Executive Summary

Q1 2024 delivered a sharp rebound in profitability: GAAP net income $30.1M and diluted EPS $3.74; adjusted pre‐tax income $14M, with annualized adjusted pre‐tax ROE of 13.8% .
Revenue declined 8.7% YoY to $239.1M on lower servicing fees and reverse gains, but operating expenses fell ~8.5% YoY; net income margin improved to ~12.6% versus -15.4% in Q1 2023 .
Strategic and balance sheet actions: $47M of PHH senior secured notes repurchased below par; liquidity $219M; book value per share $56; Moody’s upgraded corporate family rating to B3 in April 2024 .
Rebrand to Onity Group Inc. with ticker ONIT began in June (subject to shareholder approval at the time); management emphasized “capital‑light” subservicing growth and deleveraging as key drivers going forward .
Street (S&P Global) consensus data was unavailable through our SPGI connector for Q1 2024, so estimate comparisons are not provided; see Estimates Context section.

What Went Well and What Went Wrong

What Went Well

Profitability improved materially: net income swung to $30.1M (vs. $(40.2)M in Q1’23) and diluted EPS to $3.74 (vs. $(5.34)); adjusted pre‑tax income rose to $14M; Opex down $9.7M YoY (‑8.5%) .
Subservicing growth and “capital‑light” strategy: $23B total servicing additions including $19B subservicing additions; ending subservicing UPB $169B; CEO: “Our strategy of capital‑light growth has enabled us to steadily grow our subservicing portfolio…” .
Deleveraging and ratings momentum: repurchased $47M of PHH senior notes below par; Moody’s upgraded corporate family rating to B3 in April 2024 .

Quotation (CEO): “We reported strong results in the first quarter… driven by the strength of our balanced business and operational performance in both our servicing and originations segments.”

What Went Wrong

Top‑line pressure: total revenue fell 8.7% YoY to $239.1M as servicing/subservicing fees declined to $204.5M (from $232.2M) and reverse fair‑value gains decreased to $15.4M (from $21.2M) .
Rate‑sensitive items still volatile: MSR valuation adjustments remained negative (net $(11.6)M), and pledged MSR liability expense was sizable at $(44.9)M; interest expense remained elevated at $(67.4)M .
Originations still not a major earnings driver: mix shifted to higher margin products (41% vs. 31% Q1’23), but management continued to point to servicing as the primary profit engine .

Financial Results

Consolidated Performance (key items)

Metric	Q1 2023	Q3 2023	Q4 2023	Q1 2024
Total Revenue ($M)	261.8	255.5	277.4 (derived from FY 2023 $1,066.7 less Q1 $261.8, Q2 $272.0, Q3 $255.5)	239.1
Net Income ($M)	(40.2)	8.5	(47.0)	30.1
Diluted EPS ($)	(5.34)	1.05	N/A (not disclosed)	3.74
Net Income Margin (%)	(15.4)% (calc: -40.2/261.8)	3.3% (calc: 8.5/255.5)	(16.9)% (calc: -47.0/277.4)	12.6% (calc: 30.1/239.1)

Note: Q4 2023 revenue is derived from FY 2023 total revenue less Q1–Q3 quarterly revenues disclosed in company press releases; margins are calculated from reported revenue and net income (citations provided).

Revenue Composition (Q1 YoY)

Revenue Component ($M)	Q1 2023	Q1 2024
Servicing and subservicing fees	232.2	204.5
Gain on reverse loans held for investment and HMBS-related borrowings, net	21.2	15.4
Gain on loans held for sale, net	2.8	10.9
Other revenue, net	5.6	8.3
Total Revenue	261.8	239.1

Operating Expenses (Q1 YoY)

Operating Expense ($M)	Q1 2023	Q1 2024
Compensation and benefits	58.0	53.6
Servicing and origination	15.7	15.0
Technology and communications	13.4	12.7
Professional services	13.3	12.0
Occupancy, equipment and mailing	8.8	7.7
Other expenses	4.9	3.4
Total Operating Expenses	114.1	104.4

Other P&L Items (Q1 YoY)

Other Income (Expense) ($M)	Q1 2023	Q1 2024
Interest income	14.1	17.5
Interest expense	(62.3)	(67.4)
Pledged MSR liability expense	(70.3)	(44.9)
Earnings of equity method investee	0.3	2.7
Gain on extinguishment of debt	—	1.4
Total Other Income (Expense), net	(117.0)	(91.3)

KPIs and Balance Sheet Highlights

KPI	Prior Period	Current Period
Ending servicing UPB	—	$302B (Mar 31, 2024)
Ending subservicing UPB	—	$169B (Mar 31, 2024)
Total liquidity ($M)	$242 (Dec 31, 2023)	$219 (Mar 31, 2024)
Book value per share	$52 (Dec 31, 2023)	$56 (Mar 31, 2024)
PHH senior secured notes repurchased	$15M in FY 2023	$47M in Q1 2024
Corporate family rating	—	Upgraded to B3 (Apr 2024)

Non‑GAAP bridge (Q1 2024): Reported pre‑tax income $31.8M; MSR and other notables net +$18M; adjusted pre‑tax income $14M; annualized adjusted pre‑tax ROE 13.8% .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Corporate leverage (Debt/Equity) target	2024+	Not specified	Management discussed targeting “under 3.9x” debt‑to‑equity as part of deleveraging and refinancing preparations	New color (call Q&A)
Brand/ticker change	Q2 2024	N/A	Rebrand to Onity Group Inc.; begin trading as “ONIT” in June, subject to shareholder approval (at the time)	New corporate action
Quantitative revenue/EPS guidance	—	None	None provided	Maintained (no formal numeric guidance) ; call transcript corroborates lack of numeric guidance

Earnings Call Themes & Trends

Topic	Q3 2023 (11/7/23)	Q4 2023 (2/27/24)	Q1 2024 (5/2/24)	Trend
Subservicing/Capital‑light growth	Grew total servicing UPB to $296B; subservicing $167B; extended MAV investment period; renewed Rithm subservicing .	Servicing anchored results; adjusted PTI positive; highlighted MSR capital partners and special servicing wins .	$23B additions ($19B subservicing); ending subservicing UPB $169B; continued emphasis on capital‑light growth .	Positive, scaling subservicing platform
Deleveraging & refinancing prep	Repurchased $14M PHH notes; cost reductions ongoing .	Board approval to retire up to $40M more notes in 2024; liquidity $242M .	Repurchased $47M notes; targeted leverage under ~3.9x discussed in Q&A .	Accelerating deleveraging
MSR valuation/hedging	Mixed MSR valuation impacts; operating model resilient .	Increased target MSR hedge coverage ratio, “currently at 100%,” to manage GAAP volatility .	Hedge coverage discussed as ~90–110% band; market demand supported MSR valuation in Q1 (CFO) .	Stable/high hedge coverage to dampen rate volatility
Originations mix/earnings	Positive earnings despite headwinds; higher‑margin product mix maintained .	Increased higher‑margin product mix to 39% in 2023; originations not core earnings driver in high‑rate environment .	Higher‑margin mix at 41% in Q1; originations still small earnings contributor .	Incremental mix improvement; earnings leverage awaits lower rates
Rebranding/positioning	—	—	Rebrand to Onity Group; confidence in platform and team (CEO) .	New brand to reflect evolution

Management Commentary

CEO (Q1 press release): “Our strategy of capital‑light growth has enabled us to steadily grow our subservicing portfolio… Our actions to increase shareholder value resulted in improved return on equity and book value per share… we made significant progress on our deleveraging objective by reducing corporate debt by $47 million.”
CEO (Q1 press release): “We are excited about our previously announced plans to rebrand Ocwen to Onity Group… and we believe we have a strong foundation… to accelerate growth through interest rate cycles.”
CFO (Q1 call, Q&A): “We maintain a high hedge coverage ratio, operating in the 90 to 110 range… This approach mitigates both upward and downward impacts of interest rate moves.”
CEO (Q1 call, Q&A): Plan to grow subservicing while keeping owned MSR UPB in roughly the $115–$135B range and use excess liquidity for deleveraging .

Q&A Highlights

Hedging posture: Management reiterated a high hedge coverage (~90–110%) to dampen MSR mark volatility amid rate moves (CFO) .
Capital allocation: Emphasis on subservicing growth and deleveraging; excess liquidity prioritized for debt reduction; owned MSR UPB targeted in the ~$115–$135B range (CEO) .
Refinancing preparation: Management referenced targeting leverage “under 3.9x” Debt/Equity as part of readiness for corporate debt refinancing (CEO) .
Operating leverage in servicing: Market demand supported MSR valuation assumptions; operating cost advantages accrue through P&L rather than MSR marks (CEO/CFO) .

Estimates Context

S&P Global (Capital IQ) consensus data was unavailable through our connector for OCN (missing CIQ mapping), so official Street comparisons for revenue and EPS cannot be provided for Q1 2024 at this time. We therefore anchor on reported results from the company’s 8‑K press release and related materials .
If needed, we can refresh this section once S&P Global mapping is restored or provided.

Key Takeaways for Investors

Servicing‑led earnings inflection: Despite revenue headwinds, OCN delivered a strong profit rebound and double‑digit net margin, underpinned by cost discipline and servicing strength .
Subservicing flywheel: $19B in subservicing additions and UPB growth support capital‑light ROE expansion, reducing balance‑sheet intensity versus owned MSRs .
Balance sheet de‑risking: $47M of notes repurchased and leverage targets underscore intent to refinance on stronger footing; Moody’s upgrade is a supportive signal .
Rate risk managed via hedging: High hedge coverage (~90–110%) helps smooth GAAP earnings through rate cycles while preserving operating economics (CFO) .
Originations optionality: Mix is skewing to higher‑margin products (41% vs. 31% in Q1’23), positioning the platform to benefit if/when rates normalize .
Rebrand to Onity as narrative catalyst: The ONIT identity aligns with operational execution and may broaden investor attention as balance‑sheet and earnings trends improve .
Near‑term focus: Watch subservicing onboarding cadence, debt reduction progress/leverage trajectory, and sustained Opex discipline as key supports for multiple expansion and book value accretion .

References and Sources:

Q1 2024 8‑K press release and financial tables: .
Q4 2023 8‑K press release and FY 2023 tables: .
Q3 2023 8‑K press release and financial tables: .
Company news release page (Q1 2024 results): .
Q1 2024 call transcript/reporting (for quotes/themes): .

ONITY GROUP INC. (OCN)·Q1 2024 Earnings Summary