UWM (UWMC) - 2024 Q2 - Quarterly Report

Financial Performance - For the three months ended June 30, 2024, the company originated $33.6 billion in loans, an increase of$1.8 billion, or 5.6%, from $31.8 billion in the same period in 2023[79]. - The net income for the three months ended June 30, 2024, was$76.3 million, a decrease of $152.5 million compared to$228.8 million for the same period in 2023[79]. - Adjusted EBITDA for the three months ended June 30, 2024, was $133.1 million, compared to$125.4 million for the same period in 2023[79]. - For the six months ended June 30, 2024, the company originated $61.3 billion in loans, an increase of$7.1 billion, or 13.1%, from $54.2 billion in the same period in 2023[80]. - The net income for the six months ended June 30, 2024, was$256.8 million, an increase of $166.6 million compared to$90.2 million for the same period in 2023[80]. - Adjusted EBITDA for the six months ended June 30, 2024, was $234.6 million, compared to$266.4 million for the same period in 2023[80]. - Total revenue for the six months ended June 30, 2024, was $1,077,050,000, compared to$748,794,000 for the same period in 2023, representing a 43.8% increase[84]. - Net income for Q2 2024 was $76,286,000, down 66.7$228,794,000 in Q2 2023[84]. - Loan production income for Q2 2024 was $357,109,000, a 27.2$280,757,000 in Q2 2023[86]. Loan Origination and Servicing - 89% of loans originated in the three months ended June 30, 2024, were sold to Fannie Mae or Freddie Mac, or transferred to Ginnie Mae pools[73]. - The company retains the majority of the mortgage servicing rights (MSRs) associated with its production but intends to opportunistically sell MSRs depending on market conditions[73]. - The company focuses exclusively on the wholesale channel, which aligns its interests with clients and enhances customer service[74]. - Total loan origination volume for Q2 2024 was $33,628,993,000, up 5.6$31,846,800,000 in Q2 2023[85]. - The average loan amount increased to $383,000 in Q2 2024 from$377,000 in Q2 2023[85]. - The weighted average loan-to-value ratio decreased to 81.87% in Q2 2024 from 83.31% in Q2 2023[85]. - Loan servicing income for Q2 2024 was $143.9 million, a decrease of$49.3 million, or 25.5%, compared to $193.2 million in Q2 2023[90]. - Average UPB of loans serviced decreased to$204.4 billion in Q2 2024 from $296.9 billion in Q2 2023, a decline of approximately 31.1$80.4 million for the three months ended June 30, 2024, while total expenses increased by $72.1 million[100]. - Other costs for Q2 2024 increased to$295.6 million, an increase of $52.2 million, or 21.4$243.4 million in Q2 2023[97]. - Salaries, commissions, and benefits increased by $28.9 million, or 22.0$21.9 million, or 92.6%, in Q2 2024, mainly due to costs associated with new programs launched[96]. - The provision for representations and warranties obligations increased by 47.1% to $(13,394,000) in Q2 2024 from$(9,103,000) in Q2 2023[86]. Cash Flow and Liquidity - As of June 30, 2024, the company reported net cash used in operating activities of $3.52 billion, a significant decrease from$148.6 million in the same period of 2023[125]. - Net cash provided by investing activities increased to $2.34 billion for the six months ended June 30, 2024, compared to$1.07 billion for the same period in 2023, driven by higher proceeds from sales of MSRs and excess servicing cash flows[126]. - The company had net cash provided by financing activities of $1.36 billion for the six months ended June 30, 2024, compared to cash used of$1.29 billion in the same period of 2023, primarily due to net borrowings under warehouse lines of credit[127]. - The company believes its cash on hand and liquidity sources will be sufficient to maintain operations and fund loan originations for the next twelve months[104]. Debt and Financing - The company has a total of $750 million committed under early funding programs as of June 30, 2024[112]. - The 2025 Senior Notes issued by UWM amount to$800 million, with a 5.500% interest rate, maturing on November 15, 2025[114]. - The 2029 Senior Notes issued by UWM total $700 million, also at a 5.500$500 million with a 5.750% interest rate, maturing on June 15, 2027[116]. - As of June 30, 2024, the company had $91.4 million outstanding under sale and repurchase agreements collateralized by investment securities[121]. Market and Risk Factors - The company is subject to credit risk, with repurchase and indemnification obligations for breaches under loan sale agreements[145]. - The company has no losses due to nonperformance by counterparties during the three or six months ended June 30, 2024, or June 30, 2023[147]. - The company utilizes forward agency or Ginnie Mae To Be Announced (TBA) securities as its primary hedge instrument for interest rate risk[141]. - The company’s total market risk is influenced by various factors including market volatility and liquidity[142]. - The company is dependent on macroeconomic conditions and U.S. residential real estate market conditions, which may affect its operations and profitability[136]. - The company has implemented stringent underwriting standards and strong fraud detection tools to mitigate credit risk[145].