loanDepot(LDI) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Net loss improved to $25.3 million in Q2 2025, with total assets at $6.21 billion and equity declining 13.3% Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $6,208,726 | $6,344,028 | (2.1)% | | Total Liabilities | $5,769,676 | $5,837,417 | (1.2)% | | Total Equity | $439,050 | $506,611 | (13.3)% | Consolidated Statement of Operations Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Net Revenues | $282,537 | $265,390 | $556,158 | $488,175 | | Total Expenses | $314,871 | $342,547 | $634,596 | $650,496 | | Net Loss | $(25,273) | $(65,853) | $(65,969) | $(137,357) | | Diluted EPS | $(0.06) | $(0.18) | $(0.17) | $(0.37) | Consolidated Statement of Cash Flows Highlights (Six Months Ended, in thousands) | Cash Flow Activity | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(112,263) | $(556,814) | | Net Cash Provided by Investing Activities | $11,517 | $488,127 | | Net Cash Provided by (Used in) Financing Activities | $51,626 | $(45,959) | | Net Change in Cash | $(49,120) | $(114,646) | Notes to Consolidated Financial Statements Notes detail accounting policies, a $20.0 million cybersecurity insurance receivable, loan sale concentration, and capital compliance - In January 2024, a cybersecurity incident led to $15.0 million in insurance reimbursements in 2024 and an additional $20.0 million receivable expected in 2025[29][30] - Significant concentration risk exists with three investors accounting for 36%, 14%, and 12% of total loan sales for the six months ended June 30, 2025[40] - The company operates as a single reportable segment, with performance evaluated by the CODM based on consolidated net income (loss)[135][136] - As of June 30, 2025, the company complied with all regulatory capital and liquidity requirements, with a minimum adjusted net worth of $337.8 million[134] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes improved Q2 2025 performance to 'Vision 2025', with net loss narrowing to $25.3 million from revenue growth and expense reduction Key Performance Indicators (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Loan Originations | $6.73B | $6.09B | | Gain on Sale Margin | 3.11% | 3.06% | | Pull-through Weighted Gain on Sale Margin | 3.30% | 3.22% | | Total Servicing Portfolio (UPB) | $117.5B | $114.3B | - The decrease in net loss for Q2 2025 was primarily due to a $27.7 million decrease in total expenses and a $17.1 million increase in total net revenues compared to Q2 2024[156] - General and administrative expenses decreased by $33.4 million (45.7%) in Q2 2025 compared to Q2 2024, mainly due to $26.6 million in costs related to the Cybersecurity Incident in the prior year[164][165] - As of June 30, 2025, the company had $408.6 million in unrestricted cash and cash equivalents and an additional $1.6 billion in available capacity under its warehouse and other lines of credit[187] Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risks include interest rate, credit, and prepayment risks, actively managed through hedging instruments and stringent underwriting - The company's principal market exposure is interest rate risk, which affects the value of LHFS, IRLCs, servicing rights, and hedging instruments[227] - To manage interest rate risk on IRLCs and LHFS, the company enters into hedging instruments, such as forward sale contracts, which are expected to experience changes in fair value opposite to the hedged items[229] - Credit risk is managed through strict underwriting guidelines, with the company providing representations and warranties on sold loans that could lead to repurchase obligations if breached[230][231] Item 4. Controls and Procedures Management, including CEO and CFO, concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures are effective at a reasonable assurance level[237] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[238] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal and regulatory matters, including a cybersecurity class action settlement and ongoing employment and stockholder derivative litigation - The company is a defendant in a consolidated class action lawsuit related to the January 2024 Cybersecurity Incident, with a settlement agreement receiving preliminary court approval on January 13, 2025[124] - In a securities class action lawsuit related to the company's IPO, the court granted final approval of a settlement on May 24, 2024, though one class member has filed a notice of appeal[126] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes in risk factors were reported from the company's 2024 Form 10-K[241] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2025, the company issued 4,897,323 shares of Class A common stock through conversions of Class C common stock and Holdco Units, exempt from registration - In Q2 2025, the company issued a total of 4,897,323 shares of Class A common stock upon the conversion of Class C common stock and Holdco Units[243][244]