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Nationstar Mortgage Announces Third Quarter 2012 Financial Results

Stocks in this article: NSM

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 Q3 ’12 AEBITDA per share excludes certain expenses related 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 Aurora transaction.

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 third quarter results and other general business matters at 10:00 a.m. (ET) on Tuesday, November 6, 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 866-788-0545, or 857-350-1683 internationally. Please use the participant passcode 83308800 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
September 30, 2012     June 30, 2012     September 30, 2011
Revenues
Servicing fee income $ 135,504 $ 86,092 $ 53,031
Other fee income   2,396     11,610     7,660  
Total fee income 137,900 97,702 60,691
Gain on mortgage loans held for sale   139,259     102,345     30,232  
Total revenues 277,159 200,047 90,923
 
Total expenses and impairments 154,828 130,372 83,194
 
Other income (expense)
Interest income 23,542 15,650 16,201
Interest expense (65,015 ) (35,913 ) (26,376 )
Loss on interest rate swaps and caps (1,077 ) (357 )
Fair value changes in ABS securitizations           (654 )
Total other income (expense) (42,550 ) (20,620 ) (10,829 )
 
Income before taxes 79,781 49,055 (3,100 )
Income tax expense   24,714     12,780      
 
Net income 55,067

36,275

(3,100 )
Other comprehensive income, net of tax
Change in value of designated cash flow hedges (423 )
Reclassification adjustments for gain (loss)   423          
Comprehensive income $ 55,490   $ 35,852   $ (3,100 )
 
Earnings per share:
Basic earnings per share $ 0.62   $ 0.41   $ (0.04 )
Diluted earnings per share $ 0.61   $ 0.41   $ (0.04 )
Weighted average shares:
Basic 89,168 88,500 70,000
Dilutive effect of stock awards   597     1,028      
Diluted   89,765     89,528     70,000  
Dividends declared per share $   $   $  
             

NATIONSTAR MORTGAGE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS  

(dollars in thousands)

             
September 30, June 30, September 30,
2012 2012 2011
Assets (unaudited) (unaudited) (unaudited)
Cash and cash equivalents $ 430,815 $ 15,892 $ 24,005
Restricted cash 258,858 119,512 72,813
Accounts receivable 2,852,985 2,487,991 471,474
Mortgage loans held for sale 703,214 837,906 377,932
Mortgage loans held for investment, subject to nonrecourse debt - Legacy Assets 238,178 238,173 246,159
Mortgage loans held for investment, subject to ABS nonrecourse debt 477,748
Reverse mortgage interests 452,886 310,074
Receivables from affiliates 13,301 13,083 6,082
Mortgage servicing rights – fair value 592,692 596,462 246,916
Mortgage servicing rights – amortized cost 8,036 8,357
Property and equipment, net 48,714 39,090 20,990
Real estate owned (REO), net 3,193 3,429 15,411
Other assets   338,359   226,261   44,795
Total assets $ 5,941,231 $ 4,896,230 $ 2,004,325
 
Liabilities and equity
Notes payable $ 2,532,316 $ 2,412,364 $ 738,783
Unsecured senior notes 1,062,423 555,938 245,109
Payables and accrued liabilities 762,268 639,839 177,452
Derivative financial instruments 37,835 18,911 15,778
Derivative financial instruments, subject to ABS nonrecourse debt 11,889
Mortgage servicing liabilities 82,313 81,979
Nonrecourse debt - Legacy Assets 101,898 106,271 116,200
ABS nonrecourse debt (at fair value) 434,326
Excess spread financing (at fair value) 255,484 266,693
Participating interest financing   415,448   181,114  
Total liabilities   5,249,985   4,263,109   1,739,537
 
Total equity   691,246   633,121   264,788
Total liabilities and equity $ 5,941,231 $ 4,896,230 $ 2,004,325
   

SERVICING FEE INCOME DETAIL

(dollars in thousands)

 
Three months ended
September 30, 2012     June 30, 2012     September 30, 2011
(unaudited) (unaudited) (unaudited)
Total servicing fee income before MSR fair value adjustments $ 152,963 $ 109,222 $

73,255

Fair value adjustments on excess spread financing 2,213 (2,412 )
Reverse mortgage servicing amortization/accretion 2,652 (9 )
MSR changes in fair value   (22,430 )   (20,875 )   (19,035 )
Servicing fee income   135,398     85,926    

54,220

 
 
Other fee income   6,457     5,969    

3,772

 
Total servicing fee income $ 141,855   $ 91,895   $ 57,992  
     

PRO-FORMA EARNINGS PER SHARE RECONCILIATION

(dollars in thousands)

 
Three months ended
September 30, 2012     June 30, 2012
(unaudited) (unaudited)
Net Income $ 55,067 $ 36,275
Income taxes   24,714     12,780  
Income before taxes 79,781 49,055
ResCap and other transaction related expenses   3,888     4,136  
Pro-forma pre-tax income 83,669 53,191
 
Income taxes   (25,918 )   (13,856 )
Pro-forma Income $ 57,751   $ 39,335  
 
Average shares outstanding   89,765     89,528  
   
Pro-forma EPS $ 0.64   $ 0.44  
     

PRO-FORMA OPERATING AEBITDA PER SHARE RECONCILIATION

(dollars in thousands)

 
Three months ended
September 30, 2012     June 30, 2012
(unaudited) (unaudited)
AEBITDA $ 123,035 $ 101,201
ResCap and other transaction related expenses   3,888   4,136
Pro-forma AEBITDA $ 126,923 $ 105,377
 
Average shares outstanding   89,765   89,528
   
Pro-forma AEBITDA per share $ 1.41 $ 1.18
     

AEBITDA RECONCILIATION

 (dollars in thousands)

 
Three months ended
Net Income/(Loss) from Operating Segments to Adjusted EBITDA Reconciliation

September 30,

2012

   

June 30,

2012

   

September 30,

2011

Net income $ 55,067 $ 36,275 $ (3,100 )
Plus:
Net (income)/loss from Legacy Portfolio and Other 2,874 7,373 7,607
Income tax expense   24,714     12,780      
Net income/(loss) from Operating Segments 82,655 56,428 4,507
Adjust for:
Interest expense from unsecured senior notes 17,656 13,516 7,543
Depreciation and amortization 2,772 1,758 852
Change in fair value of mortgage servicing rights 22,430 20,875 19,035
Amortization/accretion of reverse mortgage servicing (2,652 ) 9
Restructuring charges
Share-based compensation 2,623 6,353 1,676
Fair value changes on excess spread financing (2,213 ) 2,412
Fair value changes in derivatives (236 ) (150 )
Ineffective portion of cash flow hedge           (617 )
Adjusted EBITDA $ 123,035   $ 101,201   $ 32,996  
Adjusted EBITDA per share $ 1.37   $ 1.13   $ 0.47  
Earnings per share $ 0.61   $ 0.41   $ (0.04 )
 

SEGMENT AEBITDA RECONCILIATION

 (dollars in thousands)

 

FOR QUARTER ENDED SEPTEMBER 30, 2012

 

Adjusted EBITDA to Net Income/(Loss)

Reconciliation

      Servicing     Origination     Operating     Legacy     Total
               
Adjusted EBITDA $ 42,121 $ 80,914 $ 123,035 $ (1,347 ) $ 121,688
 
Interest expense on corporate notes (15,707 ) (1,949 ) (17,656 ) (17,656 )
MSR valuation adjustment (22,430 ) (22,430 ) (22,430 )
Excess spread adjustment 2,213 2,213 2,213
Amortization of mortgage servicing obligations 2,652 2,652 2,652
Depreciation & amortization (2,006 ) (766 ) (2,772 ) (201 ) (2,973 )
Stock-based compensation (1,570 ) (1,053 ) (2,623 ) (13 ) (2,636 )
Fair value adjustment for derivatives 236             236       (1,313 )       (1,077 )
Pre-Tax Income/Loss 5,509 77,146 82,655 (2,874 ) 79,781
 
Income Tax (24,714 )
                         
Net Income/Loss                         $ 55,067  
 
Average shares outstanding 89,765 89,765 89,765 89,765 89,765
                         
Earnings per share                         $ 0.61  
Pre-Tax Income per share $ 0.06       $ 0.86       $ 0.92       $ (0.03 )     $ 0.89  
AEBITDA per share $ 0.47       $ 0.90       $ 1.37       $ (0.02 )     $ 1.36  

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/Loss (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 SEPTEMBER 30, 2011

 

Adjusted EBITDA to Net Income/(Loss)

Reconciliation

Servicing     Origination     Operating     Legacy     Total
 
Adjusted EBITDA $ 24,858 $ 8,138 $ 32,996 $ (7,468 ) $ 25,528
 
Interest expense on corporate notes (7,543 ) (7,543 ) (7,543 )
MSR valuation adjustment (19,035 ) (19,035 ) (19,035 )
Excess spread adjustment
Amortization of mortgage servicing obligations
Depreciation & amortization (525 ) (327 ) (852 ) (139 ) (991 )
Stock-based compensation (1,508 ) (168 ) (1,676 ) (1,676 )
Fair value adjustment for derivatives 617 617 617
                         
Pre-Tax Income/Loss (3,136 ) 7,643 4,507 (7,607 ) (3,100 )
 
Income Tax
                         
Net Income/Loss                         $ (3,100 )
 
Average shares outstanding 70,000 70,000 70,000 70,000 70,000
                         
Earnings per share                         $ (0.04 )
Pre-Tax Income per share $ (0.04 )     $ 0.11       $ 0.06       $ (0.11 )     $ (0.04 )
AEBITDA per share $ 0.36       $ 0.12       $ 0.47       $ (0.11 )     $ 0.36  

About Nationstar Mortgage Holdings Inc.

Based in Lewisville, Texas, Nationstar currently services over one million residential mortgages totaling $198 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 over 4,100 people, entirely based in the United States.

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