Core Viewpoint - The acquisition of Mr. Cooper Group Inc. by Rocket Companies, Inc. is valued at $9.4 billion, creating a significant player in the U.S. mortgage industry with a combined servicing portfolio of $2.1 trillion and 9.5 million clients [1][2]. Deal Structure - COOP shareholders will receive 11 RKT shares for each share of Mr. Cooper [2]. - The transaction is expected to enhance loan volume and client relationships, leading to increased recurring revenue and reduced client acquisition costs [2]. Leadership Insights - Jay Bray, COOP Chairman and CEO, emphasized the creation of a strong mortgage company that offers a comprehensive homeownership experience supported by advanced technology and customer care [3]. - Varun Krishna, RKT CEO, highlighted the importance of servicing in homeownership and the role of data and AI in delivering timely products [4]. Strategic Expansion - The acquisition will significantly expand Rocket Companies' homeownership platform, reinforcing its position as a leading mortgage servicer and originator [5]. - The combined entity will add nearly 7 million new clients and 150 million annual customer interactions, enhancing data capabilities and operational efficiency [6]. Financial Projections - Rocket anticipates $100 million in additional pre-tax revenue from improved recapture rates and integration of services, along with $400 million in pre-tax cost savings [7]. - The acquisition is expected to be immediately accretive to RKT's adjusted earnings per share upon closing, with anticipated acquisition-related charges of $400-$500 million [8]. Market Context - The U.S. housing market has faced challenges, but easing mortgage rates may lead to a rebound in demand during the upcoming spring buying season [9]. - The acquisition is viewed as a potential game changer for the long-term prospects of both companies [10]. Stock Performance - Year-to-date, shares of COOP and Rocket Companies have increased by 24.6% and 7.2%, respectively [11].

Group 1 - Mr Cooper (COOP) shares increased by 14.5% to close at $119.60, following a notable trading volume, contrasting with a 7% loss over the past four weeks [1] - The surge in COOP shares is attributed to the announcement of an acquisition by Rocket Companies, Inc. (RKT) in an all-stock deal valued at $9.4 billion, creating a significant mortgage entity in the U.S. with $2.1 trillion in loans and 9.5 million clients [2] - Under the acquisition terms, COOP shareholders will receive 11 RKT shares for each COOP share, which is expected to enhance loan volume and client relationships, leading to increased recurring revenue and reduced client acquisition costs [3] Group 2 - Mr Cooper is projected to report quarterly earnings of $2.91 per share, reflecting a year-over-year increase of 27.6%, with revenues expected to reach $624.03 million, up 10.6% from the previous year [3] - The consensus EPS estimate for Mr Cooper has been revised 1.1% higher in the last 30 days, indicating a positive trend that typically correlates with stock price appreciation [5] - Mr Cooper is categorized under the Zacks Financial - Consumer Loans industry, where another company, Ezcorp (EZPW), has shown a 0.3% increase in its stock price, closing at $14.72, with a 6.7% return over the past month [5]

Core Viewpoint - Mr. Cooper Group is set to be acquired by Rocket Companies in an all-stock deal valued at $9.4 billion, representing a significant consolidation in the mortgage industry [2][4]. Group 1: Acquisition Details - The acquisition values Mr. Cooper Group at $143.33 per share, which is a 35% premium over its 30-day average weighted share price [2]. - Shareholders of Mr. Cooper Group will receive a $2 cash dividend per share before the deal closes, expected in the fourth quarter of this year [2]. - Post-acquisition, Mr. Cooper Group's chairman and CEO, Jay Bray, will take on the same roles at Rocket Mortgage, with two additional members from Mr. Cooper Group joining Rocket's board [3]. Group 2: Financial Implications - The deal is projected to be immediately accretive to earnings, with expected growth in 2026 earnings in the mid-teens percentage-wise [3]. - Rocket anticipates incurring $500 million in acquisition-related expenses while achieving annual pretax cost savings between $400 million and $500 million [3]. Group 3: Market Context - Rocket Companies is actively consolidating the fragmented mortgage industry, having recently acquired Redfin for $1.75 billion [4]. - Following the acquisition of Mr. Cooper Group, Rocket will control one out of every six mortgages in the U.S. [4]. Group 4: Company Performance - Despite high interest rates negatively impacting the mortgage sector, Mr. Cooper Group's stock has surged 2,146% over the past five years, making it a strong performer in the market [5]. - As the largest mortgage servicer in the U.S., Mr. Cooper Group benefits from fewer refinances due to high rates, which enhances the value of mortgage servicing rights [5].

Group 1 - Mr. Cooper Group Inc (NASDAQ:COOP) stock is surging 18% to $123.30 following the announcement of its acquisition by Rocket Companies (RKT) for $9.4 billion in an all-stock deal aimed at expanding mortgage-related offerings [1] - COOP is trading at record highs and is on track for its largest daily increase since February 2022, with a 53.7% year-over-year gain and a potential third consecutive monthly gain [2] - Short interest in COOP has increased by 23.2% in the last month, indicating that short covering may provide additional support for the stock [2] Group 2 - Analysts have not yet commented on the acquisition, but among the nine analysts covering COOP, six have a "strong buy" rating and three have a "hold" rating [3] - The 12-month consensus price target for COOP is $126.63, which is slightly above the current trading levels, suggesting potential price-target hikes may be forthcoming [3]

Core Viewpoint - Rocket Companies has announced a definitive agreement to acquire Mr. Cooper Group Inc. in an all-stock transaction valued at $9.4 billion, enhancing its position in the mortgage industry and expanding its client base significantly [1][11]. Company Overview - Rocket Companies is a Detroit-based fintech platform that includes mortgage, real estate, title, and personal finance businesses [25]. - Mr. Cooper Group Inc. is the largest home loan servicer in the U.S., providing customer-centric servicing and origination services primarily for single-family residences [27]. Transaction Details - The acquisition will be executed at an exchange ratio of 11.0 Rocket shares for each share of Mr. Cooper, representing a value of $143.33 per share, which is a 35% premium over the 30-day volume weighted average price [11]. - Upon completion, Rocket shareholders will own approximately 75% of the combined company, while Mr. Cooper shareholders will own about 25% [11]. Strategic Benefits - The combined servicing book will exceed $2.1 trillion across nearly 10 million clients, representing one in every six mortgages in America [2][8]. - The transaction is expected to generate annual run-rate revenue and cost synergies of approximately $500 million, contributing to organic revenue growth and increasing operating leverage [7]. - Rocket's industry-leading mortgage recapture capabilities will enhance loan volume and client relationships, lowering client acquisition costs [2][8]. Leadership and Governance - The combined company will be led by an experienced board, with Mr. Cooper's CEO Jay Bray becoming President and CEO of Rocket Mortgage [9]. - The board will consist of 11 members, with 9 from Rocket and 2 from Mr. Cooper [10]. Market Position and Growth Potential - Rocket has ranked 1 in J.D. Power's mortgage servicer study for 10 years and has an 83% recapture rate, which is triple the industry average [8]. - The acquisition will significantly increase Rocket's data set, improving automation, personalization, and efficiency, with insights from nearly 7 million additional clients [8]. Financial Impact - The transaction is expected to be accretive to Rocket's adjusted earnings per share immediately after closing [8]. - The combined servicing portfolio generated $4 billion of servicing fee revenue in 2024, providing enhanced earnings growth opportunities across various interest rate environments [8].

Customer and Portfolio Metrics - As of December 31, 2024, the company served 6.7 million customers with an aggregate unpaid principal balance (UPB) of $1,556 billion, including $736 billion in owned servicing and $820 billion in subservicing[16]. - In 2024, the company acquired $753 billion UPB of loans, with $516 billion related to subservicing, contributing to the growth of its servicing portfolio[16][18]. - The company's subservicing portfolio accounted for 53% of the total servicing portfolio, with a total UPB of $820 billion as of December 31, 2024[21]. - The company funded $22.8 billion in mortgage loans during the year ended December 31, 2024, and was the 18th largest mortgage loan originator in the U.S.[24]. - The direct-to-consumer channel represented 35% of the company's mortgage originations in 2024, with a pull-through adjusted lock volume of $7.7 billion[27]. - The correspondent channel accounted for 65% of mortgage originations in 2024, with a pull-through adjusted lock volume of $16.3 billion[29]. Technology and Innovation - The company has invested significantly in technology solutions to enhance customer experience and improve service quality[22]. - The company incorporates generative AI in call centers to enhance productivity and has developed a mortgage-centric AI platform for loan portfolio analysis[130]. - The company is making significant technology investments to enhance customer-facing technology and improve operational efficiency, but the returns on these investments are unpredictable[120]. - The company has ongoing research and development for AI technology, with potential applications in various business operations[130]. Regulatory and Compliance Risks - The company is focused on maintaining compliance with a wide array of federal, state, and local regulations that impact its servicing and originations operations[33]. - The company faces risks from regulatory compliance, which could increase operational costs and impact profitability due to extensive regulations at federal, state, and local levels[133]. - The company is subject to minimum financial eligibility requirements established by Agencies, which could impede growth if not met[95]. - The company must comply with individual state licensing requirements across all 50 states, which can lead to substantial compliance costs and operational challenges[147]. - The Federal Housing Finance Agency (FHFA) may impose more stringent requirements on GSEs, which could affect the company's ability to purchase or sell MSRs[86]. - The company may face increased scrutiny and enforcement actions from regulators, particularly regarding consumer protection and compliance with new regulations[138]. Financial Performance and Risks - The company's revenues in Originations and Servicing are highly dependent on macroeconomic and U.S. residential real estate market conditions[52]. - Changes in prevailing interest rates may decrease the company's earnings, with interest rates rising further and faster than any time in modern history[54]. - A disruption in the secondary home loan market, including the MBS market, could have a detrimental effect on the company's business[58]. - The company may be unable to obtain sufficient capital to operate its business, which could adversely affect its financial condition and results of operations[59]. - Increased delinquencies in loans could lead to lower revenue for loans serviced for GSEs and Ginnie Mae, as servicing fees are collected only for current performing loans[53]. - The company faces risks related to its ability to maintain or grow the size of its servicing portfolio and originations volume[47]. - The company is highly dependent on loan programs administered by the Agencies to generate revenues[47]. - The company may not realize all anticipated benefits from previous or potential acquisitions and dispositions[47]. - The company faces risks related to its level of indebtedness, which could limit its ability to obtain financing on acceptable terms and adversely affect its business and financial condition[66]. - The company is exposed to consumer credit risk, which may require repurchasing loans or indemnifying purchasers, impacting its financial condition[75]. - Changes in tax legislation could adversely impact the company's provision for income taxes and overall financial condition[80]. - The company may face limitations in utilizing its net operating losses (NOLs) due to potential ownership changes, which could trigger additional restrictions[81]. - The company is required to make servicing advances, which can be subject to delays in recovery or may not be recoverable, potentially impacting financial condition[91]. - The company has experienced a significant decrease in loan origination volume due to rising interest rates, adversely affecting refinancing revenues[99]. - The company is exposed to interest rate risk, which can negatively affect operations, particularly in the servicing and originations segments[234]. Legal and Reputational Risks - The company is subject to numerous legal proceedings, which may result in significant financial liabilities and affect its liquidity and financial position[141]. - The company has established reserves for legal proceedings, but the ultimate resolution may involve material losses beyond current estimates[146]. - The company faces reputational risks from negative public opinion related to various activities, including lending practices and technology failures, which could impact customer retention and investor sentiment[127]. Market and Economic Factors - The volume of residential real estate transactions is highly variable, influenced by factors such as average real estate sales prices, availability of financing, mortgage interest rates, and consumer confidence[111]. - The Real Estate exchange business is affected by delays in foreclosure sales and economic slowdowns, with a significant impact on REO exchange revenues due to ongoing foreclosure moratoriums[111]. - The company's GNMA loan portfolio may experience higher default risk due to high Loan to Value Ratios (LTV), leading to potential losses from servicing expenses[107]. - The company has increased the volume of second lien originations, which carries higher market risk and may result in significant losses if market disruptions occur[110]. Interest Rate Management - The MSR hedge strategy targets a hedge coverage ratio of 75% of the MSR portfolio modeled interest rate risk, subject to change based on market conditions[238]. - Changes in interest rates could lead to increased prepayment speeds, impacting earnings through higher amortization expenses and decreased servicing fees[237]. - The pipeline hedging strategy aims to economically hedge the entire pipeline interest rate exposure of IRLCs and mortgage loans held for sale within certain tolerance levels[240]. - The company utilizes a duration-based model to assess the impact of interest rate shifts on its loan portfolio and interest rate derivatives[243]. - As of December 31, 2024, the company performed a sensitivity analysis to estimate changes in the fair value of assets and liabilities sensitive to interest rates[246]. Financial Position and Borrowing Capacity - The aggregate principal amount of the company's unsecured senior notes was $4,950 million as of December 31, 2024[63]. - The principal amount of advance facilities increased from $682 million in 2023 to $849 million in 2024[263]. - The principal amount of warehouse facilities rose significantly from $822 million in 2023 to $2,016 million in 2024[263]. - The principal amount of MSR facilities increased from $2,814 million in 2023 to $3,650 million in 2024[263]. - The unsecured senior notes principal amount grew from $3,200 million in 2023 to $4,950 million in 2024[263]. - The company has a total borrowing capacity of $1,400 million for advance facilities, with an additional $551 million available[264]. - The company is required to maintain a minimum net worth base of $2.5 million plus additional amounts based on servicing UPB for FHFA and Ginnie Mae[253]. - The company is scheduled to pay a total of $1,542 million in interest payments from unsecured senior notes over the next eight years[267]. Accounting and Financial Reporting - Deferred income taxes reflect temporary differences between financial reporting and tax purposes, with a valuation allowance provided if deferred tax assets are unlikely to be realized[274]. - The company relies on reversals of existing deferred tax liabilities and future taxable income to determine the adequacy of the valuation allowance[274]. - Recent accounting updates include ASU 2023-09, effective after December 15, 2024, enhancing transparency in income tax disclosures[276]. - ASU 2024-03 requires public entities to disclose disaggregated expenses in annual reporting periods beginning after December 15, 2026[277]. - The company is currently evaluating the impact of recent accounting standards on its financial statement disclosures[276][277].

Core Viewpoint - The article emphasizes the importance of value investing and highlights Mr. Cooper Group (COOP) as a strong value stock based on its metrics and Zacks Rank [2][4][6]. Company Summary - Mr. Cooper Group (COOP) currently has a Zacks Rank of 2 (Buy) and a Value grade of A, indicating strong potential for undervaluation [4]. - The stock is trading at a P/E ratio of 8.11, which is lower than the industry average P/E of 9.96, suggesting it may be undervalued [4]. - Over the past 52 weeks, COOP's Forward P/E has fluctuated between 6.76 and 9.47, with a median of 7.86, further indicating its valuation dynamics [4]. - COOP has a PEG ratio of 0.31, which is below the industry average PEG of 0.50, reinforcing the notion of it being undervalued [5]. - The PEG ratio for COOP has ranged from 0.27 to 0.31 over the past year, with a median of 0.30, highlighting its earnings growth potential [5][6]. - Overall, COOP's strong earnings outlook and valuation metrics position it as an impressive value stock at the moment [6]. Industry Summary - The article discusses the broader trend of value investing, which remains popular across various market environments, relying on traditional analysis of key valuation metrics [2]. - Zacks has developed a Style Scores system to identify stocks with specific traits, particularly in the Value category, which is of interest to value investors [3].

Core Viewpoint - Mr. Cooper Group Inc. demonstrated strong financial performance in the fourth quarter of 2024, with adjusted earnings per share surpassing estimates and significant year-over-year growth in net income, driven by improvements in the Servicing and Originations segments [1][2][12]. Financial Performance - Adjusted earnings per share for Q4 2024 were $2.73, exceeding the Zacks Consensus Estimate by 5.8%, and reflecting a 59.6% increase year over year [1] - Net income for Q4 2024 was $204 million, a substantial rise from $46 million in the same quarter last year [2] - For the full year 2024, adjusted earnings per share reached $10.19, beating the consensus estimate of $10.18, and up from $7.30 in 2023 [3] Revenue and Expenses - Total revenues for Q4 2024 declined by 49.5% year over year to $654 million, missing the consensus mark by 11.6% [4] - Full-year revenues were $2.22 billion, exceeding the Zacks Consensus Estimate of $2.18 billion, and representing an 89.8% increase from 2023 [4] - Total expenses in Q4 2024 grew by 10.5% year over year to $367 million [4] Segment Performance - The Servicing segment reported a pre-tax operating income of $318 million, up 38.9% year over year, with total revenues of $502 million, a 58.9% increase from the previous year [6] - The Originations segment's pre-tax operating income rose to $47 million from $10 million a year ago, with total revenues of $135 million, up from $67 million [7] Financial Position - As of December 31, 2024, total assets were $18.9 billion, an increase from $16.2 billion at the end of Q3 2024 [8] - Cash and cash equivalents amounted to $753 million, up from $733 million in the previous quarter [8] - Total liabilities increased to $14.1 billion from $11.5 billion at the end of Q3 2024, while total shareholders' equity rose to $18.9 billion from $16.2 billion [9] Capital Deployment - The company repurchased 0.4 million shares for $38 million during the quarter [10]

Financial Data and Key Metrics Changes - Pre-tax operating income was $235 million, with operating ROTCE at 15.8% [5][48] - Tangible book value increased by 12% year-over-year to $71.61 per share, and the capital ratio was 24.4% [5][56] - Liquidity decreased to $3.4 billion from $4.1 billion in the previous quarter [56] Business Line Data and Key Metrics Changes - The Servicing segment generated $318 million in pre-tax income, up 39% year-over-year [7][25] - Originations produced $47 million in EBT, with funded volumes growing 38% sequentially [7][37] - Fee income from subservicing and other services contributed over 20% of total revenue, totaling $500 million for 2024 [46] Market Data and Key Metrics Changes - The company became a top five correspondent lender, significantly improving market share from the previous year [38][105] - The acquisition of Flagstar added $275 billion in UPB in the fourth quarter [30] Company Strategy and Development Direction - The company aims to focus on unit costs, invest in origination platforms, grow fee revenues, and analyze acquisition opportunities [23][24] - The strategic direction includes leveraging technology to enhance customer experience and operational efficiency [20][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a ROTCE guidance range of 16% to 20% for 2025 and 2026, citing a balanced model resilient to interest rate volatility [18][19] - The company is optimistic about growth opportunities in 2025, particularly in correspondent and co-issue markets [28] Other Important Information - The company received the SHARP Gold Award from Freddie Mac, reflecting its commitment to quality and performance [9][10] - Moody's placed the corporate rating on a positive outlook, citing the growing strength and scale of the franchise [12] Q&A Session All Questions and Answers Question: Can you talk about the drivers that could get you to 20% ROTCE? - Management indicated that the services segment generates fee-based income, which can lead to higher ROTCE, and emphasized operational leverage as a key driver [60][64][66] Question: Can you sustain double-digit growth for services fee revenue? - Management expressed confidence in sustaining growth in the services revenue stream, highlighting opportunities with existing and new clients [69][71] Question: Can you discuss the pipeline for bulk MSR and returns? - Management noted that the bulk market is returning at attractive levels and expects continued consolidation in the industry [74][76][78] Question: Do you see room for correspondent market share to increase further? - Management confirmed expectations for continued growth in correspondent market share, focusing on scale and cost leadership [104][105] Question: Can you provide directional color on margins by channel? - Management stated that margins remained consistent across channels, with no significant changes from the fourth quarter to the first quarter [113][114] Question: Should we think about the growth rate of UPB in low double digits? - Management indicated that growth in UPB should be viewed in the context of low double digits, emphasizing a disciplined approach to acquisitions [142][143]

4Q'24 EARNINGS REVIEW February 12, 2025 1 | IMPORTANT INFORMATION This presentation contains summarized information concerning Mr. Cooper Group Inc. ("Mr. Cooper" or the "Company") and the Company's business, operations, financial performance and trends. No representation is made that the information in this presentation is complete. For additional financial, statistical and business related information, as well as information regarding business and segment trends, see the Company's most recent Annual Repor ...