UWM (US:UWMC)2023-05-09 16:00Financial Performance - For Q1 2023, the company originated $22.3 billion in residential mortgage loans, a decrease of $16.5 billion, or 42%, from $38.8 billion in Q1 2022[126] - The company reported a net loss of $138.6 million in Q1 2023, a decrease of $591.9 million, or 130.6%, compared to a net income of $453.3 million in Q1 2022[126] - Adjusted EBITDA for Q1 2023 was $141.0 million, compared to $128.4 million in Q1 2022, reflecting an increase of 9.9%[126] - Total revenue for Q1 2023 was $161.3 million, a significant decline from $821.8 million in Q1 2022[133] - Loan production income decreased to $205.4 million in Q1 2023 from $383.9 million in Q1 2022, representing a decline of 46.5%[133] - Loan servicing income increased to $218.6 million in Q1 2023 from $198.6 million in Q1 2022, an increase of 10.1%[133] - The change in fair value of mortgage servicing rights for Q1 2023 was a loss of $337.3 million, compared to a gain of $172.0 million in Q1 2022[133] - Total expenses for Q1 2023 were $300.9 million, down from $364.5 million in Q1 2022, a decrease of 17.5%[133] - Salaries, commissions, and benefits decreased to $121.0 million in Q1 2023 from $160.6 million in Q1 2022, a reduction of 24.6%[133] - Interest income for Q1 2023 was $74.6 million, compared to $67.4 million in Q1 2022, an increase of 10.7%[133] Loan Origination and Servicing - Total loan origination volume declined by $16.5 billion, or 42%, from $38.8 billion in Q1 2022 to $22.3 billion in Q1 2023, primarily due to lower refinance volume[135] - Loan servicing income increased to $218.6 million in Q1 2023, up $20.0 million, or 10.1%, from $198.6 million in Q1 2022, driven by higher average servicing fees[136] - Servicing costs decreased by $10.3 million, or 21.9%, from $47.2 million in Q1 2022 to $36.9 million in Q1 2023, due to lower loss mitigation expenses[137] - The weighted average servicing fee as of period end increased to 0.2785% in Q1 2023 from 0.2587% in Q1 2022[136] - The average loan amount remained stable at $362 in Q1 2023, compared to $363 in Q1 2022, while the weighted average loan-to-value ratio increased to 83.51% from 75.07%[134] Cash Flow and Financing Activities - Net cash provided by operating activities was $1.99 billion for Q1 2023, a decrease from $11.75 billion in Q1 2022[183] - Net cash provided by investing activities increased to $644.4 million in Q1 2023 from $610.5 million in Q1 2022, driven by higher proceeds from sales of MSRs and excess servicing cash flows[184] - Net cash used in financing activities was $2.60 billion in Q1 2023, down from $12.19 billion in Q1 2022, primarily due to decreased net repayments under warehouse lines of credit[185] - The company declared a dividend of $0.10 per share of Class A Common Stock, totaling $9.3 million, and a distribution of $150.2 million from Holdings LLC to SFS Corp.[187] Debt and Borrowing - As of March 31, 2023, the total advanced against the company's warehouse facilities was $4,259.8 million, with $400 million committed[160] - The company had $250 million outstanding under the MSR Facility as of March 31, 2023, which provides up to $1.5 billion of uncommitted borrowing capacity[171] - The company also had $250 million outstanding under the GNMA MSR facility, which offers up to $500 million of uncommitted borrowing capacity as of March 31, 2023[174] - The 2025 Senior Notes issued by the company amount to $800 million with a 5.500% interest rate, due November 15, 2025[163] - The 2029 Senior Notes issued by the company total $700 million with a 5.500% interest rate, due April 15, 2029[166] - The 2027 Senior Notes issued by the company are $500 million with a 5.750% interest rate, due June 15, 2027[168] - The company was in compliance with all financial covenants under its warehouse facilities as of March 31, 2023[162] Risk Management - The company utilizes forward agency or Ginnie Mae To Be Announced (TBA) securities as its primary hedge instrument to manage interest rate risk[201] - The company assesses market risk using a sensitivity analysis based on hypothetical changes in interest rates, with limitations in extrapolating results to actual performance[202] - The company is subject to credit risk from borrowers' defaults, which is mitigated through stringent underwriting standards and strong fraud detection tools[204] - The company manages counterparty risk by selecting financially strong counterparties and spreading risk among multiple entities[205] - The company incurred no losses due to nonperformance by any of its counterparties during the three months ended March 31, 2023, or March 31, 2022[206] Market Conditions - The fair value of mortgage servicing rights (MSRs) generally increases in rising interest rate environments, while it decreases in declining interest rate environments, impacting expected cash flows[200] - As of March 31, 2023, a 25 basis point increase in interest rates would result in a total change in assets of $1,522 thousand, while a decrease would lead to a total change of $(17,578) thousand[203] - The weighted average FICO score for originated loans as of March 31, 2023, was 737, slightly down from 741 in the same period in 2022[204] - Interest rate lock commitments for fixed rates amounted to $9.26 billion as of March 31, 2023, compared to $5.35 billion at the end of 2022[191] - The blended average pullthrough rate was 75% as of March 31, 2023, down from 77% at the end of 2022[190] - In Q1 2023, the company sold excess servicing cash flows on certain agency loans for proceeds of approximately $305.5 million[176]