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Nationstar Mortgage Announces Second Quarter 2012 Financial Results

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 Q2 ’12 EPS excludes certain expenses incurred in advance of the closing of the Aurora transaction. These expenses include the advance hiring of servicing staff, recruiting expenses and travel and licensing expenses. Pro-forma Q1 ’12 EPS normalizes Q1 ’12 EPS for a full quarter of taxes and share count.

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 AEBITDA per share comparison to prior periods. Pro-forma Q2 ’12 AEBITDA per share excludes certain expenses incurred in advance of the closing of the Aurora transaction. These expenses include the advance hiring of servicing staff, recruiting expenses and travel and licensing expenses. Pro-forma Q1 ’12 AEBITDA per share normalizes Q1 ’12 EPS for a full quarter of share count.

Conference Call Webcast and Investor Presentation

Chief Executive Officer, Jay Bray, and Chief Financial Officer, David Hisey, will host a conference call for investors and analysts to discuss Nationstar’s second quarter results and other general business matters at 10:00 a.m. (ET) on Tuesday, August 14, 2012. To listen to the event live or in an archive which will be available for 14 days, visit Nationstar's website at http://investors.nationstarholdings.com. The conference call will also be accessible by dialing 800-901-5241, or 617-786-2963 internationally. Please use the participant passcode 17854611 to access the live conference call. An investor presentation will also be available at http://investors.nationstarholdings.com.

Financial Tables

 

NATIONSTAR MORTGAGE HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(dollars and shares in thousands, except per share data)

 
Three months ended
June 30, 2012   March 31, 2012   June 30, 2011
Revenues
Servicing fee income $ 86,092 $ 83,950 $ 51,236
Other fee income   11,610     7,253     8,141  
Total fee income 97,702 91,203 59,377
Gain on mortgage loans held for sale   102,345     70,512     22,822  
Total revenues 200,047 161,715 82,199
 
Total expenses and impairments 130,372 96,577 68,402
 
Other income (expense)
Interest income 15,650 13,441 16,727
Interest expense (35,913 ) (24,980 ) (25,185 )
Loss on interest rate swaps and caps (357 ) (268 )
Fair value changes in ABS securitizations           (3,613 )
Total other income (expense) (20,620 ) (11,807 ) (12,071 )
 
Income before taxes 49,055 53,331 1,726
Income tax expense   12,780     3,145      
Net income

36,275

50,186

1,726
Other comprehensive income, net of tax
Change in value of designated cash flow hedge   (423 )       (1,210 )
Comprehensive income $ 35,852   $ 50,186   $ 516  
 
Earnings per share:
Basic earnings per share $ 0.41   $ 0.67   $ 0.02  
Diluted earnings per share $ 0.41   $ 0.67   $ 0.02  
Weighted average shares:
Basic 88,500 74,388 70,000
Dilutive effect of stock awards   1,028     173      
Diluted   89,528     74,561     70,000  
Dividends declared per share $   $   $  

     

NATIONSTAR MORTGAGE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

         
June 30, March 31, June 30,
2012   2012   2011
Assets (unaudited) (unaudited) (unaudited)
Cash and cash equivalents $ 15,892 $ 355,994 $ 2,532
Restricted cash 119,512 108,854 84,331
Accounts receivable 2,487,991 521,615 468,072
Mortgage loans held for sale 837,906 378,561 262,597
Mortgage loans held for investment, subject to nonrecourse debt - Legacy Assets 238,173 241,239 255,463
Mortgage loans held for investment, subject to ABS nonrecourse debt 490,588
Reverse mortgage interests 310,074 148,365
Receivables from affiliates 13,083 13,148 7,351
Mortgage servicing rights – fair value 596,462 266,169 151,557
Mortgage servicing rights – amortized cost 8,357
Property and equipment, net 39,090 25,106 15,667
Real estate owned (REO), net 3,429 5,720 17,249
Other assets   226,261     113,991     35,335
Total assets $ 4,896,230   $ 2,178,762   $ 1,790,742
 
Liabilities and equity
Notes payable $ 2,412,364 $ 767,754 $ 604,770
Unsecured senior notes 555,938 280,568 244,759
Payables and accrued liabilities 639,839 241,317 78,764
Derivative financial instruments 18,911 7,240 8,214
Derivative financial instruments, subject to ABS nonrecourse debt 14,151
Mortgage servicing liabilities – amortized cost 81,979 17,102
Nonrecourse debt - Legacy Assets 106,271 109,794 126,026
ABS nonrecourse debt (at fair value) 447,845
Excess spread financing (at fair value) 266,693 47,324
Participating interest financing   181,114     114,322    
Total liabilities   4,263,109     1,585,421     1,524,529
 
Total equity   633,121     593,341     266,213
Total liabilities and equity $ 4,896,230   $ 2,178,762   $ 1,790,742

 

SERVICING FEE INCOME DETAIL

(dollars in thousands)

 
Three months ended
June 30, 2012   March 31, 2012   June 30, 2011
(unaudited) (unaudited) (unaudited)
Total servicing fee income before MSR fair value adjustments $ 109,222 $ 87,524 $ 60,603
Fair value adjustments on excess spread financing (2,412) (4,852)
Reverse mortgage servicing liability accretion (9) 633
MSR changes in fair value:
Due to changes in valuation inputs or assumptions (11,054) 9,368 (3,746)
Other changes in fair value (9,821) (8,873) (4,192)
Servicing fee income 85,926 83,800 52,665
 
Other fee income 5,969 7,302 3,466
Total servicing fee income $ 91,895 $ 91,102 $ 56,131

 

PRO-FORMA EARNINGS PER SHARE RECONCILIATION

(dollars in thousands)

 
Three months ended
June 30, 2012   March 31, 2012
(unaudited) (unaudited)
Net Income $ 36,275 $ 50,186
Income taxes   12,780     3,145  
Income before taxes 49,055 53,331
Aurora ramp expenses   4,136      
Pro-forma pre-tax income 53,191 53,331
 
Income taxes (using estimated Q2 ’12 tax rate)   (13,856 )   (13,893 )
Pro-forma Income $ 39,335   $ 39,438  
 
Average shares outstanding (using Q2 ’12 share count)   89,528     89,528  
   
Pro-forma EPS $ 0.44   $ 0.44  

 

PRO-FORMA OPERATING AEBITDA PER SHARE RECONCILIATION

(dollars in thousands)

 
Three months ended
June 30, 2012   March 31, 2012
(unaudited) (unaudited)
AEBITDA $ 101,201 $ 77,243
Aurora ramp expenses   4,136  
Pro-forma AEBITDA $ 105,377 $ 77,243
 
Average shares outstanding (using Q2 ’12 share count)   89,528   89,528
   
Pro-forma AEBITDA per share $ 1.18 $ 0.86

 

AEBITDA RECONCILIATION

(dollars in thousands)

 
Three months ended
Net Income/(Loss) from Operating Segments to Adjusted EBITDA Reconciliation June 30, 2012   March 31, 2012   June 30, 2011
Net income $ 36,275 $ 50,186 $ 1,726
Plus:
Net (income)/loss from Legacy Portfolio and Other 7,373 8,047 5,098
Income tax expense   12,780     3,145      
Net income/(loss) from Operating Segments 56,428 61,378 6,824
Adjust for:
Interest expense from unsecured senior notes 13,516 8,542 7,531
Depreciation and amortization 1,758 1,242 694
Change in fair value of mortgage servicing rights 20,875 (495 ) 7,938
Amortization of mortgage servicing liabilities 9 (633 )
Restructuring charges
Share-based compensation 6,353 2,395 5,238
Fair value changes on excess spread financing 2,412 4,852
Fair value changes in derivatives (150 ) (38 )
Ineffective portion of cash flow hedge           (513 )
Adjusted EBITDA $ 101,201   $ 77,243   $ 27,712  
Adjusted EBITDA per share $ 1.13   $ 1.04   $ 0.40  
Earnings per share $ 0.41   $ 0.67   $ 0.02  

 

SEGMENT AEBITDA RECONCILIATION

(dollars in thousands)

 

FOR QUARTER ENDED JUNE 30, 2012

 
Adjusted EBITDA to Net Income/(Loss) Reconciliation Servicing   Origination   Operating   Legacy   Total
       
Adjusted EBITDA $ 37,378 $ 63,823 $ 101,201 $ (7,488 ) $ 93,713
 
Interest expense on corporate notes (13,516 ) (13,516 ) (13,516 )
MSR valuation adjustment (20,875 ) (20,875 ) (20,875 )
Excess spread adjustment (2,412 ) (2,412 ) (2,412 )
Amortization of mortgage servicing obligations (9 ) (9 ) (9 )
Depreciation & amortization (1,238 ) (520 ) (1,758 ) (96 ) (1,854 )
Stock-based compensation (4,147 ) (2,206 ) (6,353 ) 718 (5,635 )
Fair value adjustment for derivatives 150 150 (507 ) (357 )
                 
Pre-Tax Income (4,669 ) 61,097 56,428 (7,373 ) 49,055
 
Income Tax (12,780 )
                 
Net Income                         $ 36,275  
 
Average shares outstanding 89,528 89,528 89,528 89,528 89,528
                 
Earnings per share                 $ 0.41  
Pre-Tax Income per share $ (0.05 )   $ 0.68     $ 0.63     $ (0.08 )   $ 0.55  
AEBITDA per share $ 0.42     $ 0.71     $ 1.13     $ (0.08 )   $ 1.05  
 

FOR QUARTER ENDED MARCH 31, 2012

 
Adjusted EBITDA to Net Income/(Loss) Reconciliation Servicing   Origination   Operating   Legacy   Total
 
Adjusted EBITDA $ 34,850 $ 42,393 $ 77,243 $ (7,453 ) $ 69,790
 
Interest expense on corporate notes (8,542 ) (8,542 ) (8,542 )
MSR valuation adjustment 495 495 495
Excess spread adjustment (4,852 ) (4,852 ) (4,852 )
Amortization of mortgage servicing obligations 633 633 633
Depreciation & amortization (860 ) (382 ) (1,242 ) (288 ) (1,530 )
Stock-based compensation (2,155 ) (240 ) (2,395 ) (2,395 )
Fair value adjustment for derivatives 38 38 (306 ) (268 )
                 
Pre-Tax Income 19,607 41,771 61,378 (8,047 ) 53,331
 
Income Tax (3,145 )
                 
Net Income                         $ 50,186  
 
Average shares outstanding 74,561 74,561 74,561 74,561 74,561
                 
Earnings per share                 $ 0.67  
Pre-Tax Income per share $ 0.26     $ 0.56     $ 0.82     $ (0.11 )   $ 0.71  
AEBITDA per share $ 0.47     $ 0.57     $ 1.04     $ (0.10 )   $ 0.94  
 

FOR QUARTER ENDED JUNE 30, 2011

 
Adjusted EBITDA to Net Income/(Loss) Reconciliation Servicing   Origination   Operating   Legacy   Total
       
Adjusted EBITDA $ 23,381 $ 4,331 $ 27,712 $ (4,958 ) $ 22,754
 
Interest expense on corporate notes (7,466 ) (65 ) (7,531 ) (7,531 )
MSR valuation adjustment (7,938 ) (7,938 ) (7,938 )
Excess spread adjustment
Amortization of mortgage servicing obligations
Depreciation & amortization (396 ) (298 ) (694 ) (115 ) (809 )
Stock-based compensation (4,695 ) (543 ) (5,238 ) (25 ) (5,263 )
Fair value adjustment for derivatives 513 513 513
                 
Pre-Tax Income 3,399 3,425 6,824 (5,098 ) 1,726
 
Income Tax
                 
Net Income                         $ 1,726  
 
Average shares outstanding 70,000 70,000 70,000 70,000 70,000
                 
Earnings per share                 $ 0.02  
Pre-Tax Income per share $ 0.05     $ 0.05     $ 0.10     $ (0.07 )   $ 0.02  
AEBITDA per share $ 0.33     $ 0.06     $ 0.40     $ (0.07 )   $ 0.33  
 

About Nationstar Mortgage Holdings Inc.

Based in Lewisville, Texas, Nationstar currently services over one million residential mortgages totaling $193 billion in unpaid principal balance. In addition, Nationstar operates an integrated loan origination platform, enabling Nationstar to mitigate servicing portfolio run-off and improve credit performance for loan investors. Nationstar currently employs approximately 4,000 people, entirely based in the United States.

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