Onity Group (ONIT) Q4 2023 earnings summary

Executive summary

• FY23 adjusted PTI was $49M versus a $70M adjusted loss in FY22; adjusted pre-tax ROE was 10.1%. GAAP net loss was $63.7M, largely reflecting MSR valuation effects.

• Q4’23 adjusted PTI was $11M with 9.4% adjusted pre-tax ROE; GAAP net loss was $47M.

• Priorities included capital-light subservicing growth, disciplined MSR investment, cost reduction and using liquidity for debt reduction.

Financial highlights

• FY23 revenue was $1,066.7M versus $953.9M in FY22; servicing and subservicing fees rose to $947.3M from $862.6M.

• FY23 operating expenses fell to $412.1M from $532.4M, a 23% reported decline; cost reductions excluding expense notables were $97M, or 19%.

• FY23 adjusted PTI improved by $119M year over year; higher revenue contributed $56M and lower operating expenses contributed $97M.

• Q4’23 adjusted PTI rose $1M QoQ to $11M as $10M of lower expenses partly offset $5M of lower revenue.

• FY23 GAAP net loss was $63.7M versus net income of $25.7M in FY22; diluted EPS was $(8.34), versus $2.85.

Outlook and guidance

• FY24 adjusted pre-tax ROE target was 12%+, versus 10.1% in FY23.

• FY24 originations targets: $24B funded volume, 50% sold to MSR capital partners, 36 bps revenue margin and 33 bps operating expenses.

• FY24 servicing targets included $115B–$135B average owned MSR UPB, $165B–$170B average subservicing UPB, $75B–$80B servicing additions and 16% subservicing portfolio growth.

• FY24 subservicing additions target was $69B, including $29B of third-party subservicing scheduled to board in 1H.

• Priorities included reducing unallocated operating expenses to 2 bps, retiring up to $40M of senior secured notes and optimizing MSR hedges; hedge coverage reached 100% in 2023.