Financial Performance - Onity Group Inc delivered strong second quarter results in 2025, with sustained robust net income driving book value growth[9, 10] - Diluted EPS increased by 35% year-over-year to $2.40, and book value per share increased by $2.94 year-over-year to $60[12] - The company reaffirmed its annual Adjusted ROE guidance of 16-18%, demonstrating a commitment to strong shareholder returns[10] - Adjusted Pre-Tax Income was $16 million in Q2'25[12] Servicing Portfolio - Total Servicing Average UPB grew to $307 billion[12, 21] - Owned Servicing Average UPB increased from $147 billion in Q1'25 to $153 billion in Q2'25[21] - MSR originations increased by 35% year-over-year, exceeding industry growth of 23%[23] Originations - Originations volume reached $9.4 billion in Q2'25[12, 24] - Consumer Direct funded volume increased by 2.4x year-over-year[26] - The company achieved a top-tier refinance recapture rate, 1.5x the industry average in Q2'25[26] Technology and Efficiency - The company is expanding its AI-powered platform to grow revenue, reduce costs, and drive service excellence[32] - Robotic Process Automation (RPA) is performing over 190 processes, completing the work of approximately 400 FTE[35]

[Executive Summary & Business Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Highlights) [Q2 2025 Performance Highlights](index=1&type=section&id=Second%20Quarter%202025) Onity Group reported a strong second quarter in 2025, demonstrating sustained profitability and growth across key financial and operational metrics, including significant increases in net income, EPS, and originations volume Q2 2025 Key Financial Highlights | Metric | Value | | :--- | :--- | | Net income attributable to common stockholders | $20 million | | Diluted EPS | $2.40 | | ROE | 17% | | Adjusted pre-tax income* | $16 million | | Annualized adjusted ROE* | 14% | | Book value per share (as of June 30, 2025) | $60 (up $2.94 YoY) | Q2 2025 Key Operational Highlights | Metric | Value | | :--- | :--- | | Originations volume | $9.4 billion (up 35% YoY, exceeding 23% industry growth) | | Average servicing UPB | $307 billion (up $2 billion YoY) | | Funded recapture volume | Up 2.4x YoY | | Refinance recapture rate | 1.5x industry average | | Average owned servicing UPB | $153 billion (up 16% YoY) | | Total liquidity (unrestricted cash + available credit) | $218 million (as of June 30, 2025) | - The company maintained an effective MSR hedge strategy, resulting in minimal MSR fair value volatility during the quarter[9](index=9&type=chunk) - Fitch Ratings upgraded all of the Company's residential primary servicer ratings and affirmed its commercial small balance servicer ratings[9](index=9&type=chunk) [2025 Business Outlook](index=1&type=section&id=2025%20Outlook) Onity Group confirmed its previously issued guidance for 2025, including its target range for adjusted ROE and the potential release of a significant deferred tax valuation allowance - Confirmed previous guidance including 2025 adjusted ROE* range of **16% - 18%**[8](index=8&type=chunk) - ROE and adjusted ROE* were **18%** for the first half of 2025[8](index=8&type=chunk) - Some or all of the **$180 million** deferred tax valuation allowance (US) as of December 31, 2024, could be released by year-end 2025[8](index=8&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Glen Messina highlighted a strong quarter with sustained profitability and steady growth, attributing success to a resilient business model, sound strategy, and high-caliber execution, particularly in Servicing and Originations - The company reported another strong quarter with sustained profitability and steady growth, demonstrating the resilience of its business model, sound strategy, and high-caliber execution[5](index=5&type=chunk) - Achieved results in Servicing and Originations, with a growing servicing portfolio, originations volume exceeding industry growth, and a high-performing recapture platform[5](index=5&type=chunk) - Committed to delivering strong shareholder returns and navigating the future with agility, believing the balanced and diversified business is built to perform through market cycles, driven by a technology-enabled, low-cost platform[5](index=5&type=chunk) [Company Information](index=3&type=section&id=Company%20Information) [About Onity Group](index=3&type=section&id=About%20Onity%20Group) Onity Group Inc. is a leading non-bank financial services company specializing in mortgage servicing and originations solutions through its primary brands, PHH Mortgage and Liberty Reverse Mortgage, serving customers since 1988 - Onity Group Inc. is a leading non-bank financial services company providing mortgage servicing and originations solutions[11](index=11&type=chunk) - Primary brands include PHH Mortgage, one of the largest servicers, and Liberty Reverse Mortgage, one of the nation's largest reverse mortgage lenders[11](index=11&type=chunk) - Headquartered in West Palm Beach, Florida, with operations in the United States, U.S. Virgin Islands, India, and the Philippines, serving customers since 1988[11](index=11&type=chunk) [Financial Results](index=6&type=section&id=Financial%20Results) [Condensed Consolidated Balance Sheets (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) Onity Group's balance sheet as of June 30, 2025, shows an increase in total assets and stockholders' equity compared to prior periods, driven by growth in mortgage servicing rights (MSRs) and loans held for sale Total Assets (Dollars in millions) | Date | Amount | | :--- | :--- | | June 30, 2025 | $16,531.3 | | March 31, 2025 | $16,259.3 | | June 30, 2024 | $13,084.7 | Mortgage Servicing Rights (MSRs), at fair value (Dollars in millions) | Date | Amount | | :--- | :--- | | June 30, 2025 | $2,632.6 | | March 31, 2025 | $2,547.4 | | June 30, 2024 | $2,327.7 | Stockholders' Equity (Dollars in millions) | Date | Amount | | :--- | :--- | | June 30, 2025 | $481.9 | | March 31, 2025 | $460.2 | | June 30, 2024 | $446.2 | [Condensed Consolidated Statements of Operations (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) For Q2 2025, Onity Group reported total revenue of $246.6 million, with net income attributable to common stockholders of $20.5 million and diluted EPS of $2.40, showing an increase in profitability compared to Q2 2024 Total Revenue (Dollars in millions) | Period | Amount | | :--- | :--- | | Q2 2025 | $246.6 | | Q1 2025 | $249.8 | | Q2 2024 | $246.4 | Net Income (Loss) attributable to common stockholders (Dollars in millions) | Period | Amount | | :--- | :--- | | Q2 2025 | $20.5 | | Q1 2025 | $21.1 | | Q2 2024 | $10.5 | Diluted EPS | Period | Amount | | :--- | :--- | | Q2 2025 | $2.40 | | Q1 2025 | $2.50 | | Q2 2024 | $1.33 | Servicing and subservicing fees (Dollars in millions) | Period | Amount | | :--- | :--- | | Q2 2025 | $211.3 | | Q1 2025 | $203.3 | | Q2 2024 | $210.8 | [Non-GAAP Financial Measures & Reconciliations](index=4&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) [Note Regarding Non-GAAP Financial Measures](index=4&type=section&id=Note%20Regarding%20Non-GAAP%20Financial%20Measures) This section explains the use of non-GAAP financial measures, specifically adjusted pre-tax income and adjusted ROE, which management uses to assess financial performance by removing the impact of MSR fair value changes due to market interest rates and assumptions, while acknowledging their limitations - Adjusted pre-tax income and adjusted ROE are non-GAAP financial measures used by management to assess financial performance and allocate resources[14](index=14&type=chunk)[15](index=15&type=chunk) - These measures remove fair value changes of net MSR exposure due to market interest rates and assumptions to provide a clearer view of underlying business trends, independent of market volatility[15](index=15&type=chunk) - A methodology change was implemented in Q4 2024 for 'Other Income Statement Notables' to include fair value changes due to interest rates for reverse loan buyouts, aligning with the company's risk management approach[18](index=18&type=chunk)[19](index=19&type=chunk) [Adjusted Pre-Tax Income (Loss) Reconciliation](index=5&type=section&id=Adjusted%20Pre-Tax%20Income%20(Loss)%20Reconciliation) The company provides a detailed reconciliation of GAAP pre-tax income to adjusted pre-tax income, outlining specific adjustments for MSR valuation, legal/regulatory settlements, severance, LTIP stock price changes, and other notable income statement items Adjusted Pre-Tax Income (Dollars in millions) | Period | Amount | | :--- | :--- | | 1H 2025 | $42 | | Q2 2025 | $16 | | Q1 2025 | $25 | | Q2 2024 | $32 | Total Notables (Adjustments) (Dollars in millions) | Period | Amount | | :--- | :--- | | 1H 2025 | $(10) | | Q2 2025 | $6 | | Q1 2025 | $(16) | | Q2 2024 | $(19) | [Adjusted ROE Calculation](index=6&type=section&id=Adjusted%20ROE%20Calculation) The adjusted ROE calculation provides a measure of the company's return on equity after accounting for notable items, offering a supplemental view of operational performance compared to GAAP ROE Adjusted ROE (Percentage) | Period | Percentage | | :--- | :--- | | 1H 2025 | 18% | | Q2 2025 | 14% | | Q1 2025 | 22% | | Q2 2024 | 29% | GAAP ROE (after tax) (Percentage) | Period | Percentage | | :--- | :--- | | 1H 2025 | 18% | | Q2 2025 | 17% | | Q1 2025 | 19% | | Q2 2024 | 10% | [Other Disclosures](index=1&type=section&id=Other%20Disclosures) [Forward Looking Statements](index=3&type=section&id=Forward%20Looking%20Statements) This section contains standard forward-looking statements, cautioning readers about inherent uncertainties and risks that could cause actual results to differ materially from projections, including market disruptions, policy changes, and regulatory compliance - The press release contains forward-looking statements identified by future-oriented terminology, addressing matters that are inherently uncertain[12](index=12&type=chunk) - Actual results could differ materially due to various assumptions, risks, and uncertainties, including ongoing disruption in financial markets, changes in monetary and fiscal policy, impacts of inflation, and regulatory requirements[13](index=13&type=chunk) - Readers are cautioned not to place undue reliance on these statements and should review the company's SEC filings for detailed risks[12](index=12&type=chunk)[13](index=13&type=chunk) [Webcast and Conference Call](index=1&type=section&id=Webcast%20and%20Conference%20Call) Onity Group will host a conference call on August 5, 2025, to discuss its second quarter 2025 operating results and provide a business update, with access available via dial-in or live audio webcast - A conference call will be held on Tuesday, August 5, 2025, at 8:30 a.m. (ET) to review Q2 2025 operating results and provide a business update[7](index=7&type=chunk) - Participants can access the call by dialing (800) 245-3047 or (203) 518-9765 (Conference ID: "Onity") or via a live audio webcast on onitygroup.com[7](index=7&type=chunk) - A replay of the conference call will be available via the website and telephonically until August 19, 2025[7](index=7&type=chunk)[10](index=10&type=chunk) [Contact Information](index=7&type=section&id=Contact%20Information) This section provides contact details for investor relations and media inquiries - For investor inquiries, contact Valerie Haertel, VP, Investor Relations, at (561) 570-2969 or shareholderrelations@onitygroup.com[24](index=24&type=chunk) - For media inquiries, contact Dico Akseraylian, SVP, Corporate Communications, at (856) 917-0066 or mediarelations@onitygroup.com[24](index=24&type=chunk)

Core Insights - Onity Group Inc. reported strong second quarter results for 2025, highlighting sustained profitability and growth despite market challenges [4][8] - The company emphasized its commitment to delivering strong shareholder returns through a diversified and technology-enabled business model [4] Financial Performance - Net income attributable to common stockholders was $20 million, with diluted EPS of $2.40 and a return on equity (ROE) of 17% [8] - Adjusted pre-tax income was $16 million, leading to an annualized adjusted ROE of 14% [8] - Originations volume reached $9.4 billion, a 35% increase year-over-year, surpassing the industry growth rate of 23% [8] - Average servicing UPB (unpaid principal balance) increased to $307 billion, up $2 billion year-over-year [8] Business Highlights - Funded recapture volume increased 2.4 times year-over-year, with a refinance recapture rate 1.5 times the industry average [9] - The average owned servicing UPB rose by 16% year-over-year to $153 billion [9] - The company maintained total liquidity of $218 million as of June 30, 2025 [9] Market Position - Onity Group operates primarily through its brands, PHH Mortgage and Liberty Reverse Mortgage, positioning itself as a leading non-bank financial services provider [7][10] - Fitch Ratings upgraded all of the company's residential primary servicer ratings, affirming its strong market position [9] Outlook - The company confirmed its previous guidance for 2025, maintaining an adjusted ROE range of 16% to 18% [8] - Onity Group anticipates the potential release of some or all of its $180 million deferred tax valuation allowance by year-end 2025 [8]

Company Overview - Onity Group (ONIT) is expected to report a year-over-year decline in earnings despite higher revenues for the quarter ended June 2025, with a consensus outlook indicating a significant impact on its near-term stock price based on actual results compared to estimates [1][2] Earnings Expectations - The upcoming earnings report is anticipated to be released on August 5, with expectations that better-than-expected key numbers could lead to a stock price increase, while missing expectations may result in a decline [2] - The consensus estimate for Onity's quarterly earnings is $2.08 per share, reflecting a year-over-year decrease of 48.9%, while revenues are projected to be $263.75 million, representing a 7% increase from the previous year [3] Estimate Revisions - Over the last 30 days, the consensus EPS estimate has been revised down by 6.96%, indicating a reassessment by analysts regarding the company's earnings prospects [4] - The Most Accurate Estimate for Onity is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -2.65%, which suggests a bearish outlook from analysts [11] Earnings Surprise History - In the last reported quarter, Onity had an expected EPS of $1.79 but delivered $2.84, resulting in a positive surprise of 58.66% [12] - Over the past four quarters, Onity has beaten consensus EPS estimates three times, indicating some historical resilience [13] Industry Context - Rocket Companies (RKT), another player in the Zacks Financial - Mortgage & Related Services industry, is expected to report earnings of $0.03 per share for the same quarter, reflecting a year-over-year decline of 50%, with revenues projected at $1.25 billion, down 3.6% [17][18] - The consensus EPS estimate for Rocket Companies has been revised down by 9.1% over the last 30 days, and it currently has an Earnings ESP of -27.27%, combined with a Zacks Rank of 4 (Sell), making it difficult to predict an earnings beat [18][19]

Core Viewpoint - Onity Group Inc. will hold a conference call on August 5, 2025, to discuss its second quarter 2025 operating results and provide a business update [1]. Group 1: Conference Call Details - The conference call is scheduled for August 5, 2025, at 8:30 a.m. (ET) [1]. - Interested parties can participate by dialing (800) 245-3047 or (203) 518-9765, referencing the conference ID "Onity" [2]. - A live audio webcast will also be available on the Shareholder Relations page of Onity's website [2]. Group 2: Investor Presentation and Replay - An investor presentation will accompany the conference call and will be available on the Shareholder Relations page prior to the call [3]. - A replay of the conference call will be accessible on the website approximately two hours after the call concludes [3]. - A telephonic replay will be available approximately three hours after the call's completion until August 19, 2025, by dialing (844) 512-2921 or (412) 317-6671, referencing access code 11159308 [3]. Group 3: Company Overview - Onity Group Inc. is a leading non-bank financial services company providing mortgage servicing and originations solutions through its primary brands, PHH Mortgage and Liberty Reverse Mortgage [4]. - PHH Mortgage is one of the largest servicers in the country, offering a variety of servicing and lending programs [4]. - Liberty is one of the nation's largest reverse mortgage lenders, focusing on loans that help customers meet personal and financial needs [4]. - The company is headquartered in West Palm Beach, Florida, with operations in the United States, U.S. Virgin Islands, India, and the Philippines, serving customers since 1988 [4].

Core Viewpoint - PHH Mortgage has received an upgrade in its residential primary servicer ratings from Fitch Ratings, indicating a Stable Rating Outlook, reflecting the company's strong business model and operational discipline [1][2]. Group 1: Ratings Upgrade Details - Fitch Ratings upgraded the prime product to 'RPS2-' from 'RPS3+', the subprime product to 'RPS2-' from 'RPS3+', the Alt-A product to 'RPS2-' from 'RPS3', and special servicing to 'RSS2-' from 'RSS3' [5]. - Closed-End Second Lien and HELOC products were upgraded to 'RPS3+' from 'RPS3' [5]. Group 2: Company Strengths and Strategies - The ratings upgrade reflects the strength of PHH's balanced and diversified business model, commitment to operational and financial discipline, and growth across multiple channels [2][6]. - The company has been recognized for servicing excellence by Fannie Mae STAR and Freddie Mac SHARP programs and is rated as a Tier 1 servicer by HUD [6]. - PHH is focusing on its growth strategy through increased MSR retention, expanded product offerings, and improved recapture rates in its Consumer Direct channel [6]. - The company utilizes enhanced technology for increased customer engagement and personalized services [6]. - PHH has a highly tenured management team and employs a multi-layered enterprise risk management framework with a three lines of defense approach [6].

Company Overview - Onity Group (NYSE: ONIT) has seen its stock price increase from $29.48 to $39 per share, representing a more than 30% increase within one month [1]. Analyst Background - The analyst is a self-taught equity analyst with 10 years of experience in investment banking, running a consultation firm in South Africa focused on estimating the value of construction projects [1]. - The analyst has been retail investing for the past 5 years, influenced by the works of Ben Graham and Joel Greenblatt, while also learning data analytics [1]. Investment Style - The investment style is characterized by a focus on value, high quality, and long/short mid and small cap companies [1]. - The analyst utilizes data analytics skills to identify promising investment opportunities from a vast amount of data available from SEC filings and other sources [1]. Platform Utilization - Seeking Alpha is highlighted as an important platform for sharing research and analysis, allowing for interaction with fellow retail investors and analysts for constructive feedback [1].

Company Overview - Onity Group Inc. is a leading non-bank financial services company providing mortgage servicing and originations solutions through its primary brands, PHH Mortgage and Liberty Reverse Mortgage [3] - PHH Mortgage is one of the largest servicers in the country, focused on delivering a variety of servicing and lending programs to consumers and business clients [3] - Liberty is one of the nation's largest reverse mortgage lenders dedicated to providing loans that help customers meet their personal and financial needs [3] - The company is headquartered in West Palm Beach, Florida, with operations in the United States, the U.S. Virgin Islands, India, and the Philippines, and has been serving customers since 1988 [3] Upcoming Conferences - Executive management will participate in two upcoming conferences in May 2025, including the BTIG 5 Annual Housing Ecosystem Conference on May 7, 2025 [1] - The KBW Real Estate Finance & Technology Conference is scheduled for May 20, 2025, and will be held virtually [2] - An investor presentation will be made available on the Events & Presentations section of the company's shareholder relations page prior to the meetings on May 7 and May 20, 2025 [2]

Financial Performance - Net income attributable to common stockholders was $21 million, or $2.68 per share basic and $2.50 diluted [228]. - Revenue for Q1 2025 was $249.8 million, an 11% increase compared to $224.8 million in Q1 2024 [230]. - The company reported a servicing segment income of $33.1 million, down 14% from $38.4 million in the previous quarter [230]. - Total revenue for the three months ended March 31, 2025 increased by $25.0 million, or 11%, compared to the previous quarter, driven by a $26.8 million increase in Servicing revenue [232]. - Originations revenue saw a significant increase of $8.7 million, or 43%, compared to the same period last year, attributed to higher production volume in both Consumer Direct and Correspondent channels [233]. - Total revenue for the Servicing segment reached $221.2 million for the three months ended March 31, 2025, a 14% increase compared to $194.4 million for the same period in 2024 [290]. - Total revenue for the Originations segment for the three months ended March 31, 2025, was $28.6 million, a decrease of 6% from $30.4 million in the previous quarter [335]. Loan Servicing and Portfolio - The company serviced or subserviced 1.4 million loans with a total UPB of $304.6 billion as of March 31, 2025 [214]. - The average total servicing and subservicing UPB increased by $4.8 billion or 1.6% from the previous quarter and by $13.1 billion or 4.5% year-over-year [218]. - The total unpaid principal balance (UPB) serviced by the company was $304.6 billion as of March 31, 2025, reflecting a 1% increase from $301.7 billion in Q4 2024 [283]. - The servicing portfolio increased to $150.5 billion, a 5% increase from $142.7 billion in Q4 2024 [283]. - The company completed 4.6 thousand loan modifications in Q1 2025, a 7% increase from 4.4 thousand in Q4 2024 [283]. - The non-performing loans decreased to $10.4 billion, a 10% reduction from $11.5 billion in Q1 2024 [283]. - The average servicing UPB increased by 7% to $175.4 billion compared to $164.3 billion in the previous quarter, contributing to an additional $7.4 million in servicing fee collection [293]. Expenses and Liabilities - Operating expenses for the three months ended March 31, 2025 totaled $119.9 million, a 4% increase from the previous quarter, primarily due to a rise in professional services expenses [239]. - The loss on MSR valuation adjustments, net for the three months ended March 31, 2025 was $38.9 million, reflecting a $41.1 million runoff and an $18.6 million fair value loss due to input and assumption changes [236]. - Total liabilities decreased by $193.3 million, or 1%, compared to December 31, 2024, largely due to a $284.5 million decrease in HMBS-related borrowings [254]. - Operating expenses for the Servicing segment totaled $68.6 million for the three months ended March 31, 2025, a decrease of 2% from $69.7 million in the previous quarter [290]. Tax and Equity - The effective tax rate for the three months ended March 31, 2025, was (142.9)%, a decrease from 16.7% in the same period of 2024 [248]. - The income tax benefit for the three months ended March 31, 2025, was primarily driven by a favorable resolution of a prior-year uncertain tax position, resulting in a tax benefit of $13.3 million [249]. - Total stockholders' equity increased by $17.2 million during the three months ended March 31, 2025, primarily due to a net income of $22.1 million for the period [255]. Market Conditions and Future Outlook - The average 30-year fixed rate mortgage increased to 6.83% in Q1 2025, impacting borrower affordability and the origination market [221][222]. - The company expects a 17% increase in loan origination in 2025 compared to 2024, with the 30-year fixed-rate mortgage expected to end 2025 at 6.5% [258]. - The company anticipates continued competitive pressure on margins across all channels and volatility of gain on sale associated with GSE pricing dependency and volatile interest rates [258]. - The company believes it is reasonably possible to release some or all of its valuation allowance that offsets its net U.S. deferred tax asset by December 31, 2025 [251]. Cash Flow and Liquidity - Total liquidity as of March 31, 2025, was $238.6 million, including $178.0 million of unrestricted cash [356]. - Operating cash flow for the three months ended March 31, 2025, was a net cash outflow of $148 million, primarily due to $159 million net cash paid on loans held for sale [381]. - Financing activities resulted in a cash outflow of $300 million, with $468 million net cash repaid related to reverse HMBS borrowings, partially offset by $309 million from reverse mortgage securitizations [383]. - The company maintains liquidity buffers to manage risks associated with market interest rate conditions and operational risks [357].

Core Insights - Onity Group reported $249.8 million in revenue for Q1 2025, a year-over-year increase of 4.5% and an EPS of $2.84 compared to $1.74 a year ago, indicating strong earnings growth [1] - The revenue fell short of the Zacks Consensus Estimate of $259.96 million, resulting in a surprise of -3.91%, while the EPS exceeded expectations by +58.66% against a consensus estimate of $1.79 [1] - Onity's stock has returned +10.1% over the past month, outperforming the Zacks S&P 500 composite's -0.2% change, and currently holds a Zacks Rank 2 (Buy) [3] Financial Metrics - Servicing and subservicing fees were reported at $203.30 million, below the average estimate of $218.71 million [4] - Other revenues amounted to $10.90 million, slightly below the estimated $10.99 million [4] - Gain on loans held for sale, net, was $11.80 million, compared to the average estimate of $12.45 million [4] - Gain on reverse loans held for investment and HMBS-related borrowings, net, was $23.80 million, exceeding the average estimate of $17.86 million [4]