Market Overview

Ditech Holding Corporation Announces Second Quarter 2018 Highlights And Financial Results

Share:

Ditech Holding Corporation Announces Second Quarter 2018 Highlights And Financial Results

- Reported second quarter 2018 net loss of $40.5 million

- Reduced general and administrative and compensation expenses by $35.5 million, or 16%, as compared to second quarter 2017

-Reduced corporate debt by $48.4 million as compared to first quarter 2018

- Introduced extended business hours

PR Newswire

FORT WASHINGTON, Pa., Aug. 9, 2018 /PRNewswire/ -- Ditech Holding Corporation (NYSE:DHCP) today announced a net loss for the quarter ended June 30, 2018 of $40.5 million, compared to a net loss of $94.3 million for the quarter ended June 30, 2017. Adjusted Loss was $46.9 million in the current quarter as compared to an Adjusted Loss of $19.8 million in the prior year quarter.

The current quarter also included MSR valuation gains of $31.6 million, as compared to MSR valuation losses of $34.8 million in the corresponding prior year quarter. Net non-cash reverse fair value losses increased $13.6 million in the three months ended June 30, 2018 as compared to the same period of 2017 due primarily to valuation model assumption adjustments for buyout loans and changes in market pricing during 2018.

"In the second quarter, we made progress refining our strategy and executing initiatives aimed at improving operational efficiencies, enhancing our customer experience and growing market share. We worked to introduce new technology solutions, including a digital point-of-sale system, and evaluated options to introduce additional robotics and automation capabilities to our originations and servicing segments. We also began to execute on a strategy to improve execution and pricing within our originations segment and strengthened our ability to identify opportunities in our existing portfolio to help us address adverse market conditions," said Tom Marano, Chief Executive Officer and President. "Our second quarter performance did not meet our expectations, and we are continuing to take actions that we believe will help the Company return to sustained profitability."

Second Quarter 2018 Financial and Operating Overview

Highlights ($ in thousands):


For the Three Months
Ended June 30, 2018


For the Three Months
Ended June 30, 2017

Servicing Portfolio (average):





Owned MSR


$

78,688,616



$

108,856,686


Subserviced UPB


102,740,804



109,020,458


Total serviced UPB


$

181,429,420



$

217,877,144







Funded Volume:





Refinanced - HARP


$

409,948



$

799,078


Refinanced - Other


861,415



1,215,946


Purchased


1,337,669



2,180,890


Total Funded Volume


$

2,609,032



$

4,195,914







Delinquency rate - 30 days past due


8.68

%


9.86

%

Reverse Ginnie Mae Buyouts Volume


$

466,093



$

283,917


Securitized Volume


65,616



113,713


Total revenues for the second quarter of 2018 were $198.5 million, a decrease of $10.3 million as compared to the prior year quarter, primarily due to decreases of $27.3 million in net gains on sale of loans, $10.0 million in interest income and $9.6 million in net fair value gains (losses) on reverse loans and related HMBS obligations, partially offset by an increase of $38.8 million in net servicing revenue and fees. The decrease in net gains on sales of loans was primarily due to an overall lower volume of locked loans. The increase to net servicing revenue and fees was driven by the change in fair value of servicing rights related to changes in valuation inputs and other assumptions, partially offset by lower servicing fees due primarily to the reduction in our owned MSR portfolio and continued runoff of the overall servicing portfolio.

Total expenses for the second quarter of 2018 were $251.7 million, a decrease of $40.9 million as compared to the prior year quarter. This decrease was primarily driven by a decrease in salaries and benefits of $18.3 million and a decrease in general and administrative expenses totaling $17.2 million. The decrease in general and administrative expenses resulted primarily from decreases of $6.9 million in legal fees related to litigation and regulatory costs, $5.4 million in costs related to our debt restructure initiative in 2017, $3.9 million in advance loss provision due to lower Fannie Mae escrow requirements, $2.6 million in purchased services, $2.1 million in professional fees and $1.5 million in curtailment-related accruals, offset in part by $6.2 million in amortization of the Clean-up Call Agreement inducement fee in 2018 and $5.2 million in higher loan servicing expense due primarily to higher VA buydowns and loans moving into foreclosure related to a seasoning portfolio. In addition, we had a decrease of $4.9 million resulting from accretion recorded during the second quarter of 2018 related to fresh start accounting adjustments for advances, which is not comparable to the second quarter of 2017. The decline in salaries and benefits expenses was due primarily to a decrease in compensation and benefits from lower average headcount driven by site closures and various organizational changes.

The Company is dependent on its ability to secure market financing from third parties on acceptable terms and to renew, replace or resize existing financing facilities as they expire. Continued growth in reverse Ginnie Mae buyout loan activity in the Reverse Mortgage segment will require us to continue to seek additional financing or to otherwise sell or securitize reverse Ginnie Mae buyout assets.

Second Quarter 2018 Segment Results

Results for the Company's segments are presented below. Effective January 1, 2018, the Company no longer allocates corporate overhead, including depreciation and amortization, to its operating segments. These amounts are now included in the Corporate and Other non-reportable segment. Prior year balances have been restated to conform to current year presentation.

Servicing

The Servicing segment serviced approximately 1.5 million accounts with a UPB of $178.4 billion as of June 30, 2018.

The Servicing segment reported pre-tax income of $50.5 million for the second quarter of 2018, an increase of $84.4 million compared to the prior year quarter. During the second quarter of 2018, the segment generated revenue of $148.1 million, an increase of $30.6 million as compared to the prior year quarter, primarily due to $70.2 million in favorable fair value changes to our MSR, partially offset by $30.6 million in lower servicing fees due primarily to the reduction in our owned MSR portfolio and continued runoff of the overall servicing portfolio.

Total expenses in the Servicing segment for the second quarter of 2018 were $100.8 million, a decrease of $49.9 million as compared to the prior year quarter, driven by $19.3 million in lower general and administrative expenses and $15.3 million in lower salaries and benefits. The decrease in general and administrative expenses was primarily due to  decreases of $6.3 million in legal fees related to litigation and regulatory costs, $3.9 million in advance loss provision due to lower Fannie Mae escrow requirements, $2.2 million in professional fees due to transitioning bankruptcy work in-house, $1.9 million in float interest expense due to the sale of MSR, and $1.6 million in certain purchased services related to a smaller portfolio, offset in part by $5.2 million in higher loan servicing expense due in part to higher VA buydowns and loans moving into foreclosure related to a seasoning portfolio. In addition, we had a decrease of $4.9 million resulting from accretion recorded during the second quarter of 2018 related to fresh start accounting adjustments for advances, which is not comparable to the second quarter of 2017. The decline in salaries and benefits resulted primarily from a lower average headcount and a decrease in severance related to restructuring initiatives in 2017. Current quarter expenses included $4.8 million of interest expense and $3.2 million of depreciation and amortization.

Adjusted earnings improved $8.2 million for the second quarter of 2018 as compared to the prior year quarter due to lower general and administrative expenses, salaries and benefits and realization of expected cash flows, offset in part by lower servicing fees and interest income on loans.

Originations

The Originations segment funded total UPB volume of $2.6 billion for the second quarter of 2018, a decrease of $1.6 billion as compared to the prior year quarter. The recapture rate(1) was 17% for the current quarter.

The Originations segment reported $8.4 million of pre-tax loss for the second quarter of 2018 as compared to pre-tax income of $23.8 million for the second quarter of 2017, which represents a decrease of $32.2 million. During the second quarter of 2018, this segment generated revenue of $47.8 million, a decrease of $32.7 million from the prior year quarter. Net gains on sales of loans decreased $28.5 million as compared to the prior year quarter, primarily due to an overall lower volume of locked loans as well as a lower day one margin due to pricing decreases in both the consumer and correspondent channels.

Total expenses in the Originations segment for the second quarter of 2018 were $56.3 million, a decrease of $0.5 million compared to the prior year quarter. Current quarter interest expense was $7.5 million and depreciation and amortization was $4.4 million.

Adjusted earnings declined by $30.5 million for the second quarter of 2018 as compared to the prior year quarter due to the revenue decline previously discussed.

Reverse Mortgage

The Reverse Mortgage segment serviced 98,895 accounts with a UPB of $18.8 billion at June 30, 2018, which includes UPB of $9.0 billion related to on-balance sheet loans and real estate owned. During the quarter, the business securitized $65.6 million of previously unfunded commitments and related fees.

The Reverse Mortgage segment reported $29.6 million of pre-tax loss for the second quarter of 2018 as compared to pre-tax loss of $13.6 million in the prior year quarter. During the second quarter of 2018, this segment generated revenue of $5.8 million, a decrease of $9.6 million from the prior year quarter. Net non-cash fair value losses increased $13.6 million due primarily to the valuation model assumption adjustments for buyout loans and changes in market pricing during 2018. Net interest income on reverse loans and HMBS related obligations increased $6.3 million primarily due to an increase in buyouts. In addition, we had a $1.0 million decline in servicing revenue and fees.

Total expenses in the Reverse Mortgage segment for the second quarter of 2018 were $35.4 million, an increase of $6.4 million from the prior year quarter. The increase in total expenses was driven by a $9.7 million increase in interest expense due primarily to higher average borrowings on master repurchase agreements as a result of higher buyout loan levels, and a higher average cost of debt related to the interest rate on the Exit Warehouse Facilities.

Pre-tax loss increased $16.0 million to $29.6 million and adjusted loss worsened by $2.7 million to a loss of $3.9 million for the second quarter of 2018 as compared to the prior year quarter primarily due to higher interest expense and a decrease in net fair value gains on reverse loans and related HMBS obligations, partially offset by the decline in salaries and benefits.

Corporate and Other Non-Reportable Segment

The Corporate and Other Non-Reportable segment reported $52.7 million of pre-tax loss for the second quarter of 2018, a decrease in loss of $16.3 million as compared to the prior year quarter. Other net fair value gains (losses) increased $11.9 million driven by an increase in the LIBOR rate for loans and bonds related to the Non-Residual Trusts during 2018 and negative assumption change impacts in the conditional default rate during 2017. Additionally, there were other gains of $7.2 million in connection with our counterparty under the Clean-up Call Agreement having fulfilled its obligation for the mandatory clean-up call of one of the remaining Non-Residual Trusts, resulting in the subsequent deconsolidation of the trust. This gain is offset by the amortization of the inducement fee recorded in general and administrative expenses during the period.

Interest expense decreased $3.1 million for the second quarter of 2018 as compared to the prior year quarter primarily as a result of the extinguishment of the Senior Notes and Convertible Notes in connection with the Chapter 11 bankruptcy, offset in part by higher interest rates on post-bankruptcy debt.

About Ditech Holding Corporation

Ditech Holding Corporation is an independent servicer and originator of mortgage loans and servicer of reverse mortgage loans. Based in Fort Washington, Pennsylvania, we have approximately 3,600 employees and service a diverse loan portfolio. For more information about Ditech Holding Corporation, please visit our website at www.ditechholding.com. The information on our website is not a part of this release.

This press release and the accompanying reconciliations include non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP, please see the reconciliations as well as "Non-GAAP Financial Measures" at the end of this press release.

The terms "Ditech Holding," the "Company," "we," "us" and "our" as used throughout this report refer to Ditech Holding Corporation (Successor) and its consolidated subsidiaries after the Effective Date, and/or Walter Investment Management Corp. (Predecessor) and its consolidated subsidiaries prior to the Effective Date. We use certain acronyms and terms throughout this release that are defined in the Glossary of Terms in Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018.

(1) Recapture rate represents the percent of voluntary UPB payoffs during the period refinanced into new loans by Ditech.  This metric excludes payoffs on non-marketable portfolios, payoffs under $20K UPB, or payoffs prior to 60 days after boarding.

Disclaimer and Cautionary Note Regarding Forward-Looking Statements

Certain statements in this press release constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Statements that are not historical fact are forward-looking statements. Certain of these forward-looking statements can be identified by the use of words such as "believes," "anticipates," "expects," "intends," "plans," "projects," "estimates," "assumes," "may," "should," "will," "seeks," "targets," or other similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors, and our actual results, performance or achievements could differ materially from future results, performance or achievements expressed in these forward-looking statements. These forward-looking statements are based on our current beliefs, intentions and expectations. These statements are not guarantees or indicative of future performance, nor should any conclusions be drawn or assumptions be made as to any potential outcome of any changes in our strategy. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements include, but are not limited to, those factors, risks and uncertainties described below and in more detail under the caption "Risk Factors" in our filings with the SEC.

In particular (but not by way of limitation), the following important factors, risks and uncertainties could affect our future results, performance and achievements and could cause actual results, performance and achievements to differ materially from those expressed in the forward-looking statements:

  • our ability to operate our business in compliance with existing and future laws, rules, regulations and contractual commitments affecting our business, including those relating to the origination and servicing of residential loans, default servicing and foreclosure practices, the management of third-party assets and the insurance industry, and changes to, and/or more stringent enforcement of, such laws, rules, regulations and contracts;
  • scrutiny of our industry by, and potential enforcement actions by, federal and state authorities;
  • the substantial resources (including senior management time and attention) we devote to, and the significant compliance costs we incur in connection with, regulatory compliance and regulatory examinations and inquiries, and any consumer redress, fines, penalties or similar payments we make in connection with resolving such matters;
  • uncertainties relating to interest curtailment obligations and any related financial and litigation exposure (including exposure relating to false claims);
  • potential costs and uncertainties, including the effect on future revenues, associated with and arising from litigation, regulatory investigations and other legal proceedings, and uncertainties relating to the reaction of our key counterparties to the announcement of any such matters;
  • our dependence on U.S. GSEs and agencies (especially Fannie Mae, Freddie Mac and Ginnie Mae) and their residential loan programs and our ability to maintain relationships with, and remain qualified to participate in programs sponsored by, such entities, our ability to satisfy various existing or future GSE, agency and other capital, net worth, liquidity and other financial requirements applicable to our business, and our ability to remain qualified as a GSE and agency approved seller, servicer or component servicer, including the ability to continue to comply with the GSEs' and agencies' respective residential loan selling and servicing guides;
  • uncertainties relating to the status and future role of GSEs and agencies, and the effects of any changes to the origination and/or servicing requirements of the GSEs, agencies or various regulatory authorities or the servicing compensation structure for mortgage servicers pursuant to programs of GSEs, agencies or various regulatory authorities;
  • our ability to maintain our loan servicing, loan origination or collection agency licenses, or any other licenses necessary to operate our businesses, or changes to, or our ability to comply with, our licensing requirements;
  • our ability to comply with the terms of the stipulated orders resolving allegations arising from an FTC and CFPB investigation of Ditech Financial and a CFPB investigation of RMS;
  • operational risks inherent in the mortgage servicing and mortgage originations businesses, including our ability to comply with the various contracts to which we are a party, and reputational risks;
  • risks related to the significant amount of senior management turnover and employee reductions recently experienced by us;
  • risks related to our substantial levels of indebtedness, including our ability to comply with covenants contained in our debt agreements or obtain any necessary waivers or amendments, generate sufficient cash to service such indebtedness and refinance such indebtedness on favorable terms, or at all, as well as our ability to incur substantially more debt;
  • our ability to renew advance financing facilities or warehouse facilities on favorable terms, or at all, and maintain adequate borrowing capacity under such facilities;
  • our ability to maintain or grow our residential loan servicing or subservicing business and our mortgage loan originations business;
  • risks related to the concentration of our subservicing portfolio and the ability of our subservicing clients to terminate us as subservicer;
  • our ability to achieve our strategic initiatives, particularly our ability to: enter into new subservicing arrangements; improve servicing performance; successfully develop our originations capabilities; and execute and realize planned operational improvements and efficiencies;
  • the success of our business strategy in returning us to sustained profitability;
  • uncertainties related to the Board's review of strategic alternatives;
  • changes in prepayment rates and delinquency rates on the loans we service or subservice;
  • the ability of Fannie Mae, Freddie Mac and Ginnie Mae, as well as our other clients and credit owners, to transfer or otherwise terminate our servicing or subservicing rights, with or without cause;
  • a downgrade of, or other adverse change relating to, or our ability to improve, our servicer ratings or credit ratings;
  • our ability to collect reimbursements for servicing advances and earn and timely receive incentive payments and ancillary fees on our servicing portfolio;
  • our ability to collect indemnification payments and enforce repurchase obligations relating to mortgage loans we purchase from our correspondent clients and our ability to collect in a timely manner indemnification payments relating to servicing rights we purchase from prior servicers;
  • local, regional, national and global economic trends and developments in general, and local, regional and national real estate and residential mortgage market trends in particular, including the volume and pricing of home sales and uncertainty regarding the levels of mortgage originations and prepayments;
  • uncertainty as to the volume of originations activity we can achieve and the effects of the expiration of HARP, which is scheduled to occur on December 31, 2018, including uncertainty as to the number of "in-the-money" accounts we may be able to refinance and uncertainty as to what type of product or government program will be introduced, if any, to replace HARP;
  • risks associated with the reverse mortgage business, including changes to reverse mortgage programs operated by FHA, HUD or Ginnie Mae, our ability to accurately estimate interest curtailment liabilities, our ability to fund HECM repurchase obligations, our ability to assign repurchased HECM loans to HUD, our ability to fund principal additions on our HECM loans, and our ability to securitize our HECM tails;
  • our ability to realize all anticipated benefits of past, pending or potential future acquisitions or joint venture investments;
  • the effects of competition on our existing and potential future business, including the impact of competitors with greater financial resources and broader scopes of operation;
  • changes in interest rates and the effectiveness of any hedge we may employ against such changes;
  • risks and potential costs associated with technology and cybersecurity, including: the risks of technology failures and of cyber-attacks against us or our vendors; our ability to adequately respond to actual or attempted cyber-attacks; and our ability to implement adequate internal security measures and protect confidential borrower information;
  • risks and potential costs associated with the implementation of new or more current technology, such as MSP, the use of vendors (including offshore vendors) or the transfer of our servers or other infrastructure to new data center facilities;
  • our ability to comply with evolving and complex accounting rules, many of which involve significant judgment and assumptions;
  • risks related to our deferred tax assets, including the risk of an "ownership change" under Section 382 of the Code;
  • our ability to maintain the listing of our common stock and warrants on the NYSE;
  • our ability to continue as a going concern;
  • uncertainties regarding impairment charges relating to other intangible assets;
  • risks associated with one or more material weaknesses identified in our internal controls over financial reporting, including the timing, expense and effectiveness of our remediation plans;
  • our ability to implement and maintain effective internal controls over financial reporting and disclosure controls and procedures;
  • our ability to manage potential conflicts of interest relating to our relationship with WCO; and
  • risks related to our relationship with Walter Energy and uncertainties arising from or relating to its bankruptcy filings and liquidation proceedings, including potential liability for any taxes, interest and/or penalties owed by the Walter Energy consolidated group for the full or partial tax years during which certain of our former subsidiaries were a part of such consolidated group and certain other tax risks allocated to us in connection with our spin-off from Walter Energy.

All of the above factors, risks and uncertainties are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors, risks and uncertainties emerge from time to time, and it is not possible for our management to predict all such factors, risks and uncertainties.

Although we believe that the assumptions underlying the forward-looking statements (including those relating to our outlook) contained herein are reasonable, any of the assumptions could be inaccurate, and therefore any of these statements included herein may prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made, except as otherwise required under the federal securities laws. If we were in any particular instance to update or correct a forward-looking statement, investors and others should not conclude that we would make additional updates or corrections thereafter except as otherwise required under the federal securities laws.

In addition, this release may contain statements of opinion or belief concerning market conditions and similar matters. In certain instances, those opinions and beliefs could be based upon general observations by members of our management, anecdotal evidence and/or our experience in the conduct of our business, without specific investigation or statistical analyses. Therefore, while such statements reflect our view of the industries and markets in which we are involved, they should not be viewed as reflecting verifiable views and such views may not be shared by all who are involved in those industries or markets.

 

Ditech Holding Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in thousands, except per share data)












Successor



Predecessor


Successor



Predecessor


For the Three
Months Ended
June 30, 2018



For the Three
Months Ended
June 30, 2017


For the Period
From February
10, 2018 Through
June 30, 2018



For the Period
From January
1, 2018 Through
February 9, 2018


For the Six
Months Ended
June 30, 2017

REVENUES












Net servicing revenue and fees

$

130,097




$

91,321



$

178,452




$

128,685



$

204,508


Net gains on sales of loans

43,202




70,545



71,720




27,963



144,901


Net fair value gains (losses) on reverse loans and related HMBS obligations

(1,738)




7,872



(849)




10,576



22,574


Interest income on loans

471




10,489



847




3,387



21,469


Insurance revenue











3,963


Other revenues

26,496




28,560



39,573




16,662



56,657


Total revenues

198,528




208,787



289,743




187,273



454,072














EXPENSES












General and administrative

100,324




117,544



154,849




50,520



249,171


Salaries and benefits

82,802




101,071



129,584




40,408



209,028


Interest expense

58,384




60,884



88,280




38,756



121,294


Depreciation and amortization

8,384




10,042



13,078




3,810



20,974


Goodwill and intangible assets impairment

1,000






10,960







Other expenses, net

842




3,054



644




229



5,837


Total expenses

251,736




292,595



397,395




133,723



606,304














OTHER GAINS (LOSSES)












Reorganization items and fresh start accounting adjustments






(110)




464,563




Other net fair value gains (losses)

6,995




(8,105)



7,589




3,740



(3,022)


Net losses on extinguishment of debt

(1,207)




(709)



(1,207)




(864)



(709)


Gain on sale of business




7








67,734


Other

7,199






7,199







Total other gains (losses)

12,987




(8,807)



13,471




467,439



64,003














Income (loss) before income taxes

(40,221)




(92,615)



(94,181)




520,989



(88,229)


Income tax expense (benefit)

249




1,694



438




(18)



1,572


Net income (loss)

$

(40,470)




$

(94,309)



$

(94,619)




$

521,007



$

(89,801)














Comprehensive income (loss)

$

(40,381)




$

(94,314)



$

(94,523)




$

521,007



$

(89,823)














Net income (loss)

$

(40,470)




$

(94,309)



$

(94,619)




$

521,007



$

(89,801)


Basic earnings (loss) per common and common equivalent share

$

(8.60)




$

(2.58)



$

(20.81)




$

13.94



$

(2.46)


Diluted earnings (loss) per common and common equivalent share

$

(8.60)




$

(2.58)



$

(20.81)




$

13.92



$

(2.46)


Weighted-average common and common equivalent shares outstanding — basic

4,707




36,536



4,546




37,374



36,475


Weighted-average common and common equivalent shares outstanding — diluted

4,707




36,536



4,546




37,424



36,475


 

 

Ditech Holding Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share and per share data)









Successor



Predecessor



June 30, 2018



December 31, 2017

ASSETS


(unaudited)




Cash and cash equivalents


$

218,608




$

285,969


Restricted cash and cash equivalents


96,853




112,826


Residential loans at amortized cost, net (includes $924 and $6,347 in allowance for loan
  losses at June 30, 2018 and December 31, 2017, respectively)


329,671




985,454


Residential loans at fair value


10,394,781




10,725,232


Receivables, net (includes $2,143 and $5,608 at fair value at June 30, 2018 and
  December 31, 2017, respectively)


111,764




124,344


Servicer and protective advances, net (includes $11,054 and $164,225 in allowance for
  uncollectible advances at June 30, 2018 and December 31, 2017, respectively)


563,296




813,433


Servicing rights, net (includes $633,125 and $714,774 at fair value at June 30, 2018 and
  December 31, 2017, respectively)


689,194




773,251


Goodwill





47,747


Intangible assets, net


36,233




8,733


Premises and equipment, net


75,584




50,213


Deferred tax assets, net


777




1,400


Other assets (includes $21,105 and $29,394 at fair value at June 30, 2018 and
  December 31, 2017, respectively)


311,421




235,595


Total assets


$

12,828,182




$

14,164,197








LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)






Payables and accrued liabilities (includes $5,463 and $1,282 at fair value at June 30, 2018
  and December 31, 2017, respectively)


$

792,866




$

994,493


Servicer payables


116,622




116,779


Servicing advance liabilities


304,920




483,462


Warehouse borrowings


1,378,575




1,085,198


Corporate debt


1,215,266




1,214,663


Mortgage-backed debt (includes $633,244 and $348,682 at fair value at June 30, 2018
  and December 31, 2017, respectively)


633,244




735,882


HMBS related obligations at fair value


8,294,703




9,175,128


Deferred tax liabilities, net


748




848


Total liabilities not subject to compromise


12,736,944




13,806,453


Liabilities subject to compromise





806,937


Total liabilities


12,736,944




14,613,390








Stockholders' equity (deficit):






Preferred stock, $0.01 par value per share (Successor and Predecessor):






Authorized - 10,000,000 shares, including 100,000 shares of mandatorily convertible
  preferred stock (Successor) and 10,000,000 shares (Predecessor)






Issued and outstanding - 95,778 shares at June 30, 2018 (Successor) and 0 shares at
  December 31, 2017 (Predecessor) (liquidation preference $98,421)


1





Common stock, $0.01 par value per share:






Authorized - 90,000,000 shares (Successor and Predecessor)






Issued and outstanding - 4,825,987 shares at June 30, 2018 (Successor) and 37,373,616
  shares at December 31, 2017 (Predecessor)


48




374


Additional paid-in capital


185,712




598,193


Accumulated deficit


(94,619)




(1,048,817)


Accumulated other comprehensive income


96




1,057


Total stockholders' equity (deficit)


91,238




(449,193)


Total liabilities and stockholders' equity (deficit)


$

12,828,182




$

14,164,197


Non-GAAP Financial Measures

We manage our company in three reportable segments: Servicing, Originations and Reverse Mortgage. We evaluate the performance of our business segments through the following measures: income (loss) before income taxes and Adjusted Earnings (Loss). Management considers Adjusted Earnings (Loss) to be important in the evaluation of our business segments and of the company as a whole, as well as for allocating capital resources to our segments. Adjusted Earnings (Loss) is a supplemental metric utilized by management to assess the underlying key drivers and operational performance of the continuing operations of the business. In addition, analysts, investors, and creditors may use these measures when analyzing our operating performance. Adjusted Earnings (Loss) is not a presentation made in accordance with GAAP and our use of this measure and terms may vary from other companies in our industry.

Adjusted Earnings (Loss) is defined as income (loss) before income taxes, plus changes in fair value due to changes in valuation inputs and other assumptions; goodwill and intangible assets impairment, if any; a portion of the provision for curtailment expense, net of expected third-party recoveries, if applicable; share-based compensation expense or benefit; non-cash interest expense; exit costs; estimated settlements and costs for certain legal and regulatory matters; fair value to cash adjustments for reverse loans; and select other cash and non-cash adjustments primarily including severance, gain or loss on extinguishment of debt, the net impact of the Residual and Non-Residual Trusts, transaction costs, reorganization items and certain non-recurring costs, as applicable. Adjusted Earnings (Loss) excludes unrealized changes in fair value of MSR that are based on projections of expected future cash flows and prepayments. Adjusted Earnings (Loss) includes both cash and non-cash gains from mortgage loan origination activities. Non-cash gains are net of non-cash charges or reserves provided. Adjusted Earnings (Loss) includes cash generated from reverse mortgage origination activities for the periods during which we were originating reverse mortgages. Adjusted Earnings (Loss) may from time to time also include other adjustments, as applicable based upon facts and circumstances, consistent with the intent of providing investors with a supplemental means of evaluating our operating performance.

Adjusted Earnings (Loss) should not be considered as an alternative to (i) net income (loss) or any other performance measures determined in accordance with GAAP or (ii) operating cash flows determined in accordance with GAAP. Adjusted Earnings (Loss) has important limitations as an analytical tool, and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. Some of the limitations of this metric are:

  • Adjusted Earnings (Loss) does not reflect cash expenditures for long-term assets and other items that have been and will be incurred, future requirements for capital expenditures or contractual commitments;
  • Adjusted Earnings (Loss) does not reflect changes in, or cash requirements for, our working capital needs;
  • Adjusted Earnings (Loss) does not reflect certain tax payments that represent reductions in cash available to us;
  • Adjusted Earnings (Loss) does not reflect non-cash compensation that is and will remain a key element of our overall long-term incentive compensation package;
  • Adjusted Earnings (Loss) does not reflect the change in fair value due to changes in valuation inputs and other assumptions;

Because of these limitations, Adjusted Earnings (Loss) should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted Earnings (Loss) only as a supplement.

 

Ditech Holding Corporation and Subsidiaries

Segment Results of Operations and Non-GAAP Financial Measures

For the Three Months Ended June 30, 2018

(in thousands)
















Servicing


Originations


Reverse
Mortgage


Corporate
and Other


Eliminations


Total
Consolidated

REVENUES













Net servicing revenue and fees


$

125,625



$



$

6,022



$

17



$

(1,567)



$

130,097


Net gains on sales of loans


450



42,412







340



43,202


Net fair value losses on reverse loans and related HMBS obligations






(1,738)







(1,738)


Interest income on loans


459



12









471


Other revenues


21,532



5,420



1,508



211



(2,175)



26,496


Total revenues


148,066



47,844



5,792



228



(3,402)



198,528















EXPENSES













General and administrative


58,648



17,178



10,102



17,798



(3,402)



100,324


Salaries and benefits


34,965



26,248



9,229



12,360





82,802


Interest expense


4,819



7,492



13,996



32,077





58,384


Depreciation and amortization


3,194



4,354



473



363





8,384


Intangible assets impairment




1,000









1,000


Other expenses, net


(804)





1,640



6





842


Total expenses


100,822



56,272



35,440



62,604



(3,402)



251,736















OTHER GAINS (LOSSES)













Other net fair value gains


3,269







3,726





6,995


Net losses on extinguishment of debt








(1,207)





(1,207)


Other








7,199





7,199


Total other gains


3,269







9,718





12,987


Income (loss) before income taxes


50,513



(8,428)



(29,648)



(52,658)





(40,221)















Adjustments to income (loss) before income taxes













Changes in fair value due to changes in valuation inputs and other assumptions


(33,260)











(33,260)


Fair value to cash adjustment to reverse loans






25,604







25,604


Non-cash interest expense


526











526


Intangible assets impairment




1,000









1,000


Exit costs


1,326



832



107



674





2,939


Transaction costs


75







1,048





1,123


Share-based compensation expense








1,373





1,373


Other


(4,001)



234



84



(2,318)





(6,001)


Total adjustments


(35,334)



2,066



25,795



777





(6,696)


Adjusted Earnings (Loss)


$

15,179



$

(6,362)



$

(3,853)



$

(51,881)



$



$

(46,917)


 

 

Ditech Holding Corporation and Subsidiaries

Segment Results of Operations and Non-GAAP Financial Measures

For the Three Months Ended June 30, 2017

(in thousands)
















Servicing


Originations


Reverse
Mortgage


Corporate
and Other


Eliminations


Total
Consolidated

REVENUES













Net servicing revenue and fees


$

86,648



$



$

7,083



$



$

(2,410)



$

91,321


Net gains (losses) on sales of loans


(997)



70,910







632



70,545


Net fair value gains on reverse loans and related HMBS obligations






7,872







7,872


Interest income on loans


10,477



12









10,489


Other revenues


21,298



9,598



454



200



(2,990)



28,560


Total revenues


117,426



80,520



15,409



200



(4,768)



208,787















EXPENSES













General and administrative (1)


77,909



19,445



9,905



15,053



(4,768)



117,544


Salaries and benefits


50,226



28,030



12,459



10,356





101,071


Interest expense


12,860



8,599



4,288



35,137





60,884


Depreciation and amortization  (1)


8,362



662



837



181





10,042


Other expenses, net


1,327





1,554



173





3,054


Total expenses


150,684



56,736



29,043



60,900



(4,768)



292,595















OTHER GAINS (LOSSES)













Other net fair value gains (losses)


111







(8,216)





(8,105)


Net losses on extinguishment of debt


(709)











(709)


Gain on sale of business


7











7


Total other losses


(591)







(8,216)





(8,807)


Income (loss) before income taxes


(33,849)



23,784



(13,634)



(68,916)





(92,615)















Adjustments to income (loss) before income taxes













Changes in fair value due to changes in valuation inputs and other assumptions


33,017











33,017


Fair value to cash adjustment to reverse loans






12,039







12,039


Non-cash interest expense


22







2,742





2,764


Exit costs (1)


4,443



284



509



862





6,098


Transaction costs


2,158







6,928





9,086


Share-based compensation expense (1)


13



32



2



434





481


Gain on sale of business


(7)











(7)


Other (1)


1,191



82



(50)



8,108





9,331


Total adjustments


40,837



398



12,500



19,074





72,809


Adjusted Earnings (Loss)


$

6,988



$

24,182



$

(1,134)



$

(49,842)



$



$

(19,806)


__________

(1)

Effective January 1, 2018, the Company no longer allocates corporate overhead, including depreciation and amortization, to its operating segments. These amounts are now included in the Corporate and Other non-reportable segment. Prior year balances have been restated to conform to current year presentation.

 

Ditech Holding Corporation and Subsidiaries

Segment Results of Operations and Non-GAAP Financial Measures

For the Six Months Ended June 30, 2018

(in thousands)
















Servicing


Originations


Reverse
Mortgage


Corporate
and Other


Eliminations


Total
Consolidated

REVENUES













Net servicing revenue and fees


$

299,094



$



$

11,338



$

23



$

(3,318)



$

307,137


Net gains on sales of loans


955



97,963







765




99,683


Net fair value gains on reverse loans and related HMBS obligations






9,727








9,727


Interest income on loans


4,211



23










4,234


Other revenues


46,225



11,184



2,770



465



(4,409)




56,235


Total revenues


350,485



109,170



23,835



488



(6,962)



477,016















EXPENSES













General and administrative


121,004



38,400



17,905



35,022



(6,962)



205,369


Salaries and benefits


72,023



54,179



19,670



24,120





169,992


Interest expense


17,113



21,032



32,287



56,604





127,036


Depreciation and amortization


7,955



7,444



978



511





16,888


Goodwill and intangible assets impairment


1,000



9,960









10,960


Other expenses, net


(2,078)





2,868



83





873


Total expenses


217,017



131,015



73,708



116,340



(6,962)



531,118















OTHER GAINS (LOSSES)













Reorganization items and fresh start accounting adjustments


(14,588)



9,612



7,423



462,006





464,453


Other net fair value gains


3,380







7,949





11,329


Net losses on extinguishment of debt








(2,071)





(2,071)


Other








7,199





7,199


Total other gains (losses)


(11,208)



9,612



7,423



475,083





480,910


Income (loss) before income taxes


122,260



(12,233)



(42,450)



359,231





426,808















Adjustments to income (loss) before income taxes













Reorganization items and fresh start accounting adjustments


14,588



(9,612)



(7,423)



(462,006)





(464,453)


Changes in fair value due to changes in valuation inputs and other assumptions


(110,887)











(110,887)


Fair value to cash adjustment to reverse loans






37,010







37,010


Non-cash interest expense


4,954



6,579



7,146







18,679


Goodwill and intangible assets impairment


1,000



9,960









10,960


Exit costs


2,676



886



394



1,288





5,244


Transaction costs


182







2,070





2,252


Share-based compensation expense


13



14



4



1,880





1,911


Other


(1,775)



663



371



(1,993)





(2,734)


Total adjustments


(89,249)



8,490



37,502



(458,761)





(502,018)


Adjusted Earnings (Loss)


$

33,011



$

(3,743)



$

(4,948)



$

(99,530)



$



$

(75,210)


 

 

Ditech Holding Corporation and Subsidiaries

Segment Results of Operations and Non-GAAP Financial Measures

For the Six Months Ended June 30, 2017

(in thousands)
















Servicing


Originations


Reverse
Mortgage


Corporate
and Other


Eliminations


Total
Consolidated

REVENUES













Net servicing revenue and fees


$

195,189



$



$

14,591



$



$

(5,272)



$

204,508


Net gains (losses) on sales of loans


(1,317)



144,614







1,604




144,901


Net fair value gains on reverse loans and related HMBS obligations






22,574








22,574


Interest income on loans


21,445



24










21,469


Insurance revenue


3,963












3,963


Other revenues


45,926



16,690



737



710



(7,406)




56,657


Total revenues


265,206



161,328



37,902



710



(11,074)



454,072















EXPENSES













General and administrative (1)


168,556



42,895



16,369



32,425



(11,074)



249,171


Salaries and benefits


101,609



58,733



25,988



22,698





209,028


Interest expense


26,393



17,999



6,679



70,223





121,294


Depreciation and amortization  (1)


17,161



1,589



1,863



361





20,974


Other expenses, net


2,681





2,653



503





5,837


Total expenses


316,400



121,216



53,552



126,210



(11,074)



606,304















OTHER GAINS (LOSSES)













Other net fair value losses


(1,318)







(1,704)





(3,022)


Net losses on extinguishment of debt


(709)











(709)


Gain on sale of business


67,734











67,734


Total other gains (losses)


65,707







(1,704)





64,003


Income (loss) before income taxes


14,513



40,112



(15,650)



(127,204)





(88,229)















Adjustments to income (loss) before income taxes













Changes in fair value due to changes in valuation inputs and other assumptions


40,414











40,414


Fair value to cash adjustment to reverse loans






15,378







15,378


Non-cash interest expense


1,535







5,413





6,948


Exit costs (1)


4,637



491



1,187



1,654





7,969


Transaction costs


4,331







9,963





14,294


Share-based compensation expense (benefit) (1)


268



(110)



166



1,022





1,346


Gain on sale of business


(67,734)











(67,734)


Other (1)


1,606



225



(72)



7,053





8,812


Total adjustments


(14,943)



606



16,659



25,105





27,427


Adjusted Earnings (Loss)


$

(430)



$

40,718



$

1,009



$

(102,099)



$



$

(60,802)


__________

(1)

Effective January 1, 2018, the Company no longer allocates corporate overhead, including depreciation and amortization, to its operating segments. These amounts are now included in the Corporate and Other non-reportable segment. Prior year balances have been restated to conform to current year presentation.

 

Cision View original content:http://www.prnewswire.com/news-releases/ditech-holding-corporation-announces-second-quarter-2018-highlights-and-financial-results-300694676.html

SOURCE Ditech Holding Corporation

View Comments and Join the Discussion!