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Nationstar Mortgage Announces Fourth Quarter and Full Year 2012 Financial Results

Stocks in this article: NSM

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, and 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“).

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 fourth quarter and full year 2012 results and other general business matters at 10:00 a.m. (ET) on Thursday, March 7, 2013. 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 800-320-2978, or 617-614-4923 internationally. Please use the participant passcode 61330875 to access the live conference call. An investor presentation will also be available at http://investors.nationstarholdings.com.

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 Year ended December, 31

December 31, 2012

 

 

September 30, 2012

 

 

December 31, 2011

  2012       2011  
Revenues
Servicing fee income $ 145,496 $ 142,482 $ 67,775 $ 462,495 $ 233,411
Other fee income   12,070     3,129     15,205     34,656     35,294  
Total fee income 157,566 145,611 82,980 497,151 268,705
Gain on mortgage loans held for sale   175,048     139,259     35,576     487,164     109,136  
Total revenues 332,614 284,870 118,556 984,315 377,841
 
Total expenses and impairments 200,268 154,828 86,466 582,045 306,183
 
Other income (expense)
Interest income 30,406 16,564 15,556 71,586 66,802
Interest expense (71,400 ) (65,015 ) (28,446 ) (197,308 ) (105,375 )
Loss on interest rate swaps and caps 708 (1,077 ) 298 (994 ) 298
Fair value changes in ABS securitizations (5,470 ) (12,389 )
Contract termination 15,600 15,600
Loss on equity method investment   (13,244 )   (733 )   864     (14,571 )   (107 )
Total other income (expense) (37,930 ) (50,261 ) (17,198 ) (125,687 ) (50,771 )
 
Income before taxes 94,416 79,781 14,892 276,583 20,887
Income tax expense   30,657     24,714         71,296      
Net income 63,759 55,067 14,892 205,287 20,887
Other comprehensive income, net of tax
Change in value of designated cash flow hedges
Reclassification adjustments for gain (loss)       423              
Comprehensive income $ 63,759   $ 55,490   $ 14,892   $ 205,287   $ 20,887  
 
Earnings per share:
Basic earnings per share $ 0.72   $ 0.62   $ 0.21   $ 2.41   $ 0.30  
Diluted earnings per share $ 0.71   $ 0.61   $ 0.21   $ 2.40   $ 0.30  
Weighted average shares:
Basic 89,173 89,168 70,000 85,328 70,000
Dilutive effect of stock awards   711     597         196      
Diluted   89,884     89,765     70,000     85,524     70,000  
Dividends declared per share $   $   $   $   $  

NATIONSTAR MORTGAGE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

     
December 31, September 30, December 31,
  2012   2012   2011
Assets (unaudited) (unaudited)

(audited)

Cash and cash equivalents $ 152,649 $ 430,815 $ 62,445
Restricted cash 393,190 258,858 71,499
Accounts receivable 3,043,606 2,852,985 562,300
Mortgage loans held for sale 1,480,537 703,214 458,626
Mortgage loans held for investment, subject to nonrecourse debt - Legacy Assets 238,907 238,178 243,480
Reverse mortgage interests 750,273 452,886
Receivables from affiliates 12,604 13,301 4,609
Mortgage servicing rights – fair value 635,860 592,692 251,050
Mortgage servicing rights – amortized cost 10,973 8,036
Property and equipment, net 75,026 48,714 24,073
Real estate owned (REO), net 10,467 3,193 3,668
Other assets   318,705   338,359   106,181
Total assets $ 7,122,797 $ 5,941,231 $ 1,787,931
 
Liabilities and equity
Notes payable $ 3,601,586 $ 2,532,316 $ 873,179
Unsecured senior notes 1,062,635 1,062,423 280,199
Payables and accrued liabilities 628,085 762,268 183,789
Derivative financial instruments 20,026 37,835 12,370
Mortgage servicing liabilities 83,238 82,313
Nonrecourse debt - Legacy Assets 100,620 101,898 112,490
Excess spread financing (at fair value) 288,089 255,484 44,595
Participating interest financing   580,836   415,448  
Total liabilities   6,365,115   5,249,985   1,506,622
 
Total equity   757,682   691,246   281,309
Total liabilities and equity $ 7,122,797 $ 5,941,231 $ 1,787,931

SERVICING SEGMENT - SERVICING FEE INCOME DETAIL

(dollars in thousands)

   
Three months ended   Year ended December 31,  

December 31, 2012

 

 

September 30, 2012

 

 

December 31, 2011

    2012       2011  
(unaudited) (unaudited) (unaudited)
Total servicing fee income before MSR fair value adjustments $ 174,645 $ 159,941 $ 80,707 $ 535,807 280,454
Fair value adjustments on excess spread financing (5,633 ) 2,213 (3,060 ) (10,684 ) (3,060 )
Reverse mortgage servicing amortization/accretion 1,844 2,652

-

5,120

-

Fair value adjustments on MSR
Due to changes in valuation (1,169 ) 8,355 1,304 5,500 (14,207 )
Other changes in fair value   (24,263 )   (30,785 )   (9,547 )   (73,742 )   (24,793 )
Servicing fee income   145,424     142,376     69,404     462,001     238,394  
 
Other fee income   14,078     7,190     9,967     35,133     17,189  
Total fee income $ 159,502   $ 149,566   $ 79,371   $ 497,134   $ 255,583  

AEBITDA RECONCILIATION

(dollars in thousands)

   
Three months ended Year ended December 31,
Net Income/(Loss) from Operating Segments to Adjusted EBITDA Reconciliation

December 31, 2012

 

September 30, 2012

 

December 31, 2011

 

2012

      2011  
Net income $ 63,759 $ 55,067 $ 14,892 $ 205,287 $ 20,887
Plus:
Net (income)/loss from Legacy Portfolio and Other 2,189 2,874 7,912 20,483 24,892
Income tax expense   30,657     24,714         71,296      
Net income/(loss) from Operating Segments 96,605 82,655 22,804 297,066 45,779
Adjust for:
Interest expense from unsecured senior notes 24,165 17,656 7,842 63,879 30,464
Depreciation and amortization 3,107 2,772 1,208 8,880 3,395
Change in fair value of mortgage servicing rights 25,432 22,430 8,243 68,242 39,000
Amortization/accretion of reverse mortgage servicing (1,844 ) (2,652 ) (5,120 )
Restructuring charges 1,836 1,836
Share-based compensation 2,675 2,623 2,612 14,045 14,764
Fair value changes on excess spread financing 5,633 (2,213 ) 3,060 10,684 3,060
Fair value changes in derivatives (813 ) (236 ) (298 ) (1,237 ) (298 )
Ineffective portion of cash flow hedge                   (2,032 )
Adjusted EBITDA $ 154,960   $ 123,035   $ 47,307   $ 456,439   $ 135,968  
Adjusted EBITDA per share $ 1.72   $ 1.37   $ 0.68   $ 5.34   $ 1.94  
Earnings per share $ 0.71   $ 0.61   $ 0.21   $ 2.40   $ 0.30  

SEGMENT INCOME STATEMENT & AEBITDA RECONCILIATION

(dollars in thousands)

 

FOR QUARTER ENDED December 31, 2012

  Servicing   Origination   Operating   Legacy   Eliminations   Total
Revenues
Servicing fee income $ 145,424 $ - $ 145,424 $ 502 $ (430 ) $ 145,496
Other fee income   14,078     (1,956 )   12,122     (52 )   -     12,070  
Total fee income 159,502 (1,956 ) 157,546 450 (430 ) 157,566
Gain on mortgage loans held for sale   -     175,048     175,048     -     -     175,048  
Total revenues 159,502 173,092 332,594 450 (430 ) 332,614
 
Total expenses and impairments 109,975 86,808 196,783 3,485 - 200,268
 
Other income (expense)
Interest income 19,983 5,707 25,690 4,286 430 30,406
Interest expense (57,764 ) (10,301 ) (68,065 ) (3,335 ) - (71,400 )
Loss on interest rate swaps and caps 813 - 813 (105 ) - 708
Contract termination 15,600 - 15,600 - - 15,600
Loss on equity method investment   (13,244 )   -     (13,244 )   -     -     (13,244 )
Total other income (expense) (34,612 ) (4,594 ) (39,206 ) 846 430 (37,930 )
           
Income before taxes $ 14,915   $ 81,690   $ 96,605   $ (2,189 ) $ -   $ 94,416  
 
Interest expense on corporate notes 19,959 4,206 24,165 24,165
MSR valuation adjustment 25,432 25,432 25,432
Excess spread adjustment 5,633 5,633 5,633
Amortization of mortgage servicing obligations (1,844 ) (1,844 ) (1,844 )
Depreciation & amortization 2,020 1,087 3,107 155 3,262
Stock-based compensation 1,576 1,099 2,675 2 2,677
Fair value adjustment for derivatives   (813 )       (813 )   105         (708 )
Adjusted EBITDA $ 66,878   $ 88,082   $ 154,960   $ (1,927 ) $ -   $ 153,033  
 
Average shares outstanding 89,884 89,884 89,884 89,884 89,884 89,884
 
Earnings per share - Diluted           $ 0.71  
Pre-Tax Income per share $ 0.17   $ 0.91   $ 1.07   $ (0.02 ) $ -   $ 1.05  
AEBITDA per share $ 0.74   $ 0.98   $ 1.72   $ (0.02 ) $ -   $ 1.70  

 

SEGMENT AEBITDA RECONCILIATION

       

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 - Diluted         $ 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 December 31, 2011

Adjusted EBITDA to Net Income/(Loss) Reconciliation Servicing Origination Operating Legacy Total  
 
Adjusted EBITDA $ 35,594 $ 11,714 $ 47,307 $ (7,609 ) $ 39,698
 
Interest expense on corporate notes (7,842 ) (7,842 ) (7,842 )
MSR valuation adjustment (8,243 ) (8,243 ) (8,243 )
Excess spread adjustment (3,060 ) (3,060 ) (3,060 )
Restructuring charges (1,836 ) (1,836 ) (1,836 )
Depreciation & amortization (796 ) (412 ) (1,208 ) (303 ) (1,511 )
Stock-based compensation (2,351 ) (261 ) (2,612 ) (2,612 )
Fair value adjustment for derivatives 298 298 298
           
Pre-Tax Income/Loss 13,600 9,205 22,804 (7,912 ) 14,892
 
Income Tax
   
Net Income/Loss $ 14,892  
 
Average shares outstanding 70,000 70,000 70,000 70,000 70,000
   
Earnings per share - Diluted         $ 0.21  
Pre-Tax Income per share $ 0.19   $ 0.13   $ 0.33   $ (0.11 ) $ 0.21  
AEBITDA per share $ 0.51   $ 0.17   $ 0.68   $ (0.11 ) $ 0.57  
 

FOR YEAR ENDED December 31, 2012

Adjusted EBITDA to Net Income/(Loss) Reconciliation Servicing Origination Operating Legacy Total  
 
Adjusted EBITDA 181,228 275,212 456,440 (18,215 ) 438,225
 
Interest expense on corporate notes (57,724 ) (6,155 ) (63,879 ) - (63,879 )
MSR valuation adjustment (68,242 ) - (68,242 ) - (68,242 )
Excess spread adjustment (10,684 ) - (10,684 ) - (10,684 )
Amortization of mortgage servicing obligations 5,120 - 5,120 - 5,120
Depreciation & amortization (6,124 ) (2,756 ) (8,880 ) (740 ) (9,620 )
Stock-based compensation (9,449 ) (4,597 ) (14,045 ) 703 (13,342 )
Fair value adjustment for derivatives   1,237     -     1,237     (2,231 )   (994 )
Pre-Tax Income/Loss 35,362 261,704 297,066 (20,483 ) 276,583
 
Income Tax (71,296 )
   
Net Income/Loss $ 205,287  
 
Average shares outstanding 85,524 85,524 85,524 85,524 85,524
   
Earnings per share - Diluted         $ 2.40  
Pre-Tax Income per share $ 0.41   $ 3.06   $ 3.47   $ (0.24 ) $ 3.23  
AEBITDA per share $ 2.12   $ 3.22   $ 5.34   $ (0.22 ) $ 5.12  
 

FOR YEAR ENDED December 31, 2011

 

 

Adjusted EBITDA to Net Income/(Loss) Reconciliation Servicing Origination Operating Legacy Total  
 
Adjusted EBITDA $ 107,491 $ 28,477 $ 135,968 $ (24,175 ) $ 111,793
 
Interest expense on corporate notes (30,339 ) (125 ) (30,464 ) - (30,464 )
MSR valuation adjustment (39,000 ) - (39,000 ) - (39,000 )
Excess spread adjustment (3,060 ) - (3,060 ) - (3,060 )
Restructuring Charges - (1,836 ) (1,836 ) - (1,836 )
Depreciation & amortization (2,089 ) (1,306 ) (3,395 ) (667 ) (4,062 )
Stock-based compensation (13,249 ) (1,515 ) (14,764 ) (50 ) (14,814 )
Hedge ineffectiveness 2,032 - 2,032 - 2,032
Fair value adjustment for derivatives   298     -     298     -     298  
Pre-Tax Income/Loss 22,084 23,695 45,779 (24,892 ) 20,887
 
Income Tax -
   
Net Income $ 20,887  
 
Average shares outstanding 70,000 70,000 70,000 70,000 70,000
   
Earnings per share - Diluted         $ 0.30  
Pre-Tax Income per share $ 0.32   $ 0.34   $ 0.65   $ (0.35 ) $ 0.30  
AEBITDA per share $ 1.54   $ 0.41   $ 1.94   $ (0.35 ) $ 1.60  

About Nationstar Mortgage Holdings Inc.

Based in Lewisville, Texas, Nationstar offers servicing, origination, and real estate services to financial institutions and consumers. Nationstar is one of the largest servicers in the United States, with a servicing portfolio of over 1.8 million residential mortgages in excess of $300 billion in unpaid principal balance as of February 1, 2013. Nationstar’s integrated loan origination business mitigates servicing portfolio run-off and improves credit performance for loan investors. Our Solutionstar business unit offers asset management, settlement, and processing services. In 2012, Nationstar was a top 3 performing IPO, as measured by share price appreciation, for global IPOs with a deal size of at least $100 million and excluding closed-end funds and SPACs, out of 203 deals total. Nationstar currently employs over 4,900 people. Additional corporate information is available at www.nationstarholdings.com.

Forward Looking Statements

Any statements in this release 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’s current expectations or forecasts of future events. When used in this release, 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’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 release.



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