Mr Cooper Group (COOP) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 was $204 million, with pre-tax operating income of $219 million and operating ROTCE of 15.3%; tangible book value per share rose 17% year-over-year to $68.67.

• Servicing portfolio grew 37% year-over-year to $1.2 trillion UPB, with the Flagstar acquisition adding $356 billion in UPB and 1.3 million customers, expected to close in Q4 2024.

• Originations generated $38 million pre-tax income on $3.8 billion funded volume, with strong refinance recapture rates and a diversified funding mix.

• Board approved an additional $200 million for stock repurchases, bringing total authorization to ~$270 million.

• Focus remains on balance sheet strength, efficiency, and technology-driven customer experience, with ongoing investments in AI and digital tools.

Financial highlights

• Q2 2024 total revenues were $583 million, up from $486 million in Q2 2023; diluted EPS was $3.10, up from $2.07 in Q2 2023.

• Servicing pre-tax income reached $288 million (excluding mark-to-market), up 58% year-over-year, with operating revenues up 37% and expenses up 16%.

• Originations segment earned $38 million pre-tax income, with a pretax margin of 0.57% and funded 15,080 loans totaling $3.8 billion.

• Liquidity stood at $3.2 billion at quarter end, with TNW/assets at 28.4%.

• Repurchased 0.3 million shares for $24 million in Q2 2024.

Outlook and guidance

• Flagstar acquisition expected to close in Q4 2024, funded by cash and MSR line draws, with $50 million anticipated integration and transaction costs.

• Pro forma, the servicing portfolio will reach $1.56 trillion, servicing 6.6 million customers, with a 52% subservicing and 48% owned mix.

• Servicing and originations segments expected to maintain stable earnings in Q3 2024, with potential upside from lower mortgage rates.

• ROTCE for 2025 expected at the midpoint of the 14%-18% range, with amortization expense and Fed rate cuts as headwinds.

• Management expects operational capacity to support smooth onboarding of Flagstar customers.