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Exhibit 99.1 |
Investor UpdateBank of America Merrill Lynch Leveraged Finance Conference December 4, 2019
This presentation contains summarized information concerning Mr. Cooper Group Inc. (the “Company”) and
the Company’s business, operations, financial performance and trends. No representation is made that the information in this presentation is complete. For additional financial, statistical and business related information, as well as
information regarding business and segment trends, see the Company’s most recent Annual Report on Form 10-K (“Form 10-K”) and Quarterly Reports on Form 10-Q filed with the U.S. Securities and Exchange Commission (the “SEC”), as well other
reports filed with the SEC from time to time. Such reports are or will be available in the Investors section of the Company’s website (www.mrcoopergroup.com) and the SEC’s website (www.sec.gov).Forward Looking Statements. This presentation
contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including target ROTCE and current initiatives. All statements other than statements of historical or current fact included in
this presentation that address activities, events, conditions or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements give our current expectations and
projections relating to our financial condition, results of operations, plans, objectives, future performance and business and these statements are not guarantees of future performance. Forward-looking statements may include the words
“anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “strategy,” “future,” “opportunity,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Such forward-looking
statements involve risks and uncertainties that may cause actual events, results or performance to differ materially from those indicated by such statements. Certain of these risks are identified and discussed in documents Mr. Cooper has
filed or will file from time to time with the SEC. These risk factors will be important to consider in determining future results and should be reviewed in their entirety. These forward-looking statements are expressed in good faith, and Mr.
Cooper believes there is a reasonable basis for them. However, the events, results or trends identified in these forward-looking statements may not occur or be achieved. Forward-looking statements speak only as of the date they are made, and
Mr. Cooper is not under any obligation, and expressly disclaims any obligation, to update, alter or otherwise revise any forward-looking statement, except as required by law. Readers should carefully review the statements set forth in the
reports that Mr. Cooper has filed or will file from time to time with the SEC.Basis of Presentation. For purpose of Mr. Cooper's financial statement presentation, Mr. Cooper Group Inc. was determined to be the accounting acquirer in the WMIH
Corp. merger. “Predecessor” financial information relates to Nationstar and “Successor” financial information relates to Mr. Cooper. The financial results for the three months ended September 30, 2019, three months ended June 30, 2019, the
three months ended March 31, 2019, and the three months ended December 31, 2018 reflect the results of the Successor. With respect to the three months ended September 30, 2018, the Company has presented the results on a “combined” basis by
combining the financial results of the Predecessor for the period from July 1, 2018 through July 31, 2018 and the financial results of the Successor for the period from August 1, 2018 through September 30, 2018. Although the separate
financial results of the Predecessor for the period from July 1, 2018 through July 31, 2018 and the Successor for the period from August 1, 2018 through September 30, 2018 are each separately presented under generally accepted accounting
principles (“GAAP”) in the United States, the combined results reported reflect non-GAAP financial measures, because a different basis of accounting was used with respect to the financial results for the Predecessor as compared to the
financial results of the Successor. Non-GAAP Measures. This presentation contains certain references to non-GAAP measures. Please refer to the Appendix for more information on non-GAAP measures. Important Information
Post Crisis, Servicing Market Share Shifted to Non-banks (%) Industry-leading Portfolio
Growth Source: Federal Reserve, Inside Mortgage Finance as of 6/30/2019 Evolution of the Leading Non-bank Mortgage Servicer
⁽¹⁾ Percentage of loans boarded delinquent brought back to performing status, compared to industry
reperformance for buckets of similar loans. Source: Core Logic ⁽²⁾ Direct servicing cost per loan for performing loans. Categories are defined as prime servicers; “Mid to Large” is 500k-1mm loans, “Large” is greater than 1mm loans, “Small” is
less than 100k loans. Source: 2017 MBA Peer Group Study Best-in-Class Operational Skills Kept More People in Their Homes Returning Delinquent Loans to Performing Status at 2X the Industry Rate (1) Built a Very Efficient Operating
Platform Industry Direct Servicing cost per Loan below Peer Average (2)
Significant Improvement in Customer Experience Refinance Recapture is a Competitive
Advantage Rebranding Establishes Customer-centric Culture Complaints Ratio (per 1,000 loans) Complaints ⁽¹⁾ Industry refinance recapture data as of 2Q’19 based on Black Knight’s mortgage monitor August 2019 report.
4Q’19 Mid-Quarter Update Interest-rate lock volume was $4.8 bn in October and estimated at $3.5 bn
in November, with Originations margin averaging 1.1%, reflecting typical seasonal patternsPrepayment speeds have remained high so far in the fourth quarter, with forward owned CPRs of 20.3% in October and 17.8% in November Note:
Interest-rate lock volume refers to pull through adjusted lock volume. See appendix for quarterly volumes.
⁽¹⁾ Please see appendix for reconciliations of non-GAAP items⁽²⁾ Adjusted EBITDA is based on trailing
twelve months Third Quarter Highlights Reported $83 million net income or $0.90 per share, and pretax operating income of $171 mm⁽¹⁾Generated record Originations EBT of $178 mm on record funded volume of $11.9 bnServicing UPB remained
stable, ending the quarter at $641 bn, with an operating margin of 6.2 bpsXome reported EBT of $14 mm and pretax operating income of $13 mm,⁽¹⁾ with AMS contributing positive resultsCalled $100 mm of unsecured senior notes due 2021 and
reported debt:adjusted EBITDA⁽¹⁾ of 4.1x⁽²⁾Achieved Great Place to Work certification
Generating and Sustaining Investor Returns Note: ROTCE estimates are forward-looking and are subject
to a number of risks, uncertainties and changes in circumstances, certain of which are beyond our control. Actual results could differ materially as a result of several factors, including interest rates, prepayment rates, amortization,
economic growth and delinquencies. Please see appendix for reconciliations of non-GAAP items. Target ROTCE Integration:Pacific UnionSeterusAMS Field services and title Back office Valuation on scheduleInvestment and Cost SavingsTitan
investment on schedule$50 mm corporate actions on scheduleDeleveragingRetirement of senior notes Called $100 mm of 2021sTarget debt: adjusted EBITDA <5.0x 4.1x Current Initiatives 12%+ ROTCE shown fully taxed, does not
include the cash flow benefits associated with the company’s deferred tax asset
Summary 3Q’19 Financial Results ⁽¹⁾ Please see appendix for reconciliations of non-GAAP items⁽²⁾
Other mark-to-market does not include fair value amortization. Fair value amortization represents the additional amortization required under the fair value amortization method over the cost amortization method⁽³⁾ Assumes GAAP tax-rate of
24.2% and does not give credit to cash flow benefits of the DTA⁽⁴⁾ Assumes marginal tax rate of 3.2%⁽⁵⁾ 3Q’18 Pretax income excludes ($123) mm merger related costs. Net income (loss) assumes a normalized tax rate of 24.2% and does not include
the DTA tax benefit realized from the WMIH merger. Adjustments in 3Q’19 included removal of $5 mm corporate action charges in Corporate and $4 mm gain on the remeasurement of contingent consideration associated with the acquisition of
Assurant Mortgage SolutionsTrust collapse in Q3 contributed $21 mm in earnings, of which $11 mm was included in Servicing segment and $10 mm in Corporate/Other
MSR Value Update The company reported a mark-to-market of ($83) mm, reflecting the impact on MSR
value of higher expected lifetime prepayment speeds, offset by the corresponding impact on excess spread liabilityAs of 9/30/19, 1 million customers would save, on average, $220 per month by refinancing 30-year fixed mortgage rate-12 bps
q/q
Total funded volume of $11.9 bn was up 19% q/q and 131% y/y, while locked volume was up 13% q/q to
$12.7 bnThe purchase mix was 39.1% of total funded volumeOriginations margin benefitted from declining rates and continued strong performance in the DTC channel, including increased contribution from the Home Advisor unit ⁽¹⁾ Please see
appendix for reconciliations of non-GAAP measures Record Originations Results Originations Pretax Margin⁽¹⁾ Funded Volume By Channel ($ bn’s) Correspondent +10% q/q Direct to Consumer +39% q/q Wholesale +19%q/q
Servicing Portfolio UPB is Stable Total portfolio ended the quarter at $641 bn, largely stable with
the prior quarter-endExcluding the economic share of run-off attributable to excess spread co-investment partners, the net replenishment rate for the forward owned MSR portfolio was 99%Subservicing increased from 47% to 48% of the total
portfolioThe reverse mortgage portfolio remains in run-off, with balances down 22% y/yBulk MSR acquisitions and sales was minimal during the quarter Portfolio Walk ($ bn’s) Note: Net replenishment is calculated as originations funded volume
excluding subservicing, divided by net run-off. During the quarter, originations of $11.9 bn included $0.8 bn associated with subservicing contracts. Net run-off is calculated as $18 bn in run-off associated with the forward owned MSR, less
38% attributable to excess spread co-investors, based on the ratio of the excess spread liability to the MSR value at the end of the quarter Net Replenishment
Pretax income Titanexpenses Servicing Margin (bps)⁽¹⁾ Servicing Margin Impacted by Higher
Amortization Servicing margin compressed sequentially due to higher amortization, driven by increase in CPR to 17.5%Servicing margin excludes $7 mm in Project Titan investment spendingServicing segment benefitted from trust collapse of
legacy loans, which contributed $11 mm in the quarter60+ day delinquencies improved sequentially from 2.3% to 2.2% ⁽¹⁾ Please see appendix for reconciliations of non-GAAP measures CPR Trend
AMS crossed the breakeven point and contributed positively to results. Integration of AMS is largely
complete, with valuations unit to be fully integrated by 1Q’20Auction exchange continued to win third-party business, helping to mitigate impact of low-delinquency environment Revenues benefitted from strong results in title and close,
reflecting uptick in refinance-related orders ⁽¹⁾ Please see appendix for reconciliations of non-GAAP measures Xome Operating Results Improved to $13 mm⁽¹⁾ Exchange Sales and Service Orders Operating Profitability ($ mm’s)⁽¹⁾ Core
Xome AMS Percentage of revenue from third-parties Services completed orders Exchange properties sold
Commitment to Strong Capital and Liquidity ⁽¹⁾ Please see appendix for reconciliations of non-GAAP
measures Debt: adjusted EBITDA declined to 4.1xEstimated steady state cash flow improved to $170 mm on strong origination profitability$50 mm in operating lines was paid down voluntarily during the quarterAnnounced retirement of $100 mm of
senior notes due 2021, which settled in October
Appendix
Segment Operating Income and Non-GAAP Reconciliation ⁽¹⁾Consolidated includes eliminations⁽²⁾
Amount represents the additional amortization required under the fair value amortization method over the cost amortization method $
Tangible Book Value (TBV) Reconciliation
ROTCE Reconciliation ⁽¹⁾ Includes income tax expense and non-controlling interest⁽²⁾ Assumes GAAP
tax-rate of 24.2% and does not give credit to cash flow benefits of the DTA⁽³⁾ Assumes marginal tax rate of 3.2% ROTCE is a non-GAAP financial measure that is computed by dividing earnings by tangible common equity. Tangible common equity
equals total stockholders’ equity less goodwill and intangible assets. The methodology of determining tangible common equity may differ among companies. Management believes that ROTCE is a useful financial measure because it measures the
performance of a business consistently and enables investors and others to assess the Company’s use of equity. We are unable to provide a reconciliation of the forward-looking non-GAAP financial measure to its most directly comparable GAAP
financial measure because we are unable to provide, without unreasonable effort, a meaningful or accurate calculation or estimate of amounts that would be necessary for the reconciliation due to the complexity and inherent difficulty in
forecasting and quantifying future amounts or when they may occur. Such unavailable information could be significant to future results.
Servicing Non-GAAP Reconciliation
Servicing Profitability
Servicing Profitability [cont.]
Servicing Portfolio Supplemental Data ⁽¹⁾ 2Q’18 ending unpaid principal balance was $278,105
million
Originations Non-GAAP Reconciliation Note: Revenue based on pull through adjusted lock volume,
expenses based on funded volume
Originations Profitability and Supplemental Data ⁽¹⁾ Calculated on pull through adjusted lock volume
as revenue is recognized at the time of loan lock
Originations Profitability [cont.] ⁽¹⁾ Calculated on funded volume as expenses are incurred based on
closing of the loan⁽²⁾ Revenue based on pull through adjusted lock volume, expenses based on funded volume
Xome Non-GAAP Reconciliation
Xome Profitability $
Adjusted EBITDA ⁽¹⁾ Adjusted EBITDA calculated consistent with the definition in the corporate
indentures for senior unsecured notes maturing in 2023 and 2026. 3Q’19 includes rent differential $1 mm, Project Titan expenses $7 mm, charges related to corporate actions $5 mm, remeasure of contingent consideration associated with AMS ($4
mm) Numbers may not add due to rounding
3Q’19 Sources and Uses Cash Flow ⁽¹⁾ Required investment to sustain the net MSR is based on sum of
$(162) mm forward MSR amortization, $77 mm excess spread accretion, and $(32) mm fair value amortization ⁽²⁾ Includes mortgage loans originated, sold or repurchased, net gains on mortgage loans held for sale excluding capitalized servicing
rights, reverse mortgage interests, interest income on reverse mortgage loans, and HECM and participating interest activities, repayment of nonrecourse debt – legacy assets, and changes in warehouse facilities, advance facilities, advances
and other receivables, other assets, payables and other liabilities, and other activities