Onity Group Inc.(ONIT) - 2025 Q2 - Quarterly Results

Executive Summary & Business Highlights Q2 2025 Performance Highlights 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] - Fitch Ratings upgraded all of the Company's residential primary servicer ratings and affirmed its commercial small balance servicer ratings[9] 2025 Business Outlook 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] - ROE and adjusted ROE* were 18% for the first half of 2025[8] - 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] CEO Commentary 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] - Achieved results in Servicing and Originations, with a growing servicing portfolio, originations volume exceeding industry growth, and a high-performing recapture platform[5] - 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] Company Information About Onity Group 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] - Primary brands include PHH Mortgage, one of the largest servicers, and Liberty Reverse Mortgage, one of the nation's largest reverse mortgage lenders[11] - 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] Financial Results Condensed Consolidated Balance Sheets (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) 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 Note Regarding Non-GAAP Financial Measures 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][15] - 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] - 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][19] Adjusted Pre-Tax Income (Loss) Reconciliation 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 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 Forward Looking Statements 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] - 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] - Readers are cautioned not to place undue reliance on these statements and should review the company's SEC filings for detailed risks[12][13] Webcast and Conference Call 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] - 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] - A replay of the conference call will be available via the website and telephonically until August 19, 2025[7][10] Contact Information 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] - For media inquiries, contact Dico Akseraylian, SVP, Corporate Communications, at (856) 917-0066 or mediarelations@onitygroup.com[24]