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| 8-K - FORM 8-K - Nationstar Mortgage Holdings Inc. | d476754d8k.htm |
 Investor
Presentation January 31, 2013
Financial data as of September 30, 2012
Exhibit 99.1 |
 Forward
Looking Statements 1
Any statements in this presentation 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 Mortgage
Holdings Inc.’s (“Nationstar”) current expectations or forecasts of
future events. When used in this presentation, 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
Mortgage Holdings Inc.’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 presentation. |
 Our
Business 1)
Proforma UPB and customers include Q3 ‘12 end of period UPB, $13B UPB BofA
acquisition closed in Q4 ’12, and ~$215B UPB acquired portfolio. Acquired portfolio transfers to occur as investor and
other third-party approvals are received
2)
Annual origination run-rate based on Q3’12 Annualized
3) As of January 29, 2013
$7.2B annual production
(2)
Agency and government
Servicing substantially retained
$425B of UPB
(1)
Service 2.5MM+ customers
(1)
Focused on asset performance
and credit risk management
Servicing
Originations
2
A leading service provider to the residential mortgage market
Economics across mortgage
lifecycle
Settlement
Processing
Asset management
Solutionstar
Corporate Highlights:
Established in 1994 as a division of Centex Homes
Sold to funds managed by Fortress Investment Group in 2006
Publicly traded (NYSE: NSM) with market
capitalization of $3.1B
(3)
Over 4,100 total employees |
 Strategically Positioned Platform
3
Balanced real estate services platform designed to drive fee-based income across the
entire economic cycle Low rate environment
Distressed market
Rising rate environment
Improving economy
Servicing
Acquire servicing at attractive multiples
Additional revenue streams
(mod/incentive/late fees)
Servicing costs are higher due to higher
delinquencies
Extended life of servicing cash flows
Lower portfolio DQs
Lower servicing costs
Originations
Recapture drives strong margins with
no customer acquisition costs
Recapture extends servicing cash flows
Profitably create servicing assets
Robust housing market -
rising purchase
volumes
Stronger builder and broker channels drive
significant purchase money volume
Healthy economy improves employment and
credit -
larger pool of eligible buyers
Ancillary revenue from Solutionstar attractive in every environment
|
 BofA
Portfolio
Acquisition
–
Landmark
Acquisition
4
4
1)
Balances as of Nov. 30, 2012; balances may change prior to closing due to normal
portfolio run-off 2)
Proforma UPB includes Q3 ‘12 end of period UPB, $13B UPB BofA acquisition closed in
Q4 ’12, and ~$215B UPB acquired portfolio. Acquired portfolio transfers to occur as investor and other third-party approvals are
received
3)
Please refer to Endnotes for information regarding 2013E and 2014E Net Income; CAGR and
bar chart amounts for 2013E and 2014E represent midpoint of ranges for proforma combined company
Acquiring $215B
(1)
servicing book; proforma UPB of $425B
(2)
; 1.3MM new customers
Capture multiple revenue streams driving profitability over entire economic cycle
Significant earnings accretion expected
Net Income Growth
(3)
$ in millions
Deal Summary
$ in millions
$ UPB
$215,000
MSRs
$1,345
Servicing Advances
$5,800
Total Assets
$7,145
MSR Price (bps)
63
Average Servicing Fee (bps)
33
MSR Purchase Multiple
1.9x |
 Earnings
Estimates 1)
Assumes 90.7 million shares outstanding
2)
Please refer to Endnotes for information regarding 2013E and 2014E AEBITDA, Net Income
and EPS 5
Acquisition highly accretive
2013 estimates reflect year-one portfolio ramp and integration
2014 estimates reflect fully ramped earnings power of the company
AEBITDA per share
(1)(2)
Earnings per share
(1)(2)
2013E
2014E
Acquired Portfolio
Total Company Estimate
Acquired Portfolio
Total Company Estimate
$2.20 -
$2.55
$9.50 -
$11.05
$4.65 -
$5.40
$12.30 -
$14.30
$0.70 -
$0.80
$3.70 -
$4.35
$2.30 -
$2.70
$5.60 -
$6.50 |
 Future
Growth Opportunities (1)
1)
The identified
opportunities
referenced
above
are
not
currently
serviced
by
the
Company
and
there
can
be
no
assurance
that
these
potential
servicing
transactions
will
ultimately
be
consummated,
or
will
remain the
same
size.
Notwithstanding
the
above,
it
is
possible
that
these
potential
servicing
transactions,
if
consummated,
could
result
in
a
partial
or
total
loss
of
any
invested
capital.
2)
All pipeline deals are under a signed non-disclosure agreement between Nationstar
and the counter-party. 3)
Proforma
UPB
and
customers
include
Q3
‘12
end
of
period
UPB,
$13B
BofA
acquisition
closed
in
Q4
’12,
and
~$215B
acquired
portfolio.
Acquired
portfolio
transfers
to
occur
as
investor
and
other third-party approvals are
received
Servicing
Originations
Bulk Servicing
Flow Servicing
Channel Development
MSRs and subservicing
Multiple lenders
Already executed
agreements ~ $10B for
‘13
KB Home/Builder
Wholesale
Correspondent
$300 billion+
$25-50 billion annually
Potential Opportunity Size:
Macro-thesis of secular shift remains intact; legal, regulatory and headline risk
for banks persists Growth of customer base presents opportunity for expansion of
Solutionstar Solutionstar
2.5 million customers in
servicing portfolio
(3)
Data-rich environment
Multiple fee-based opportunities
$425 billion portfolio
(3)
6
Pipeline of opportunities remains elevated for the foreseeable future
|
 Prospective Opportunities for Nationstar
Focus on core customers
Shedding non-core assets
Capital constraints and pressures
Legal, regulatory, headline risk
7
…Creating a Need for a Strategic Service Partner
Financial Institutions Re-evaluating Their Mortgage Business Models…
Complete outsourcing
Credit risk management
Origination/fulfillment
Default servicing
Core/non-core servicing
Solutionstar
Multiple Fee-Based Revenue Streams
Long-term partner of choice to financial institutions
|
 Servicing
Profitability Ramp 8
Expense Reduction (bps)
EPS
Impact
$0.30 EPS per 1 bps
improvement in servicing
expenses
1)
Notes to replace $300 million in existing Agency servicing advance facilities that
carried a weighted average floating rate of Libor plus 2.86%, or 3.10% in total, resulting in a reduction in rate of 1.65% as of Jan. 24, 2013.
2)
For illustrative purposes only. This illustration uses assumptions that affect
results shown, including assumptions that are based on factors that are beyond NSM’s control. Actual results could differ from this illustration. Assumes
marginal tax rate of 35%
Illustrative
Cost
Reduction
Example
(2)
Servicing portfolio:
$425B
Targeted Improvement: 8 bps
Targeting 8 bps servicing expense reduction by Q3 ‘14
Assumptions
Multiple initiatives underway:
Cost per loan:
Strategic sourcing of non-customer facing functions
Portfolio performance:
Reduced Aurora 60+ DQ rate by 250 bps since boarding
Reduce advance costs:
$300MM GSE advance securitization (reducing funding cost by >1.65%)
(1)
Opportunity for non-agency securitizations (significant potential savings)
|
 Originations: Enhances Core Servicing Platform
9
Origination
Volume
(1)
($bn of UPB)
Capitalize on market dislocation; wide margins & limited supply
1)
2012 data as of 9/30/12
2013/2014 Objectives:
HARP:
Exhaust portfolio of HARP/recapture opportunities to capitalize on margin
premium Build Out Channels:
Wholesale, correspondent, direct-to-consumer
Builder:
Execute additional ventures with homebuilders; set stage for return of purchase
money Recapture
of refinanced Nationstar loans
Cash flow-positive, cost-effective creation of servicing assets
Primary Strategy:
|
 Housing
Market – Return of Residential Investment
10
December ’12 housing starts highest level since 2008
Homebuilder sentiment highest since 2006
2012 building permits up 30% year over year
NAHB/Wells Fargo Housing Market Index (HMI) and New Single-Family Starts
1)
Source: NAHB/Wells Fargo Housing Market Index. U.S. Census Bureau.
|
 HARP Rich
Servicing Portfolio 11
HARP within BofA portfolio
“Nationstar Express”
(HARP streamline) launch in Q1‘13
Nationstar
Applications through December ‘13
Funding until mid-2014
Administration contemplating extension/expansion
HARP Program
Significant HARP opportunities available; execution prices remain attractive
LTV
107%
FICO
747
DTI
37%
Coupon
4.1%
Benefits Borrower and Servicer
Interest expense savings make payments more
affordable for borrower
Underwater borrowers see clearer path back to
equity -
mitigates strategic default
HARP loans have slower prepay speeds
Few refinancing opportunities outside of HARP
Borrower unlikely to sell home when underwater
NSM Q3 Agency Orig. Credit Profile |
 Solutionstar
2013 Expectations:
$200 million in revenue
15% of revenue from third-party customers
12
Processing
Recovery Services
BK Processing
FCL Processing
Claims Processing
Real Estate
Traditional REO
REO and SPO Auctions
Brokerage
Field Services
Settlement
Valuation Services
Title Services
Closing Services
Opportunity to capture economics across the entire mortgage lifecycle
16,000 REO properties in portfolio presents
significant management/disposition opportunities
Attractive, capital-light, fee-based earnings stream
linked to UPB growth |
 At
Current Levels, NSM Represents Value Proposition 13
‘14E P/E
Multiple
1)
Fee-based service peer group of Fidelity National, Old Republic, Lender Processing
Services, Corelogic, First American Financial, Altisource. Average of ‘14 P/E multiples based on share prices as of 1/29/13
2)
Sterne Agee Industry Report, 1/10/13
3)
Peer group consists of OCN and WAC. Average for ‘14 P/E multiple based on
share prices as of 1/29/13 4)
Based on 1/29/13 closing price of $34.31 and mid-point of ’14E EPS guidance of
$6.05 NSM Discount
-
35%
Average for fee-based service providers 12–14x
(1)
Historical average P/E ratio for mortgage companies
has been 8-10x
(2)
Peers trading at discount to historical multiples for
originators/servicers and fee-based providers
5x
6x
7x
8x
9x
10x
12x
14x
Peer Average
(3)
7.7x
Nationstar
(4)
5.7x
Mortgage Cos. –
Historical Average
Fee-Based Service
Providers
NSM trading at significant discount to peers, historical valuations
|
 Focused
on Profitable Growth UPB Growth ($bn)
Revenue Growth ($mm)
(1)
Margin (%)
22%
30%
24%
36%
7%
11%
6%
30%
12%
9M
14
1) Revenue, AEBITDA and pre-tax income from operating
segments 2) Please see
Endnotes for information on AEBITDA and reconciliations on pg 15 $21
$34
$64
$107
$198
0
80
120
160
200
2008
2009
2010
2011
Q3 '12
40
$97
$156
$267
$ 379
$1,108
0
200
400
800
1,000
1,200
2008
2009
2010
2011
Q3 '12 RR
600
$7
$16
$15
$46
$331
0
50
100
150
200
250
300
350
2008
2009
2010
2011
Q3 '12 RR
$22
$46
$65
$136
$301
0
50
100
150
200
250
300
350
400
450
2008
2009
2010
2011
2012
Estimate
$400+
Pre-Tax Income Growth ($mm)
(1)
AEBITDA Growth ($mm)
(1)(2) |
 ($ in
thousands) Nine Months
Ended
Adjust for:
Net loss from Legacy Portfolio and Other
164,738
97,263
24,806
24,892
2,874
18,294
Interest expense from unsecured senior notes
-
-
24,628
30,464
17,656
39,714
Depreciation and amortization
1,172
1,542
1,873
3,395
2,772
5,773
Change in fair value of MSRs
11,701
27,915
6,043
39,000
22,430
42,810
Amortization of mortgage servicing obligations
-
-
-
-
(2,652)
(3,276)
Fair value changes on excess spread financing
-
-
-
3,060
(2,213)
5,050
Share-based compensation
1,633
579
8,999
14,764
2,623
11,371
Exit costs
-
-
-
1,836
-
-
Fair value changes on interest rate swaps
-
-
9,801
(298)
(236)
(424)
Ineffective portion of cash flow hedge
-
-
(930)
(2,032)
-
-
Income tax expense
-
-
-
-
24,714
40,639
AEBITDA Reconciliation
15
1)
For Operating Segments
Adjusted EBITDA
(1)
$ 21,634
$ 46,422
$ 65,306
$ 135,968
$ 123,035
$ 301,479
9/30/12
Q3 ’12
FY 2008
FY 2009
FY 2010
FY 2011
Net Income (loss)
$ (157,610)
$ (80,877)
$ (9,914)
$ 20,887
$ 55,067
$ 141,528 |
 Endnotes
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 Q3 ‘12 EPS excludes certain expenses
related
to
ResCap
and
other
transactions.
These
expenses
include
the
advance
hiring
of
servicing
staff,
recruiting
expenses
and
travel
and
licensing
expenses.
Pro-forma
Q2
‘12 EPS
excluded certain expenses incurred in advance of the closing of the Aurora transaction.
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 earnings per share comparison to prior periods. Pro-forma Q3 ‘12 AEBITDA per share
excludes certain expenses related to 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 closing of the Aurora transaction. 2013
Estimate
Net
Income
2013
Estimate
Net
Income
is
based
on
our
expectations
of
continued
growth,
current
market
conditions
and
increased
operating
efficiencies
in
our
business in addition to our financial targets for 2013. Our actual Net Income for 2013
on an annualized basis may differ from our 2013(E) Net Income. 2014
Estimate
Net
Income
2014
Estimate
Net
Income
is
based
on
our
expectations
of
continued
growth,
current
market
conditions
and
increased
operating
efficiencies
in
our
business in addition to our financial targets for 2014. Our actual Net Income for 2014
on an annualized basis may differ from our 2014(E) Net Income. 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 (if any), 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“). 2013
Estimate
AEBITDA
2013
Estimate
AEBITDA
is
based
on
our
expectations
of
continued
growth,
current
market
conditions
and
increased
operating
efficiencies
in
our
business
in addition to our financial targets for 2013. Target for all non-GAAP
figures excludes the same items as we excluded in our 2011/2012 non-GAAP reconciliation, as follows: income
and expenses that relate to the financing of the senior notes, depreciable (or
amortizable) asset base and several other relevant items. Our actual AEBITDA for 2013 on an annualized
basis may differ from our 2013(E) AEBITDA.
2014
Estimate
AEBITDA
2014
Estimate
AEBITDA
is
based
on
our
expectations
of
continued
growth,
current
market
conditions
and
increased
operating
efficiencies
in
our
business
in addition to our financial targets for 2014. Target for all non-GAAP
figures excludes the same items as we excluded in our 2011/2012 non-GAAP reconciliation, as follows: income
and expenses that relate to the financing of the senior notes, depreciable (or
amortizable) asset base and several other relevant items. Our actual AEBITDA for 2014 on an annualized
basis may differ from our 2014(E) AEBITDA.
NOTE:
2013
and
2014
Estimate
Net
Income
and
2013
and
2014
Estimate
AEBITDA
are
forward-looking
and
subject
to
significant
business,
economic,
regulatory
and
competitive
uncertainties,
many
of
which
are
beyond
control
of
Nationstar
and
its
management,
and
are
based
upon
assumptions
with
respect
to
future
decisions,
which
are
subject
to
change.
Actual results will vary and those variations may be material. Nothing in this
presentation should be regarded as a representation by any person that this target will be achieved and
Nationstar undertakes no duty to update this target.
16 |