements with potential capital partners and develop new business, including
acquisitions
of
mortgage
servicing
rights
and
the
development
of
our
originations
business,
all
of
which
are
subject
to
customer
demand
and
various
third-party
approvals;
•
our
ability
to
realize
all
anticipated
benefits
of
past,
pending
or
potential
future
acquisitions
or
joint
venture
investments;
•
the effects of competition on our existing and potential future business, including
the impact of competitors with greater financial resources and broader scopes of operation;
•
changes in interest rates and the effectiveness of any hedge we may employ against
such changes; •
risks and potential costs associated with technology and cybersecurity, including
the risks of technology failures and of cyber-attacks against us or our vendors, our ability to adequately
respond to actual or alleged cyber-attacks and our ability to implement
adequate internal security measures and protect confidential borrower information;
•
our ability to comply with evolving and complex accounting rules, many of which
involve significant judgment and assumptions; •
uncertainties regarding impairment charges relating to our goodwill or other
intangible assets; •
our ability to maintain effective internal controls over financial reporting and
disclosure controls and procedures; •
our ability to manage conflicts of interest relating to our investment in WCO; and
•
risks related to our relationship with Walter Energy, including tax risks allocated
to us in connection with our spin-off from Walter Energy. All of the above factors, risks
and uncertainties are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New
factors, risks and uncertainties emerge from time to time, and it is not possible for our management
to predict all such factors, risks and uncertainties. Although we believe that the assumptions underlying the forward-looking statements (including
those relating to our outlook) contained herein are reasonable, any of the assumptions could be
inaccurate, and therefore any of these statements included herein may prove to be inaccurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information should not be
regarded as a representation by us or any other person that the results or conditions described
in such statements or our objectives and plans will be achieved. We make no commitment to revise or update any forward-looking statements in order
to reflect events or circumstances after the date any such statement is made, except as otherwise
required under the federal securities laws. If we were in any particular instance to update or
correct a forward-looking statement, investors and others should not conclude that we would make additional updates or corrections thereafter except
as otherwise required under the federal securities laws.
In addition, this presentation may contain statements of opinion or belief concerning market
conditions and similar matters. In certain instances, those opinions and beliefs could be
based upon general observations by members of our management, anecdotal evidence and/or our experience in the conduct of our business, without specific
investigation or statistical analyses. Therefore, while such statements reflect our view of the
industries and markets in which we are involved, they should not be viewed as reflecting
verifiable views that are not necessarily shared by all who are involved in those industries or markets.
|
 GAAP
Financial Results ($ in millions)
Q1 2015
Q4 2014
Q1 2014
Income Statement
Total revenues
$
310.8
$
317.5
$
369.9
Total expenses
(371.4)
(429.9)
(338.5)
Other gains (losses)
10.9
3.3
(2.5)
Income tax (expense) benefit
18.7
65.1
(11.5)
Net income (loss)
$
(31.0)
$
(44.0)
$
17.4
Net income (loss) per diluted share
$
(0.82)
$
(1.17)
$
0.45
As of
As of
As of
3/31/2015
12/31/2014
3/31/2014
Balance Sheet
Total Assets
$
19,308.2
$
18,992.0
$
17,484.3
Total Liabilities
$
18,259.2
$
17,915.3
$
16,292.1
Equity
$
1,049.0
$
1,076.7
$
1,192.2
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
15 |
 Non-Recourse Liabilities ($13.1 BN) Comprise 72% of
Total Liabilities
(1)
$ in millions
Assets of $13.4 BN collateralize $13.1 BN of non-recourse liabilities
Reverse Mortgage
Assets
$
10,233.2
Liabilities
$
10,304.4
Equity
$
(71.2)
Residual Trusts
Assets
$
1,349.3
Liabilities
$
1,078.4
Equity
$
270.9
Non-Residual Trusts
Assets
$
604.9
Liabilities
$
635.2
Equity
$
(30.3)
Servicer and Protective Advance Financing Facilities
Assets
$
1,244.9
Liabilities
$
1,091.8
Equity
$
153.1
$153.1 MN of equity in servicer advance trusts
(1)
Above presentation excludes impact of overall Walter tax positions.
16
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
Net fair value liability of $71.2 MN in Reverse
Mortgage is a positive to tangible net worth over
time
$270.9 MN of residual interest in legacy Walter
Investment portfolio
Net fair value liability of $30.3 MN associated with
mandatory clean-up call obligation in Non-Residual
Trusts |
 Servicing Segment
(1)
Adjusted Average UPB Serviced and AEBITDA include adjustments related to servicing
fee economics to reflect MSR acquisitions closed during certain quarters as though they
were closed at the beginning of the quarter as economics (cash flows) were
actually recorded for the full quarter. (2)
The
quarterly
portfolio
disappearance
rate
is
the
weighted
average
of
the
disappearance
rate
for
each
month
in
such
quarter.
The
monthly
disappearance
rate
is
the
annualized
exponential rate of dividing the aggregate dollar amount of contractual payments,
voluntary prepayments and defaults attributable to forward loans in the forward loan servicing
portfolio during such month by the sum of the unpaid principal balance of the
loans in the forward loan servicing portfolio at the beginning of such month plus the unpaid principal
balance
of
any
forward
loans
added
to
such
portfolio
during
such
month.
$ in millions
Servicing Key Metrics
Q1 2015
Q4 2014
Q1 2014
Servicing fees
$
170.7
$
166.8
$
164.9
Incentive and performance fees
25.1
31.5
38.7
Ancillary and other fees
23.5
21.5
21.6
Servicing revenue and fees
$
219.3
$
219.8
$
225.2
Amortization of servicing rights
(6.5)
(11.0)
(10.4)
Other changes in fair value
(54.7)
(41.4)
(22.0)
Changes in valuation inputs
(74.5)
(50.1)
(25.6)
Change in fair value of excess servicing spread liability
(1.8)
$
(0.1)
$
—
Net servicing revenue and fees
81.8
117.2
167.2
AEBITDA/average UPB
17
bps
12
bps
24
bps
Serviced UPB (in billions)
236.4
238.1
233.8
Serviced units (in millions)
2.2
2.2
2.2
Adjusted
Average
UPB
serviced
(in
billions)
(1)
$
238.9
$
238.8
$
237.6
Disappearance Rate
(2)
13.8%
12.8%
13.5%
17
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures. |
 18
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
Originations Segment
$ in billions
(1)
Calculated on pull-through adjusted locked volume.
(2)
Calculated on funded volume.
$ in thousands
(1)
Calculated on pull-through adjusted locked volume.
(2)
Calculated on funded volume.
(1)
Recapture
rate
represents
the
percent
of
voluntary
UPB
payoffs
refinanced
in
to
new
loans.
This
metric
excludes
payoffs on non-marketable portfolios (e.g. sub-serviced), payoffs under $20K
UPB, or payoffs prior to 60 days after boarding.
Originations Data by Channel
Consumer Lending Origination Economics
Correspondent Lending Origination Economics
Capitalized MSR
Applications
Q1 2015
Q4 2014
Q1 2014
Consumer Lending
$
2.9
$
2.5
$
2.5
Correspondent Lending
6.7
4.8
2.3
$
9.6
$
7.3
$
4.8
Pull-Through Adjusted Locked Volume
Q1 2015
Q4 2014
Q1 2014
Consumer Lending
$
2.0
$
1.7
$
1.9
Correspondent Lending
4.9
3.4
1.7
$
6.9
$
5.1
$
3.6
Funded Volume
Q1 2015
Q4 2014
Q1 2014
Consumer Lending
$
1.8
$
1.6
$
1.8
Correspondent Lending
3.7
3.4
1.7
$
5.5
$
5.0
$
3.5
Sold Volume
Q1 2015
Q4 2014
Q1 2014
Consumer Lending
$
1.8
$
1.7
$
2.0
Correspondent Lending
3.7
3.3
1.9
$
5.5
$
5.0
$
3.9
Q1 2015
Q4 2014
Q1 2014
Recapture Rate
(1)
29%
28%
47%
bps
Q1 2015
Q4 2014
Q1 2014
Gain on Sale
(1)
479
416
486
Fee Income
(2)
7
—
16
Direct Expenses
(2)
(290)
(302)
(292)
Direct Margin
196
114
210
bps
Q1 2015
Q4 2014
Q1 2014
Gain on Sale
(1)
55
41
77
Fee Income
(2)
10
10
13
Direct Expenses
(2)
(37)
(41)
(74)
Direct Margin
28
10
16
Q1 2015
Q4 2014
Q1 2014
Capitalized MSR (MN)
$
72.7
$
58.7
$
52.6
Base MSR (MN)
$
49.8
$
43.8
$
41.2
Excess MSR (MN)
$
22.9
$
14.9
$
11.4
Base MSR Multiple
3.93
3.88
4.23
Excess MSR Multiple
4.39
4.30
3.80
Loans sold
$
5,074,406
$
4,507,219
$
3,896,016
Loans sold with excess
$
2,807,585
$
2,401,610
$
1,834,547 |
 19
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
Reverse Mortgage Segment
(1)
Representative of servicing fee for on-balance sheet residential loans
serviced. (2)
Cash generated by origination, purchase and securitization of HECM loans.
(3)
Funded volumes exclude securitized tail volumes.
(4)
Represents cash gains on securitized loans and tails over the basis in the
securitization. Reverse Mortgage Key Metrics
Q1 2015
Q4 2014
Q1 2014
Interest income
$
106.3
$
103.6
$
96.9
Interest expense
(98.5)
(96.1)
(90.6)
Net interest margin
(1)
$
7.8
$
7.5
$
6.3
Blended cash generated
(2)
18.7
14.7
15.6
Fair value of loans and HMBS securities
4.3
18.3
(4.7)
Fair value
$
30.8
$
40.5
$
17.2
Net servicing revenues and fees
11.4
9.8
7.6
Other
1.8
2.8
3.0
Total revenue
$
44.0
$
53.1
$
27.8
Funded volume
(3)
$
310
MN
$
356
MN
$
245
MN
Securitized volume
$
413
MN
$
416
MN
$
415
MN
Blended cash margin
(4)
403
bps
332
bps
363
bps
Serviced UPB (in billions)
$
18.7
$
18.0
$
16.3
Serviced units
114,208
110,498
100,141 |
 20
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
Reconciliation of GAAP Income (Loss) Before Income
Taxes to Non-GAAP Adjusted EBITDA
$ in millions
For the Three Months Ended
For the Three Months Ended
March 31, 2015
March 31, 2014
Income (loss) before income taxes
$
(49.7)
$
29.0
Add/(Subtract):
Amortization and fair value adjustments
135.5
58.8
Interest expense
40.1
37.5
Depreciation and amortization
16.6
18.6
Curtailment expense
16.1
—
Non-cash share-based compensation expense
3.4
3.5
Fair value to cash adjustment for reverse loans
(4.3)
4.7
Servicing fee economics
—
9.7
Other
5.0
6.0
Sub-total
212.4
138.8
Adjusted EBITDA
$
162.7
$
167.8 |
 21
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
Reconciliation of GAAP Income (Loss) Before Income
Taxes to Non-GAAP Adjusted Earnings
($ in millions, except per share amounts)
For the Three Months Ended
For the Three Months Ended
March 31, 2015
March 31, 2014
Income (loss) before income taxes
$
(49.7)
$
29.0
Add/(Subtract):
Changes in fair value due to changes in valuation inputs and other
assumptions 73.8
25.6
Curtailment expense
16.1
—
Step-up depreciation and amortization
9.5
11.9
Step-up amortization of sub-servicing rights (MSRs)
4.9
8.5
Non-cash interest expense
3.3
3.3
Non-cash share-based compensation expense
3.4
3.5
Fair value to cash adjustment for reverse loans
(4.3)
4.7
Other
4.8
8.6
Adjusted Earnings before taxes
$
61.8
$
95.1
Adjusted Earnings after tax (38% in 2015 and 39% in 2014)
$
38.3
$
58.0
Adjusted Earnings after taxes per common and common equivalent share
$
1.02
$
1.53 |
 22
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
three
months
ended
March 31, 2015 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
Reconciliation of Funds Generated in Period to Net Increase in Cash
and Cash Equivalents
($ in millions)
For the last twelve
months ended
For the three
months ended
For the year ended
For the three
months ended
March 31, 2015
March 31, 2015
December 31, 2014
March 31, 2014
Adjusted EBITDA
$
599.1
$
162.7
$
604.2
$
167.8
Less:
Cash Interest Expense on Corporate Debt
(129.9)
(17.6)
(132.5)
(20.2)
Cash Taxes/Refund
(18.1)
1.1
5.3
24.5
Capital Expenditures
(20.8)
(3.7)
(21.6)
(4.5)
Funds Generated in Period
$
430.3
$
142.5
$
455.4
$
167.6
Investing and Financing activity and other uses of Funds Generated in Period:
Investment
in
retained
OMSRs
(1)
(234.0)
(72.3)
(214.3)
(52.6)
Net
investment
in
originations
activity
(2)
(80.2)
(26.5)
(14.4)
39.3
Net activity for servicing advances
230.3
66.7
168.2
4.6
Net investment in reverse mortgage activity
(49.6)
(26.9)
(5.8)
16.9
Proceeds from Sale of Excess Servicing Spread, net of payments
66.4
(2.2)
68.6
—
Acquisitions,
including
related
transaction
costs
(3)
(571.8)
(57.2)
(549.2)
(34.6)
Net
payments
of
corporate
debt
(4)
(16.9)
(4.3)
(17.2)
(4.6)
Other working capital
1.3
(1.5)
(63.0)
(65.8)
Change in Cash
$
(224.2)
$
18.3
$
(171.7)
$
70.8
Cash flows provided by (used in) operating activities
(490.8)
121.0
(204.3)
407.5
Cash flows provided by (used in) investing activities
(1,283.1)
(241.3)
(1,244.1)
(202.3)
Cash flows provided by (used in) financing activities
1,549.7
138.6
1,276.7
(134.4)
Total change in cash
(224.2)
18.3
(171.7)
70.8
(3)
Represents payments for acquisitions of businesses net of cash acquired,
acquisitions of servicing rights and transaction & integration costs incurred as a result.
(4)
Represents proceeds from issuance of debt net of debt issuance costs and payments
made during the period. (1)
Represents originated MSRs that have been capitalized upon transfer of loans.
(2)
Represents
originations
activity
including
purchases
and
originations
of
residential
loans
held
for
sale,
proceeds
from
sale
and
payments
on
residential
loans
held
for
sale,
net
change in master repurchase agreements associated with residential loans held for
sale and total net gains on sales of loans less gain on capitalized servicing rights. |