Rocket Companies(RKT) - 2024 Q2 - Quarterly Results

Financial & Operational Highlights Rocket Companies reported strong Q2 2024 results, with adjusted revenue of $1.2 billion, GAAP net income of $178 million, and adjusted EBITDA of $225 million Q2 2024 Key Financial Results (vs. Q2 2023) | Financial Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total revenue, net | $1,301M | $1,236M | | GAAP Net income (loss) | $178M | $139M | | Adjusted revenue | $1,228M | $1,002M | | Adjusted net income (loss) | $121M | $(33)M | | Adjusted EBITDA | $225M | $18M | | GAAP diluted EPS | $0.01 | $0.05 | | Adjusted diluted EPS | $0.06 | $(0.02) | Q2 2024 Key Operational Metrics (vs. Q2 2023) | Operational Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Closed loan origination volume | $24,662M | $22,330M | | Gain on sale margin | 2.99% | 2.67% | | Net rate lock volume | $25,050M | $22,244M | - The company achieved year-over-year growth in purchase market share through optimizations in processes, teams, marketing, and technology[2][7] - Home equity loan volume more than doubled year-over-year in Q2 2024, aided by the launch of an Automated Valuation Model (AVM) that speeds up the process to as little as 7 business days[8] - Expansion of AI-powered tools continued, with AI live chat leading to conversion rates three times higher, and the roll-out of Rocket Logic Assistant to the entire banking team to automate mortgage applications[9] Business Segment Performance Direct to Consumer and Partner Network segments drove Q2 2024 performance, with DTC adjusted revenue of $909 million and Partner Network $188 million Direct to Consumer Segment Performance (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Sold loan volume | $13,032M | $12,446M | | Sold loan gain on sale margin | 4.14% | 3.67% | | Adjusted revenue | $909M | $789M | | Contribution margin | $375M | $259M | Partner Network Segment Performance (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Sold loan volume | $11,296M | $9,571M | | Sold loan gain on sale margin | 1.59% | 0.93% | | Adjusted revenue | $188M | $122M | | Contribution margin | $126M | $56M | - The Direct to Consumer segment allows clients to interact directly with Rocket Mortgage's app and bankers, with revenue derived from originating, closing, selling, and servicing loans[15] - The Partner Network segment leverages marketing partnerships and mortgage broker relationships through Rocket Pro TPO to generate business[17] Financial Position and Outlook Rocket Companies maintained robust liquidity and equity as of June 30, 2024, with a positive Q3 2024 adjusted revenue outlook - For Q3 2024, the company expects adjusted revenue to be between $1.15 billion and $1.3 billion[14] - Total liquidity was $8.6 billion as of June 30, 2024, comprising $1.3 billion in cash, $1.9 billion corporate cash for self-funding, $3.4 billion in undrawn lines of credit, and $2.0 billion in undrawn MSR lines[5][17] Balance Sheet Highlights | ($ in millions) | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,309 | $1,108 | | Mortgage servicing rights, at fair value | $7,163 | $6,440 | | Total equity | $8,814 | $8,302 | Detailed Financial Statements This section presents unaudited condensed consolidated financial statements, including the Statement of Income, Balance Sheet, and segment results Condensed Consolidated Statements of Income (Loss) Q2 2024 net income reached $178 million on $1.3 billion in total net revenue, an increase from $139 million in the prior year Q2 2024 Income Statement Summary (vs. Q2 2023) | ($ in thousands) | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total revenue, net | $1,300,722 | $1,236,227 | | Total expenses | $1,108,680 | $1,097,857 | | Net income (loss) | $177,925 | $139,152 | Condensed Consolidated Balance Sheets Total assets grew to $23.6 billion as of June 30, 2024, with total liabilities at $14.8 billion and total equity at $8.8 billion Balance Sheet Summary | ($ in thousands) | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total assets | $23,648,714 | $19,231,740 | | Total liabilities | $14,834,793 | $10,930,030 | | Total equity | $8,813,921 | $8,301,710 | Summary Segment Results Total contribution margin for Q2 2024 reached $501 million, significantly up from $316 million in Q2 2023, driven by both Direct to Consumer and Partner Network segments Contribution Margin by Segment (Q2 2024 vs Q2 2023) | ($ in millions) | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Direct to Consumer | $375 | $259 | | Partner Network | $126 | $56 | | Segments Total | $501 | $316 | Non-GAAP Financial Measures & Reconciliations This section details non-GAAP financial measures, including Adjusted Revenue, Adjusted Net Income, and Adjusted EBITDA, with reconciliations to GAAP for core operational performance analysis Adjusted Revenue Reconciliation Q2 2024 Adjusted Revenue was $1.228 billion, derived from GAAP total revenue by excluding a $73 million change in MSR fair value Adjusted Revenue Reconciliation (Q2 2024 vs Q2 2023) | ($ in millions) | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total revenue, net (GAAP) | $1,301 | $1,236 | | Change in fair value of MSRs | $(73) | $(235) | | Adjusted revenue (Non-GAAP) | $1,228 | $1,002 | Adjusted Net Income (Loss) Reconciliation Adjusted Net Income for Q2 2024 was $121 million, a significant improvement from a $33 million loss in Q2 2023, after adjustments for share-based compensation and MSR fair value Adjusted Net Income (Loss) Reconciliation (Q2 2024 vs Q2 2023) | ($ in millions) | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net income (loss) attributable to Rocket Companies | $1 | $7 | | Pro forma & tax adjustments | $144 | $98 | | Share-based compensation expense | $39 | $51 | | Change in fair value of MSRs | $(73) | $(235) | | Other tax adjustments | $10 | $(54) | | Adjusted net income (loss) (Non-GAAP) | $121 | $(33) | Adjusted EBITDA Reconciliation Adjusted EBITDA for Q2 2024 substantially increased to $225 million from $18 million, derived by adjusting GAAP net income for various non-cash and non-operating items Adjusted EBITDA Reconciliation (Q2 2024 vs Q2 2023) | ($ in millions) | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net income (loss) (GAAP) | $178 | $139 | | Interest & amortization on non-funding debt | $38 | $38 | | Provision for (benefit from) income taxes | $14 | $(1) | | Depreciation and amortization | $28 | $25 | | Share-based compensation expense | $39 | $51 | | Change in fair value of MSRs | $(73) | $(235) | | Adjusted EBITDA (Non-GAAP) | $225 | $18 | Explanation of Non-GAAP Measures Non-GAAP measures like Adjusted Revenue, Net Income, and EBITDA are used to provide clearer operational performance insights by excluding specific non-cash or volatile items - The company uses non-GAAP financial measures because management believes they provide useful information for comparing general operating performance from period to period and for planning and forecasting[33][34] - The change in fair value of MSRs due to valuation assumptions is excluded because it is a non-cash, non-realized adjustment that is not indicative of core operational performance[36] Corporate Updates and Responsibility Rocket Companies appointed a new CTO, announced its first Investor Day, and reinforced its 'For-More-Than-Profit' commitment through ESG reporting and community investments - Shawn Malhotra was appointed as the company's first Chief Technology Officer to lead technology strategy, including AI development, data science, and product engineering[11] - The company will hold its first Investor Day on September 10, 2024, in Detroit to engage with the investment community[11] - The company published its 2023 ESG report, reinforcing its commitment to being a 'For-More-Than-Profit' organization[11] - Community initiatives include the Rocket Mortgage Classic, which has raised over $8.4 million for local charities since 2019, and a $320,000 investment in Black Tech Saturdays by the Rocket Community Fund[12]