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    Mr. Cooper Group (COOP)

    Q1 2025 Earnings Summary

    Reported on Apr 24, 2025 (Before Market Open)
    Pre-Earnings Price$112.07Last close (Apr 22, 2025)
    Post-Earnings Price$115.99Open (Apr 23, 2025)
    Price Change
    $3.92(+3.50%)
    • Robust Financial Strength: The company finished Q1 2025 with a capital ratio of 25.5% and liquidity of $3.9 billion, underscoring its strong balance sheet and resilience against market challenges.
    • Successful Integration & Growth Catalysts: The effective onboarding of the Flagstar acquisition coupled with the anticipated transaction with Rocket sets the stage for operational synergies, with the Servicing segment generating $332 million in pretax income, reflecting solid earnings growth.
    • Operational Excellence & Technological Innovation: Recognition through top industry awards (e.g., Fannie Mae STAR Award and SHARP Gold Award) and the rollout of AI-powered tools like AgentiQ demonstrate a commitment to efficiency and digital transformation, enhancing customer service and competitive positioning.
    • Integration Risk: The pending Rocket combination and recent Flagstar acquisition could lead to integration challenges and execution risks that might negatively impact financial performance and operational stability .
    • Margin Pressure: The significant mark-to-market adjustments on MSR valuations, driven by falling interest rates and higher CPR expectations, may compress margins and create profitability concerns .
    • Liquidity and Debt Refinancing Risk: The presence of $500 million in senior notes maturing in February 2026, which are callable at par, poses a refinancing risk if market conditions deteriorate, potentially impacting liquidity .
    MetricYoY ChangeReason

    Total Revenue

    –1% YoY

    Q1 2025 Total Revenue was $560 million, nearly flat compared to $564 million in Q1 2024. This minor decrease reflects a balanced mix of opposing trends where higher originations revenue was offset by declines in other segments, suggesting overall stability but minimal growth relative to the previous period vs..

    Servicing Revenue

    –10% YoY

    Servicing revenue dropped to $403 million in Q1 2025 from $450 million in Q1 2024. This 10% decline likely results from weakened servicing portfolio performance or lower base servicing fees relative to the previous period’s higher servicing income, indicating challenges in maintaining volume or fee rates consistent with prior growth vs..

    Originations Revenue

    +Over 50% YoY

    Originations revenue surged to $140 million from $92 million in Q1 2024, an increase of over 50%, driven primarily by significantly higher direct-to-consumer refinance volumes and improved pull-through adjusted lock and funded volumes. This marks a robust rebound compared to the previous period and indicates strong execution in the Originations segment vs..

    Corporate/Other Revenue

    –23% YoY

    Corporate/Other revenue fell to $17 million in Q1 2025 from $22 million in Q1 2024, a 23% decline. This decrease is attributable to lower Xome revenues, specifically a reduction in the average exchange volume, mirroring a trend noted in prior periods vs..

    Net Income

    –51% YoY

    Net income dropped sharply to $88 million in Q1 2025 compared to $181 million in Q1 2024 (a decline of roughly 51%). The fall stems from lower overall revenues—especially the servicing segment—and higher expenses, which contrasts starkly with Q1 2024's stronger performance vs..

    Basic EPS

    –50% YoY

    Basic EPS declined to $1.38 in Q1 2025 from $2.80 in Q1 2024, reflecting a near 50% contraction. This drop is directly related to the substantial decline in net income, even though the weighted average shares slightly decreased, thereby highlighting operational challenges relative to the previous period vs..

    Operating Cash Flow

    Significant Increase (from $28M to $227M)

    Operating cash flow improved dramatically to $227 million in Q1 2025 from $28 million in Q1 2024. This turnaround is mainly due to a major improvement in working capital management, which generated $296 million in cash, despite higher cash use for repurchase activities and a drop in cash generated from originations net sales activities, contrasting with prior weaknesses in efficient cash conversion vs..

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Originations

    Q1 2025

    $30 million to $50 million

    $53 million

    raised

    Servicing Segment – Pretax income

    Q1 2025

    $315 million to $335 million

    $332 million

    no change

    Corporate Expenses

    Q1 2025

    $51 million

    $51 million

    no change

    ROTCE

    Q1 2025

    16% to 20%

    16.8%

    no change

    MSR Hedge Coverage Ratio

    Q1 2025

    no prior guidance

    72%

    no prior guidance

    Stock Repurchases

    Q1 2025

    no prior guidance

    Suspended; none expected prior to Q4 2025

    no prior guidance

    Liquidity

    Q1 2025

    no prior guidance

    $3.9 billion

    no prior guidance

    Capital Ratio

    Q1 2025

    no prior guidance

    25.5%

    no prior guidance

    MetricPeriodGuidanceActualPerformance
    Originations
    Q1 2025
    $30 million to $50 million
    $140 million
    Beat
    TopicPrevious MentionsCurrent PeriodTrend

    Flagstar Acquisition Integration

    Consistently discussed in Q2–Q4 2024 with emphasis on smooth onboarding, operational execution, portfolio growth, and strategic importance ( , , )

    Q1 2025 emphasizes exceptional integration success with strong customer metrics, on-schedule onboarding, and positive financial impact ( , )

    Consistent positive performance. Integration remains smooth with sustained operational excellence and strategic value.

    Technological Innovation and AI Adoption

    Across Q2–Q4 2024, topics included AI tools like Agent IQ, AgentiQ, and the Pyro platform; digital-first strategies were highlighted to drive efficiency and cost reduction ( , , )

    Q1 2025 focuses on the AgentiQ rollout to 1,400 agents, enhanced customer service, and integration with the pending Rocket combination to create a fully integrated homeownership platform ( , )

    Increased emphasis on AI and digital transformation. Continued focus with deeper integration and broader application in operations.

    Margin Pressure and MSR Valuation Risks

    Q2–Q4 2024 discussions centered on rising CPRs, markdowns in MSR valuation, and hedging strategies (e.g. hedge coverage rates and adjustments) ( , , )

    Q1 2025 discusses MSR markdown due to falling rates and higher CPR expectations with hedge gains offsetting losses, though hedge coverage remains slightly below target ( )

    Consistent concern with evolving hedging strategies. Slight sentiment shifts as market dynamics cause adjustments in valuation, but risk management remains a focus.

    Interest Rate Environment and Volatility

    Mentioned in Q2–Q4 2024 with awareness of rate fluctuations, challenges for refinancing, and reliance on a balanced business model to mitigate volatility ( , , , )

    Q1 2025 underscores the impact of falling interest rates, limited refinance opportunities, and resilient operational performance amid volatility ( , , )

    Persistent focus on managing rate volatility. The company continues using a balanced strategy to adapt to rate changes while capturing specific growth opportunities.

    Financial Strength and Liquidity Management

    Emphasized in Q2–Q4 2024 via strong liquidity levels, robust balance sheet (capital ratio details, hedge programs, and MSR line capacity), and proactive funding of acquisitions ( , , )

    Q1 2025 reports improved liquidity at $3.9B, use of operating cash flow to reduce debt, and an increased capital ratio, reinforcing financial stability ( , )

    Steady improvement. Ongoing strengthening of balance sheet and liquidity with targeted debt management and higher capital ratios.

    Operational Efficiency and Cost Leverage

    Across Q2–Q4 2024, discussions featured cost per loan reductions, investment in AI, digital-first strategies, decreased call times, and recognition via awards; operational leverage became a key strength ( , , , , )

    Q1 2025 highlights further operational excellence through smooth integration, process improvements, favorable operating expense ratios, and industry awards (e.g., SHARP Gold and Fannie Mae STAR) ( , )

    Consistent enhancement in efficiency. Continued cost reductions and productivity gains driven by technology and process improvements.

    Growing Fee-Based Revenue Streams

    In Q2–Q4 2024, fee revenue growth was highlighted through subservicing, special servicing, and recapture income; double-digit growth and the asset-light nature were emphasized ( , , )

    Q1 2025 reiterates fee income as a key theme, underscoring its strategic role alongside operating leverage and strong origination execution ( )

    Steady, robust growth. Consistent focus on building stable, high-return, fee-based revenue streams as a core strategic pillar.

    Emerging Rocket Transaction

    Not mentioned in Q2–Q4 2024; no reference to any Rocket-related transaction in prior periods.

    Q1 2025 introduces the pending combination with Rocket as a strategic move to create an integrated homeownership platform that leverages both companies’ strengths ( , )

    New and high-impact topic. This emerging transaction presents a transformative opportunity with broad future implications.

    Debt Refinancing and Increased Leverage Risks

    Q2–Q4 2024 addressed debt management through discussions on capital ratios, liquidity, hedging strategies, and proactive refinancing (e.g. MSR and advance lines, senior notes, and hedge performance) ( , , )

    Q1 2025 highlights refinancing actions such as early evaluation of senior notes, increased borrowing capacity, and improved liquidity to address leverage, with no alarming risk signals ( , )

    Continued focus with improvements. Consistent management of leverage and refinancing risk, with enhanced liquidity measures reducing concerns.

    Scale Expansion and Organic Growth

    Across Q2–Q4 2024, scale expansion was driven by the Flagstar acquisition, correspondent channel gains, subservicing growth, and operational improvements; organic growth was supported by technology investments and customer-centric strategies ( , , , )

    Q1 2025 reinforces growth via integrated Flagstar benefits, organic subservicing growth, enhanced correspondent and DTC channels, and the prospect of further expansion through the Rocket transaction ( , )

    Sustained robust growth. Consistent execution combining strategic acquisitions with organic initiatives leads to positive scale expansion and future growth prospects.

    1. No Q&A
      Q: Was there any Q&A session?
      A: The transcript provided only includes management’s prepared remarks without a separate Q&A segment, highlighting key financial and operational metrics such as pretax operating earnings, liquidity of $3.9B, and the progress on the Flagstar integration.

    Research analysts covering Mr. Cooper Group.