Rocket Companies(US:RKT)2025-08-08 19:45PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) H1 2025 saw a net loss of $178.4 million, driven by MSR fair value changes, while total assets grew to $30.4 billion following a $4.0 billion senior note issuance and the Up-C Collapse Condensed Consolidated Balance Sheets Total assets increased to $30.4 billion by June 30, 2025, driven by higher cash and senior notes, while total equity decreased to $7.4 billion due to the Up-C Collapse Condensed Consolidated Balance Sheet Highlights (as of June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $5,090,631 | $1,272,853 | +$3,817,778 | | Mortgage loans held for sale | $11,168,691 | $9,020,176 | +$2,148,515 | | Mortgage servicing rights (MSRs) | $7,566,632 | $7,633,371 | -$66,739 | | Total Assets | $30,360,222 | $24,510,063 | +$5,850,159 | | Liabilities | | | | | Funding facilities | $9,481,780 | $6,708,186 | +$2,773,594 | | Senior Notes, net | $8,000,225 | $4,038,926 | +$3,961,299 | | Total Liabilities | $22,911,294 | $15,466,683 | +$7,444,611 | | Equity | | | | | Non-controlling interest | $— | $8,340,879 | -$8,340,879 | | Total Equity | $7,448,928 | $9,043,380 | -$1,594,452 | Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Q2 2025 net income decreased to $34.1 million, and H1 2025 resulted in a $178.4 million net loss, primarily due to MSR fair value changes and increased expenses Income Statement Summary (Q2 & H1 2025 vs. 2024) | Metric ($ in thousands) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenue, net | $1,360,251 | $1,300,722 | $2,397,515 | $2,684,438 | | Total expenses | $1,335,989 | $1,108,680 | $2,596,356 | $2,194,026 | | Net income (loss) | $34,089 | $177,925 | ($178,357) | $468,639 | | Net (loss) income attributable to Rocket | ($1,785) | $1,295 | ($12,168) | $17,510 | | Diluted EPS | ($0.01) | $0.01 | ($0.08) | $0.13 | Condensed Consolidated Statements of Changes in Equity Total equity decreased to $7.4 billion by June 30, 2025, primarily due to the Up-C Collapse eliminating non-controlling interest, alongside a net loss and special dividend payments - The Up-C Collapse on June 30, 2025, resulted in the elimination of the non-controlling interest and the exchange of Class D common stock for newly created Class L common stock1725 - A special dividend of $122.2 million was paid to Class A shareholders in the first half of 20251738 Condensed Consolidated Statements of Cash Flows Cash and cash equivalents increased by $3.8 billion in H1 2025, driven by $6.5 billion from financing activities, partially offset by $2.6 billion used in operations Cash Flow Summary (Six Months Ended June 30) | Metric ($ in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,647,130) | ($3,135,051) | | Net cash used in investing activities | ($54,575) | ($226,025) | | Net cash provided by financing activities | $6,524,908 | $3,560,983 | | Net increase in cash | $3,824,001 | $200,426 | - Financing activities were significantly boosted by $4.0 billion in borrowings from new Senior Notes during the first half of 202519 Notes to Condensed Consolidated Financial Statements Notes detail the Up-C Collapse, recent acquisitions of Redfin and pending Mr. Cooper deal, $4.0 billion senior note issuance, and the company's two reportable segments - On June 30, 2025, the company completed a series of transactions to collapse its Up-C structure, simplifying its organization by eliminating non-controlling interests and creating a new Class L common stock25 - The company completed the acquisition of Redfin Corporation on July 1, 2025, and has a pending agreement to purchase Mr. Cooper Group Inc., expected to close in Q4 20255758 - In June 2025, the company issued $2.0 billion of 6.125% senior notes due 2030 and $2.0 billion of 6.375% senior notes due 2033106112 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses challenging market conditions, an 18% increase in Q2 2025 mortgage origination volume to $29.1 billion, but a decline in net income to $34.1 million due to lower margins and higher expenses, while maintaining $9.1 billion in liquidity Executive Summary and Recent Developments Q2 2025 faced high inflation and mortgage rates, with strategic moves including the Up-C Collapse and acquisitions, resulting in an 18% increase in origination volume but a drop in net income to $34.1 million - Market conditions in Q2 2025 were characterized by inflation remaining above the Federal Reserve's target and elevated 30-year fixed mortgage rates, which continued to challenge housing affordability and mortgage activity208 Q2 2025 Financial Highlights | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Mortgage Origination Volume | $29.1 billion | $24.7 billion | +18% | | Net Income | $34.1 million | $177.9 million | -81% | | Adjusted EBITDA | $171.8 million | $224.8 million | -24% | Key Performance Indicators Q2 2025 saw an 18% increase in closed loan origination volume to $29.1 billion, but gain on sale margin compressed to 2.80%, while total serviced UPB grew to $609.2 billion and Rocket Money subscribers reached 4.46 million Key Performance Indicators (Q2 2025 vs. Q2 2024) | Indicator | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Closed loan origination volume | $29.1B | $24.7B | | Gain on sale margin | 2.80% | 2.99% | | Total serviced UPB (at period end) | $609.2B | $534.6B | | Rocket Money paying subscribers | 4.46M | 3.67M | Results of Operations Q2 2025 net revenue slightly increased to $1.36 billion, but total expenses rose 21% to $1.34 billion due to higher compensation, marketing, and acquisition costs, impacting pre-tax income - Gain on sale of loans, net increased by 8% in Q2 2025 to $815.9 million, driven by a 13% increase in net rate lock volume249 - Loan servicing income, net decreased by 16% in Q2 2025 to $202.4 million, primarily due to a negative change in MSR valuation model inputs caused by a decrease in interest rates during the quarter257 - Total expenses for Q2 2025 increased by 21% to $1.3 billion, driven by higher variable compensation, a 31% increase in marketing expenses, and acquisition-related costs268 Summary results by segment Q2 2025 Direct to Consumer contribution margin decreased 2% to $367.5 million, while Partner Network saw a 34% decline to $83.4 million due to compressed gain on sale margins Segment Contribution Margin (Q2 2025 vs. Q2 2024) | Segment | Q2 2025 Contribution Margin | Q2 2024 Contribution Margin | YoY Change | | :--- | :--- | :--- | :--- | | Direct to Consumer | $367.5 million | $374.7 million | -2% | | Partner Network | $83.4 million | $126.3 million | -34% | - The Direct to Consumer segment's expenses grew 20% YoY, driven by brand marketing and higher variable costs, which offset an 11% increase in adjusted revenue275276 - The Partner Network's adjusted revenue fell 21% YoY, driven by a 25% decrease in gain on sale of loans, net, due to compressed margins283 Liquidity and Capital Resources The company maintained a strong liquidity position of $9.1 billion as of June 30, 2025, bolstered by a $4.0 billion senior note offering to support strategic acquisitions - Total liquidity stood at $9.1 billion as of June 30, 2025, including $5.1 billion of cash and cash equivalents297 - In June 2025, the company issued $4.0 billion in aggregate principal of new senior notes, with proceeds intended to fund the redemption of Mr. Cooper's senior notes upon acquisition completion and for general corporate purposes299 - A special cash dividend of $0.80 per share was paid to Class A common stockholders on April 3, 2025303 Item 3. Quantitative and Qualitative Disclosures about Market Risk No material changes to the company's market risk exposure have occurred since the disclosures in its 2024 Annual Report on Form 10-K - There have been no material changes to the Company's market risk exposure since the end of fiscal year 2024306 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures are effective at a reasonable assurance level307 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls308 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal actions but does not anticipate a material adverse effect on its financial condition or operations - Management does not expect pending or threatened legal matters to have a material adverse effect on the company's business, financial condition, or results of operations310 Item 1A. Risk Factors The company's risk factors have not significantly changed from those disclosed in its 2024 Form 10-K and Q1 2025 Form 10-Q - There have been no significant changes to the company's risk factors from those previously disclosed in the 2024 Form 10-K and Q1 2025 Form 10-Q311 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On June 30, 2025, the company issued approximately 1.85 billion shares of Class L common stock as part of the Up-C Collapse, exempt from public registration - The company issued approximately 1.85 billion shares of Class L common stock on June 30, 2025, as part of the Up-C Collapse transaction312 - The issuance was exempt from registration under Section 4(a)(2) of the Securities Act of 1933 as a private offering313 Item 5. Other Information No additional information was reported under this item - None314 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate charters, debt indentures, and executive certifications - The report includes numerous exhibits, such as the Second Amended and Restated Certificate of Incorporation, the Indenture for the new senior notes, and amendments related to the Up-C Collapse and Tax Receivable Agreement315