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Section 1: 8-K (MR. COOPER GROUP INC. 8-K)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549 
 
 

FORM 8-K
 
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported):  July 30, 2020
 

 
Mr. Cooper Group Inc.
(Exact Name of Registrant as Specified in Charter) 
 

 

Delaware
 
001-14667
 
91-1653725
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)

8950 Cypress Waters Blvd.
Coppell, TX 75019
(Address of Principal Executive Offices, and Zip Code)

469-549-2000
Registrant’s Telephone Number, Including Area Code
 

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
 

Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 

Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 

Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
COOP
The Nasdaq Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



Item 2.02
Results of Operations and Financial Condition.
 
On July 30,2020, Mr. Cooper Group Inc. (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2020. A copy of the press release is attached as Exhibit 99.1 and will be published in the Investors section on the Company’s website at www.mrcoopergroup.com. In connection with the release and the related conference call, the Company posted a presentation relating to its second quarter ended June 30,2020 financial results in the Investors section on the Company’s website.
 
The press release and presentation include certain non-generally accepted accounting principles financial measures. Reconciliations to the most directly comparable generally accepted accounting principles financial measures are included in the press release and the presentation.
 
The information furnished pursuant to this Item 2.02 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 8.01
Other Events.
 
On July 30, 2020, the Company announced that its Board of Directors authorized the repurchase of up to $100 million of its outstanding common stock. The repurchase program allows the Company to repurchase its common stock using open market stock purchases or privately negotiated transactions. The number of shares repurchased and the timing of repurchases will depend on a number of factors, including, but not limited to, share price, trading volume and general market conditions, along with working capital requirements, general business conditions and other factors. The stock repurchase program may be suspended, modified or discontinued at any time at the Company's discretion. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K.

Item 9.01
Financial Statements and Exhibits.

(d) Exhibits

 
Exhibit
Number
  
Exhibit
     
 
  


 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Mr. Cooper Group Inc.
     
Date:  July 30, 2020
 
By:
 
/s/Christopher G. Marshall
   
Christopher G. Marshall
Vice Chairman & Chief Financial Officer


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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

Mr. Cooper Group Reports Second Quarter 2020 Financial Results

  • Reported $73 million net income or $0.77 per diluted share
  • Generated strong pretax operating income of $350 million, equivalent to a ROTCE of 55.0%, offset by a mark-to-market loss of $261 million
  • Increased unrestricted cash quarter-over-quarter from $579 million to $1.0 billion
  • Originations segment generated record pretax income of $433 million and pretax operating income of $434 million on funded volume of $10.7 billion
  • Servicing margin compressed to 0.7 bps
  • Xome reported pretax income of $12 million and pretax operating income of $13 million
  • Forbearance declined from a peak of 7.1% of customers to 5.9% as of July 27th
  • Board authorized $100 million stock repurchase

 

DALLAS--(BUSINESS WIRE)--July 30, 2020--Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), which principally operates under the Mr. Cooper® and Xome® brands, reported a second quarter net income of $73 million or $0.77 per diluted share. Net income included a negative $261 million in mark-to-market. Excluding the mark-to-market and other items, the Company reported pretax operating income of $350 million. Items excluded from operating income were negative $261 million in mark-to-market, net of the add back of $29 million in fair value amortization that is included in the full mark-to-market, $1 million in severance charges related to the shutdown of the Wholesale division, and $7 million of intangible amortization.

Chairman and CEO Jay Bray commented, “I’m very proud of our team members, who have done a fantastic job adapting to these unprecedented conditions. Thanks to their hard work, the company produced the strongest operating results in our history, driven by record margins in our Direct-to-Consumer channel, which scaled up to accommodate huge demand. Strong origination profits not only offset pressure on the servicing margin, but also earned back the MSR mark within the same quarter, demonstrating the significant progress we’ve made in building a balanced and profitable business model.”

Chris Marshall, Vice Chairman and CFO added, “Forbearance levels declined in the quarter, as we helped customers exit forbearance plans and resume payments with both digital solutions and world-class customer care. At the same time, we significantly increased cash on hand to $1 billion, which demonstrates the company’s robust cash generation and access to liquidity, and positions us to serve as a source of strength for the mortgage market even if economic conditions turn more adverse.”


Servicing

The Servicing segment is focused on providing a best-in-class home loan experience for our 3.5 million customers while simultaneously strengthening asset performance for investors. In the second quarter, Servicing recorded pretax loss of $251 million, reflecting a negative $261 million in mark-to-market. The total servicing portfolio ended the quarter at $596 billion UPB. Servicing earned pretax operating income excluding the full mark of $10 million, equivalent to a servicing margin of 0.7 bps. At quarter end, the carrying value of the MSR was $2,763 million, of which $2,757 million was at fair value equivalent to 99 bps of MSR UPB and original cost basis of 86 bps.

 

 

 

Quarter Ended

($ in millions)

 

Q1'20

 

Q2'20

 

 

$

 

BPS

 

$

 

BPS

Operational revenue

 

$

313

 

 

19.7

 

 

$

294

 

 

19.2

 

Amortization, net of accretion

 

(76)

 

 

(4.8)

 

 

(102)

 

 

(6.6)

 

Mark-to-market

 

(383)

 

 

(24.1)

 

 

(261)

 

 

(17.1)

 

Total revenues

 

(146)

 

 

(9.2)

 

 

(69)

 

 

(4.5)

 

Total expenses

 

(149)

 

 

(9.3)

 

 

(122)

 

 

(8.0)

 

Total other income (expenses), net

 

(30)

 

 

(1.9)

 

 

(60)

 

 

(3.9)

 

Loss before taxes

 

(325)

 

 

(20.4)

 

 

(251)

 

 

(16.4)

 

Mark-to-market

 

383

 

24.1

 

 

261

 

17.1

 

Accounting items

 

4

 

0.2

 

 

 

 

Pretax operating income excluding mark-to-market

 

$

62

 

 

3.9

 

 

$

10

 

 

0.7

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

Q1'20

 

Q2'20

Ending UPB ($B)

 

$

629

 

 

$

596

 

Average UPB ($B)

 

$

636

 

 

$

612

 

60+ day delinquency rate at period end

 

1.9

%

 

4.7

%

Annualized CPR

 

19.2

%

 

26.0

%

Modifications and workouts

 

8,709

 

 

38,684

 

Originations

The Originations segment focuses on creating servicing assets at attractive margins by acquiring loans through the correspondent channel and principally refinancing existing loans in the Direct-to-Consumer channel. Originations earned pretax income of $433 million and pretax operating income of $434 million excluding $1 million in severance charges related to the shutdown of the Wholesale division.

Mr. Cooper funded 41,223 loans in the second quarter, totaling approximately $10.7 billion UPB which was comprised of $8.6 billion in Direct-to-Consumer, $1.9 billion in Correspondent, and $0.2 billion in Wholesale. Funded volume decreased 13% quarter-over-quarter.


 

 

 

Quarter Ended

($ in millions)

 

Q1'20

 

Q2'20

 

 

 

 

 

Income before taxes

 

$

158

 

 

$

433

 

Accounting items

 

 

 

1

 

Pretax operating income excluding accounting items

 

$

158

 

 

$

434

 

 

 

Quarter Ended

($ in millions)

 

Q1'20

 

Q2'20

Total pull through adjusted volume

 

$

12,677

 

 

$

12,394

 

Funded volume

 

$

12,359

 

 

$

10,729

 

Refinance recapture percentage

 

38

%

 

31

%

Recapture percentage

 

30

%

 

26

%

Purchase volume as a percentage of funded volume

 

26

%

 

10

%

Xome

Xome provides real estate solutions including property disposition, asset management, title, close, valuation, and field services for Mr. Cooper and third-party clients. The Xome segment recorded pretax income of $12 million and pretax operating income of $13 million in the second quarter, which excluded intangible amortization.

 

   

Quarter Ended

($ in millions)

   

Q1'20

 

Q2'20

Income before taxes

   

$

11

 

 

$

12

 

Intangible amortization

   

2

 

 

1

 

Pretax operating income excluding intangible

amortization

   

$

13

 

 

$

13

 

 

   

Quarter Ended

($ in millions)

   

Q1'20

 

Q2'20

Exchange property sold

   

2,114

 

 

1,191

 

Average Exchange property listings

   

17,777

 

 

17,438

 

Services orders completed

   

408,734

 

 

423,974

 

Percentage of revenue earned from third-party customers

   

55

%

 

53

%

Conference Call Webcast and Investor Presentation

The Company will host a conference call on July 30, 2020 at 9:00 A.M. Eastern Time. The conference call may be accessed by dialing 855-874-2685, or 720-634-2923 internationally. Please use the participant passcode 9776505 to access the conference call. A simultaneous audio webcast of the conference call will be available in the Investor section of www.mrcoopergroup.com. A replay will also be available approximately two hours after the conclusion of the conference call by dialing 855-859-2056, or 404-537-3406 internationally. Please use the passcode 9776505 to access the replay. The replay will be accessible through August 14, 2020 at 12:00 P.M. Eastern Time.


Non-GAAP Financial Measures

The Company utilizes non-GAAP financial measures as the measures provide additional information to assist investors in understanding and assessing the Company’s and our business segments’ ongoing performance and financial results, as well as assessing our prospects for future performance. The adjusted operating financial measures facilitate a meaningful analysis and allow more accurate comparisons of our ongoing business operations because they exclude items that may not be indicative of or are unrelated to the Company’s and our business segments’ core operating performance, and are better measures for assessing trends in our underlying businesses. These notable items are consistent with how management views our businesses. Management uses these non-GAAP financial measures in making financial, operational and planning decisions and evaluating the Company’s and our business segment’s ongoing performance. Pretax operating income (loss) in the servicing segment eliminates the effects of mark-to-market adjustments which primarily reflects unrealized gains or losses based on the changes in fair value measurements of MSRs and their related financing liabilities for which a fair value accounting election was made. These adjustments, which can be highly volatile and material due to changes in credit markets, are not necessarily reflective of the gains and losses that will ultimately be realized by the Company. Pretax operating income (loss) in each segment also eliminates, as applicable, transition and integration costs, gains (losses) on sales of fixed assets, certain settlement costs that are not considered normal operational matters, intangible amortization, and other adjustments based on the facts and circumstances that would provide investors a supplemental means for evaluating the Company’s core operating performance.

Forward-Looking Statements

Any statements in this release that are not historical or current facts are forward looking statements. Forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including the severity and duration of the COVID-19 pandemic; the pandemic’s impact on the U.S. and global economies; federal, state, and local governmental responses to the pandemic; borrower forbearance rates and availability of financing. Results for any specified quarter are not necessarily indicative of the results that may be expected for the full year or any future period. Certain of these risks and uncertainties are described in the “Risk Factors” section of Mr. Cooper Group’s most recent annual reports and other required documents as filed with the SEC which are available at the SEC’s website at http://www.sec.gov. Mr. Cooper undertakes no obligation to publicly update or revise any forward-looking statement or any other financial information contained herein, and the statements made in this press release are current as of the date of this release only.


MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(millions of dollars, except for earnings per share data)


 

 

 

 

Three Months Ended

March 31, 2020

 

Three Months Ended

June 30, 2020

Revenues:

 

 

 

 

Service related, net, excluding mark-to-market

 

$

330

 

 

$

273

 

Mark-to-market

 

(383)

 

 

(261)

 

Net gain on mortgage loans held for sale

 

331

 

 

618

 

Total revenues

 

278

 

 

630

 

Total expenses:

 

444

 

 

419

 

Other expense, net:

 

 

 

 

Interest income

 

118

 

 

76

 

Interest expense

 

(192)

 

 

(177)

 

Other income, net

 

1

 

 

 

Total other expenses, net

 

(73)

 

 

(101)

 

(Loss) income before income tax (benefit) expense

 

(239)

 

 

110

 

Income tax (benefit) expense

 

(68)

 

 

37

 

Net (loss) income

 

(171)

 

 

73

 

Net loss attributable to non-controlling interest

 

(3)

 

 

 

Net (loss) income attributable to Mr. Cooper Group

 

(168)

 

 

73

 

Undistributed earnings attributable to participating stockholders

 

 

 

1

 

Net (loss) income attributable to common stockholders

 

$

(168)

 

 

$

72

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share attributable to common stockholders:

 

 

 

 

Basic

 

$

(1.84)

 

 

$

0.78

 

Diluted

 

$

(1.84)

 

 

$

0.77

 

Weighted average shares of common stock outstanding (in millions):

 

 

 

 

Basic

 

91.4

 

 

92.0

 

Diluted

 

91.4

 

 

93.0

 


 

 

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)




 

 

March 31, 2020

 

June 30, 2020

Assets

 

 

 

Cash and cash equivalents

$

579

 

 

$

1,041

 

Restricted cash

266

 

 

260

 

Mortgage servicing rights

3,115

 

 

2,763

 

Advances and other receivables, net

685

 

 

668

 

Reverse mortgage interests, net

5,955

 

 

5,709

 

Mortgage loans held for sale at fair value

3,922

 

 

3,179

 

Property and equipment, net

111

 

 

115

 

Deferred tax assets, net

1,411

 

 

1,391

 

Other assets

1,569

 

 

2,174

 

Total assets

$

17,613

 

 

$

17,300

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Unsecured senior notes, net

$

2,259

 

 

$

2,261

 

Advances facilities, net

489

 

 

475

 

Warehouse facilities, net

4,551

 

 

4,031

 

Payables and other liabilities

1,965

 

 

2,460

 

MSR related liabilities - nonrecourse at fair value

1,285

 

 

1,173

 

Mortgage servicing liabilities

53

 

 

48

 

Other nonrecourse debt, net

4,945

 

 

4,707

 

Total liabilities

15,547

 

 

15,155

 

Total stockholders' equity

2,066

 

 

2,145

 

Total liabilities and stockholders' equity

$

17,613

 

 

$

17,300

 


 

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

(millions of dollars, except for earnings per share data)


 

 

Three Months Ended March 31, 2020

 

Servicing

 

Originations

 

Xome

 

Corporate/

Other

 

Consolidated

 

 

 

 

 

 

 

 

 

 

Service related, net

$

(180)

 

 

$

20

 

 

$

106

 

 

$

1

 

 

$

(53)

 

Net gain on mortgage loans held for sale

34

 

 

297

 

 

 

 

 

 

331

 

Total revenues

(146)

 

 

317

 

 

106

 

 

1

 

 

278

 

Total expenses

149

 

 

166

 

 

96

 

 

33

 

 

444

 

Other income (expense), net:

 

 

 

 

 

 

 

 

 

Interest income

83

 

 

34

 

 

 

 

1

 

 

118

 

Interest expense

(113)

 

 

(27)

 

 

 

 

(52)

 

 

(192)

 

Other income, net

 

 

 

 

1

 

 

 

 

1

 

Total other income (expense), net

(30)

 

 

7

 

 

1

 

 

(51)

 

 

(73)

 

Pretax (loss) income

$

(325)

 

 

$

158

 

 

$

11

 

 

$

(83)

 

 

$

(239)

 

Income tax benefit

 

 

 

 

 

 

 

 

(68)

 

Net loss

 

 

 

 

 

 

 

 

(171)

 

Net loss attributable to noncontrolling interests

 

 

 

 

 

 

 

 

(3)

 

Net loss attributable to common

stockholders of Mr. Cooper Group

 

 

 

 

 

 

 

 

(168)

 

Undistributed earnings attributable to

participating stockholders

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

 

 

 

 

 

 

 

 

$

(168)

 

Net loss per share

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

$

(1.84)

 

Diluted

 

 

 

 

 

 

 

 

$

(1.84)

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

 

 

Pretax (loss) income

$

(325)

 

 

$

158

 

 

$

11

 

 

$

(83)

 

 

$

(239)

 

Mark-to-market

383

 

 

 

 

 

 

 

383

 

Accounting items / other

4

 

 

 

 

 

 

 

4

 

Intangible amortization

 

 

 

 

2

 

7

 

9

 

Pretax income (loss), net of notable items

62

 

 

158

 

 

13

 

 

(76)

 

 

157

 

Fair value amortization (1)

(30)

 

 

 

 

 

 

 

 

(30)

 

Pretax operating income (loss)

$

32

 

 

$

158

 

 

$

13

 

 

$

(76)

 

 

$

127

 

Income tax expense

 

 

 

 

 

 

 

 

(31)

 

Operating income

 

 

 

 

 

 

 

 

$

96

 

ROTCE

 

 

 

 

 

 

 

 

19.6

%

(1) Amount represents additional amortization required under the fair value amortization method over the cost amortization method.


 

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

(millions of dollars, except for earnings per share data)


 

 

Three Months Ended June 30, 2020

 

Servicing

 

Originations

 

Xome

 

Corporate/

Other

 

Consolidated

 

 

 

 

 

 

 

 

 

 

Service related, net

$

(114)

 

 

$

21

 

 

$

106

 

 

$

(1)

 

 

$

12

 

Net gain on mortgage loans held for sale

45

 

 

573

 

 

 

 

 

 

618

 

Total revenues

(69)

 

 

594

 

 

106

 

 

(1)

 

 

630

 

Total expenses

122

 

 

167

 

 

95

 

 

35

 

 

419

 

Other income (expense), net:

 

 

 

 

 

 

 

 

 

Interest income

57

 

 

19

 

 

 

 

 

 

76

 

Interest expense

(117)

 

 

(13)

 

 

 

 

(47)

 

 

(177)

 

Other income (expense), net

 

 

 

 

1

 

 

(1)

 

 

 

Total other income (expense), net

(60)

 

 

6

 

 

1

 

 

(48)

 

 

(101)

 

Pretax (loss) income

$

(251)

 

 

$

433

 

 

$

12

 

 

$

(84)

 

 

$

110

 

Income tax expense

 

 

 

 

 

 

 

 

37

 

Net income

 

 

 

 

 

 

 

 

73

 

Net loss attributable to noncontrolling interests

 

 

 

 

 

 

 

 

 

Net income attributable to common

stockholders of Mr. Cooper Group

 

 

 

 

 

 

 

 

73

 

Undistributed earnings attributable to

participating stockholders

 

 

 

 

 

 

 

 

1

 

Net income attributable to common stockholders

 

 

 

 

 

 

 

 

$

72

 

Net income per share

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

$

0.78

 

Diluted

 

 

 

 

 

 

 

 

$

0.77

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

 

 

Pretax (loss) income

$

(251)

 

 

$

433

 

 

$

12

 

 

$

(84)

 

 

$

110

 

Mark-to-market

261

 

 

 

 

 

 

 

261

 

Accounting items / other

 

 

1

 

 

 

 

 

 

1

 

Intangible amortization

 

 

 

 

1

 

 

6

 

 

7

 

Pretax income (loss), net of notable items

10

 

 

434

 

 

13

 

 

(78)

 

 

379

 

Fair value amortization (1)

(29)

 

 

 

 

 

 

 

 

(29)

 

Pretax operating (loss) income

$

(19)

 

 

$

434

 

 

$

13

 

 

$

(78)

 

 

$

350

 

Income tax expense

 

 

 

 

 

 

 

 

(85)

 

Operating income

 

 

 

 

 

 

 

 

$

265

 

ROTCE

 

 

 

 

 

 

 

 

55.0

%

(1) Amount represents additional amortization required under the fair value amortization method over the cost amortization method.

 

Contacts

Investor Contact:
Kenneth Posner, SVP Strategic Planning and Investor Relations
(469) 426-3633
[email protected]

Media Contact:
Christen Reyenga, VP Corporate Communications
[email protected]

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