Earnings call transcript: Onity Q1 2025 earnings beat boosts stock

Onity Group Inc. (ONIT) reported impressive first-quarter 2025 earnings, with earnings per share (EPS) significantly surpassing expectations. The company posted an EPS of $2.5, exceeding the forecast of $1.51 by approximately 65.6%. Despite a minor revenue miss, reporting $249.8 million against a forecast of $250.1 million, the market responded positively. In premarket trading, Onity’s stock rose 4.42% to $37.10, reflecting investor confidence. According to InvestingPro data, ONIT has delivered a remarkable 52.23% return over the past year, with analyst price targets ranging from $40 to $50, suggesting potential upside ahead.

Key Takeaways

• Onity’s EPS surpassed expectations by 65.6%, marking a strong start to 2025.
• Revenue slightly missed forecasts but showed a year-over-year increase.
• Premarket trading saw a 4.42% increase in stock price, indicating positive sentiment.
• The company reported a significant improvement in adjusted pretax income and ROE.

Company Performance

Onity’s overall performance in Q1 2025 was robust, with a notable increase in adjusted pretax income to $25 million from $15 million in the previous year. The company’s adjusted return on equity (ROE) reached 22%, surpassing its guidance of 16-18%. These metrics suggest strong operational efficiency and profitability. Trading at a P/E ratio of 7.44 and price-to-book of 0.64, the stock shows interesting valuation metrics. However, InvestingPro analysis indicates the company is quickly burning through cash, with a negative free cash flow yield of -2.02%. The company’s innovative product launches and digital transformation initiatives have also contributed to its competitive edge.

Financial Highlights

• Revenue: $249.8 million, a 5% increase year-over-year.
• Earnings per share: $2.5, significantly above the $1.51 forecast.
• Adjusted pretax income: $25 million, up from $15 million.
• Adjusted ROE: 22%, exceeding the guidance range.

Earnings vs. Forecast

Onity’s EPS of $2.5 exceeded the forecast of $1.51 by $0.99, or 65.6%. This substantial beat is indicative of the company’s effective cost management and operational strategies. Revenue, however, slightly missed expectations by $0.3 million, a negligible shortfall in the broader context of its financial performance.

Market Reaction

The stock’s premarket rise of 4.42% to $37.10 reflects a positive market reaction to Onity’s earnings beat. The stock is trading well above its 52-week low, suggesting investor confidence in the company’s growth prospects and operational improvements.

Outlook & Guidance

Onity confirmed its 2025 guidance, expecting an adjusted ROE of 16-18% and servicing book growth of over 10% year-over-year. The company also anticipates a potential release of a $180 million valuation allowance, which could significantly impact its financials. With a beta of 1.58, investors should note the stock’s higher volatility compared to the market. InvestingPro subscribers have access to 8 additional key insights about ONIT, including detailed analysis of its financial health score of 2.24 (FAIR) and comprehensive valuation metrics. Get the full picture with InvestingPro’s exclusive Research Report, available for over 1,400 US stocks including ONIT.

Executive Commentary

CEO Glenn Messina stated, "We believe we’re well positioned to navigate the market environment ahead and deliver long-term value for our shareholders." He emphasized the company’s balanced business model and disciplined cost management as key drivers of performance.

Risks and Challenges

• Economic recession risks and interest rate volatility could impact future performance.
• Slight revenue miss highlights potential market challenges.
• The impact of industry mergers on Onity’s subservicing market is uncertain.

Q&A

During the earnings call, analysts inquired about the potential release of the valuation allowance and its financial impact. Questions also focused on the implications of industry mergers and legal expenses related to a longstanding class action matter.

Full transcript - Onity Group Inc (ONIT) Q1 2025:

Conference Operator: Good day, everyone, and welcome to the Onity Group’s First Quarter Earnings and Business Update Conference Call. At this time, all participants are in a listen only mode.

Later, will have the opportunity to ask questions during the question and answer session. Please note this call is being recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Valerie Hertel, Vice President of Investor Relations. Please go ahead.

Valerie Hertel, Vice President of Investor Relations, Onity Group: Thank you. Good morning, and welcome to Onity Group’s first quarter twenty twenty five earnings call. Please note that our earnings release and presentation are available on our website at onitygroup.com. Speaking on the call will be Chair, President and Chief Executive Officer, Glenn Messina and Chief Financial Officer, Sean O’Neill. As a reminder, our comments today may contain forward looking statements made pursuant to the Safe Harbor provisions of the federal securities laws.

These statements may be identified by reference to a future period or by use of forward looking terminology and address matters that are uncertain. Forward looking statements speak only as of the date they are made and involve assumptions, risks and uncertainties, including those described in our SEC filings. In the past, actual results have differed materially from those suggested by forward looking statements, and this may happen again. In addition, the presentation and our comments contain references to non GAAP financial measures such as adjusted pretax income. We believe these non GAAP measures provide a useful supplement to discussions and analysis of our financial condition because they are measures that management uses to assess the performance of our operations and allocate resources.

Non GAAP measures should be viewed in addition to and not as an alternative for the company’s reported GAAP results. A reconciliation of these non GAAP measures to their most directly comparable GAAP measures and management’s reasons for including them may be found in the press release and the appendix to the investor presentation. Now I would like to turn the call over to Glenn Messina.

Glenn Messina, Chair, President and Chief Executive Officer, Onity Group: Thank you, Valerie. Good morning, everyone, and thanks for joining our call. We’re looking forward to sharing a few highlights for the first quarter as well as review our strategy and financial objectives to deliver long term value for our shareholders. Let’s get started on slide three. I want to start with three key themes today.

First, we’re delivering on our 2025 operating priority to accelerate growth in originations volume and total servicing UPB. Second, our growth in book value and adjusted ROE performance demonstrate that our strategy is sound and execution is on track. And third, we believe our balanced business positions us for success in high and low interest rate environments. Let’s turn to slide four to review a few highlights for the quarter. Despite unpredictable market conditions, we delivered strong financial performance in the first quarter with adjusted pretax income of $25,000,000 and annualized adjusted ROE of 22%, which exceeds our guidance.

GAAP net income attributable to common shareholders of $21,000,000 or $2.5 per share fully diluted, reflects an annualized return on equity of 19% and is above consensus. Average servicing UPB of $3.00 $5,000,000,000 for the quarter is up $13,000,000,000 versus the first quarter of twenty twenty four. Total servicing additions of $17,000,000,000 is down from the first quarter of ’twenty four, primarily due to lower subservicing additions related to the timing of bulk boardings. However, owned MSR additions more than doubled versus the first quarter twenty twenty four. And finally, book value per share was approximately 4 percent versus Q1 ’twenty four and up approximately 2% versus year end ’twenty four.

We’re pleased with our results for the quarter, which reflects the strength of our business and solid execution from our team. Let’s turn to slide five to discuss how we’re positioned for the balance of 2025. We believe 2025 will be a dynamic and unpredictable year. We’re expecting continued interest rate and GSE price volatility, which is likely to generally impact hedge costs and drive unpredictable surges in refinancing activity and origination margin volatility. The Mortgage Bankers Association and Fannie Mae estimate for industry origination volumes expected to be up 17% year over year.

While not out of the realm of possibility, it is dependent on a 9% increase in home purchase volume and a 39% increase in refinancing volume. Economists have commented that the probability of a recession has increased since the beginning of the year, although we have not yet seen a deterioration in mortgage delinquencies. We believe the ROCCAT acquisition of Mr. Cooper has the potential to accelerate M and A activity for two primary reasons, the desire to accelerate servicing scale and a desire to own servicing capability. In addition, M and A activity over the past twelve to eighteen months amongst companies who had large concentrations of subservicing is giving rise to an increase in financial institutions exploring their options for subservicing providers.

We believe we’re well positioned for this dynamic environment and we’re maintaining our full year guidance. Our balanced business continues to demonstrate the resilience to successfully navigate high and low interest rates. We have a terrific servicing platform that is delivering top tier performance for the benefit of customers and investors. We believe our servicing portfolio mix and special servicing skills will help minimize advancing and delinquencies in the event of a recession and create delinquent subservicing growth opportunities. We are accelerating growth consistent with our planned actions, and we believe we’re on track to achieve our portfolio growth objectives.

Should interest rates decline, we have an agile and high performing recapture platform that continues to close the gap And as always, in this dynamic environment, we are maintaining the flexibility to evaluate all options to create value for shareholders. Let’s turn to Slide six for more about our balanced business. We believe our balanced business is positioned to perform well with high or low interest rates. As you can see, even with the sharp increase in interest rates from 2021, our total business is delivering improved performance driven by our servicing platform.

Q1 twenty twenty five adjusted pretax income of $48,000,000 for origination and servicing reflects both segments are operating profitably with servicing delivering most of our segment earnings. As in 2021, if interest rates were to materially decline, industry origination volume and margins typically expand, while servicing runoff increases. In this scenario, we would expect originations to deliver most of our earnings. Given the current outlook for interest rates, we expect servicing will continue to be the predominant earnings contributor for 2025, with industry originations volume projected to increase modestly. Let’s turn to slide seven for more about our servicing platform.

We’ve built a strong servicing platform and our team is delivering industry leading performance on multiple dimensions. We service or sub service 1,400,000 loans with a total UPB of over $300,000,000,000 on behalf of more than 4,000 investors and over 120 subservicing clients. We service forward, reverse, and business purpose residential mortgages, and our clients and loan investors include some of the largest financial institutions in The United States. We’ve been recognized by Fannie Mae, Freddie Mac, and HUD for industry leading servicing performance in each of the past four years. Our commitment to technology is evidenced with our Automation Center of Excellence having been recognized in 2024 as best in class by the Shared Services Outsourcing Network, which is the world’s largest community of business services and outsourcing professionals with more than 200,000 global members.

During the first quarter, our investment in technology was evident with roughly 89% of customer inquiries handled through digital interface channels and robotic process automation, saving over 60,000 manual work hours a month. Our investments in talent, technology, and global proprietary infrastructure have created a scalable, low cost, high performing platform for investors and customers alike. Our continuous improvement in customer experience is evidenced with a four point six and four point one out of five star satisfaction rating for our call center and low boarding performance, respectively, as well as a 61 Net Promoter Score from servicing clients, a score consistent with companies such as Amazon, Apple, and Google. In addition, we were named by the National Association of Mortgage Brokers as one of their affiliate companies of the year for the past two years for our work in reverse mortgage. While we are not the largest servicer in the industry, we deliver top tier performance for customers and investors and are positioned to fiercely compete with anyone regardless of size.

Please turn to Slide eight to discuss how we’re positioned for a recession. Oneiti’s legacy DNA is special servicing. In the event of a recession, we believe our portfolio mix and special servicing skills position the company to minimize our exposure to advances and potentially take advantage of delinquent subservicing opportunities. Looking at our portfolio mix, the 51% of our portfolio in subservicing has no or limited exposure to advances and generally includes additional revenue to service delinquent loans. The 35% of our portfolio in GSE owned MSRs is generally with higher credit quality consumers and we have no obligation to advance principal and interest payments after one hundred and twenty days of delinquency.

Only the remaining 14% of our portfolio in PLS and Ginnie Mae forward and reverse owned servicing has exposure to all advances through resolution. Here’s where our special servicing skills make a difference. In the middle of the page, you could see how we perform on resolving delinquent loans. For all delinquent loans boarded in 2021 through 2023, ’12 months after boarding, we brought 61% of the loans to current or paid in full status and reduced the delinquent population by 60 percentage points. As you can see on the right side of the page, our ability to resolve delinquent loans is the primary reason why we’re able to reduce outstanding advances on our legacy servicing book by 20% year over year with only a 10% reduction in loan count.

We believe our special servicing skills are an asset that can be converted to revenue through delinquent subservicing and a recessionary cycle. Now let’s turn to Slide nine to discuss the results of our growth actions. In the first quarter, our originations and capital markets teams delivered over two times growth in total MSR additions versus Q1 twenty twenty four with a 53% increase in originations volume versus an 8% increase for the overall industry during the same period. Our performance in MSR additions is consistent with our objective to retain more MSRs to grow earnings and book value as well as reload our portfolio for recapture opportunity. Average total servicing in the first quarter is up 13,000,000,000 or approximately 5% year over year.

Subservicing is roughly flat versus Q1 twenty twenty four, with additions offsetting runoff and over $16,000,000,000 in scheduled transfers from the Rhythm and MAV portfolios over the same period. The runoff in the Rhythm subservicing portfolio has really masked our growth performance over the past several years. Since the beginning of 2020, the Rhythm subservicing UPB has declined by $84,000,000,000 while we increased all other servicing by $176,000,000,000 or roughly 2.9 times over the same period. I believe this highlights the power of our origination capability and success of our growth strategy. Switching to our product development activities, we’re excited to report that our new product launches are on track.

The first quarter rollout of our enhanced closed end second lien product was very well received by customers with lock volume 3.6 times the same period last year. In April, we launched a proprietary EquityIQ reverse mortgage product on schedule. And for the balance of the year, we are targeting to launch several non agency expanded credit products to further expand the market opportunity we can access. We believe our product development actions expand our addressable market opportunity, provides access to higher margin market segments and creates alternatives for our Consumer Direct platform to maintain operating capacity for surges and refinancing activity. Now please turn to slide 10 to discuss the progress we made in our recapture platform.

Our Consumer Direct team is continuing to improve our recapture capability to near benchmark performance levels, while maintaining the flexibility to address mortgage rate volatility. As you can see on the left, funding and lock volume in our Consumer Direct platform was up two point seven and two point five times respectively in Q1 twenty twenty five versus Q1 twenty twenty four as compared to 1.4 times for the industry over the same period. Based on our refinancing recapture benchmarking for the quarter and the last twelve months, excluding Home Equity products, we believe our platform is performing better than average in several of our public non bank third party origination focused peers and the ICE reported averages. For the first quarter, our refinance recapture rate is on par with our benchmark peer. While we’re pleased with our recapture performance so far, we want to be the benchmark by which all others are measured.

To that end, we continue to invest in talent, technology, predictive analytics, products and marketing to further improve our capability. Now I’ll turn it over to Sean to cover our financials and segment performance in more detail.

Sean O’Neill, Chief Financial Officer, Onity Group: Thanks, Glenn. Let’s turn to Slide 11 for our financial performance. 2025 is off to a strong start for us, and the financial metrics reflect that. Here, we compare three key metrics year over year. Top line revenue grew 5% while keeping operating efficiency stable.

That combination flowed through to drive adjusted pretax income up to $25,000,000 versus $15,000,000 prior year quarter. The result was an adjusted ROE of 22%, which was well ahead of our guidance of 16% to 18% for full year 2025. This continued the upward trajectory of book value per share with $2.15 book value being added from the first quarter. Overall, we had a robust quarter, added scale to the servicing platform, growing UPB by $13,000,000,000 a year, including growth in our owned MSR book by $12,000,000,000 and originations was again profitable despite the elevated rate environment. Please turn to Slide 12 for our servicing performance in both the forward and reverse space.

The servicing segment again remained a strong contributor to adjusted pretax income. Forward servicing grew adjusted PTI through increased fee generation, which was up 6% year over year and 5% from last quarter, driven by the growth in owned servicing, which was up 9% from the prior quarter. Lower MSR runoff also helped to more than offset the seasonally lower first quarter float income. Reverse servicing was up from the prior quarter, but lower versus prior year. The year over year change was due primarily to strong asset gains in the first quarter of twenty twenty four, as well as valuation adjustments on buyout loans in the first quarter of twenty twenty five.

Overall, our reverse assets, our recapture capabilities and our derivatives delivered an effective hedge to the forward MSR in the first quarter. The right graph shows an illustrative example of the impact of growing subservicing UPB and the subsequent lift in adjusted PTI. This shows the leverage that our operating platform provides as we build scale. And as Glenn mentioned, we believe shifts in the competitive landscape that have occurred over the last twelve plus months create opportunities to acquire new clients for subservicing. Let’s turn to Slide 13 for the results of our origination segment.

Originations grew adjusted PTI significantly year over year. This was driven primarily by total volume growing 50% from the first quarter of twenty twenty four and the high margin consumer direct channel growing by about 165%. This improvement in consumer direct is driven by the strong recapture capabilities previously mentioned. Generally, the first quarter is a seasonally weaker originations quarter. Industry volume was down 21% quarter over quarter.

Despite our lower volume, originations posted a consistent level of adjusted PGI. This was driven by stronger net interest income and improved operating expense. Overall, we continue to operate a profitable originations business with a wide range of products, and we believe we are able to adapt to any interest rate environment. Regarding new high margin products, our additional home equity loan product is showing strong locks and the reverse proprietary product was successfully rolled out last week. Let’s go to Slide 14.

We’ll confirm our guidance for 2025. Our financial objectives remain unchanged, sustained adjusted PTI growth and earnings stability. These are enabled by increased scale and the agility to capture market opportunities. For 2025, we are confirming the guidance we provided last quarter. Continued expectation of a strong adjusted ROE in the range of 16% to 18%, growth in our servicing book to exceed 10% year over year, a consistent hedge ratio targeting 90% to 110%, and a stable efficiency ratio as we prudently add costs commensurate with new revenue.

Then we’ve also included information that we provided in our March 8 ks release regarding the reasonable possibility that we will release some or all of our valuation allowance on our U. S. Deferred tax assets or DTA by year end 2025. For a frame of reference, the total valuation allowance or VA for The U. S.

DTA was about $180,000,000 at the end of ’twenty four and using the twenty four year end share count would create an increase of roughly $22 per share. This increase results from the valuation allowance lifting, which then allows the existing net deferred tax asset to be an accretive impact on net income as an income tax benefit. This in turn increases our stockholder equity by the same amount. This will also have a beneficial impact on our leverage ratio as measured by debt to equity. In closing, I’d like to say this was a strong quarter.

We are pleased with our results that exceeded guidance and the trajectory of our business. Back to you, Glenn.

Glenn Messina, Chair, President and Chief Executive Officer, Onity Group: Thanks, Sean. Now please turn to Slide 15 for a few comments before we open up the call for questions. I believe we’re well positioned to navigate the market environment ahead and deliver long term value for our shareholders. We’ve delivered a robust increase in profitability and returns in 2024 and we’re off to a great start in 2025. Our performance is the result of our balanced business, capital light growth, top tier operating performance, disciplined cost management and dynamic asset management.

Our operating priorities for 2025 are aligned with our strategy and focused on three areas: accelerating growth, differentiating operating performance, and elevating the customer experience. Our execution is driven by our experienced team who are relentlessly focused on delivering on our commitments and providing excellent service to our customers. All this comes together to suggest a share price that we believe has excellent upside and we intend to continue to take the actions necessary and maintain the agility in a dynamic marketplace to harvest that value for the benefit of all shareholders. Overall, we could not be more optimistic about the potential for our business. With that, Nikki, let’s open up the call for questions.

Conference Operator: We’ll take our first question from Randy Binner with B. Riley. Go ahead. Your line is open.

Randy Binner, Analyst, B. Riley: Okay. Thank you. Good morning. Hard to know where to start, but obviously, really solid quarter and good informative call. I guess, this the valuation allowance news and the kind of detail you provided here is pretty interesting.

And so I hear that you’re saying it’s worth $22 a share. I just generally my experience with these is that there can be ownership tests and rules with the IRS and timing things that affect how these kind of the value of that DTA comes out. And so I just want to maybe dig into that a little bit, some of the details there. Or are there really not limitations? And it could all kind of accrete to equity value like on a single date.

Glenn Messina, Chair, President and Chief Executive Officer, Onity Group: John? So Randy, thanks for

Sean O’Neill, Chief Financial Officer, Onity Group: the question. You’re right. Valuation allowances are interesting and arcane. Really, the key question that future performance and our continued analysis will show us is that do we lift all or some of the VA? Whether it’s some or all of the valuation allowance or VA, that then flows through dollar to dollar.

It hits net income. It raises book value. So the question is, how much of the VA remains? And we look at this by every quarter, we analyze positive and negative data. A cumulative loss in recent periods is negative evidence.

And we’ve had the valuation allowance in place since 2015. So we think given our recent strong performance over multiple quarters that we will transition from a cumulative loss in recent years to a cumulative income. So that’s kind of one of the key parameters. There’s several others. But once you make the VA decision, then the math becomes relatively simple.

Randy Binner, Analyst, B. Riley: Okay. So there’s no ownership or other kind of tests that would hold hold back timing?

Sean O’Neill, Chief Financial Officer, Onity Group: No. I think you’re referring to ownership changes, can affect the overall deferred tax asset, which apply whether or not you have a valuation allowance, and that’s due to changes in shareholders over 5%. But that’s Reg three eighty two. That’s kind of a separate concept around DTAs.

Bose George, Analyst, KBW: Okay. So that’s And our

Sean O’Neill, Chief Financial Officer, Onity Group: DTA has been pretty consistent. The valuation allowance has been in that neighborhood of 175 to 183 for the last several years. We only print it in the K, so it shows up once a year.

Glenn Messina, Chair, President and Chief Executive Officer, Onity Group: All right. Well, I have

Randy Binner, Analyst, B. Riley: a bunch of others, but I’ll drop back in the queue. Appreciate that. Thank you.

Glenn Messina, Chair, President and Chief Executive Officer, Onity Group: Thanks, Randy.

Conference Operator: Thank you. Our next question comes from Bose George with KBW. Please go ahead. Your line is open.

Eric Hagen, Analyst, BTIG: Hey, guys. Good morning. Actually, one follow-up on the DTA. Is there any timing in terms of when it has to be utilized by?

Sean O’Neill, Chief Financial Officer, Onity Group: The vast majority of our DTA is not limited by a timeframe. It’s post February I think it was ’seventeen Tax Reform Act, When the DTAs only cover 80% of your taxable income, but they’re indefinite. And that’s the large majority of almost all of our federal and a good chunk of our state.

Eric Hagen, Analyst, BTIG: Okay, great. Thanks. And then actually, it looked like there was a legal expense this quarter. Can you just talk about that? And then just can you remind us where things stand in terms of anything else on the regulatory legal side?

Glenn Messina, Chair, President and Chief Executive Officer, Onity Group: Yeah, Bose, it’s Glenn. So look, on the legal side, we did reach an agreement in principle this quarter to resolve one of our oldest legacy class action litigation matters. Believe it or not, this thing is nearly two decades old dealing with pre acquisition PHH practices again that were discontinued almost two decades ago. So look, we had the opportunity to reach a settlement here, again, for this thing, carrying on for almost twenty years. It’s just let’s get it behind us and move on.

Eric Hagen, Analyst, BTIG: Okay, great. And then just as a reminder, is there anything else that’s lied sort of on the litigation front or regulatory front? Or are things kind of fully resolved now?

Glenn Messina, Chair, President and Chief Executive Officer, Onity Group: Yeah, Bose, as you know, our 10 ks and our 10 Q includes what we believe are generally the major litigation matters affecting the company. Think as you know, look, the mortgage industry is subject to litigation from a number of different directions. In the ordinary course of business, We and other market participants can become involved in all sorts of threatened and pending legal matters. And that’s no different than anybody else in this industry. The biggest thing out there from the prior administration is the just generally an adverse reaction to consumer fees charged to consumers of any type.

We and others have defending ourselves in a number of different pending actions or inquiries regarding convenience fees. And we believe we’ve complied with the law in every one of those examples. More recently, resolved one of those matters with HUD. Pretty much where we stand.

Eric Hagen, Analyst, BTIG: Okay, great. Thank you.

Conference Operator: Thank you. We will move next with Eric Hagen with BTIG. Please go ahead. Your line is open.

Bose George, Analyst, KBW: Hey, thanks. Good morning, guys. I want to ask about the Rocket Coupe merger and what you think is the impact on the subservicing market specifically. How much you see that maybe driving lower costs for the industry at large? Are you guys doing anything differently to source new business as a result of the merger?

And do you feel like it will even maybe change behavior from any of the other subservicers in the market?

Glenn Messina, Chair, President and Chief Executive Officer, Onity Group: Hey, Look, anytime you see a big transaction like that with Rocket’s announced acquisition of Mr. Cooper, it’s big, it’s disruptive, it shakes things up a bit. I think there’s been a couple of folks who’ve been very vocal about how they think about the transaction. People generally fall subservicing clients particularly will generally fall into one or two camps. If people feel threatened by Rocket, they’re going to want to think about other opportunities.

Where else could they go where they’re partnering with a player who potentially is not going to be a threat to their business. And in other cases, people look at Rocket and say, hoorah, love Rocket and want to be more closely aligned with them. So I think it’s a mixed bag. But generally speaking, we’re seeing, I would say, two key themes emerge. On the subservicing side, people either wanting to explore their options, but that’s, I would say, not just solely related to Rocket Coop.

Over the last twelve to eighteen months, there’s been a number of subservicing centric platforms that have changed ownership. And that creates an opportunity for people to consider alternatives. And we’ve been very aggressive in growing our subservicing business. Last year, we added $46,000,000,000 of new subservicing UPB and a record 13 new clients. And we are attacking the marketplace with passion and energy and trying to continue to grow that side of our business.

Bose George, Analyst, KBW: All right. Good stuff. I always appreciate your complete answers. A lot of your MSRs are flow and co issue MSRs. Is there an advantage that you can point to in this environment, being as volatile as it is, for being a flow buyer versus a bulk buyer?

Like, there a distinct source of value that you can identify for being in the flow market and being a formidable competitor there versus sourcing MSRs in a different channel?

Glenn Messina, Chair, President and Chief Executive Officer, Onity Group: Eric, with our originations platform, we basically have an or in three different waters, so to speak. We do the flow, which is our correspondent business. We also are, what I’ll call, delivery agnostic. So to the extent one of our clients wants to deliver to us through the co issue channels, the cash channels, CRX, S and P or PIT, we’ll do that as well. And we opportunistically tap into the bulk market.

So for us, we target a yield that’s a proprietary number. We don’t disclose it publicly. And we like to demonstrate some level of agility and flexibility to emphasize or deemphasize those channels where we see the best economics. And having that ability to lean into the flow market when the flow market is much more attractive or lean into the S and P, CRX, PIP market when that appears to be more attractive or a bulk market if that appears to be more attractive, I think is a great advantage for the company and gives us flexibility to maximize returns.

Bose George, Analyst, KBW: Got it. Okay. We’re looking at Slide 22. We’re looking at the operating efficiency chart that you have there. I mean, is there an objective that you have with respect to the operating efficiency on the servicing side?

Or is there or should we kind of like expect that level to kind of be stable?

Sean O’Neill, Chief Financial Officer, Onity Group: I’d say our overall objective, Eric, is just to continue to increase pretax income in each segment. We think our current levels are adequate. It can shift as we brought in more special servicing, you would see possibly it slightly increase until revenue catches up. Same thing with big chunks of reverse. But overall, we like the level we’re at, always continue to try and drive it slightly better through technology, operations, talent, scale.

But we do not have a stated target that we are trying to attain in a certain period of time.

Bose George, Analyst, KBW: All right. You guys. Thank you.

Glenn Messina, Chair, President and Chief Executive Officer, Onity Group: Thanks, Eric. Thanks, Eric.

Conference Operator: Thank you. And there appear to be no further questions at this time. I will turn the call back to Glenn Messina for closing remarks.

Glenn Messina, Chair, President and Chief Executive Officer, Onity Group: Thanks, Nikki. And I’d like to thank our shareholders and key business partners for supporting our business. I’d also like to thank and recognize our Board of Directors and the Onity Global Business team for their hard work and commitment to our success. I look forward to updating everyone on our progress to the next quarterly earnings call. Thank you.

Conference Operator: And this does conclude today’s program. Thank you for your participation. You may disconnect at any time.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.