Mr. Cooper Group Inc.

Good day and thank you for standing by. Welcome to the Mr. Cooper Group Q3 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker at Mr. Cooper Group. Please go ahead.

Good morning and welcome to Mr. Cooper Group's third quarter earnings call. My name is Ken Posner and I'm SVP of strategic planning and investor relations. With me today are Jay Bray, Chairman and CEO, Mike Weinbach, President, and Kirk Johnson, Executive Vice President and CFO. As a reminder, this call is being recorded. You can find the slides on our investor relations webpage at investors.mrcoopergroup.com. During the call, we may refer to non-GAAP measures which are reconciled to GAAP results in the appendix to the slide deck. Also, we may make forward-looking statements, which you should understand could be affected by risk factors that we've identified in our 10-K and other SEC filings. We are not undertaking any commitment to update these statements if conditions change. I'll now turn the call over to Jay.

Good morning, everyone, and thank you for joining our call. Let's dive into the quarterly highlights starting on slide three. In summary, we produced a very solid quarter with pre-tax operating income of $246 million and operating ROTC of 16.8%, which is at the upper end of our guidance. Tangible book value grew 11% year over year to $69.93 per share. And our balance sheet remains in strong shape with a capital ratio of 27.9% and liquidity at a record high of 4.1 billion. Turning to operations, we grew the servicing portfolio to 1.2 trillion. which represents 5.4 million customers and generated $305 million in pre-tax servicing income thanks to continued strong operating leverage. Our origination segment generated $69 million of pre-tax income, which significantly exceeded our guidance. This was, of course, due in part to the drop in mortgage rates in the quarter. However, we also benefited from investments we've been making in both our direct-to-consumer and correspondent platforms. which together out-indexed the market with 80% sequential growth in funding. I'm also very pleased to report that Mr. Cooper was certified once again as a great place to work, which now makes six consecutive years that we've received this special recognition. We put a lot of care into creating a purposeful and welcoming environment for our team members, and I'm delighted with this independent validation of our culture and our people. Finally, I'll mention that the Flagstar acquisition remains on schedule to close in the fourth quarter. We've been spending a lot of time getting to know the very talented team members in Flagstar's mortgage operations, and we're excited to welcome them to the Cooper family. If you'll turn to slide four, I'd like to share some thoughts about our competitive position as we look ahead into 2025 and beyond. As you know, we're very proud of our 20-year track record of portfolio growth. which has culminated in $1.2 trillion in outstandings. However, a different way to think of scale is that we now have 5.4 million customers, which will rise to over 6 million when Flagstar closes. This makes us the single largest customer franchise in the mortgage industry. Now our mission is to help every single customer achieve their dream of homeownership, and we are constantly working with them through a variety of channels, answering questions, suggesting opportunities to save money, or providing assistance when they face challenges. As of today, we're running at 152 million customer interactions per year. As a result, we've amassed an enormous amount of information about how best to serve mortgage customers. In fact, our data lake now contains 16 petabytes. In a world of digital technology, and especially AI, this data gives us a real advantage when it comes to understanding customers' needs and how to create value for them. Our goal is to become increasingly more proactive at anticipating their needs and faster at solving them. So if you'll turn to slide five, I'll summarize the investment plans we've put in place to implement this vision, which we're now in the process of finalizing for our 2025 budget. To start with, we're investing in multiple areas to continue improving the customer experience. One such area is AI in the call center, where earlier this month we began piloting Agent IQ. This app is a state-of-the-art AI-driven coaching platform, which listens to calls in real time, assesses sentiment, and prompts our team members on how best to help the customer. We're also continuing to invest in our Digital First platform. which consists of self-serve channels like web, mobile, and IVR, where customers can access information at their fingertips. Our second focus area is originations, where we believe we can sustainably gain market share in both our DTC and correspondent channels. We are working on enhancements for customers, including a faster and easier application process. And we are continuing to componentize and automate our workflows with the goal of driving lower unit cost savings and faster cycle times. Our third focus area is loss mitigation, which may surprise you since the frequencies are so low today. But we know the cycle will eventually turn. We're working on innovative technologies which will increase our capacity to help customers in what might be more difficult environments in the future. Finally, to support all these initiatives, we're constantly strengthening the core. Last week, we announced the promotion of Sridhar Sharma to Chief Innovation and Digital Officer, and the hiring of Jeff Carroll as Chief Technology Officer. Jeff's mission is to ensure our cloud-native tech stack is ready for the next leg of customer growth. These investments will benefit our customers, clients, and investors, and they will drive long-term productivity gains for the company. We can afford to make these investments because the company is generating consistent, strong profitability and cash flow. In fact, I would say, based on my 25 years of experience here, that there is as much excitement in the company and energy among our people as I've ever seen. In the last few years, we've hit important strategic milestones. We've emerged as a scale leader in our industry, and we're gratified to see market recognition of this in a rising stock price. which recently hit a record high. Yet the stock's valuation is still quite modest in our view, at only eight times consensus 2025 earnings, despite a significant runway for growth and rising return on equity. We think there's still a meaningful opportunity for investors to join us on this journey, and we continue to view stock repurchase as a smart way to invest the company's own capital. And with that, I'll turn the call over to our president, Mike Lineback, to take you through our operational results in more detail.