Nationstar Mortgage Holdings Inc. (NSM)

[Enterprising Investor]

Nationstar Announces Third Quarter 2013 Results & New Strategic Initiatives (11/07/13)

LEWISVILLE, Texas--(BUSINESS WIRE)--Nationstar Mortgage Holdings Inc. (NYSE: NSM):

“In the third quarter overall Nationstar made good progress on multiple fronts”

•GAAP EPS of $0.91 on net income of $82 million

•Pro forma EPS of $1.08, excluding BofA ramp and other one-time expenses totaling $25 million

•Ending servicing portfolio UPB of $375 billion; pro forma UPB of $415 billion

•Executed new agreements to acquire $25 billion in servicing

•Servicing: Profitability targets on track; over $400 billion bulk acquisition pipeline

•Solutionstar: Continued build-out of fee-based services offerings; significant revenue growth

•Originations: Funded volume of $8.0 billion; year-to-date recapture rate of 45%

•New strategic initiatives to increase shareholder value and returns

Nationstar Mortgage Holdings Inc. (“Nationstar”), a leading residential mortgage services company, today reported quarterly net income of $81.9 million, or $0.91 per share, for the third quarter 2013 compared to $55.1 million, or $0.61 per share, in the third quarter 2012.

Pro forma Q3’13 EPS was $1.08, after adjusting for $25.1 million in platform ramp related to the previously announced servicing acquisition from Bank of America (“BofA”) and other one-time transaction expenses. Pro forma Q3’13 EPS was up in comparison to Q3’12 pro forma EPS of $0.64.

On a Non-GAAP basis, adjusted EBITDA (“AEBITDA”) for operating segments grew 38% to $169.7 million, or $1.88 per share, for the current quarter versus $123.0 million, or $1.37 per share, in the third quarter 2012. In the current quarter AEBITDA margin was 27%.

Nationstar’s servicing portfolio, as measured by unpaid principal balance (“UPB”), ended the third quarter at $375 billion. Q3’13 ending UPB was up 90% over Q3’12 ending UPB of $198 billion. Pro forma for the closing of the remaining BofA PLS portfolios, and other servicing portfolios under contract, Nationstar’s UPB is approximately $415 billion.

“In the third quarter overall Nationstar made good progress on multiple fronts," said Jay Bray, Chief Executive Officer. "Servicing segment income increased as we continued to grow the size and profitability of the portfolio. Reflecting momentum in the build-out of our fee-based real estate services business, Solutionstar revenue grew at an impressive rate. In the origination segment, the interest rate volatility in the quarter negatively impacted loan pipeline growth and gain-on-sale margins, resulting in a challenging origination quarter.”

Bray continued, “The combination of servicing, Solutionstar, and originations provides attractive return opportunities and a predictable, fee-based earnings stream that should increase in value over the long term. Within originations, we are focused on the profitable creation of servicing assets, hence our forward emphasis on the core consumer-direct origination channel. Our strategic initiatives target a lower cost operating model and the formation of capital vehicles that will generate greater cash flows. I am confident in our ability to execute as we remain focused on generating long-term shareholder value."

Chief Financial Officer David Hisey said, “Our core servicing segment is ahead of plan on our previously identified profitability goals which we expect will generate increased segment earnings. Solutionstar remains focused on real estate sales and its settlement services business while exploring additional revenue growth and client diversification opportunities. We were not immune to the fluctuation of interest rates in the quarter that negatively impacted refinance volumes and gain-on-sale margins. We are adjusting our guidance for 2013 and 2014 to reflect the impact of market conditions on our origination segment. Within this new guidance, servicing and Solutionstar will contribute a majority percentage of earnings, resulting in more predictable cash flows that should carry a premium valuation as compared to prior quarters when originations was a larger component.”

[Click below for entire lengthy press release including financial tables]

http://www.businesswire.com/news/home/20131107005740/en/Nationstar-Announces-Quarter-2013-Results-Strategic-Initiatives